The objective of this consultation is to gather information from stakeholders on the revised Broadband Guidelines, which lay down how the Commission will apply the EU state aid rules in relation to public support granted for broadband network infrastructure deployment.
To the extent possible, please in particular mention individual paragraphs in our draft if you wish to make specific comments. We would appreciate obtaining documents in an electronic format that will enable the reader to copy & paste text.
Consultation period From 01.06.2012 until 01.09.2012
PRESS RELEASE DG INFSO
(27 April 2012) High-speed Internet underpins all sectors of the economy and will be the backbone of the Digital Single Market. For every 10% increase in the broadband penetration the economy grows by 1 to 1.5%. In this context the European Commission is seeking views on how to cut the costs of setting up new networks for high speed internet in the EU. In particular, the Commission wants to explore how to reduce the costs associated with civil engineering, such as the digging up of roads to lay down fibre, and which can account for as much as 80% of the total cost. The Commission believes it could cut the cost of broadband investments by a quarter. Input is sought from all interested public and private parties including telecoms and utility companies for instance, investors, public authorities and consumers.
An intelligent and innovative Europe cannot be built without its backbone: next generation broadband access. European policymakers at all levels – regions, states and the EU as a whole – are conscious of this. This awareness has been transformed in various political initiatives, from the EU Digital Agenda to regional initiatives.
However, there is a substantial gap between Europe and other developed economies, such as South Korea and Japan, in terms of the pervasiveness of next generation broadband access. A renewed effort and commitment is required to bridge the divide, but most importantly, to also stimulate economic growth through broadband infrastructures and services.
There are clear challenges to face – deployment costs, demand uncertainty, and regulatory inefficiencies – but the difficult time that Europe is currently facing requires an exceptional effort in order to drive growth. This effort calls for a more synergic collaboration between the private sector and the public sector in order to accelerate the penetration of next generation broadband access, and transform the urban and rural areas of Europe into a single, unified smart continent.
The greatest impact is found for the public sector where the result indicates that communication related costs can be cut by 30-50% thanks to the availability of fiber. The study also shows that the municipalities that have invested in fiber will have a positive economic growth in the form of increased employment and a positive population trend.
“A particularly interesting finding is that the deployment of new fiber-based broadband networks in Sweden has a clear impact on economic growth and population development” says Crister Mattsson Senior Advisor at Acreo. “In order to stimulate local initiatives this needs to be clarified with the local authorities, too often they are not aware of the positive effects of fiber investments.”
Acreo has performed a statistical analysis that links the effects of fiber investments, spread over a four year period, to the specific socio-economic factors. The return of investment was then calculated year by year, up to five years after the investment. The study also estimates the investment needed to connect the remaining households that do not have access to fiber. The analysis is based on data from Statistics Sweden (SCB), Swedish Post and Telecommunications Authority (PTS), meta-analysis, Acreo’s own research in the field, and on extensive interview data where Acreo has conducted both surveys and in-depth interviews with local governments, telecom operators and network owners.
“The actual return is expected to be greater than what is calculated in the study when indirect and induced economic effects are likely to increase over time and also due to effects not currently quantifiable” says Marco Forzati Senior Researcher at Acreo. “Therefore, to be able to calculate the true value of an investment, a more comprehensive method needs to be developed.”
Traditionally, the success of broadband investments is primarily evaluated from a telecom perspective. For society, however, economic growth and the impact on the public sector are more important success factors for the assessment of the investment.
“This feasibility study is the first step to better understand the real social impact of broadband investments in Sweden. It provides a good basis for further discussions in the efforts to spread knowledge of broadband-related issues and its benefits for society” says Patrik Sandgren at the Government Broadband Forum.
For further information please contact:
Crister Mattsson, Senior advisor at Acreo, +46 (0)8-632 77 92; crister.mattsson(at)acreo.se
Marco Forzati, Senior scientist at Acreo, +46 (0)8-632 77 53, marco.forzati(at)acreo.se
Tove Madsen, Marketing and Communication
+46 (0)8-632 77 86, tove.madsen(at)acreo.se
Acreo is one of Europe’s top research institutes providing breaking edge results within the field of electronics, optics and communication technologies. Turning academic research into commercial products, Acreo offers value-adding technology solutions for growth and competitiveness in industry and society. The types of assignments are ranging from feasibility studies, long term research projects, prototyping and small scale production, to verification and testing. Acreo also supports small and medium sized companies with technology transfer, business networks and financial advice. Acreo is part of Swedish ICT, and has 145 employees located in Kista (headquarter), Norrköping and Hudiksvall, in Sweden.
About Acreo Broadband Technology
Acreo Netlab is active in the field of Broadband Technology; our activities span core networks through access networks to home networks. We address network design, optical transmission and IP protocols, we measure how networks are used and how network performance influence quality of experience of important services such as video and IPTV. We perform technical research and development; we drive standardization and policy issues as well as analyze business models.
Thanks to our EBPII expert Gareth Locksley for aggregating and submitting this response to DG COMP
State Aid and Broadband GL Submission Click on Link to read full submission
Specific Comments on DG COMP Questionnaire
The following partial responses draw on the general comments above.
Question 1.3 The development of the ‘free’ business model and the ‘utility’ model should be considered within the Guidelines.
Question 2.2 The Guidelines should consider the possibility of the application of the utility model to these long lasting and long technology life cycle components of B+NGAB. The resultant lowering of prices would clearly serve the objectives of the Commission and the EU regarding affordable and widespread generalised access to B+NGAB.
Question 3.3 The plans should be backed by significant performance guarantee bonds payable to the local authorities when the plans are unfulfilled.
Question 4.1 Competition in B+NGAB being limited to geographically limited areas [for example two thirds of the UK population live in around 10% of the land mass] does to function in a manner similar to ‘traditional’ markets. There are no incentives to address the entire market. New entrants only need to undercut incumbents in the most attractive markets. Far greater incentives or more active public intervention is required outside these limited areas.
Question 5.1 There are always difficulties with incumbents and the difficulties rise with the degree and intensity of vertical integration of incumbents.
Question 5.2 Access to all technological possibilities is required
Question 5.3 At least 7 years. More realistically an obligation for the entire technology life cycle of the component of B+NGAB.
Question 5.4 Multiple fibre infrastructures are highly unlikely to materialise in white areas and are improbable in grey areas without state aid. Effective open access to fibre priced on the utility [or even free model] will provide for competition in the provision of service, applications and content.
Question 5.6 A requirement that the recipient applies a utility [or free] business and pricing model to network infrastructure.
Question 6.1 NRAs could assist authorities in ensuring the business and pricing model of the response to 5.6.
Question 8.1 Separation would ease the application of a utility [or free] business and pricing model to network infrastructure. It would also provide opportunities for investors seeking such risks, returns and appropriate asset backing.
Question 8.2 Public ownership and social enterprises using utility or free models should be allowed for in the Guidelines in white areas where there is a clear market failure. There is also a case for similar arrangements in grey areas, in particular where the incumbent does not transparently price the network infrastructure component of B+NGAB according to its technology life cycle.
Specific comment on existing Guidelines
Art 51 (g) This exercise does not take into account the technology life cycle of the network infrastructure component of B+NGAB, obliging bidders to replicate the business models of incumbents rather than applying valid alternative models.