Maximizing public investment in European NGA

One of the three packages announced last week by the EC aims to facilitate better public financing and intervention in next-generation access (NGA) investment and deployment, with a key emphasis on it working effectively alongside commercial investment.

 

The measures outlined by the EC are essential if European member states wish to avoid a much bigger digital divide in the longer term.

 

However, in terms of implementation, most countries will face significant challenges in accommodating the commercial freedom necessary for a market-driven approach, the ambitious targets set for high-speed broadband coverage, and the desire to provide equal access to all.

The EC’s ambitions for fiber-dependent high-speed broadband will take many years to achieve

The Europe 2020 Strategy regards comprehensive deployment of high-quality broadband connections as key to promoting competitiveness and social inclusion in the EU.

 

The European strategy includes a staggered target of basic broadband availability (normally around 2Mbps for most countries) by 2013, and by 2020, access to speeds above 30Mbps for all European citizens and access to broadband above 100Mbps for 50% of households.

European ambitions appear considerably less bullish than the progress made by predominantly urban markets such as Japan and Korea, and the high-profile ambitions outlined by countries such as Singapore.

 

The fact that many operators, particularly incumbents, have outlined broadband plans based on FTTC/VDSL for areas outside urban areas and sweet spots – not the FTTH required for “over 100 Mbps” – makes the ten-year timeframe seem more realistic.

The EC guidelines break down into measures centered around the adoption of an operational broadband plan by member states with measures for effective funding, including both direct public funding and EU structural and rural development funds.

The guidelines also provide for extra and effective funding by the EC and the European Investment Bank (EIB), and outline actions from regional and local authorities to help reduce deployment costs, which must be combined with effective regulation.

Most of these are not new, apart from the additional financing tools to be provided by the EIB. Rather, the EC is seeking to ensure that all member states now adopt and implement all measures, which must work in tandem if public and private investments are to work effectively alongside each other.

 

This is why the EC has also outlined requirements for member states to take into account existing NGA infrastructure and investment plans by operators, and to ensure that safeguards such as open-tender and claw-back mechanisms mean that private investment is not crowded out.

Leaving aside the politicking in individual markets around broadband goals and achievements, the approach adopted in Europe towards NGA can be described as pragmatic.

 

However, this brings its own challenge, which resides in the inherent tensions contained in the primary objective of the Broadband Guidelines: “to foster a wide and rapid rollout of broadband networks while at the same time preserving the market dynamics and competition in a sector that is fully liberalized.”

 

The widely accepted premise is that there is significant commercial appetite to invest in FTTx/LTE in urban areas, but beyond these sweet spots, greater public funding and infrastructure sharing will be required. This is also commensurate with the guidelines on state-aid rules.

Much of this entails not only building on existing best practice in legislative changes, funding, and better coordination, but also requires breaking new ground.

 

The business case for NGA in less dense areas remains shaky and certainly requires shared investment. New approaches, such as the creation of shared fiber local loops or a more active role for authorities in facilitating the use of civil infrastructure, entail painstaking consultation between parties that often have quite different agendas.

In an ideal world, public authorities will work hand in hand with operators to ensure that public funding can top up and help extend network coverage to as many households as possible.