Public Funding Said Key to Universal Broadband in Europe
With investment in European broadband infrastructure predicted to reach $441 billion in the next decade, the European Commission Thursday issued guidelines for public financing of high-speed and very-high-speed networks. The guidelines will help EU governments and public authorities ensure their broadband funding plans comply with state aid rules and help boost deployment, said Competition Commissioner Neelie Kroes. While most investment will come from private companies, public funding plays a key role in providing broadband access to underserved and non-profitable areas, she said.
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The guidelines, most of which track existing state aid rules currently applied on a case-by-case basis, include new provisions for next generation access (NGA) fiber networks. The guidelines distinguish among “black” areas such as densely populated cities where there’s competition and state aid is unnecessary, “grey” areas where there’s one broadband network but services remain inadequate, and “white” areas where no infrastructure exists. In the latter cases, public funding may be justified if certain conditions are met, Kroes said. To determine if public money can be spent on NGA networks, the EC will look not only at existing infrastructures but at telecom operators’ concrete future investment plans, she said.
The guidelines incorporate several “crucial safeguards” to avoid distorting competition and crowding out private investment. They require detailed mapping to identify the unserved or unprofitable areas; open, transparent tenders for aid grants; and open access obligations to prevent incumbents from reviving old monopolies and encourage competition at the retail level, Kroes said. State aid grants must be technologically neutral and have a “claw-back” provision recapturing profits once they hit a certain level to avoid giving windfalls to companies receiving financing and wasting taxpayer money, she said.
Government intervention in deployment of basic broadband networks occurred mostly in rural or economically undeveloped areas, but the economics of NGA networks is said to discourage their rollout not only in remote areas but also in some urban zones, the guidelines say. The main issues affecting fiber deployment appear to be costs and, to a lesser extent, population density, they say. Direct public intervention may therefore be needed to ensure that areas which operators avoid as unprofitable don’t fall into a new digital “NGA divide,” they say. Member countries may want to step in to ensure fiber networks deploy quickly by, for example, easing acquisition of rights-of-way or undertaking some civil works themselves, they say.
Cable operators and telecommunications providers welcomed the EC move. The guidelines are needed to stop local politicians from distorting competition by funding fiber with taxpayer money, Cable Europe said. Competition and investment by cable operators have resulted in products of 100+ Mbps, five times the speed of ADSL, in more than 12 countries, President Manuel Kohnstamm said. Given the many past cases concerning public/private investment in broadband, and indications of more public incentives to come, the market needed more clarity, he said.
State aid rules should ensure that public funds are spent on networks that will last for the next 50 years, said the European Competitive Telecommunications Association (ECTA). Given long payback periods, in some cases the state may be the only entity that can realistically afford to invest in expensive networks, but spending must be targeted to areas where operators aren’t already installing infrastructure, said ECTA Chairman Innocenzo Genna.
The guidelines confirm that investment in high-speed broadband access networks should be driven primarily by the private sector but that public authorities have a role to play in areas where that isn’t commercially viable, said European Telecommunications Network Operators’ Association (ETNO) Director Michael Bartholomew. ETNO wants governments to encourage deployment by lowering the cost of civil works by, for instance, giving access to all ducts. Governments should also spur uptake of new broadband services through tax incentives and by ensuring online availability of public services, he said.
Incorporating the principle of technology neutrality will allow funding of tailor-made fixed and wireless solutions to fill gaps in the white-areas map as soon as possible, attorney Axel Spies said on behalf of German competitive carriers association VATM. The downside is that the rules are still very complex, he said. Moreover, competitors seeking to build new ducts and pipes must coordinate their plans with utility companies, which could slow broadband deployment and sector-specific funding significantly, he said.
The EC is drafting a recommendation on regulations to encourage private investment in fiber, Kroes said.