Florence School of Regulation Workshop - Broadband Policy and NGA Regulation Workshop

ETNO Executive Board Chairman, Luigi Gambardella, spoke at Florence School of Regulation Workshop on "Boradband Policy and NGA Regulation". 

Luigi Gambardella, ETNO Executive Board Chairman, spoke at the Florence School of Regulation worskhop on Broadband Policy and NGA Regulation.

Main highlights from the speech:

• The need for a digital economy policy is now openly acknowledged as a strategic priority for Europe’s recovery and competitiveness.
• The reference framework has changed: an accurate analysis of sectoral policies must take into consideration not only the individual traditional markets, but also the current and future capability of European market players to invest in order to permit Europe to keep pace with high growth countries, in terms of innovation and infrastructure assets.
• From this perspective, in May 2010 Commissioner Kroes proposed her ambitious Digital Agenda with the aim of defining the way forward for the development of the digital economy. It recognizes the key role of large scale deployment of high speed broadband (or “NGA”) in bringing growth, increased efficiency and welfare as well as addressing key societal challenges such as climate change or an ageing population.
• The European Commission is rightly suggesting that the achievement of the Digital Agenda goals requires the commitment of all digital economy players and institutions involved and has shown its willingness to play a decisive role in supporting the industry’s efforts.
• Commissioner Kroes recently organized a CEO roundtable to assess together with key stakeholders how best to ensure the very high levels of private sector investment needed for the deployment of next generation broadband networks to sustain internet growth and meet Europe's Digital Agenda targets.
• I would like to briefly remind you of some of the targets set out at the EU level for developing the online internal market and citizens services:
  1. by 2015, 50 per cent of the EU population should be shopping online, with 20% of the population using cross-border online services;
  2. by 2015, regular internet use should increase from 60 per cent to 75 per cent, and in the case of disadvantaged people from 41per cent to 60 per cent;
  3. by 2015, the proportion of people who have never used the internet should be halved (from 30 per cent to 15 per cent);
• The aforementioned targets are clearly very ambitious and are embraced by ETNO members: meeting them will help economic recovery and will result in strengthening the Digital Internal Market.
• The European Parliament will soon adopt a resolution that fully embraces the policy goal of developing a digital European Union, in terms of infrastructure deployment and an internal market for digital services. 
• The timely deployment of high speed fixed and mobile networks is fully recognized by the Commission as the underlying condition to achieve other Digital Agenda objectives. The Commission has set ambitious coverage targets :
  • broadband coverage for all EU citizens by 2013;
  • 30Mbps broadband coverage by 2020, with half of European households subscribing to speeds above 100 Mbps.
• Meeting these goals will require very significant investments which will mainly be driven by the private sector. The costs for reaching the target of 30 Mbps for all, to be achieved through a technology mix of VDSL, wireless and fiber are estimated by the European Commission to cost between € 38 and € 58 billion. 
• The costs of covering 50% of households with 100 Mbps are expected to be between € 181 and € 268 billion. These figures give an idea of the challenge that the industry is facing.
• The scale of this investment requires a balance between private sector contributions and EU and member states’ funds which should be carefully targeted to complement and not to crowd-out private investment, by intervening in those areas where commercial investment is not viable.
• Next to the role of public funding, regulatory policy both at EU and national level heavily affects operators’ investment choices.
• Regulation in Member States should properly differentiate between the approach applied to copper networks and to NGA. Regulation of NGA needs to fully reflect the uncertainty about the market reaction to these new technologies and therefore about return on investment, and needs to recognize the competitive realities in which these new networks are deployed.
• A recent study by Plum consulting carried out for ETNO illustrates that the NGA business case is not only influenced by competition currently in the market, such as the presence of cable, but also by the copper platform which will coexist with the new network for a transitional period. If price differences between copper and NGA are artificially high, incentives for end-users to switch to the NGA platform will be low.   
• To lower copper prices, according to Plum, would thus disincentivise NGA investment in two ways: it would lower the overall profitability of investment in the market by lowering the price level for broadband products. and it would impede an efficient transition to the new network. 
• Against this background, ETNO would like to stress the importance of the new European Commission initiative for a Recommendation on access costing for key wholesale products. The Recommendation should give a clear sign of support for the investments needed to achieve the Digital Agenda targets. 
• The Commission Recommendation on NGA, while continuing to rely on cost-based access regulation as the preferred option, contains at the same time several instruments which, if effectively applied, can support NGA investment. 
•  The Recommendation follows the policy introduced by the revised EU Framework to support a symmetric access approach on physical local access bottlenecks (such as in- building wiring).
• The Recommendation also encourages an appropriate level of geographical segmentation and foresees commercial agreements between operators to share risks under the supervision of the regulator. 
• It is key that the Recommendation is applied in a flexible and forward-looking way, For example, pricing flexibility should be considered as a viable option, thereby modulating the principle of cost-orientation, in order to respond to different competitive needs in the market. Such flexibility will be an important factor for the business case for NGA.
• We observe that some national Regulators already take into consideration the various degrees of competition within their national market and support commercial agreements between operators instead of enforcing a strict cost-based price regulation of the new fibre network. We call on EU policy makers to not rule out such approaches which can prove valuable in accelerating NGA deployment.
• Finally, ETNO deems it important that national regulatory authorities and the Commission embrace the principle of technological neutrality enshrined in the EU framework so as to let the market decide which technologies and which network architectures are the most efficient to support new investments in fiber optic networks and to drive new services take-up. 
• Broadband deployment in accordance with the ambitious schedule proposed at the EU level will rely not only on the rollout of new networks, but also on the supply of innovative services and on the necessary knowhow and expertise: the development of e-health and e-government services have to be quickly included into all national digital agendas in order to support the growth of new services and the swift development of new networks.
• Achieving the Digital Agenda targets will require a mix of technologies. Mobile broadband networks will play a key role in many areas, in particular in remote and rural areas.  The opening of the digital dividend frequency bands to mobile services will accelerate the deployment of broadband networks in rural and remote areas. This band would require four times less investment than in higher bands and require up to three times less base stations.
• Opening spectrum bands conducive to lower-cost and efficient deployment of mobile and wireless broadband is therefore essential to achieve the Digital Agenda objectives, in particular in remote and rural regions. 
• This is why ETNO relies on the European Parliament and the Council to support a swift adoption of the Commission decision on the Radio Spectrum Policy Programme. 
• To conclude, may I remind you about one of the findings of the Monti report on ‘A new Strategy for the Single Market’ commissioned by President José Manuel Barroso to Professor Mario Monti and published in conjunction with the Digital Agenda on 9 May 2010:
• The EU could gain 4% of GDP by stimulating the fast development of the Digital Single Market by 2020. This corresponds to a gain of almost € 500 billion and means that the Digital Single Market alone could have an impact similar to the 1992 Internal Market programme.

More information about the conference