Wednesday, September 22, 2010

European Union policy update: universal broadband service requires public investment

Neelie Kroes' speech to the Nordic Broadband Forum on 15th September put an interesting perspective on the UK government's view that the market is best placed to deliver the broadband infrastructure the country needs. Her speech focussed on approaches to funding a universal service obligation for broadband:
"In this debate, considering the large investments involved, it is crucial to determine where an extended universal service obligation should be funded by the telecoms sector or rather a broader base, such as by the State budget. In my view we should keep in mind that universal broadband offers benefits beyond the telecoms sector. The others who benefit range from currently uncovered citizens to companies offering internet services, content and applications. So while it is right to expect telecom companies to invest in new and more efficient networks, and it is right to have a socially inclusive system, it might be unfair to force the telecoms companies to fund the entire exercise. Telecoms companies should be able to realise reasonable profits from their investments at the end of the day. We must also be mindful that cross-subsidisation – very often from smaller challengers to historic incumbents - can lead to higher retail prices and competition distortions. It is best to avoid such outcomes. I therefore think that, in adapting or developing our universal service rules to the broadband environment, we need to be careful to avoid putting the entire burden on the telecom sector."
Seems a pretty clear acknowledgement of the need for European governments to invest in broadband to me? This recognition puts the limited public monies so far committed in the UK to universal service and next generation access into rather sharp relief. I would venture that funding of at least an order of magnitude greater is needed if the UK is to implement what Neelie Kroes envisages in her speech. She set out four possible approaches to universal service:
"First, to move away altogether from sector-specific universal service funding towards a publicly financed system. This would be recognition of the fact that ensuring universal broadband access, also covering remote and scarcely populated areas where the market alone would not deliver, is today a basic need. Under this option, such needs would be guaranteed by the public authorities.
A second option would be to establish a harmonised universal service obligation at a very basic speed level as a minimum EU standard. This could be financed through a sectoral fund, with the speed level being updated from time-to-time in the light of technical and social developments. The telecoms sector contribution would remain proportionate and the EU safety net would remain a real minimum safety net. At the same time, this would leave the way open for Member States to set higher national universal service standards, or promote more ambitious broadband roll-out by using general taxation (without sectoral funding). This would of course need to be in compliance with the innovative State Aid rules we adopted for broadband in 2009;
A third option is setting a cap to the funding contributions of the telecom companies. This would allow a more flexible approach that takes into account the financial strength of the companies in a given Member State while creating funds for broadband roll-out at a proportionate rate, thus avoiding undue distortions of competition. Public budgets could supplement the capped sectoral funds.
Finally, we could simply complement the EU Universal Service Directive with a guidance instrument regarding the telecoms legislation. This would guide Member States to use universal service obligations funded by the sector only where there is a true risk of social exclusion, and no risk of undue competition distortions."
So there is a clear expectation that public funding should play a major role in all four approaches, depending upon the amount (if any) of sector-specific (i.e. money to provided by telcos) funding applied as well. came to a similar conclusion in their coverage. Hot on the heels of the speech came an announcement on 20th September (and welcomed by the FTTH Council Europe) of three measures "to deliver fast and ultra-fast broadband in Europe":
"This package comprises a Commission Recommendation on regulated access to Next Generation Access (NGA) networks that provides regulatory certainty to telecom operators, ensuring an appropriate balance between the need to encourage investment and the need to safeguard competition, a proposal for a Decision to establish a Radio Spectrum Policy Programme to ensure, inter alia, that spectrum is available for wireless broadband and a Broadband Communication outlining how best to encourage public and private investment in high and ultra-high speed networks."
More on this last one here; an interesting and timely extract from the full text, on ways to promote investment and reduce investment costs:
"Local authorities should also consider using fibre core networks that have been or are being constructed to link up public entities (schools, libraries, clinics) in order to bring high-speed connections to unserved communities. Where appropriate, Member States should consider setting up broadband funds at national level on which local authorities can call for the construction of such passive infrastructures."
A nice coincidence with the key message from Rory Stewart's recent broadband conference - re-use existing public sector infrastructure to deliver in rural areas. So at least the UK appears switched on in terms of possible approach, if not finances. So, time for a look down the back of the Treasury's sofa perhaps?

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