Earlier this month the European Commission published (in draft for comment) an updated version of its state aid guidelines for broadband networks (press release here), further to this consultation in 2011.
According to the press release, last year's consultation showed that "most stakeholders found that the existing rules worked well and required no significant modifications, but considered that there was scope for more clarification." As identified by ISP Review, the new draft guidelines also recognise the need to support the roll-out of ultra-fast (100Mbps+) networks where appropriate and compatible with state aid regulations.
The ever-growing demand for additional bandwidth is acknowledged early in the draft guidance:
"Demand for capacity-intensive services is expected to increase in the future, as cloud computing, a more intense use of peer to peer technologies, social networks and video on demand services will develop further."The guidance also acknowledges the need for public funding of broadband infrastructure if the Digital Agenda for Europe 2020 targets are to be met:
"The Europe 2020 Strategy has underlined the importance of broadband deployment to promote social inclusion and competitiveness in the EU. It restated the objective to bring basic broadband to all Europeans by 2013 and seeks to ensure that, by 2020, (i) all Europeans have access to much higher internet speeds of above 30 Mbps and (ii) 50% or more of European households subscribe to internet connections above 100 Mbps."The guidance goes on to explain the importance of managing state aid in this area:
"Any state intervention should limit as much as possible the risk of crowding out private investments, of altering commercial investment incentives and ultimately of distorting competition to an unacceptable extent...State aid measures can, under certain conditions, correct market failures, thereby improving the efficient functioning of markets and enhancing competitiveness. Further, where markets provide efficient outcomes but these are deemed unsatisfactory from a cohesion policy point of view, State aid may be used to obtain a more desirable, equitable market outcome. In particular, a well targeted state intervention in the broadband field can contribute to reducing the 'digital divide' between areas or regions where affordable and competitive broadband services are on offer and areas where such services are not."Public funds are thus important to "extend broadband coverage in areas where there is no incentive for commercial operators to invest in and accelerate the deployment of very high speed, next generation access networks." The guidance goes on to explain the criteria used to determine whether a proposed investment is appropriate, with particular regard to ensuring that a minimum of market distortion occurs. It now distinguishes between basic broadband, NGA (next generation access) networks and ultra-fast networks:
"Several different technology platforms can be considered as basic broadband networks including asymmetric digital subscriber line (ADSL), cable, mobile, wireless and satellite solutions. At the current stage of market and technological development, NGA networks are wired access networks which consist wholly or partly of optical elements and which are capable of delivering broadband access services with enhanced characteristics (such as higher throughput) as compared to those provided over existing copper networks. They are able to deliver services at very high speeds and support a multitude of advanced digital converged services. At the current stage of market and technological development, NGA networks are therefore wired fibre-based or advanced upgraded cable networks."A footnote provides further explanation of what does and does not constitute NGA network technology:
"At this stage of technological and market development, neither satellite nor mobile or wireless network technologies (including LTE) appear to be capable of providing very high speed (symmetrical) broadband services, in particular since these technological solutions are "shared", thus the speeds will depend on the number of connected users in the area covered. However, given the rapid evolution of technology the Commission will closely follow the technology advancements and change the NGA definition and its interpretation accordingly, if technologies have changed."The draft guidance also acknowledged that NGA is about more than headline speeds:
"However, while connection speed is one important characteristic of NGA networks, at the same time it is not the only one. Apart from a certain download speed, future-proof NGA networks – which are more adequate for urban areas - are understood to have at least also the following characteristics: (i) provide enhanced connectivity (ii) provide the possibility of symmetric speeds and (iii) represent a sustainable and non-temporary technological advancement by extending fibre until the customer premises (iv) supports infrastructure-based competition."The guidance asserts that NGA represents a step-change in technology rather than an upgrade, underlining the risk of a new digital divide if areas are left behind:
"It is important to bear in mind that in the longer term NGA networks are expected to supersede existing basic broadband networks and not just to upgrade them. To the extent that NGA networks require a different network architecture, offering significantly better quality broadband services than today as well as the provision of multiple services that could not be supported by today’s broadband networks, it is likely that in the future there will be marked differences emerging between areas that will be covered and areas that will not covered by NGA networks."The following recommendations are made in respect of supporting investment in ultra-fast broadband networks:
"In light of the Digital Agenda objectives, in particular achieving 50% penetration to internet connections above 100 Mbps, public intervention would still be possible in areas where existing or planned NGA networks do not reach the end user premises with fibre networks."Again, a footnote provides further clarification:
"...NGA networks do not reach end user premises with fibre in case of FTTN networks, where fibre is installed only until the nodes (cabinets). Similarly, some cable networks are also using fibre until the cabinets and connect end-users with coaxial cables."...which I take to mean that the guidelines support public funds being used to top-up private sector investments, to convert FTTC deployments to FTTP where the required criteria can be met. One of these relates to demonstrating a clear "step change" over existing infrastructure: any new infrastructure must have "significant enhanced technological characteristics" compared to existing networks (for instance through symmetric speeds), thereby making it future-proof. There must also be expected demand for such improvements and the subsidized network must operate as a wholesale only network.
Comments on the draft guidelines should be submitted by 3 September. On the basis of the comments received, the Commission intends to adopt definitive Broadband Guidelines in December 2012.