IHS Global Insight Perspective | |
Significance | The European Union (EU) will have to show consistent use of this new regulation, as it attempts to strike a delicate balance between encouraging competition and bringing broadband to all. |
Implications | With operator spend being reined in as the recession bites, the EU will be forced to accept more state-funded NGNs if it hopes to meet ambitious coverage targets. |
Outlook | The EU needs to be seen to be fair and even with the enforcement of this legislation if it is avoid being accused of bias by any of the parties involved. |
The European Commission has published fresh guidelines on state funding of broadband infrastructure and next-generation networks (NGNs), which state that public money should only be used to fund roll-out in underserved areas, where commercial investment is not practical. The new rules are aimed at making it easier for member states to provide aid in so-called "grey" areas, where broadband infrastructure does not exist, while restricting funding in "black" areas, where competition exists with at least two operators.
The guidelines are the result of six months of consultation, during which the commission has examined the case for state funding of NGNs in the bloc (see Europe: 20 March 2009: EU to Update Rules on Broadband State Funding). The EU has stated it regards Internet access as a fundamental human right, and as such is committed to ensuring all citizens have fair access to high-speed broadband services. However, it is also opposed to member state interference in commercially viable markets, and there are fears funding of NGNs in such regions will lead to dominant incumbents and damage competition.
EU Competition Commissioner Neelie Kroes stated she hoped the new guidelines would facilitate the widespread roll-out of high-speed and very high-speed broadband networks, while enhancing European competitiveness and helping to build a knowledge-based society in the bloc. The EU also stipulated that any recipients of state aid would have to allow competitors access to its networks, and not favour any particular technology.
Outlook and Implications
- A Delicate Balance: Competition Commissioner Neelie Kroes stated that although NGN investment should be made mostly by private companies, there is an important role for public investment in achieving the widest possible access to broadband in underserved and non-profitable areas. The EU is committed to shrinking the digital divide, both within and between European Union member states, and sees public investment as making a significant contribution to bridging this gap. However, the EU will have to show consistent use of this new regulation, as it attempts to strike a delicate balance between encouraging competition and bringing broadband to all.
- High-Speed Broadband for All: The EU has repeatedly stated that it see high-speed broadband networks as necessary for education and innovation, and key to the future development of the bloc and economic recovery (see Europe: 8 April 2009: EU's Reding Stresses Importance of Redistributing Digital Dividend). The EU executive has pledged to drive growth of high-speed Internet in the 27-nation bloc, and has set a target of achieving 100% broadband coverage in the European Union by 2010. However, the Commission estimates that 200—300 billion euro (US$295—US$443 billion) worth of investment will be needed to bring NGNs to the whole bloc. With operator spend being reined in as the recession bites, the EU will be forced to accept more state-funded NGNs if it hopes to meet ambitious coverage targets.
- Future Clashes with Regulators and Operators: Many of Europe's key operators have welcomed the guidelines, with lobby group ETNO stating the new rules provided much-needed clarity for the industry, and made the case for private investment clearer. However, it is clear that the larger dominant operators are likely to benefit most from state funding, as they are most likely to win network tenders simply because they have the resources available to roll out NGNs in underserved areas. Cable companies have also lashed out at the concept of state-funded NGNs, saying that domestic governments shouldn't be allowed to distort competition by funding fibre roll out with taxpayers' money. The EU is already on a collision course with several domestic regulators concerning Internet access, and the cutting off of pirates who download copyrighted material illegally (see France: 16 September 2009: Watered-Down Internet Piracy Law Passes Lower House), and needs to be seen to be fair and even with the enforcement of this legislation if it is avoid being accused of bias by any of the parties involved.