EU Commissioner says local governments should set up broadband networks if private firms won’t

By Esme Vos on May 14, 2007 in Events Articles

Viviane Reding, EU commissioner for telecommunications, opened the EU conference “Bridging the Broadband Gap” in Brussels on 14 May 2007 by emphasizing that, if necessary (i.e. where current services are inadequate), local governments should step in to deploy broadband infrastructure. I am here at the EU conference “Bridging the Broadband Gap” (May 14-15, 2007 in Brussels) blogging the conference. The opening keynote speaker is Viviane Reding, EU commissioner for telecommuniations, who is known for favoring structural separation of infrastructure and services, and for coming down hard on countries that favor their telecom incumbents.

Viviane Reding’s keynote

Broadband only brings significant benefits if developed on a large scale. Think of the growth rates in Europe if the rural areas can have fast broadband. Without broadband, Europe cannot become more competitive. It has to be a national and not just regional task.

High-definition IPTV and interactive services (Web 2.0) all require high speed broadband and more symmetry between up and down links.

But it’s not just individuals who need high speed broadband, companies need broadband for purchasing, accounting, bidding for contracts, updating and protecting vital information. All of these applications can now be delivered over the Internet so without fast symmetric connections, these companies will be in trouble.

The distribution of EU content (films, books, TV shows) on a global scale benefits not just the producers of such content, but add to the cultural diversity of entertainment and art in the world. This is a competitive issue for European producers of content and only high speed broadband can make this happen.

Easily accessible and efficient public services delivered through e-government applications save people money, lower costs but again require broadband. E-health applications, e.g. life-saving long distance access to records and images, can be delivered only with broadband. Education access is a big problem for rural areas. They need to communicate with specialist teachers and form learning communities.

All these applications are bandwidth hungry.

Where does the EU stand today?

The EU is doing fairly well on broadband availability and uptake. In 2007, there are 18 million broadband connections (in the EU 25 member states).The overall EU broadband penetration rate is 17% and five countries — Denmark, Sweden, the Netherlands, Finland and Belgium — are world leaders in this respect.

But there is a lot of variation, a difference of 26.5 percentage points between the country with the greatest penetration and the one with the least. Unfortunately the broadband gap is actually widening because operators serving urban areas are increasing broadband speeds and lowering rates at a faster rate.

Ten percent of the EU population are excluded from broadband access. It’s just not available in the area they live in. Thirty percent of the rural population in the EU has no broadband and that is 20% above the national average. Data from the new member states are not yet available and if we had those, the gap will look greater.

What do we mean by broadband?

So far people call broadband anything over 144 Kbps but in reality, we need at least 2 Mbps upstream and downstream. Unfortunately, in rural areas 512 Kbps is the norm, with many users suffering from slower connections.

There is no sign of closing the divide between broadband speeds in urban and rural areas. The cost of broadband is high in less densely populated areas. There is a structural problem and it’s getting worse.

Lack of broadband access widens social and economic divides. Local and regional authorities are key players because they understand local needs and requirements of infrastructure, training and services.

Where all else fails, local governments should build their own infrastructure, that is, if the private parties don’t act. Governments should not distort competition, but if the government believes that current services are inadequate, they should intervene. Neelie Kroes, Eu Commissioner for competition policy, will talk about what constitutes permissible state aid to broadband projects tomorrow (May 15).

The message to local governments: talk to the operators first, don’t duplicate an investment credibly announced within a reasonable time frame. But if there is a market failure and the only way to solve the problem is to step in, then do so.

Broadband as part of universal service obligation?

Broadband is a service of general economic interest. Should it be part of universal service obligation? Maybe we have to rethink our objectives are in mandating universality. The current funding model designed for national monopolies and is no longer suitable for today’s market. The world has changed, but the rules are still the same. Do we need to change the rules?

Next year, the Commission will publish a green paper to launch a policy debate on the topics outlined in this presentation and this could turn into a legislative proposal in 2009.

Competition is key; local governments’ role

The broadband market has developed because of competition. The strongest performers are those where there is infrastructure competition or where regulators have acted to promote access to the network.

Competition drives investment and investment drives innovation. Reding is against all regulatory holidays for fiber investments (e.g. Germany).

So how does one encourage investment in broadband in rural areas?
- open up access to dark fiber
- reinforce nondiscriminatory access rules
- free up the airwaves for wireless broadband

In upgrading the local loop, 80% of the cost is related to civil engineering so where it is physically feasible, regulators should open up the access to the ducts, the manholes, the street cabinets. In many areas, local authorities have power to open up these alternatives.

There are interesting projects where public authorities have opted for open access networks managed by independent parties, open to all providers on fair terms. Many of these projects have display booths here at the EU conference. There should be more of these local initiatives.

Structural separation between infrastructure and services

Where due to physical or economic considerations, there is no competition, access has to be offered on a nondiscriminatory basis: the structural separation model. In many countries that are behind in broadband penetration, the cause is the incumbent being favored by the regulator.

Structural/functional separation can be an exceptional measure for the regulator to use to address lack of competition. All market players have to be treated equally so regulators must put pressure on incumbents to upgrade core and access networks.

Use of wireless technology

Wireless technology is crucial to rural areas. But wireless solutions will become a reality only if radio spectrum is available and accessible to market players who will be ready to invest. So the EU needs spectrum policy that is flexible and market driven. Today the process for allocating spectrum is bureaucratic and slow. We have to change this so in the forthcoming reform, the Commissioner will propose a change of approach: flexibility is a default, not command and control.

Here are some proposals:
- open up the 2.6 GHZ for mobile and innovative fixed wireless services;
- new approaches to digital dividend: opening up the TV white spaces, a once in a generation opportunity;
- reserving a part of the white spaces for wireless broadband, even a small part of the spectrum range could bridge the digital divide in the rural areas in a scalable, cost effective manner. It could also create more competition, more choice. There should be no high stakes auctions here; this should be for the public interest. Otherwise there would be no competition and no inexpensive wireless broadband service for communities.

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