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Bartek Tokarz  European Commission - eu broadband policy incl cef inca london 08052014
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Bartek Tokarz European Commission - eu broadband policy incl cef inca london 08052014

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Transform Digital Conference 08-05-2014 …

Transform Digital Conference 08-05-2014
broadband, technology, fibre, digital

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  • 1. EU Broadband Policy Bartek Tokarz DG CONNECT Unit B5: Broadband INCA Transform Digital Conference London, 8 May 2014 1
  • 2. Urban (> 500 inhab. Per km2) Suburban (500-100inhab. Per km2) Rural (<100 inhab. Per km2) 50% 20% 30% 30% 50% 20% % of total EU population % of total EU wide FTTH cost ShareofinhabitantsandFTTHcost • 50% of the European population live in urban areas and additional 30% in suburbs • Building a nation-wide NGN network in Europe would cost around EUR 200 bn* • 20% of this cost is required to cover 50% of European population in urban areas • 50% of this cost is required to cover the 20% of European population in rural areas * Based on consultancy assignment commissioned by the EIB
  • 3. NGN investment climate Supply: market operators invest around EUR 15 bn annually for fixed BB: cherry picking and parallel deployment in highly profitable areas Demand: Market uptake and willingness to pay premium lower than anticipated. As a result: • Operators are scaling back their investment plans • Change to lower cost technologies (VDSL, vectoring…) State aid for rural BB roll-out: • New member states are leapfrogging due to availability of structural funds and high co-financing rate • Apart from EU funds, only few national state aid programs are operational Investors hesitant to finance FTTH projects: • Long pay-back periods • Uncertain regulation increasing the risk • Small scale projects
  • 4. The scale and risk of different broadband projects – EIB experience Incumbents and alternative operators present larger projects but mainly in densely populated areas. Business risk mitigated by existing cash generation and sound business case Local-government supported projects: smaller in size, mainly covering grey and some white areas . Business cases are not strong, thus the government support Small private projects cover areas which are “overlooked” by incumbents, mainly in grey and some urban areas. Business cases vary, risk is usually high.
  • 5. EC strategy for NGA investment • Focus: Incentivising private NGA infrastructure investment by improving risk-return trade-off Market framework: recalibration of regulatory instruments Financing and funding Increases private investor returns Reduce private investor risk
  • 6. 6 Financing and funding Market framework • Directive on cost reduction • Recommendation on non-discrimination and costing methodologies • Proposal for Regulation on Telecom Single market: • European inputs: Spectrum coordination, access to RLAN and European standardised virtual access projdcts • Single consumer space: Net neutrality, harmonised end user rights, roaming • Single authorisation • Upcoming review of recommendation on relevant markets • European Structural and Investment Funds (ESIF) • Connecting Europe Facility (CEF) • Broadband state aid guidelines Single market for telecoms
  • 7. 7 • 2014 - 2020: ICT a priority in the European Structural and Investment Funds • Connecting Europe Facility (CEF): Some complementary EU support by means of financial instruments • Possibly greater EIB lending activity in ICT/broadband following capital increase Public financing (1) EU-level funding
  • 8. EU/EIB support Structure at project level (funded solution): SPV Project Costs Equity Sub-debt Bank/ Project Bonds Sub- invest ment grade debt Invest ment grade debt EU partner (e. g. EIB) • Sufficient increase in credit quality of senior debt so as to attract bank/ bond financing • Sub-debt debt pricing includes fair risk margin, i. e. no subsidy • Sub-debt can be combined with different funding sources (senior loans, bonds)
  • 9. EU/EIB impact – additional factors • Project appraisal benefits from sector-specific expertise • EU involvement has strong signalling effect for other investors/lenders • Although risk-based, pricing takes into account economic benefits/ externalities • More favourable pricing can give additional boost to project viability
  • 10. State aid: new guidelines Achieving the right mix between public and private investment: public interventions targeted at market failures; faster decisions. Principles: • Technological neutrality: Next Generation Access networks can be based on different technological platforms. • to protect private investors, publicly financed infrastructure can only be allowed if it provides a substantial improvement ("step change") over existing networks. • public funding of ultra-fast broadband networks (of more than 100 Mbps) will be possible also in urban areas subject to very strict conditions to ensure a pro-competitive outcome. • when a network is realised with taxpayers' money, competitors will benefit from a truly open network for the benefit of consumers.
  • 11. Thank you 11