Universality in the Broadband Age


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Discusses experiences of deploying broadband and the options of government stimulus on the communications sector

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Universality in the Broadband Age

  1. 1. Universality in the Broadband Age: Lessons from International Experience J. Scott Marcus, Director and Department Manager Brussels, 25 March 2009
  2. 2. Universality in the Broadband Age <ul><li>Why universality? </li></ul><ul><li>Stimulus initiatives </li></ul><ul><ul><li>United States </li></ul></ul><ul><ul><li>Australia </li></ul></ul><ul><ul><li>New Zealand </li></ul></ul><ul><ul><li>Germany </li></ul></ul><ul><li>Challenges of NGA deployment </li></ul><ul><li>Views of Universal Service: ITU, World Bank, EU </li></ul><ul><li>Competition and Universal Service </li></ul>
  3. 3. Why universality? <ul><li>Some services are so important that nobody should be excluded, even those of limited means. </li></ul><ul><ul><li>“A fundamental requirement of universal service is to provide users on request with a connection to the public telephone network at a fixed location, at an affordable price.” – USD </li></ul></ul><ul><li>Network externalities: If nearly everyone is reachable, the network is more valuable to everyone. </li></ul><ul><li>Commercial incentives alone would not achieve universal coverage, so intervention can be warranted. </li></ul>
  4. 4. Stimulus in the United States <ul><li>Stimulus bill includes some $7 billion US in (1) subsidies to rural areas ($2.5B), and (2) subsidies to unserved and underserved areas ($4.7B). </li></ul><ul><li>For the US, this is a relatively small subsidy. </li></ul><ul><li>Few companies were in a position to accelerate deployments over the next twelve months, which was the target time frame for the stimulus package. </li></ul>
  5. 5. Stimulus in the United States <ul><li>The thrust of the package is to further extend the build-out of broadband, not to ensure: </li></ul><ul><ul><li>That markets in the U.S. are competitive. </li></ul></ul><ul><ul><li>That price/performance for broadband is at the level that would be expected in a truly competitive market. </li></ul></ul><ul><li>Firms that accept subsidies must also accept “non-discrimination and network interconnection obligations” including the FCC’s “broadband policy statement”. </li></ul>
  6. 6. Stimulus “Down Under” <ul><li>Australia is in the process of procuring a build-out of a National Broadband Network (NBN). </li></ul><ul><ul><li>Coverage of 98% at 12 Mbps. </li></ul></ul><ul><ul><li>Commitment of up to 4.7 billion AUD. </li></ul></ul><ul><ul><li>Telstra has failed to submit a compliant bid. </li></ul></ul><ul><li>New Zealand is planning a broadband stimulus. </li></ul><ul><ul><li>Coverage of 75% with “ultrafast broadband”. </li></ul></ul><ul><ul><li>Commitment of 1.5 billion NZD. </li></ul></ul>
  7. 7. Stimulus in Germany <ul><li>The German BMWi recently announced initiatives. </li></ul><ul><ul><li>Coverage of 100% at 1 Mbps by end of 2010. </li></ul></ul><ul><ul><li>Coverage of 75% at 50 Mbps by end of 2014. </li></ul></ul><ul><ul><li>Funding of € 150 million. </li></ul></ul><ul><ul><li>Various complementary infrastructure-sharing and spectrum management initiatives. </li></ul></ul>
  8. 8. Challenges of NGA deployment <ul><li>WIK report on Next Generation Access (NGA) for ECTA (2008) </li></ul><ul><li>Sophisticated models of fibre roll-outs in France, Germany, Italy, Netherlands, Portugal, Spain </li></ul><ul><li>Key findings: </li></ul><ul><ul><li>No country likely to achieve full coverage without public stimulus/subsidy. </li></ul></ul><ul><ul><li>Only limited prospect of replicating infrastructure. </li></ul></ul><ul><ul><li>Maintenance of adequate procompetitive remedies is vital. </li></ul></ul>
  9. 9. Challenges of NGA deployment
  10. 10. Challenges of NGA deployment
  11. 11. Challenges of NGA deployment
  12. 12. Challenges of NGA deployment <ul><li>Migration to FTTC/VDSL complicates competitive remedies, both for shared access and for Local Loop Unbundling (LLU). </li></ul><ul><li>The street cabinet becomes the point of interconnection rather than the Main Distribution Frame (MDF). </li></ul><ul><ul><li>More points for competitor to connect to. </li></ul></ul><ul><ul><li>Fewer customers per cabinet. </li></ul></ul><ul><ul><li>Only incumbent has ducts to cabinet. </li></ul></ul><ul><ul><li>Physical access, heat dissipation … </li></ul></ul>
  13. 13. Views of Universal Service <ul><li>Concepts of best practice emerge in studies by the ITU and by the World Bank (cf. Bjorn Wellenius) </li></ul><ul><li>The national territory can be viewed as consisting of three kinds of areas: </li></ul><ul><ul><li>Those where commercial incentives are sufficient to ensure deployment and ongoing viability of services. </li></ul></ul><ul><ul><li>Those that require subsidy indefinitely. </li></ul></ul><ul><ul><li>Those that could be self-sustaining once initially “jump started”. </li></ul></ul>
  14. 14. Views of Universal Service <ul><li>Important to avoid needless subsidies to services that could sustain themselves. Not only is it wasteful, but it also distorts competition. </li></ul><ul><li>“ Reverse auctions” are a best practice means of providing no more subsidy than necessary. </li></ul><ul><li>Reverse auctions are not trouble free: </li></ul><ul><ul><li>The winner may be unwilling or unable to actually complete the build-out at the agree-on price. Encourages “bid to win”. </li></ul></ul><ul><ul><li>Does not automatically adjust to changing circumstances. </li></ul></ul>
  15. 15. Views of Universal Service <ul><li>“ Member States shall determine the most efficient and appropriate approach for ensuring the implementation of universal service …They shall seek to minimise market distortions, in particular the provision of services at prices or subject to other terms and conditions which depart from normal commercial conditions, whilst safeguarding the public interest.” </li></ul><ul><li>- Universal Service Directive </li></ul>
  16. 16. Views of Universal Service <ul><li>In considering whether the scope of universal service obligations be changed or redefined, the Commission is to take into consideration the following elements: </li></ul><ul><ul><li>are specific services available to and used by a majority of consumers and does the lack of availability or non-use by a minority of consumers result in social exclusion, and </li></ul></ul><ul><ul><li>does the availability and use of specific services convey a general net benefit to all consumers such that public intervention is warranted in circumstances where the specific services are not provided to the public under normal commercial circumstances? </li></ul></ul><ul><li>- Universal Service Directive </li></ul>
  17. 17. Views of Universal Service <ul><li>“When a universal service obligation represents an unfair burden on an undertaking, it is appropriate to allow Member States to establish mechanisms for efficiently recovering net costs. Recovery via public funds constitutes one method of recovering the net costs of universal service obligations. It is also reasonable for established net costs to be recovered from all users in a transparent fashion by means of levies on undertakings.” </li></ul><ul><li>- Universal Service Directive </li></ul>
  18. 18. Competition and broadband stimulus <ul><li>Where public funds are used to roll out broadband and/or NGA, maintaining competition is critical. </li></ul><ul><ul><li>The funded entity may be the only network serving that geographic area. </li></ul></ul><ul><ul><li>Funding risks distortions to competition </li></ul></ul><ul><li>Nondiscriminatory wholesale NBN access is crucial. </li></ul><ul><ul><li>Network operator cannot be permitted to favour its own affiliated operations over those of competitor. </li></ul></ul><ul><ul><li>Prohibition on offering retail services? </li></ul></ul><ul><ul><li>Functional or structural separation? </li></ul></ul>
  19. 19. wik -Consult GmbH Postfach 2000 53588 Bad Honnef Tel 02224-9225-0 Fax 02224-9225-68 eMail info@wik-consult.com www. wik-consult.com