Transcript Investment incentives for broadband investments on fixed

European sector regulation
and investment incentives for NGA
to meet objectives for Digital Agenda
Harald Gruber
Project Directorate, European Investment Bank
AGCOM Seminar
Rome 26 May 2011
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Outline
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•
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Europe’s position in broadband deployment
Sector regulation
Investment incentives
Investment requirments
Financing challenges for NGA investment
Conclusions
Broadband household penetration 2000-2009
100%
90%
80%
of households
70%
60%
50%
40%
30%
20%
10%
0%
2000
2001
2002
2003
EU27 average
2004
USA
2005
Australia
2006
2007
Japan
2008
2009
Korea
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Fixed line broadband regulation
• Bottleneck in local loop access
• Regulatory remedy: open access at cost based
prices
• Asymmetric access regulation of DSL
(unbundling) vs. cable modem
• Did ladder of investment concept (short term
service competition, long term platform
competition) work?
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Ladder of investment theory
• Short term goal of service based
competition
– Resale
– Bitstream
• Long term goal of facility based
competition
– Shared access
– Full local loop unbundling
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EU is moving away from platform
competition
Shares of broadband access technologies in EU-25
2004
2005
2006
2007
DSL
77.8%
80.4%
81.8%
81.5%
Cable
20.0%
17.3%
15.9%
15.6%
FTTH
1.2%
1.1%
1.0%
1.2%
Satellite
0.5%
0.3%
0.2%
0.1%
WLL
0.1%
0.5%
0.7%
1.1%
Other
0.3%
0.5%
0.4%
0.5%
100.0%
100.0%
100.0%
100.0%
Total
Source: European Commission
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Coverage of different broadband technologies
100
% of households / population
90
80
70
60
50
40
30
20
10
0
DSL
EU average
Cable
USA
Korea
FTTH/FTTB
Japan
Australia
3G
OECD Average
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Outcomes in the market place
• Stronger emphasis on single platform for
high speed broadband
• Slow development of competing platforms
(except some countries with DOCSIS3
upgrades
• Research under way shows that unbundling
leads to increased broadband penetration,
but effects dissipates after 4 years
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Europe 2020 - Digital Agenda
I.
Broadband Infrastructure Development
Digital Agenda Broadband
Targets
Broadband
Category*
Access Speed*
Enabling Technologies*
Target I: Basic Broadband for
all by 2013
Basic Broadband
150 kbps – 30 Mbps
Copper (ADSL2, VDSL1, SDSLS), Cable
(EuroDOCSIS 1.1/2), Mobile (EDGE, 3G, HSPA),
Wireless (WiMax), Satellite
Target II: High or very high
speed access to all by 2020 (30
Mbps or above)
High Speed
30 Mbps – 50 Mbps
Copper (VDSL2), Mobile (HSPA+, LTE)
Very High Speed
50 Mbps – 100 Mbps
FTTH (GPON, PtP), Mobile (LTE advanced)
Target III: 50% or more of EU
households subscribe to
Internet access above 100
Mbps by 2020
Ultra High Speed
100 Mbps – 1 Gbps
FTTH (NGA1, NGA2, PtP), Cable (EuroDOCSIS 3)
II.
Application and Diffusion of ICT Across Sectors (Digital Single Market, Digital
Inclusion, eGovernment)
III.
ICT R&D and ICT Applications for Low Carbon Economy
*EIB Classification
Digital Agenda interpretations
DIGITAL AGENDA
BROADBAND TARGETS
1.
2.
3.
It restated the objective to bring
Broadband access for all Europeans
by 2013
Seeks to ensure that all Europeans
have access to much higher internet
speeds of above 30 Mbps by 2020
Seeks to ensure that 50% or more of
European households subscribe to
internet connections above 100 Mbps
by 2020.
ISSUES OPEN FOR
INTERPRETATION
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What is the definition of Broadband in
target 1?
Do the access speeds refer to upload,
download, both?
Are speeds guaranteed speeds,
advertised, theoretical speeds?
Meaning of “Have access to”: regulation
in place, access at the workplace,
village, building passed, home passed,
etc?
For target 3: Pan European average or
27x national average?
The way the Digital Agenda targets are interpreted influences the scale
and the type of available technologies to be deployed.
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Different interpretations lead to different scenarios for the
Digital Agenda targets
• Four scenarios, with different interpretations of each target:
Minimum: Theoretical speed, with internet centres in rural areas (ADSL2, Internet
Centres, VDSL2, EuroDOCSIS 3.0, FTTB)
Base: Theoretical speed, coverage to the household (HSPA, VDSL2,
EuroDOCSIS 3.0, FTTB, FTTH)
Advanced: Actual Speed, coverage to the household (ADSL2, LTE, VDSL2,
EuroDOCSIS 3.0, FTTB, FTTH)
Maximum: Actual symmetric speed, coverage to the household (G.SHDSL2 and
Fiber)
• Every target in each scenario for each area leads to a range of technological
solutions.
• Countries were further split into urban, suburban and rural areas, as the population
density is the key determinant of technology deployment cost
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Capex for DA 2020 scenarios
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Addressable Market Segments
Estimated total investments EUR in excess of 200bn until 2020
White & Certain Grey Areas
Government funding plus “New risk-sharing
instruments” or modified existing ones will be needed
Grey + White
Black areas
EUR 80-90bn**
Certain Grey
Areas
EIB Existing Instruments
Projects must be:
• Technically sound
• Financially viable
Black Areas
• In compliance with regulation
• Show acceptable economic return
Source: EIB estimates
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Financial considerations for Digital Agenda
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Investment requirements in excess of EUR 200 bn
The heaviest investment need accumulates from the achievement of 30 Mbps for all,
representing over 75% of the total cost in each scenarios.
If considering cable infrastructure upgrades, a 25-35% decrease to the total need could be
achieved
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Though economically justified, substantial part of total capex has questionable financial
profitability, especially in non-urban areas
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Problem that there is no particularly compelling business case, except when there is
competition between platforms (DSL vs. Cable)
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Scope for public sector in generating critical demand (e.g. e-government, e-health) and new
instruments for procurement (pre-commercial procurement)
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Role of financial instruments, in particular widening of RSFF, but also PPP and equity
instruments
Regulatory challenges for NGA
• Encourage more investment
• When single network, open access.
• What to do with legacy copper network? How to regulate?
Sunset for copper network?
• Utility regulation for NGA?
• Regulatory support for raise funding and/or optimise use of
subsidies
• Role of regulation in credit enhancement
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Conclusion
• Regulation has been effective in increasing competition,
but also increased role of single platform
• Regulation has strong effects on investment behaviour
• Stimulation of facility based competition appears
expensive (duplication)
• Utility type regulation for NGA with subsidies to meet
policy targets for roll-out could be one option, but are there
more market based ones?
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Backup slides
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European Investment Bank
Broadband Financing: direct loans to broadband infrastructure 2000 – 2010
Following sharp decline in broadband
infrastructure financing after the
dotcom bubble, EIB has been steadily
expanding its lending with signatures
for 2009 of EUR 2.3bn
ICT Signatures 2000-2010
Other
6%
2G NW
14%
Fixed Broadband
32%
Fixed NW
7%
In 2009, loan approvals in the ICT
sector reached EUR 3.9bn
Approximately 40% of these were for
ICT Research, Development and
Innovation
More than 50% of the approvals were
for broadband projects including land,
mobile and satellite
Nearly 2/3 of the approved broadband
projects were fixed solutions
Broadband
51%
Mobile Broadband
19%
RDI
22%
EIB investments to broadband infrastructures
mEUR
2,500
2,000
1,500
1,000
500
0
2000
2001
2002
2003
2004
2005
Fixed broadband
2006
2007
2008
2009
2010
Mobile broadband
For an updated list of projects visit: http://www.eib.org/projects/loans/sectors/telecommunications.htm
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European Investment Bank
Broadband Financing: FTTx examples (2009 – 2010)
ZON Multimedia
(Portugal)
Iliad SA
(France)
Fastweb S.p.A.
(Italy)
Portugal Telecom
(Portugal)
EUR 150m
EUR 350m
EUR 200m
Project: EUR 800m
(FTTH & xDSL)
Project: EUR 850m
(ADSL & FTTH)
Project: EUR 750m
(FTTH)
07-2009
02-2009
07-2009
09-2009
M-Net Breitband Munchen
(Germany)
SONAECOM
(Portugal)
Türk Telekom
(Turkey)
Reggefiber Group B.V.
(The Netherlands)
EUR100m
EUR 75m
EUR 250m RSFF
EUR 130m RSFF
Project: EUR 205m
(FTTH)
Project: EUR 152m
(FTTH)
Project: EUR 661m
(FTTC & FTTB)
Project: EUR 290m
(FTTH)
12-2009
02-2010
04-2010
10-2010
EUR 100m
Project:EUR 307m
(i.a. FTTH)
For an updated list of projects visit: http://www.eib.org/projects/loans/sectors/telecommunications.htm
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