Study on the implementation of the existing Broadband Guidelines Multilateral Meeting
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1 Study on the implementation of the existing Broadband Guidelines Multilateral Meeting Dieter Elixmann Dr. Karl-Heinz Neumann Ralf G. Schäfer 14 November 2011 Brussels 0
2 Agenda Background of the project Results from the case studies Technological issues and recommendations 1
3 Background of the project Objectives Support the revision process of the Broadband Guidelines Analysis of case studies Analysis of technological issues Derive recommendations for the upcoming revision of the Guidelines 2
4 Background of the project Overview of the case studies Country Case N53/2010 (DE): Federal framework programme on duct support N570/2007 (DE): Broadband in rural areas of Baden-Württemberg N62/2010 (FI): Finland NGA N746/2006 (UK): North Yorkshire NYNET Project N267/2005 (UK): Rural Broadband Access Project N284/2005 (IRL): Metropolitan Area Network Broadband Program N596/2009 (IT): Bridging the digital divide in Lombardia N331/2008 (FR) : Réseau à très haut débit en Hauts-de-Seine C53/2006 (NL): Citynet Amsterdam New Zealand: Ultra-Fast Broadband Initiative 3
5 Background of the project Basic characteristics of the case studies Case Project Broadband Network layer Network segment N53 National framework NGA Passive Backhaul* N570 Regional framework Basic No limitation Backhaul and access N62 National framework NGA Passive and active Backhaul* N746 Individual regional case Basic/NGA No limitation Core network/pop N267 Regional Programme Basic No limitation Backhaul and access N287 National Programme NGA Passive Backhaul N596 Individual regional case Basic No limitation Backhaul and access N331 Individual regional case NGA Passive Backhaul and access C53 Individual local case NGA Passive Backhaul and access UFBI National programme NGA Passive and active Backhaul and access * Access network may be affected to some extent. 4
6 Background of the project Technological issues addressed Definition of NGA Contribution of technological solutions for NGA networks, e.g. xdsl FTTx Hybrid fibre coax Mobile technologies Wholesale access to networks and potential open access" products, e.g. Unbundling Bitstream Separation, e.g. Accounting separation Functional separation Structural separation Regional splitting 5
7 Agenda Background of the project Results from the case studies Technological issues and recommendations 6
8 Results from the case studies Experiences and key challenges (1) Detailed mapping and coverage analysis Problems in receiving sound projections from private investors Ambitious requirements regarding resources and know-how Uncertainties regarding the distinction between grey and black areas Potential conflict of interest on lower administrative levels Open tender process High transaction costs for bidders due to limited transparency and varying requirements across different regions Sometimes none or only a few bidders due to insufficient economic viability Most economically advantageous offer Uncertainties about relevant criteria and their weights in addition to the amount of aid Technology neutrality Different interpretation of technology neutrality Insufficient awareness that broadband technologies differ with regard to bandwidth and their QoS capabilities 7
9 Results from the case studies Experiences and key challenges (2) Use of existing infrastructures Limited availability of relevant and accurate information Access not or not in a non-discriminatory way provided Risk of favouring incumbents Open access Uncertainties with regard to potential and relevant access products Often limited demand for access in rural/remote areas, in particular on the passive layer High transaction costs for national operators in case of missing harmonisation Benchmarking pricing exercise Intention of public authorities to profit from telecommunications regulation to reduce the complexity of tasks Claw-back mechanism to avoid over-compensation Low practical relevance/rare application Fear of significant cost of administration Sometimes linked with a separation obligation on the accounting level Re-invest option as an alternative to a pay-back obligation 8
10 Agenda Background of the project Results from the case studies Technological issues and recommendations 9
11 Technological issues and recommendations Overview Basic principles (Rec. 1 Rec. 7) Definition of NGA Harmonisation of SMP regulation and State aid rules State aid and broadband projects in general (Rec. 8 Rec. 30) Conditions of para. 51 Amendments with regard to broadband networks in general State aid and NGA projects (Rec. 31 Rec. 42) Distinction of NGA areas (para. 68 ff.) Additional conditions for NGA networks (para. 79) Amendments with regard to NGA networks Separation (Rec. 43 Rec. 45) 10
12 Agenda Background of the project Results from the case studies Technological issues and recommendations Basic principles Excursus: technological aspects State aid and broadband projects in general State aid and NGA projects Separation 11
13 Technological issues and recommendations Basic principles (1) Ensuring consistency between Digital Agenda, NGA Recommendation and Broadband Guidelines Differentiation of three categories: - Basic broadband - Fast broadband - Ultra-fast broadband NGA = ultra-fast broadband Not all technological solutions support any type of broadband - Only wired access networks (FTTB/H and cable) support ultra-fast broadband - Mobile technologies only support basic broadband and potentially fast broadband (LTE) 12
14 Technological issues and recommendations Basic principles (2) Orientation of State aid rules towards SMP regulation Same portfolio of access obligations and same principles for determination of access prices Benefit from competencies and experiences of NRAs through their active involvement - Examination of the results of market analysis - Assessment of wholesale price proposals - Determination or at least approval of access obligations - Development of a code of practice in case of national framework programmes Provide a comparable legal basis for the activities of NRAs relating to - the notification of State aid measures - the implementation of State aid measures 13
15 Technological issues and recommendations Basic principles Rec. 1 Rec. 6 Feedback and discussion 14
16 Agenda Background of the project Results from the case studies Technological issues and recommendations Basic principles Excursus: technological aspects State aid and broadband projects in general State aid and NGA projects Separation 15
17 Excursus: technological aspects Ladder of investment Source: BEREC: Next Generation Access Implementation Issues and Wholesale Products, March 2010, p
18 Excursus: technological aspects Classification of alternative access products Various ways to classify access products (OSI) layer - 0 Duct access, dark fibre (unbundling) - 1 Wavelength access (WDM) - 2 Ethernet bitstream access - 3 IP bitstream access Active vs. passive access products Location of the access point in the network (Primary) wholesale products vs. (ancillary) wholesale products to reach access points 17
19 Excursus: technological aspects Classification according to access points Access can be provided at various locations of the network in the basement of end-user buildings (access to the in-house wiring) at the street cabinet (FTTC architecture) or concentration point (FTTH): subloop or concentration point unbundling at the MDF (copper network) or MPoP (fibre network): unbundling or bitstream access at a core network node: only bitstream access 18
20 Excursus: technological aspects Scenario P2P with fibre LLU 19
21 Excursus: technological aspects Scenario GPON with bitstream access at a core network node 20
22 Excursus: technological aspects Scenario GPON with bitstream access at the MPoP 21
23 Excursus: technological aspects Concentration point unbundling Source: BEREC: Next Generation Access Implementation Issues and Wholesale Products, March 2010, p
24 Excursus: technological aspects Conclusions Advantages of full unbundling of subsidised NGA networks at the ODF via P2P architectures Future proof network topology Provides best opportunities for effective competition Enables independency of technological decisions of access providers and access seekers Only low additional investment cost to deploy P2P compared to P2MP (if at all) Overcompensation of higher investment cost by positive welfare effects Bitstream access will get more relevance in NGA Despite limited replicability of fibre infrastructure duct access important if and where not the incumbent invests in fibre... for infrastructure competition in high density areas... for backhaul access and competition 23
25 Agenda Background of the project Results from the case studies Technological issues and recommendations Basic principles Excursus: technological aspects State aid and broadband projects in general State aid and NGA projects Separation 24
26 Technological issues and recommendations State aid and broadband projects in general (1) Enhancement of positive impact of State aid measures on competition Obligation that access seekers get access to the infrastructure of incumbents at the same terms and conditions as the latter use for their own tenders Specification of minimum access requirements for typical broadband access network constellations Requirement that access obligations imposed under the State aid rules take effect as early as possible before starting the network operation Postulation that the calculation of wholesale access prices takes into account subsidies that are provided for certain network elements used to provide these wholesale services Establishment of an option to abstain from a reverse payment mechanism regarding excessive profits and instead requiring a re-investment by the beneficiary in nonprofitable areas 25
27 Technological issues and recommendations State aid and broadband projects in general (2) Clarification of details of the Guidelines in order to enhance applicability Classification of a grey area even if two different broadband service offerings are provided by the same operator via different network platforms (e.g. DSL and LTE) Provision of appropriate definitions of not sufficiently transparent terms, e.g. - Active infrastructure - Passive infrastructure - Wholesale open access - Market failure Provision of more methodological details on selected tasks arising from the Guidelines, e.g. - Market investor test - Selection of the most advantageous offer 26
28 Technological issues and recommendations State aid and broadband projects in general (3) Increasing efficiency of the implementation of State aid measures from the perspective of public authorities as well as of potential investors/operators Encouragement to set up framework programmes at a more central level and to provide advice on the details and provisions of State aid to the benefit of local or regional public authorities including a proper implementation and monitoring approach Shortening of the near future horizon for market analysis from 3 to 2 years Permission for public authorities to go ahead if they have justified doubts on deployment commitments made by market participants for strategic reasons Encouragement to take into account the assessment of economic incentives in the definition of relevant regions Encouragement to publish tender information on a national or at least on a regional level Encouragement to harmonise tendering conditions at a national level Obligation of beneficiaries to provide comprehensive and non-discriminatory access to information on their infrastructure deployed under a State aid Consideration of the option of giving up the claw-back mechanism under the assumption of competitive tender processes 27
29 Technological issues and recommendations State aid and broadband projects in general Rec. 7 Rec. 30 Feedback and discussion 28
30 Agenda Background of the project Results from the case studies Technological issues and recommendations Basic principles Excursus: technological aspects State aid and broadband projects in general State aid and NGA projects Separation 29
31 Technological issues and recommendations State aid and NGA projects (1) Overcoming the chicken-and-egg problem regarding demand for NGA Abolition of the requirement to demonstrate end-user demand following the objectives of the Digital Agenda Differentiation of obligations for additional access products Mandatory provision of - Full unbundling - Bitstream - Duct access Other access products (e.g. sub-loop or concentration point unbundling) only in case of actual demand or similar obligations in the context of SMP regulation No justification to impose multi-fibre deployment so far 30
32 Technological issues and recommendations State aid and NGA projects (2) Focusing the State aid intervention for NGA networks Limit subsidies to passive network infrastructure elements of NGA networks Strengthen competition in the case of grey NGA areas by application of regulatory instruments instead of subsidising additional NGA infrastructures Analysis of specific issues with regard to concerns from a State aid perspective Cost allocation of infrastructure investments between the regulated electricity business and the telecommunications or other businesses Infrastructure investments of state owned local utilities and potential crowding out effects of private sector initiatives Adding NGA specific aspects of other forms of State aid to the Guidelines in order to reduce uncertainties for innovative project approaches Guarantees/capital cost subsidies Public-private partnerships (PPP) 31
33 Agenda Background of the project Results from the case studies Technological issues and recommendations Basic principles Excursus: technological aspects State aid and broadband projects in general State aid and NGA projects Separation 32
34 Technological issues and recommendations Separation No need for obligations regarding structural separation in addition to the Framework Considering a mandatory accounting separation obligation Encouraging MS to regionalize lots in national or supra-regional projects Demarcation of regional lots taking into account cost and profitability considerations Allow bids for a single or only some of the regional lots and bids for all lots Award a single operator in case the advantages of this approach outweigh its disadvantages 33
35 Technological issues and recommendations State aid and NGA projects/separation Rec. 31 Rec. 42/Rec. 43 Rec. 45 Feedback and discussion 34
36 WIK-Consult GmbH Postfach Bad Honnef Deutschland Tel.: Fax:
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