Br0kenTeleph0n3

Following the broadband money

NGA funding chasm revealed as Kroes meets industry CEOs

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A massive funding gap will make it hard or impossible to meet the European Commission’s Digital Agenda targets by 2020, yesterday’s meeting between Digital Agenda champion Neelie Kroes and communications industry CEOs revealed.

Kroes told the CEOs yesterday she hoped the commission’s proposal for €9.2bn between 2014 and 2020 would unlock over €100bn in private investment.

McKinsey, a consultancy, estimates the cost of achieving the Digital Agenda goals at around €300bn. The European Investment Bank told Br0kenTeleph0n3 it would cost €200bn.

The Digital Agenda targets are basic broadband for all by 2013, universal access to 30Mbps, with 50% using 100Mbps services by 2020. Kroes asked the CEOs in March for proposals on how to fund the investment needed to achieve them.

There was clearly no consensus. Kroes said in a statement, “While it is understandable that commercial players try to maximise their own advantages, we also need to recognise that we have common interests.”

She said there was more mutual understanding about the issues, especially that digital video distribution is likely to be crucial in stimulating demand for high speed broadband.

However, there is growing evidence, such as the rise in uploads to YouTube, that audiences are becoming increasingly prolific producers. This will increase demand for higher upload speeds.

Kroes reiterated the European Commission’s support for a “robust best-efforts internet to which everyone has access”, saying it’s up to industry players to find commercially acceptable contracts, and that regulation will be a last resort.

Kroes said she wanted more time to study the CEOs’ proposals, but added some points were already clear. These were:

  • The maturity of high-speed networks differed across Europe and take-up levels were “disappointing”.
  • Investors were unwilling to commit funds for a massive NGA (next generation access) roll-out.
  • With uncertain short term demand for very fast broadband, a switch-off date for copper was unclear.
  • Consolidation and specialisation of network operators could create the scale and certainty required to attract investors.
  • There should be a single pan-European regulatory regime.
  • More open and interoperable technical standards were needed to improve efficiency and create uniform wholesale network access products.
  • Net neutrality, i.e. a robust best-efforts internet to which everyone has access, should be preserved. “Players at different levels of the internet value chain should be free to reach commercial agreements to innovate and develop new business models,” Kroes said.
  • The commission accepted that internet service providers should self-regulate the transparency of the terms, conditions and performance characteristics of the products they sold.

The CEOs’ proposals were put to Kroes by Ben Verwaayen of Alcatel-Lucent, René Obermann of Deutsche Telekom and Jean-Bernard Lévy of Vivendi.

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One Response

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  1. It feels like the only bit missing in the solution is imagination. There seems to have been an assumption that today’s models with a bit of gap funding would see us clear to the 2020 goals but its clear that the gap to be financed is a rather large part of the solution.

    So logic seems to suggest that if the goals themselves remain valid, that alternative business models might need to be looked at – in service delivery, in infrastructure financing, and so on. There are certainly projects around Europe that do have high take-up levels and are making money but they are rarely ones which have taken today’s businesses models and attempted “business as usual” at higher speeds.

    It seems odd that its a surprise that only perhaps 10-20% of a population are switched on by bandwidth – everyone else have no interest in the size of the Internet pipe any more than they care about the fuse rating for their electricity supply or the diameter of their water supply.

    So when you look at the projects that are making money and have high take-up rates they rarely sell “Superfast internet” as their one and only offering. Its more likely that they have healthcare, education, gaming, community TV, and a long list of services that mean something to people. It might be that what they sell if bandwidth but it isn’t what they market.

    But to engage people in this way requires a very different relationship with customers – less of a resource constrained model, to a more participative one. Its certainly not easy but it will be necessary if we are to achieve the 2020 goals.

    Adrian

    2011/07/14 at 09:24


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