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The Role of State in Broadband Growth : Possible intervention areas and competition restraints

The Role of State in Broadband Growth : Possible intervention areas and competition restraints. M. Bilal ÜNVER 11th Caspien Telecoms Istanbul , April 20, 2012. Content. Role of Broadband in Social and Economic Development Role of State in Driving Broadband Development

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The Role of State in Broadband Growth : Possible intervention areas and competition restraints

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  1. The Role of Statein BroadbandGrowth: Possibleinterventionareasandcompetitionrestraints M. Bilal ÜNVER 11th CaspienTelecoms Istanbul, April 20, 2012

  2. Content • Role of Broadband in SocialandEconomicDevelopment • Role of State in DrivingBroadbandDevelopment • EU’sstanceregardingstateinterventions • PublicPolicy ToolsandInstruments • Funding Schemes • Municipal Fiber Projects • Utility Resources • A Snapshot of Turkey • Conclusions

  3. Role of broadband • Acritical enabler for • Economicproductivity • Increasedinnovation • Socialcoherence • Educationandhealthservices • Employment • Corelation between broadband penetration rate and economic growth rate (e.g. gross domestic product). • Countries with less-developed economies take less advantage of broadbandgrowth.

  4. Needtobroadbandstrategies • All these indicators herald the importance of and the need to building a national broadband policy • Publicinterventiondeemed a leverageforbroadbanddevelopment • The reasonsbehindare as follows: • Economicprosperity (NZ, AS, USA, Germany) • Socialgoalsscuh as publicservicesandaccesstotheinformationsociety (Finland) • Use of ICT in othersectors (Sweden) • Avoidance of regionaldisparity (France) • Internationalcompetitiveness (UK)

  5. EU’sposition in general • EU has a hesitationtowardspublicintervention: “… Action at allgovernmentlevels can helptoincreasecoverage in under-servedareas. Nevertheless, theassessment of market failures is a difficulttask, particularlywhenthere is uncertaintyoverthepace of broadbanddeployment. The benefitsfromgovernmentinterventionmusttherefore be clearandsubstantial, compensatingfortherisks of undesirableconsequences” (EuropeanCommission, (2006), CommunicationfromtheCommission) • A disaggregatedapproach is remarkableacross EU. • StateAidGuidelines (EuropeanCommission, 2009)

  6. At thecrossroad of Internet era • Market forcesfound not enoughtorespondthewholeneeds of a country. • EU DigitalAgenda: CriticalTargetsto be reachedby 2020 such as • Access bythehalf of thepopulationto 50 Mbps • Access bythewholepopulationto 30 Mbps • No backward step fromregulatorybaseline • Callformacro-levelpolicyobjectives • Release of EU funds (€1 billion earmarked as part of the European Economic Recovery Plan) • Encouragement of nationalbroadbandpolicies

  7. Types of publicinterventions • Microandmacrolevelmeasures • Creation of NationalBroadband Plan • Creationandsharingof a broadband atlas, • Establishment of a new task force, etc., • Release ofgrants or low-interest loans • Allocation of spectrum • Facilitatingrights of way • Demandandsupplysidemeasures • Fiscalandindustrialpolicymeasures (supplyside) • Taxreduction • E-government, e-commerceactivities(demandside)

  8. Publicpolicytools Threemaincategories: • Government subsidisation for broadband deployment • Operation/deploymentby municipalities • Utilityoperationsand open accessservices

  9. Government subsidisation • FiscalPolicies: Withinthe form of threemainmethods: • Taxcuts • Government transfer payments • Publicexpenditures • Directfundsandgovernmentalgrants • Staterunnetworksorsubsidies? • General financialschemesorproject-tailoredfunds? • General Principles: Opentenders, a neutralandtransparentapproach, minimisingdistortion of competition

  10. Governmentsubsidisation • France: National Ultra-High-Speedprgrammewithsome 2 billion € fundsto deliver 100% broadbandcoverageby 2024. • Korea: A seqeuence of nationalinitiatives, e.g. NationalBasicInformationSystem, e-KoreaVision 2006, IT839 Strategytofostergovernmentinvestments • Australiaand New Zealand:Release of fundstodirectlydeploy/operate fiber networks (venturedby NBN Co). • Moremoderateapproaches • USA: A verycomprehensivenationalbroadband plan (2009) • Germany: General/regionalfinancialshemesand a mix of public&regulatoryemasures

  11. Municipalsupportingmechanisms • Operation either by municipalities or via independent operators • Prosandcons • Risk of crowdingoutprivateinvestments • Benefit of thelong-termeconomicspill-overeffectsoverthelocalcommunities • Municipalownership of publicutilities has an importanteffect in driving FTTH deployments • Bundlingopportunitywithelectricityservices • Risk of financialinabilitytopursueoperations (Amsterdam Citynet, Neuen, etc.)

  12. Municipalprojects • InGreece, 72 municipalitiesconstructedMANs. • Sweden, Netherlands, UK has particularexamples. • Social/e-governmentservicescomplement MAN construction • Somegovernmentalsupports, grantsaremadeavailableformunicipalprojects. • InFrancea public bank is usedforthispurpose • InSweden, 400 million € is releasedforinfrastructuredevelopment • Ireland: Using EU regionaldevelopmentfundsforlocalprojects.

  13. Utilityinfrastructure • Operate at bothwholesaleandretaillevels • Advantageregardingrights of way • Capacityrestraints • Accordingtostudy, 44% of theenergyutilitiesexaminedofferolytriple-playservices; 50% offertriple-playandopenaccess, andonly 6% arelimitedtoopenaccessservices • Particularexamplesexist in Denmark, Sweden(Malarenergi, SollentunaEnergi), Germany (City2020, EWE-Tel), Switzerland (Zurich, Bern, Basel) • Tripleplayservicestoconsumers, • OpenaccessservicestoISPs • …

  14. Utilityinfrastructure • InAustria, Blizznet, involvesbothVienna’selectricandsewerageutilities, aiming 2 m. FTTH residentialcustomers • A Greenfield FTTH deploymentproject in Germanyinvolvesbothlocalelectricandwaterutilities. • InSwizerland,withtheexeption of Obwald, allcityutilitiesdeploy fiber in collaborationwiththeincumbent (Swisscom). • InSpain, a number of utilitiescollaboratewith an operator (Citynet), andreceive a smallshare of theownership (usuallyupto 15%) fortheirfacilitation in rights-of-wayandconstructionpermits.

  15. Othermeasures • Facilitysharing • Spectrumpolicies • Risk premiumsand/orhigheraccessfees • Rights of way • Implementing ‘universal service’ concept • Regulatoryholidays • Structuraland/orfunctionalseparation

  16. Turkey: A snapshot • StrongandWeakAspects • Existence of young population,demographicstructure (+) • Commerciallyextensive room for bundle, triple-play and innovative services (+) • Market beingdrivenby market forceswithout a seriousgovernmentintervention (+) • RecentlygivenauthoritytotheMinistryto set thefees, termsandconditionsregardingrights of way (+) • Absence of effective competition between rival networks (-) • Lack of authority of municipalities & utilitiestooperate/deploy FTTH (-)

  17. Broadband Technologies in Turkey • Coverage of Technologies • Reach of theHomePassesby Fiber • Number of Subscribers

  18. Turkey: Broadbandtargets Policyobjectives • ICT Strategy Paper (2006-2010) • 9th Development Plan (2007-2013) • Transportation Platform (2009) • Ministryof Transport Strategy Plan (2009-2013) • to increase the broadband subscribers to more than 11 million • Broadband to all the schools with the social responsibility and to eliminate the regionaldisparitieswithin the framework of Universal Service Act • Encouragement ofR&D studies in ICT • Reductionof taxes at the level of %35 in a proportionateway

  19. Conclusion • Collaborationmechanismssuch as municipality-utility, utility-incumbent, municipality-ISPareavailable • Moresophisticated PPP mechanisms • Full service integrationandcommercialbundles of broadband has somerisksandadvantages • Threattowardsalternative network investments • Needfor a holistic ICT approach & Bestuse of nationalresources • Market forces in Turkeycompelsomeregulatorymeasures, e.g. rights of way, facilitysharing but not stateinterventions

  20. THANK YOU FOR YOUR ATTENTION M. Bilal ÜNVER 11th CaspienTelecoms Istanbul, April 20, 2012

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