Broadband access in the EU: An assessment of future economic benefits

This paper evaluates the net economic benefits that would derive from the implementation of the broadband infrastructure deployment targets by 2020 as entailed by the Digital Agenda for Europe Initiative set forth by the European Commission. As a first step, we estimate the returns from broadband infrastructure for the period 2005–2011, differentiating the impact of broadband by levels of adoption and speed while accounting for reverse causality and extensive heterogeneity. In the second step, the cost of broadband roll-out is assessed under different assumptions of technical performance and contrasted with the forecasted benefits that derive from increased broadband coverage. We find that in the base case scenario the overall future benefits outweigh the investment costs for the European Union as a whole for the highest performance technologies. This holds also for the majority of member states individually. We further extrapolate the returns by country under different scenarios of implementation. In most cases the benefits are substantially well above the costs. Private sector is reluctant to invest, as investors in broadband infrastructure only can partially appropriate benefits. This would suggest a rationale for the public sector to subsidize build-out of high speed broadband infrastructure.     

Improving the FTTH business case–A joint telco-utility network rollout model

Fiber to the home networks are seen as the most future proof technology to offer increasing bandwidth to customers. The publication of the Digital Agenda has put forward challenging goals for the broadband connectivity in Europe, but the rollout of next generation fixed access networks is still lagging. One of the reasons is the high initial investment cost associated with the rollout of these networks. To decrease this cost, a cooperation model between utility operators during the deployment phase is proposed in this paper. A model has been developed, in order to optimize the position of the different infrastructures in the trench and to allow for a fair allocation of the different costs incurred between all cooperating parties. The combination of these models has shown that a synergetic deployment phase of new infrastructures, both in Greenfield and Brownfield installations, can decrease the deployment costs for fiber infrastructure up to 21%.     

Public policy targets in EU broadband markets: The role of technological neutrality

The European Commission has recently sought to substantially revise how it regulates the telecommunication industry, with a key goal being to incentivise investment in high-speed broadband networks. Ambitious goals to incentivise investment in high-speed broadband networks have been set across the European Union, initially in the ‘Digital Agenda for Europe’ and more recently in its ‘Gigabit strategy’. These goals reflect the view of many that there are widespread and significant socio-economic benefits associated with broadband. Our analysis explores the consequence of target setting at a European level, in terms of encouraging investment and picking which technology should be adopted within the context of technological neutrality. We demonstrate that while public policy targets might implicitly favour specific technologies, especially when gigabit targets are defined, the technological choices that occur within individual Member States are shaped by the complex and dynamic interaction between a series of path dependencies that may vary significantly across as well as within Member States. Adopting an ecosystem perspective, we propose a conceptual framework that identifies the key factors associated with technological neutrality and informs a rational decision-making process.     

Next Generation Access (NGA) supply side interventions—An international comparison

Over the last years, technical and economic developments towards the deployment of Next Generation (Access) Networks have triggered discussions under which circumstances investments into physical infrastructure are economically viable. In many countries the discussion has arisen regarding conditions under which private investment will/will not be undertaken and whether or not in such cases public policy measures should support deployment. This could come in different ways—from incentivizing private investments to deploying new “state-owned” networks. Public policy can have an impact for example by intervening into a competitive market. The paper tries to provide answers as to “why” such interventions and supply side policies are undertaken (thereby referring to the central role that broadband infrastructures have for the economy) and “how” such interventions take place, for example an analysis of the public policy interventions to drive Next Generation Access Network deployment. The article thereby derives policy patterns that have occurred in different regions of the world.     

Public private partnerships as a tool for stimulating investments in broadband

The paper is concerned with PPP in the telecommunications area and more specifically with the combination of public and private investments in upgrading broadband infrastructures. Following the liberalization of the telecommunications area, investments were primarily left to the private sector – though public investments have continued to take place in specific areas such as research and education networks and rural and otherwise underserved areas. Lately, however, governments have upgraded their public investment plans in broadband infrastructures. The question is whether we are witnessing a simple quantitative change or whether this quantitative change includes a qualitative evolvement in the view on the role of the public sector in expanding broadband infrastructures. At the present time, the most likely answer is that increasing public investments in broadband infrastructures signal a combination of concerns raised by the economic crisis and the growing awareness of the social and economic importance of efficient broadband infrastructures.     

Long term risk sharing contracts as an approach to establish public–private partnerships for investment into next generation access networks

This paper develops an investment/pricing model for the deployment of basic broadband networks which, along with other applications, is applicable to public–private partnership projects. In particular, a new investment model is suggested to be used for finance deployment over a longer term by enabling both private and public investors to participate in the roll-out of next generation access (NGA) infrastructure. This so-called “long-term risk sharing concept” has several notable benefits compared with the traditional regulatory approach. Above all, the model enables both private operators and public authorities to share the risk of investing in NGA infrastructure. Thus the model offers a way for public authorities to achieve a timely and countrywide roll-out of NGA networks, including in areas where NGA investment would otherwise not occur.     

Municipal support of wireless access network rollout: A game theoretic approach

Next generation access networks are expected to bring ubiquitous broadband access and have attracted interest of municipal governments. This paper investigates the support by municipal authorities for the rollout of such a city-wide wireless broadband access network. Different business cases for 3G and WiFi operators are developed and it is indicated how to model the specificities for commercial versus public players. Furthermore, a game theoretic approach is used to investigate the investment options of the municipal player. It is shown that a partnership between a commercial and public player is the most likely investment strategy. However, bringing more players into the competitive environment reduces the intention of the commercial partner to engage in the public–private partnership (PPP).     

Lessons from broadband development in Canada,Japan, Korea and the United States

Broadband network development does not always track closely a nations overall wealth and economic strength. The International Telecommunication Union reported that in 2005 the five top nations for broadband network market penetration were: Korea, Hong Kong, the Netherlands, Denmark and Canada. The ITU ranked the United States sixteenth in broadband penetration.Aside from the obvious geographical and demographic advantages accruing to small nations with large urban populations, broadband development thrives when it becomes a national priority. Both developed and developing nations have stimulated capital expenditures for infrastructure in ways United States public and private sector stakeholders have yet to embrace. Such investments have accrued ample dividends including the lowest broadband access costs in the world. For example, the ITU reports that in 2002 Japanese consumers paid $0.09 per 100 kilobits per second of broadband access compared to $3.53 in the United States.Economic policies do not completely explain why some nations offer faster, better cheaper and more convenient broadband services while other nations do not. This paper will examine best practices in broadband network development with an eye toward determining the optimal mix of legislative, regulatory and investment initiatives. The paper will track development in Canada, Japan and Korea as these nations have achieved success despite significantly different geographical, political and marketplace conditions. The paper also notes the institutional and regulatory policies that have hampered broadband development in the United States.The paper also will examine why incumbent local exchange and cable television operators recently have begun aggressively to pursue broadband market opportunities. The paper will analyze incumbents’ rationales for limited capital investment in broadband with an eye toward determining the credibility of excuses based on regulatory risk and uncertainty. The paper concludes with suggestions how national governments might expedite broadband infrastructure development.     

Public and private intervention for next-generation access deployment: Possibilities for three European countries

How next-generation access (NGA) deployment can be encouraged is a challenge that many countries are facing, and one that has been widely and actively discussed around the globe. This discussion has highlighted a dilemma that ultimately shapes investment—how to encourage the widespread deployment of NGA while enabling operators to achieve reasonable returns. This paper focuses on the tensions that arise as a consequence of this investment challenge in three countries – the Netherlands, Sweden and the United Kingdom (UK) – and uses the analysis of extensive data collection with k7ey actors to argue the case for the injection of public or private incentives. The paper finds that markets with competitive infrastructure will not benefit from public investment while markets with geographical constraints are in need of public support. The paper also explains that regulatory intervention is necessary in the early stage of NGA roll-out, even in currently competitive markets. In all the discussions it becomes evident that, among the three cases, the UK is most in need of public intervention.     

Ultra-fast broadband investment and adoption: A survey

In recent years, and in line with EC plans, telecom operators have been facing the need to deploy high-speed, fiber-based infrastructure. What is the socio-economic impact of these new investments on growth and local development? What are their effects on the labor market outcomes, in terms of firm productivity and entrepreneurship? What is the role of regulation and competition in spurring the deployment and the adoption of ultra-fast broadband networks? In this survey, we review the existing literature on ultra-fast, fiber-based broadband network, devoting special attention to the results and to the methodology used in the most recent studies.     

The role of government in broadband access

This paper discusses the role of governments in broadband. It is divided into five sections. Following an introduction in section one, section two discusses the diffusion of broadband Internet. Section three deals with competition-based and public-goods views on regulation and the corresponding roles and issues for governments. To gain deeper insights into the role of government in broadband, section four analyses market regulation and public activities in furthering broadband deployment in the US, Korea and Europe. These insights are evaluated in relation to the theoretical considerations established in section three. Section five closes with a discussion of our results and some conclusions. It becomes obvious that national broadband strategies benefit from considering both public good and competition-related aspects.     

Race to the top: Does competition in the DSL market matter for fibre penetration?

High speed broadband creates potential productivity gains and has a positive impact on economic growth. Achieving Europe's broadband access objectives will require large scale investment in next generation broadband networks, and it is imperative that an appropriate investment climate is created to encourage fibre network rollout. This study considers whether and how competition in the DSL market affects the incentives of operators to invest in the deployment of high-end fibre optic networks. Most earlier research on the drivers of investment in broadband technology has focused on the effect of mandatory access policies, such as local loop unbundling, or competing infrastructures. We posit that competition in the DSL sector may also influence fibre penetration, possibly to a considerable extent. We find that the relationship between service-based competition and fibre penetration is non-linear: a lack of or severe DSL competition is correlated with a negative effect on fibre penetration, but if a moderate degree of competition is already present in the market, more service-based competition may positively influence fibre penetration. The scale of these effects however varies with the openness of the DSL market: operators' incentives to invest in fibre appear to be more sensitive to changes in DSL competition if there is extensive local loop unbundling.     

Unbundling the incumbent and deployment of high-speed internet: Evidence from France

In this paper, we study the impact of competition on the legacy copper network on the deployment of high-speed broadband. We first develop a theoretical model, which shows that the relation between the number of competitors and investment in a quality-improving technology can be positive if the quality of the new technology is high enough, and is negative otherwise. We test these theoretical predictions using data on broadband deployments in France in more than 36,000 local municipalities. First, using panel data over the period 2011–2014, we estimate a model of entry into local markets by alternative operators using local loop unbundling (LLU). Second, using cross-sectional data for the year 2015, we estimate how the number of LLU entrants impacts the deployment of high-speed broadband with speed of 30 Mbps or more by means of VDSL, cable and fiber technologies, controlling for the endogeneity of LLU entry. We find that a higher number of LLU competitors in a municipality implies lower incentives to deploy and expand coverage of high-speed broadband with speed of 30 Mbps or more.     

Regulation and investment behaviour in the telecommunications sector: policies and patterns in US and Europe

This paper reports the results of the quantitative analysis of international experience of the relationship between infrastructure investment in the deployment of capacity that can carry large volumes of voice and data traffic and regulatory policy changes in the telecommunications sectors. It looks at the relationship between infrastructure investment for these infrastructure assets and the access pricing régimes for local exchange carriers in the United States and Europe. It then looks at the relationship between various aspects of regulatory and institutional policy changes in Europe and how they affect access prices.The paper finds that a lower access price promotes greater deployment of digital technology among US incumbent local exchange carriers (ILECs). Based on this finding, it suggests that it is in the ILECs interest to have access to their networks encouraged.The European data for interconnection are recent and far reaching conclusions are not feasible, but the findings, however, suggest that competition has worked by facilitating new entry through decreasing interconnection prices, although path dependencies, of existing and traditional concepts, in the mindsets of operators as well as regulators, may account for these findings.     

Broadband investment and regulation: A literature review

Investment in broadband communications and its infrastructures (the so-called Next Generation Networks) is receiving extraordinary attention from policy makers all over the world, due to the significant impact of high-speed Internet access on the whole economy and society. However, even before the recent financial crises, a dramatic downward trend in telecommunications investment has occurred, mainly due – at least according to incumbent operators – to excessively intrusive regulatory intervention. The typical conflict between regulation, competition and investment emerges. It is therefore important, for both future research and regulatory and practitioners’ references, to review the specialized but growing branch of the literature on this interesting and policy-relevant issue. The purpose of this paper is therefore to survey the relevant theoretical and empirical literature on the relationship between regulation, at both retail and wholesale level, and investment in telecoms infrastructures. The picture that emerges is not conclusive, and further research is still needed, both theoretically and empirically, to better understand the real impact of regulatory incentives on investments.     

A business case for 5G mobile broadband in a dense urban area

5G networks are envisioned to provide consumers and industry with improved transmission performance and advanced communication possibilities. To deliver on this promise of ushering in faster downloads and lower latency, mobile network operators are called upon for substantial investment in network infrastructure. Investors and operators need a clear 5G business case before making such investment. So far, very little research has been published on the topic of the 5G business case. This article studies the impact of different elements driving the business case of a 5G network. The study was performed within 3 boroughs of central London, UK, for the period 2020–2030. 5G-related costs and revenues were calculated to derive the business case. The results show that the business case for a 5G network providing mobile broadband services alone is positive over the time period 2020–2030 but has some risk in the later years of this time period. The business case is also particularly sensitive to assumptions on the revenue uplift and the rate of traffic growth which are inherently challenging to forecast. The sensitivity analysis shows that the return on investment becomes negative if both traffic and costs are significantly higher and revenues increase more slowly than our baseline forecasts. Network sharing helps to substantially improve the business case. Further research is needed to understand the business case on a regional or nationwide basis, and for a network that provides additional services beyond broadband.     

CEO career horizon,corporate governance,and real options: The role of economic short‐termism

Research Summary: Combining studies on real options theory and economic short‐termism, we propose that, depending on CEOs’ career horizons, CEOs have heterogeneous interests in strategic flexibility, and thus, have different incentives to make real options investments. We argue that compared to CEOs with longer career horizons, CEOs with shorter career horizons will be less inclined to make real options investments because they may not fully reap the rewards during their tenure. In addition, we argue that long‐term incentives and institutional ownership will mitigate the relationship between CEOs’ career horizons and real options investments. U.S. public firms as an empirical setting produced consistent evidence for our predictions. Our study is the first to theoretically explain and empirically show that a CEO's self‐seeking behavior will impact real options investments. Managerial Summary: This article helps to explain how a CEO's self seeking‐behavior may shape a firm's real option investment, which could result in different level of strategic flexibility. We argue that CEOs with short career horizons have less time to exercise their firms’ real options, which should lower the investments in the firms’ real options portfolios relative to CEOs with long career horizons. We study a sample of U.S. public firms and find strong evidence that a CEO's expected tenure in the firm is positively related to the real options investments at the firm level. We find that this agency issue can be mitigated by adopting appropriate corporate governance mechanisms such as long‐term incentives and institutional investors.     

Broadband adoption,jobs and wages in the US telecommunications industry

This article evaluates the impact of broadband adoption on wage and employment levels among the local exchange companies in the US telecommunications industry for the period between 1988 and 2001. Broadband is a general purpose technology and its adoption and diffusion is expected positively to impact wages because of the need for higher level skill in its deployment and usage, but can also lead to less human capital usage because of a scale effect. Using the extent of fiber adoption among the local exchange firms as a measure of broadband deployment, it was found that broadband diffusion within and between the firms over time has had a positive and significant impact on wage levels but its impact on employment has been negative. As broadband diffusion increases, with substantial scope available to do so given the low levels of deployment both among the local exchange firms studied and within the United States as a whole, the impact of such diffusion on enhancing wage levels in the sector can be profound.     

Multilevel governance and broadband infrastructure development: Evidence from Canada

This paper investigates the contributions of digital infrastructure policies of provincial governments in Canada to the development of broadband networks. Using measurements of broadband network speeds between 2007 and 2011, the paper analyzes potential causes for observed differences in network performance growth across the provinces, including geography, Internet use intensity, platform competition, and provincial broadband policies. The analysis suggests provincial policies that employed public sector procurement power to open access to essential facilities and channeled public investments in Internet backbone infrastructure were associated with the emergence of relatively high quality broadband networks. However, a weak essential facilities regime and regulatory barriers to entry at the national level limit the scope for decentralized policy solutions.