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.     

Factors determining municipal broadband strategies across Europe

Recognizing that high-speed broadband connectivity emerges as a key element for growth, city authorities engage in fiber access deployments to empower their local communities in the digital economy. Currently, a growing number of municipal fiber projects are underway or planned while the international community and the telecommunications industry are yet undecided about the role and type of municipal intervention. This paper takes a holistic view of municipal broadband in Europe, aiming to understand the factors that determine municipal strategies in fixed Next-Generation Access (NGA) networks and the implications of municipal broadband to regulation and markets. The data suggests that the determining factors are (a) the engagement of public utilities; (b) the involvement of the private sector in joint infrastructure projects; (c) the local demand for retail and wholesale services; and (d) the institutional and regulatory framework at the European and national scale. The findings of the study indicate that (a) municipal initiatives are highly dependent on national factors, thus the resulting interventions fare strong resemblance within a single country, while they can be substantially different across national contexts; (b) current EU provisions for public involvement in broadband development stimulate municipal plans for large scale arrangements; and (c) national regulatory frameworks, that primarily address vertical integrated incumbents and nationwide markets, may need adjustments to handle emerging access monopolies of regional and city broadband infrastructures.     

Municipal electric utilities’ role in telecommunications services

Municipal electric utilities (MEUs) are increasingly expanding into telecommunications services. Such entry is interesting in several respects. First, MEUs marry two potential pathways for the growth of telecommunications access infrastructure and services: public ownership of last-mile facilities and electric power company expansion into telecommunications. Second, municipalities are key early adopters of next generation access technology in the form of both fiber-to-the-home (FTTH) and broadband wireless (e.g., WiMax) systems. Third, MEUs are at the nexus of the debate over the proper role for local government in promoting broadband Internet access. Most homes in the United States are served by investor-owned local telephone and cable television providers, using company-owned wireline infrastructure. These providers have generally opposed municipal entry, arguing that it will crowd out private investment and represents an unfair and less efficient form of competition. A number of states have acted to limit—or in some cases—to promote such entry. Before engaging in this debate, it is necessary to have a clearer picture of the current state of municipal entry and the local demographic, cost, industry, and policy factors that influence its evolution. To address this need, this paper reports the results of an empirical analysis of MEUs that provide communications services to the public. This analysis shows that MEUs are more likely to offer such services if they also provide internal communication services to support their electric utility operations (scope economies); are relatively close to metropolitan areas (lower backhaul costs); are in markets with fewer competitive alternatives (cable modem and DSL service availability limited); and which are less encumbered by regulatory barriers to entry (in communities in states which do not restrict municipal entry into telecommunication services). Of these results, the competitive impacts are the least straight-forward to interpret, suggesting richer dynamics and avenues for further research.     

The business case of a network that serves both public safety and commercial subscribers

Deploying a single nationwide broadband wireless network to serve all public safety users would have great advantages over the existing fragmented public safety systems. A nationwide system could be created to serve both public safety and commercial subscribers, which would allow a provider to exploit important economies but force it to meet the more costly requirements of public safety. This paper analyzes the viability of a public-private partnership that serves public safety and commercial subscribers from a for-profit provider's perspective. A model is presented that estimates the net present value (NPV) of a wireless network by calculating costs based on the number of cell sites required and revenue based on the projected number of subscribers acquired. The model is applied to both a network that serves only commercial subscribers on 10 MHz of 700 MHz spectrum and a public-private partnership that serves commercial subscribers and public safety personnel on 20 MHz of 700 MHz spectrum. It is found that NPV is greater for the public-private partnership than for the commercial-only network for any population density, which shows that the value of 10 MHz of spectrum exceeds the cost of meeting public safety requirements. Furthermore, the paper demonstrates that NPV/cell increases with population density, so urban areas are profitable and rural areas are unprofitable. The paper demonstrates that a partnership covering 94% of the US population breaks even because the most urban 56% of population subsidizes coverage for the next 38%. If initial deployment is subsidized, a financially sustainable public-private partnership can serve much more than 94%. Additionally, it is shown that allowing urban municipalities to opt-out of the partnership can significantly increase the subsidies required.     

Emerging models of public–private interplay for European broadband access: Evidence from the Netherlands and Italy

The paper examines the role and function of public–private interplay in the development of municipal initiatives in the broadband sector. The analysis of initiatives in the Netherlands and Italy shows how the interaction between public and private stakeholders can facilitate local broadband initiatives. This interaction has been vital in aligning the interests of different private and (semi-)public parties, in designing the network and in aggregating sufficient demand for broadband services. The comparative analysis examines the steps involved in these initiatives and the strengths and weaknesses of joint public–private activities. The paper shows that the challenge for cooperating stakeholders has been to foster further investment in the upgrading of the network and in the provision of advanced broadband services.     

Public-private partnership for building a resilient broadband infrastructure in Puerto Rico

This article will explore the use of an innovative approach to a public-private partnership (PPP) to spur the deployment of broadband and create more resilient telecommunications networks in Puerto Rico. Such a partnership is a critical ingredient of the plan for rebuilding the telecommunications sector of Puerto Rico after the island was devastated by Hurricanes Irma and Maria in September 2017. The proposed partnership also has the potential for enabling the expansion of citizen access to broadband services throughout Puerto Rico. This work was done as part of the Congressionally mandated economic and disaster recovery plan for the island.     

Impact of modern communication infrastructure on productivity,production structure and factor demands of US industries: Impact revisited

This study investigates the contribution of modern communication infrastructure characterized by high speed broadband access network on the productivity growth, production structure and factor demands for US industries and for the aggregate economy. To evaluate such contribution, we modify the traditional cost function by incorporating communication infrastructure as input in production process in conjunction with other public infrastructures. The network externality and spillover effect of broadband access technology are captured by introducing broadband penetration rate as a shift factor in industry level production function. Empirical results show that the increased use of modern communications infrastructure increases the productivity of all industries with wide variations across industries. Estimated impacts on input demands show that increase in use of communications infrastructure service saves labor and materials and increase the demand for private capital. Finally, aggregate social rate of return on such investment has been estimated for policy implications.     

Learning processes in municipal broadband projects: An absorptive capacity perspective

Effective knowledge management is important to the success of information technology projects. This research applies the integrated lens of the absorptive capacity theory and the social process model of information system development projects to examine the dynamic of knowledge activities concerning broadband infrastructure development in the context of municipal broadband networks. The research questions are: (1) What is the extent of the dynamic of knowledge activities involved in the development process?, (2) What are the events that trigger knowledge activities in municipal broadband development?, and (3) How does a city create and utilize new knowledge in the development process? This study examines municipal wireless projects in three cities (Chaska, MN; Hermosa Beach, CA; and Fredericton, Canada). Events that trigger knowledge activities are assignment of personnel, physical system construction, performance problems, resistance, and reassignment of organizational roles. Four factors that influence knowledge activities and project performance are the dynamic of technology development, partnership commitments, limitation of external knowledge and learning-by-doing, and political dynamics. The study has policy implications for cities that are in the process of planning and deployment. A good project planning, user expectation management, systematic performance evaluation, a careful partner selection process, and the use of service level agreements are important to project success. In addition, cities need to take into consideration that the technology is not a plug and play technology and that considerable efforts are needed to integrate the technology with other solutions to deliver broadband services as well as to configure the system according to topologies, street conditions, buildings, density of trees, among others.     

The digital divide problem: An economic interpretation of the Japanese experience

This study presents an economic analysis of Japan's attempt to address the geographical digital divide problem for broadband and mobile telephone services. To receive broadband service local inhabitants make voluntary contributions, which are matched by a municipal subsidy. The approach is effective in terms of economic efficiency and equity. Importantly, as fixed broadband service is provided locally the benefits are limited to local inhabitants. By contrast, mobile service is provided via a spectrum user fee system. That is, for mobile telecommunication services, no universal service fund exists. The underlying rationale is that subscribers are beneficiaries and commercial decision-making should be left to mobile operators.     

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 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.     

State broadband policy: Impacts on availability

We use a county-level panel dataset from 2012 to 2018 to assess the impacts of various state policies on total and rural broadband availability in the United States. The primary dependent variable is the percentage of residents with access to 25 Megabits per second (MBPS) download and 3 MBPS upload speeds via a fixed connection, with alternative specifications considering other aspects of availability such as technology type and competition. We control for the main determinants of Internet availability such as income, education, age, and population density. Our policy variables come from the newly released State Broadband Policy Explorer from the Pew Charitable Trusts and individual contacts from the nationwide State Broadband Leaders Network. Our primary policies of interest are those related to: (1) availability of state-level funding, (2) existence of a state-level broadband office/task force with full-time employees, and (3) restrictions on municipal/cooperative broadband provision. We find a positive and significant impact of state-level funding programs on general (and fiber) broadband availability, and a negative impact of municipal/cooperative restrictions. The findings are similar when the analysis is restricted to the rural portions of counties.     

A study on the deployment of high-speed broadband networks in NUTS3 regions within the framework of digital agenda for Europe

This paper investigates the high-speed broadband situation in the EU and its prospects. It uses a deployment model to estimate the investment required to meet the Digital Agenda for Europe (DAE) broadband targets set by the European Commission in its Europe 2020 strategy at different stages: as of 2016, after expected operators’ deployment, after public subsidies and leveraged investment, and as expected in 2020. The model uses data at the NUTS3 level, which is the most granular level that has data available on the status of broadband deployment, to arrive at a coherent and comparable framework. From the different perspectives on the investment to meet DAE targets, the paper concludes on the need for an appropriate combination of incumbent and alternative operators investments, public subsidies and leveraged investments, and new investments, both public and private and non-existing as of 2016, examining their feasibility and the impact of different regulatory, technical, and policy strategies.     

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 and infrastructure competition for broadband adoption: Implications for NGA regulation

The common idea of open access policy is that it refers to the sharing of particular elements, such as wholesale access networks, backhaul, under-sea cable and internet exchange points in fixed and mobile networks. In broadband networks, the use of open access policy usually refers to the infrastructure parts, which are considered a bottleneck. Many regulators have generally focused open access policy on fixed broadband networks, especially digital subscriber line (DSL) technology, in the last decade. Local loop unbundling (LLU) regulation is one of the main strategies for the regulator to open access to an incumbent’s bottleneck network in order to soften its monopoly power and encourage competition in the DSL broadband market. The OECD countries have different strategies regarding unbundling local loop and infrastructure competition, as the characteristics and infrastructure networks of countries vary. There are currently more choices of next generation network (NGN) technologies to develop. While local loop unbundling may not be applied fully to NGN development (the cost is not sunk, more technologies are available to implement, incentive of investment by operator), it can indicate benefits and drawbacks of open access policy in the past decade that can be adapted to NGN.The empirical results of this study show that during 2002–2008, LLU regulation was one of the strategies used to increase broadband adoption in countries that had difficulty encouraging infrastructure competition. Unbundling regulation can therefore be implemented carefully and differently in each country that has inefficiency that is harmful to consumers in its market from a monopoly incumbent. Infrastructure competition, on the other hand, is introduced as another strategy to increase broadband adoption. The empirical results of this study indicate that infrastructure competition can be used as a strategy when there are already enough infrastructures in the area or country. These results support the idea of using open access and infrastructure competition policy depending on the existing competition of broadband infrastructure in each country.     

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.     

Endogenous timing of actions under conflict between two types of second mover advantage

In this model, two players, who are heterogeneous in information quality, compete with each other with perfect information about the other player's information quality. The less-informed player has an incentive to delay her action in order to gain more information. The more-informed player also intends to delay her action, not through a desire to learn but rather to prevent the less-informed player from gaining information. Hence, if a waiting option is available, both players want to delay their actions and the conflict between the two types of second mover advantage yields a delay race. Although both players can benefit from a delay, the gain from a delay in order to learn is greater than that from a delay intended to prevent the other from learning. Therefore, the cost for a delay plays an important role in characterizing the equilibrium, and if the sequential timing of actions is derived in a pure equilibrium, the leader will be the more-informed player. If a given cost for a delay is sufficiently low, the only equilibrium is a mixed equilibrium. Interestingly, in that equilibrium, the existence of the first-mover advantage from being imitated is also derived.     

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.     

Broadband and contributions to economic growth: Lessons from the US experience

The connection between broadband deployment and economic prosperity in the United States has garnered public attention due to stimulus plan funding authorized in February 2009 for broadband planning and deployment initiatives. The importance of innovation for a nation's economic well-being is fairly well understood. Through a literature survey, this article analyzes the connection between information and communications technologies and economic growth, as well as the connection between broadband and economic growth. There appears to be a positive economic impact from expanded broadband deployment and adoption. However, various research challenges including methodological problems and access to sufficiently granular data have prevented the authors from drawing more definitive conclusions from the US broadband experience. Another finding is the time lag for businesses to effectively exploit innovative broadband applications.