Public/private partnerships

A growing number of European policy-makers at the local and national level are beginning to view optical-fibre infrastructure as they view any other transport infrastructure. Telecommunications networks lie on a primary infrastructure of ducts, masts, and civil constructions to house equipment and fibre. The common denominator is the long depreciation period for these assets—much longer than that of active equipment. Traditionally, this primary infrastructure has been constructed and controlled by the operators, but there is no technical need to do so. On the contrary, there are good reasons to distinguish between the primary infrastructure and the networks themselves. Local governments are often best positioned to ensure the deployment of this primary infrastructure.

This model was practically invented in Stockholm, when in 1993 the city council created a dark fibre utility. Independent company Stokab was founded with the idea of deploying dark fibre and leasing it to operators at cost-oriented prices. The company broke even five years later and remains profitable. It has enabled Stockholm to become one of the most "broadband-friendly" places in the world.

The model is simple. A third party deploys the primary infrastructure surrounding both wireline and wireless telecom networks and leases it to the various operators. The civil infrastructure can be shared by several network operators with no adverse impact on competition. In fact, it is in the third party's best interest to attract as many operators as possible and avoid discrimination.

Some European public authorities have also realised another peculiarity of the telecom business—that this primary infrastructure is "real estate." It is a long-term investment with large initial costs and a long lifecycle (20 years), which is the financial profile of a utility.

However, the telecom networks themselves are "high tech" investments with a much shorter lifecycle, typically five to seven years. They create more "added value" to users and allow higher returns. But they have higher risks, making loans for this investment more expensive than loans for utilities. During the past few years, telecom operators have been borrowing "expensive" money and spending a major portion of it to dig trenches. Separating these two different types of investments makes financing easier and cheaper.

At the end of January, Erkki Liikanen, EU commissioner for the Enterprise and Information Society, hosted "Accelerating Broadband in Europe," bringing together representatives from the EU and industry. "Politicians should give fresh impetus to initiatives fostering broadband development in Europe," he said. "Investments are costly, take-up is slow, and the financial situation of the sector is delaying deployment of broadband and its social benefits."

Local and regional authorities are initiating deployment of broadband networks in their communities. But their options can be limited by the national policies of their individual states. A survey of telecom development projects in Europe is shown in the accompanying Table, which highlights activity—or inactivity—in some representative states. ..

United KingdomThe Broadband Stakeholders Group issued its "Second Annual Report and Strategic Recommendations" last November. One recommendation was that government should facilitate infrastructure sharing to reduce capital requirements for new service provision and develop practical steps to enable the provision of civil infrastructure by third parties. Scottish Enterprise initiated Project ATLAS (Accessing Telecoms Links Across Scotland) to make an open access telecommunications infrastructure for Scottish businesses.
FranceBefore July 2001, local authorities were prohibited from operating telecom networks. Responding to local pressure to develop the base infrastructure to support such a network, the French government amended the law to distinguish primary infrastructure from services. The state-owned Caisse des Dépôts et Consignations (CDC) was authorised to invest up to EUR228 million into local projects and earmark an additional EUR1.5 billion in long-term loans in tandem with other banks.
IrelandIreland's broadband penetration rate is only 27th amongst OECD countries. That imbalance is unsustainable, so the National Development Plan announced a program in 2001 to invest in the development of broadband facilities in less-developed parts of Ireland. The program is a mix of EUR200-million government investment and a comparable contribution from the private sector.
ItalyItaly has the lowest penetration of broadcast cable TV in Europe so is fertile ground for a different source of competition. That alternative is FastWeb, a division e Biscom, which started in Milan in 1999 as a broadband Internet service provider (ISP) to businesses. FastWeb offers 10-Mbit/sec Ethernet Internet access, VoIP, and video on demand; operates in seven cities; and signs up 500 new customers a day.
SwedenIn addition to Stokab, a Swedish national telecoms policy has been put into place with a four-level hierarchical structure: The backbone network connects the principal in each of the 289 administrative areas, regional networks connect local communities within each administrative area, local access networks will provide access to the higher-level networks for a majority of the population, and private access offers limited private networks to campuses.
GermanyExcepting the low-lying countries (Benelux), Germany has one of the highest cable TV penetration rates in Europe. However, Germany has the lowest fraction of its cable TV infrastructure upgraded to enable broadband access. In addition T-Online, the ISP subsidiary of incumbent operator Deutsche Telekom, has a 45% market share of dial-up access and an 80% market share of DSL access, making Germany one of the least competitive markets for broadband in the whole of Europe.

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