Slide 1

Broadband policies in the European Union

Sofia, 11 April 2014"ICT Clusters Collaboration for Growth, Prosperity and Competitiveness in the Black Sea Region"

Nicolas GYSSPolicy OfficerBroadband Policy Unit (CNECT B5)Nicolas.gyss@ec.europa.eu

Part 1

ICT and broadband economic importance2

The virtuous circle of the Digital economy ICTinfrastructureApplications & e-ServicesBusiness & individualend-usersICT : not just a "sector" (telecom)> enabler for all socio-economic sectors

ICT : no longer "hardware v.s. software" > cloud computing, mobility and ubiquity

ICT : from "nice-to-have" to "must-have" > pre-condition for productivity, growth & innovation

4ICT: a must for competitiveness and innovation5 % of GDP but driving 20% of overall productivity growth (3.2 trillion by 2016 in G20 economies)Companies adopting IT based processes improve labour productivity by 5% in manufacturing and 10% in servicesSMEs grow 2 to 3 times faster when connectedFor every job lost, 2.6 new ones created

Next programming period 322.146 billion for Cohesion Policy. If it passes 10% in the European Council 32.2 bn for ICT

14.393 billion for Greece i.e. 1.4 bn for ICT. 203 m for Territorial cooperation

Important to create employment and growth

Still suggested amounts5Broadband drives competitiveness

"An increase in the broadband penetration rate by 10 percentage points raises annual growth in per-capita GDP by 0.9 to 1.5 percentage points"

(Czernich et al. - CESIFO WORKING PAPER NO. 2861, Ifo Institute for Economic Research, 2009)Part 2

Broadband deployment Where do we stand now?7Digital Agenda for Europe (DAE) 2010-2020

ICT and BB full potential not yet fully exploited

Over 100 actions for the Commission and Member States

3 targets on Broadband:Basic broadband for all citizens by 2013 Coverage: Next Generation Networks (NGN) (30 Mbps or more) for all by 2020;Uptake: 50% of households having 100 Mbps subscriptions or higher by 2020.

Basic broadband target achieved in autumn 2013Challenges ahead for fast and ultra-fast broadband coverage and take-up 2020 targets

"close to target" in areas such as eGov, internet usage and partly eCommerce

Broadband targetsEU Digital Agenda 9

Source: Digital Agenda ScoreboardProgressEU National broadband plans"Member States should: [] Develop and make operational national broadband plans by 2012 that meet the coverage and speed and take-up targets defined in Europe 2020, using public financing in line with EU competition and state aid rules"Communication "A Digital Agenda for Europe", 26.8.2010

6 MS have an operational broadband strategy fully aligned with DAE targets.11 MS mostly meet these criteria. In 9 of these cases one of the main divergences concerns the choice of targets, often the need of imposing a take-up target. In some cases coverage targets are higher than in the DAE.3 MS have an updated strategy in place but should adopt or reinforce implementing measures.8 MS are updating or working on a new Broadband strategy.Standard fixed broadband* availabilityBasic broadband for all by 2013adding wireless, EU coverage is 99.97%*xDSL, Cable, FTTP and WiMax; Source: Point Topic

11NGA* availability (54% of EU homes)At least 30 Mbps for all by 2020But only 12% of EU rural areas are covered* Next Generation Access (NGA): VDSL, Cable Docsis 3.0 and FTTP; Source: Point Topic

12Fixed broadband lines penetration in the EU 28.8% (lines as a % of population) (equivalent to 72.5% of EU homes subscribing to broadband) Fixed broadband take-up

13Source: Communications Committee20% of EU fixed broadband subscriptions are NGAShare of High-speed broadbandSource: Communications Committee

143.4 % of EU fixed broadband subscriptions are at least 100 MbpsFixed broadband lines by speedSource: Communications Committee

15Part 3

EU policies and the way forward16Cost reduction eComms regulation, e. g. Recommendation on non-discrimination and costing methodologiesDemand stimulationSingle EU authorisationEuropean inputs for high-speed broadband: Spectrum and virtual access productsSingle consumer space: Net neutrality, harmonised end user rights, roamingTools & Investment impact of EU policy17financing and fundingmarket frameworkEuropean Structural and Investment Funds (ESIF)Connecting Europe Facility (CEF)Broadband state aid guidelinesSingle Market for Telecoms17EU regulation: A set of top regulatory principles and objectives to ensure predictability and consistency

Promotion of competition and investmentDevelopment of the Single MarketPromotion of citizens' interests

Main components:Connected Continent Package: The Communication: Commission's vision for a Single Telecoms MarketThe Costing and Non-discrimination Recommendation Proposal for a Regulation concerning the EU Telecoms Single Market (TSM Proposal)Measures to reduce the cost of deploying high-speed electronic communications networks (Cost reduction)Review of the Relevant Markets RecommendationSingle consumer spaceHarmonised end-user rights and easier switching Open Internet: net neutralityPhasing out roamingEuropean inputs for high-speed broadbandWireless: spectrum coordination; facilitating small cellsFixed: European virtual access productsSingle EU authorisationSimplified and more convergent regulation

TSM Proposal: key measuresA Single Telecoms Market essential for Europe's return on the growth pathIf the internal market for electronic communications were completed, the EU's GDP could grow by up to 110 billion euros a year Economies of scale Higher productivity in other economic sectors through more efficient cross-border electronic communications services to companiesAffordable cross-border prices for consumersMore diversified products and services available to consumersInnovation* Ecorys, TU Delft et al., Steps Towards a Truly Internal Market for e-Communications, 2013.

Cost reduction what is at stake?

Up to 80% of the costs are linked to civil engineering

These costs are unnecessarily high due to the presence of various bottlenecks and economic inefficiencies.

As a result: grey and white areas often too expensive to cover. Rolling out high-speed communication networks is expensive and cumbersomeReduce costs of broadband rollout by 20 to 30% and make it easierBetter use of existing infrastructure and more transparency, incl. cross-utilityImproved coordination of civil engineeringSimplify permit granting processBuildings ready for access to high-speed internetBB Cost Reduction: objectivesObjectives:Enhance the Single Market for electronic communicationsIncrease legal certainty and predictability on remediesPromote competition and foster investments in NGN Three interlinked pillars:Stricter non-discrimination rulesStable prices for access to copper networksNo price regulation on access to NGA networks

24Costing & Non-discrimination RecommendationAdoption of broadband cost reduction Directive by EP in first reading on 3 April 2014; transposition 1 January 2016TSM: EP vote in first reading on 3 April, agreement expected in 2014Revised Recommendation on Relevant Markets: adoption by the Commission foreseen in autumn 2014A few steps closer towards a Digital Single Market26Where the market cannot deliver, local, regional, and national authorities will have to close the financing gapNew guidelines on State aidsMain financing instruments:Connecting Europe Facility (CEF): Some complementary EU support by means of financial instruments2014 - 2020: ICT a priority in the European Structural and Investment Funds

Public financingState aid: new guidelines

Achieving the right mix between public and private investment: public interventions targeted at market failures; faster decisions. Principles:Technological neutrality: Next Generation Access networks can be based on different technological platforms. to protect private investors, publicly financed infrastructure can only be allowed if it provides a substantial improvement ("step change") over existing networks. public funding of ultra-fast broadband networks (of more than 100 Mbps) will be possible also in urban areas subject to very strict conditions to ensure a pro-competitive outcome. when a network is realised with taxpayers' money, competitors will benefit from a truly open network for the benefit of consumers.Transparency has been reinforced: publication of documents, a centralised data base for existing infrastructure and ex post reporting obligations to the Commission.Connecting Europe Facility (CEF) 28DG CONNECT is currently analysing in a sector-specific study what requirements CEF financial instruments must fulfil to suit the specificities of the broadband sector CEF debt instrument for transport, energy and broadband will be set up in the course of this yearProject Bonds to be continued in CEF debt portfolio, likely to be complemented by other debt facilitiesCEF technical assistance launch is targeted for 2014 . It will improve the pipeline of broadband projects in general and make more projects financeable

Research/InnovationEnvironmentTransportInformation societySocial infrastructureEnergyTourismCultureInstitutional capacityProgrammed investments of total ERDF and Cohesion Fund ( 271 billion)455 Operational Programmes 50% at national level 50% at regional level Cohesion Policy in 2007-2013ICTICT a priority of Cohesion Policy in 2007-2013 ?29ICT a priority in 2007-2013 ?Low level of programming :ICT : 4,2 % of Structural FundsBroadband : 0.7 % of Structural Funds

Difficulties in the execution: Delays & substantial de-programming in some Member StatesCurrent execution rates are catching upImportant in the future to ensure good coordination at national level for the management of the funding of ICT and BB projectsCohesion Policy in 2007-2013

30Funds allocated to ICT in 2007-2013:

Shift from infrastructure to e-Services & applications both in the public sector (eHealth, eGovernment, etc.) and for SMEs (eLearning, eBusiness, etc.)

Cohesion Policy

Cohesion Policy in 2007-2013Biggest spender on infrastructure: Poland ( 984 million) Greece ( 210 million Italy / Spain ( 164 million each)

AT: only 1,5% goes to ICT. This percentage is similar to that of BG (1.1%) contrast: the 9.5% of the Slovak Republic for ICT investments

31

Billion EURLess developed regions164.3Transition regions31.7More developed regions49.5Cohesion Fund66.4European territorial cooperation8.9Of whichCross border cooperation6.6Transnational cooperation1.8Interregional cooperation0.5Outermost regions and northern sparsely populated regions1.4Youth Employment initiative3.0TOTAL325.1Cohesion Policy in 2014-2020New Youth employment initiativeEUR 6 billionAvailable to all regions in EU-28 with levels of youth unemployment > 25 % (2012 data)EUR 3 bn from targeted investments from the ESF+ EUR 3 bn of match funding from a dedicated YEI budget line

Maximum EU co-financing rate80-85 % in less developed and outermost regions;60-80 % in new category of transition region;50 % in more developed regions. Enhanced financial engineering provisions

32Less developed regions (min. 50%)Developed regions ( min.80%)

TO-1: Research and InnovationTO-4 : Energy efficiency and renewable energyTO-3: SMEs competitivenessTO-2: ICT access, quality and use Concentration on "two ormore" of the four thematic objectives 1, 2, 3 and 4 which then share 50% to 80% of ERDF

2014 - 2020: ICT one of four "concentration themes" (out of 11) in the European Regional Development Fund (ERDF)

Cohesion Policy in 2014-2020

3333ICT Infrastructure: Next Generation Networks, H2020 R&D/e-Infrastructure for R&D, Cloud Computing, Key Enabling Technologies (KETS) for Europe, Network and Information Security;e-Services and Applications: eGovernment, eHealth, Active and Healthy Ageing, Digitalisation of cultural heritage, language resources, intelligent transport cities, smart cities, smart grids;ICT Take-up: Web entrepreneurship to boost start-ups, Open data portals, living labs, digital skills, ICT innovation vouchers.Broadband infrastructures (NGN) are eligible to ERDF in all EU Regions

Areas covered by ESIF 34Partnership Agreement (PA)A "high level business plan" which the MS agrees with the Commission;Setting the direction of the funding programmes ensuring how the funds are best deployed to support maximum impact (sustainable growth and jobs).

Operational Programme (OP)Document written by the MS and/or Regions defining the investment of EU funds for each priority chosen and proposing concrete Measures for funding; It includes: Priorities (axes) setting out specific objectives;Financial appropriations (ESI Funds + national co-financing);Indicators to assess progress (absorption, output, results); Description of the Measures: framework for the selection of operations (= projects) : main target groups, specific territories, types of beneficiaries, major projects, etc.

36ICT Ex-Ante Conditionalities (EAC)They reflect existing commitments or obligations that should be met. They help ensure an effective and efficient implementation of the ESIF in a wider policy framework.Two EAC for Thematic Objective 2 (ICT): - Digital Growth 2.1- National Broadband plan NGA 2.2If an EAC not met, an action plan is required by 2016 possibly with a suspension of payment?

EAC 2.2: NGN Plan(National or Regional)Criteria includeA plan of infrastructure investments based on an economic analysis taking account of existing private and public infrastructures and planned investments;Prioritisation, available budgetary resources, and investment models that should enhance competition and provide access to open, affordable, quality and future proof infrastructure and services; Measures to stimulate private investment.

At the cross-road of two EU policies:Implementation of the Digital Agenda for Europe (DAE) 2010-2020

Definition of investment priorities under the European Structural & Investment Funds (ESIF) 2014-2020

Thank you for your attention

40Chart34.084.164.464.193.924.244.44.414.364.524.434.544.774.365.144.34.624.335.475.25.395.145.415.615.035.45.415.435.45.02

DenmarkNetherlandsKoreaLuxembourgSwedenGermanyFranceBelgiumUKFinlandMaltaUSJapanAustriaEstoniaIrelandSloveniaCyprusSpainItalyCzech Rep.HungaryLithuaniaPortugalLatviaSlovakiaPolandBulgariaRomaniaFixed broadband lines per 100 populationWEF's Global Competitive Index scoreCorrelation Fixed Broadband Penetration and Competitiveness

Broadband and competitivenessBB penetrationWEF's GlobalCompetitive Index scoreRO0.1368547924.081BG0.13851033424.162PL0.14886640414.463SK0.15519071694.194EL0.18637243273.925LV0.18796561434.246PT0.19147386294.47LT0.19551408084.418HU0.19654938584.369CZ0.2038731444.5210IT0.21330407584.4311ES0.22451387094.5412IE0.22941437864.7713CY0.23349560494.3614AT0.23468954515.1415SI0.23640970884.316EE0.26021115914.6217MT0.28452705554.3318FI0.2905953875.4719BE0.30062187125.220UK0.30591498385.3921FR0.3111407745.1422DE0.31346347825.4123SE0.31903452025.6124LU0.33214557455.0325DK0.38224971085.426NL0.38573926795.4127US0.275.4328JP0.265.429KOR0.345.0230

Broadband and competitiveness

DenmarkNetherlandsKoreaLuxembourgSwedenGermanyFranceBelgiumUKFinlandMaltaUSJapanAustriaEstoniaIrelandSloveniaCyprusSpainItalyCzech Rep.HungaryLithuaniaPortugalLatviaSlovakiaPolandBulgariaRomaniaFixed broadband lines per 100 populationWEF's Global Competitive Index scoreCorrelation Fixed Broadband Penetration and Competitiveness

Chart1-0.0642014258-0.01842157740.09956679150.00025682260.18691668370.0721331689-0.0602753502-0.01846255430.10847018850.00389298570.2003343330.0771390091-0.04749311930.0040879690.08779138510.01453689990.14686948990.0463757121-0.03340513320.02468563180.10477902940.01095142490.13274128740.0546854546

KoreaFixed voice telephonyBusiness data servicesInternet access and servicesMobile voice telephonyMobile data servicesPay TV

Market value telecom200820092010201120122009/20082010/20092011/20102012/201120082009201020112012Carrier services116097211826741217766125525613029611.9%3.0%3.1%3.8%11111Fixed voice telephony295414276448259785247447239181-6.4%-6.0%-4.7%-3.3%25.4%23.4%21.3%19.7%18.4%Business data services8023278754773007761679532-1.8%-1.8%0.4%2.5%6.9%6.7%6.3%6.2%6.1%Internet access and services11241712361013701814904716466410.0%10.8%8.8%10.5%9.7%10.5%11.3%11.9%12.6%Mobile voice telephony4322054323164339994403084451300.0%0.4%1.5%1.1%37.2%36.6%35.6%35.1%34.2%Mobile data services11743213938216730519187721734718.7%20.0%14.7%13.3%10.1%11.8%13.7%15.3%16.7%Pay TV1232721321641423591489611571077.2%7.7%4.6%5.5%10.6%11.2%11.7%11.9%12.1%200820092010201120122009/20082010/20092011/20102012/201120082009201020112012Carrier services116097211826741217766125525613029611.9%3.0%3.1%3.8%100.0%100.0%100.0%100.0%100.0%Data (fixed and mobile)31008134174638162341854046154310.2%11.7%9.7%10.3%26.7%28.9%31.3%33.3%35.4%Voice (fixed and mobile)727619708764693784687755684311-2.6%-2.1%-0.9%-0.5%62.7%59.9%57.0%54.8%52.5%Pay TV1232721321641423591489611571077.2%7.7%4.6%5.5%10.6%11.2%11.7%11.9%12.1%

Market value telecom

Data (fixed and mobile)Voice (fixed and mobile)Growth of world market value of telecom carrier services

Sheet3