Over the last twenty years there has been a widespread recognition of the role played by high speed broadband in supporting economic growth. Many countries have set ambitious objectives of national high-speed broadband coverage. Investments by private telecom companies may not be enough to reach these objectives, in particular in less populated rural areas, since the upfront investment required to deploy the necessary infrastructure are very high and the returns uncertain.
Hence, national and local governments have been exploring alternative solutions to fund this infrastructure, ranging from allowing private joint ventures between competing telecom companies, to providing public funding and participating in public private partnerships.
Competition delegates discussed in their meeting in June 2014 the financing of the roll-out of broadband networks and examined alternative ways in which governments are ensuring the deployment of the infrastructure necessary to ensure high speed broadband access across their territory, and their impact on competition.
In particular the discussion focused on:
Key conclusions from the discussion included:
- when and why governments are getting involved in the development of the infrastructure rather than relying on market forces;
- what forms this involvement is taking;
- what are the impact this involvement may have on competition in the provision of broadband services;
- if and how all costs as well as the benefits of public intervention have been assessed.
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- Nationwide broadband coverage is considered essential for the economic and social development of a country. Ubiquitous access to broadband is therefore a key element in many OECD (and non-OECD) countries’ digital agendas and national broadband plans.
- The roll out of optical fibre to deliver fast broadband is commercially viable only in very densely populated high-income areas. Hence its nationwide deployment is likely to require some form of government funding.
- Public funds should be used only when there is reasonable certainty that no sufficient private investments would be made. When subsidies are provided, competent authorities should carefully examine how to ensure their best allocation without adversely affecting the incentives of private firms to invest.
- Public funds should be technologically neutral to ensure that firms always choose to the most the most efficient and cost effective means to provide broadband access.
- As technology evolves the cost of providing broadband access also in more remote and/or less densely populated areas may decline. This means that subsidies and other forms of state intervention that seek to ensure the deployment of broadband may become unnecessary to achieve the objectives set in national broadband plans and digital agendas.
- Infrastructure competition is likely to lead to better market outcomes than when only one network is available. However, the presence of several parallel infrastructures can in many instances be unprofitable.