EN Official Journal of the European Union C 327/102

Opinion of the European Economic and Social Committee on the ‘Proposal for a Regulation of the European Parliament and of the Council on measures to reduce the cost of deploying high-speed electronic communications networks’

COM(2013) 147 final — 2013/0080 (COD)

2013/C 327/17

Rapporteur: Mr McDONOGH

On 12 and 16 April 2013, respectively, the Council and the European Parliament decided to consult the European Economic and Social Committee, under Article 114 of the Treaty on the Functioning of the European Union, on the

Proposal for a Regulation of the European Parliament and of the Council on measures to reduce the cost of deploying high-speed electronic communications networks

COM(2013) 147 final — 2013/0080 (COD).

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 20 June 2013.

At its 491st plenary session, held on 10 and 11 July 2013 (meeting of10 July 2013), the European Economic and Social Committee adopted the following opinion by 180 votes to1 with 3abstentions.

1. Conclusions and recommendations

1.1 The Committee believes that universal access to high-speed electronic communications networks is key to promoting growth in Europe, creating jobs and strengthening cohesion. The EESC strongly supports the broadband targets in the Digital Agenda (1); however, the targets will be difficult to achieve without special efforts by Member States and the Commission to improve the environment for both the supply and the demand for broadband across the Union.

1.2 The Committee was extremely disappointed by the recent decision of the European Council to reduce the part of the 2014-20 Multiannual Financial Framework (MFF) budget for digital infrastructure from EUR 9.2bn to only EUR 1bn. This cut will remove MFF support for broadband rollout, and hurt the poorer and less advantaged regions of the EU most.

1.3 The Committee welcomes the proposed regulation from the Commission. The measures proposed are particularly important to bridging the digital divide and facilitating the rollout of broadband in rural areas.

1.4 The EESC would like the Commission to advise how access to high-speed broadband can be recognised as a universal right of all citizens regardless of location. The Commission raised the question re inclusion of broadband in the Universal Service Obligation in 2010 (2). An answer to this question is urgently needed to promote citizen welfare, employment and digital inclusion.

1.5 The Committee calls on MSs to complete their national broadband plans without further delay.

1.6 The Commission and MSs should consider what financial incentives and supports could be given to the Private Sector to encourage investment in high-speed broadband for areas with low population density.

1.7 In addition to substantial investment by the private sector in the rollout of high-speed broadband, the Committee estimates that up to EUR 60bn in public funding will also be needed to meet the Digital Agenda 2020 targets. The EESC calls on the Commission and MSs to include this critical funding in budgets.

1.8 The Committee would like the Commission to address the problem of broadband service providers who are not providing customers with the Internet connection speeds promised in their contracts. This contractual "non-conformity" and false advertising undermines trust in the digital market, hurts demand and must be tackled by strong measures.

1.9 The Committee calls on the Commission to build on the proposed regulation and develop a pan-European wholesale market for broadband infrastructure.

1.10 The EESC asks the Commission, the NRAs and the MSs to ensure that a competitive market for broadband infrastructure is developed in all areas of the Union.

1.11 The Committee notes that the proposed regulation will offer new business opportunities for the utility and transport undertakings to participate in the broadband infrastructure market. The Commission and MSs should make special efforts to encourage these firms to take advantage of this opportunity.

1.12 The Committee draws the attention of the Commission to previous recent opinions dealing with the rollout of high-speed broadband and reducing the digital divide: A Digital Agenda for Europe (3), The first radio spectrum policy programme (4) and The Digital Agenda for Europe - Driving European growth digitally (CES959-2013, not yet published).

2. Gist of the Commission proposal

2.1 Purpose

2.1.1 The Communication "Single Market Act II: Together for new growth identified cost reduction of broadband rollout as one of 12 key actions that will boost growth.

2.1.2 Provision of high-speed broadband has slowed down, especially in non-urban areas, because of a patchwork of rules and administrative practices at national and sub-national levels.

2.2 Objectives

2.2.1 The regulation aims to: — Reduce costs and investment risk by streamlining efficient planning and investment processes for broadband provision. — Remove barriers to the functioning of the Single Market caused by the patchwork of rules and administrative practices at national and sub-national levels required to provide broadband infrastructure. — Stimulate ubiquitous broadband coverage. — Ensure equal treatment and non-discrimination of undertakings and investors providing broadband.

2.3 The proposed regulation

2.3.1 To achieve the intended cost and efficiency objectives, the regulation defines a number of directly applicable rights and obligations for network operators and infrastructure providers, applicable across the various steps of infrastructure deployment.

2.3.2 The regulation proposes the following legal rules to achieve its aims: — Access to existing physical infrastructure: Every network operator (telecoms or non-telecoms infrastructure owner - In the regulation, "network operator" means an electronic communications network provider as well as an undertaking providing a physical infrastructure intended to provide: a service of production, transport or distribution of gas, electricity, including public lighting, heating, water, including disposal or treatment of waste water and sewage; transport services, including railways, roads, ports and airports) has the right to offer, and an obligation to meet, all reasonable requests for access to its physical infrastructure for the deployment of high-speed electronic communications networks, whether fixed or wireless. — Information on existing infrastructure: Broadband providers will have the right to access, via a single information point, a set of minimum information concerning the existing physical infrastructure, and the right to carry-out in-site surveys of existing infrastructure. — Coordination of civil works: Every network operator can negotiate agreements to coordinate civil works with entities authorised to provide elements of high-speed broadband networks. In order to enable better coordination of works, any network operator shall make available on request minimum information concerning on-going or planned civil works related to its physical infrastructure. — Permit granting: Every broadband networks provider can access by electronic means via a single information point, any information concerning the conditions and procedures for granting permits for civil works, and submit its application electronically via the same single information point. The competent authorities shall grant or refuse permits within six months from receiving a request. — In-building equipment: All newly-constructed buildings and buildings undergoing major renovation shall be equipped with high-speed-ready in-building physical infrastructure, up to the network termination points.

2.3.3 Any disputes between network operators and broadband service providers concerning their rights and obligations, will be mediated if necessary by a competent national dispute settlement body: the NRA or another competent authority.

2.3.4 The regulation would become directly applicable across the EU after agreement by the European Parliament and the Council.

3. General comments

3.1 Broadband is essential

3.1.1 Broadband is the essential enabling infrastructure for the Digital Agenda and the completion of the Digital Single Market. The economic importance of broadband services cannot be overstated. The availability of broadband has a multiplier effect on economic growth: the World Bank estimates that every 10 % increase in broadband take-up results in up to 1.5 % growth in GDP growth. High-speed, ubiquitous connectivity is essential to the rollout of new transformative technologies and services like cloud computing and smart grids.

3.1.2 Broadband's importance to growth and jobs is recognised in the Digital Agenda which set-out to provide basic broadband for all Europeans by 2013, and by 2020 (i) access to download rates of 30 Mbps for all Europeans, and (ii) subscription to internet connections above 100 Mbps by 50 % or more of European households. These goals will only be achieved if the infrastructure deployment costs are lowered across the EU and extraordinary measures taken to provide broadband in rural and less advantaged areas of the Union.

3.2 Low cost and world class

3.2.1 Low-cost, world-class broadband infrastructure is a fundamental component of a vibrant 21st century economy. Knowledge-based businesses will grow where the skills and infrastructure exist to support them. And an increasing amount of advanced services in health, education and social services will depend on fast and ultrafast broadband availability.

3.2.2 The quality of networks, their cost of provision, and competitive end-user prices are important management criteria in build-out programmes. As up to 80 % of the cost of network infrastructure is due to civil engineering works, it is vital that national and local authorities work to significantly reduce costs by efficient coordination of infrastructure projects.

3.3 Universal service right

3.3.1 The EESC has asked the Commission in numerous opinions, most recently in its opinion on driving European growth digitally (5), to advise how access to high-speed broadband can be recognised as a universal right of all citizens, regardless of location. An answer to this question is now urgently needed.

3.4 Ultrafast broadband is necessary

3.4.1 The targets set in the Digital Agenda for 2020 broadband availability will be overtaken in the not-so-distant future by the rapid advances taking place in broadband technology and Internet-based services (e.g. high definition video conferencing). Ultrafast Networks providing connectivity of up to 1Gbps (1 000Mbps) are already being rolled-out in some urban areas (http://arstechnica.com/tech-policy/2012/07/tokyo-seoul-and-paris-get-faster-cheaper-broadband-than-us-cities/) and video-based services are developing to use these higher bit-rates.

3.4.2 Substantial investment in high-speed connectivity will be needed throughout the EU to keep-up with the global development of the Internet economy.

3.5 EU falling behind

3.5.1 As was recognised by the Commission in its recent Communication on the importance of the Digital Agenda for driving economic growth (6), Europe is falling further behind its global competitors in the delivery of broadband infrastructure.

3.5.2 Investments in high-speed broadband are taking place more quickly in parts of Asia and in the United States, leading to significantly better coverage and higher speeds. As of December 2011, South Korea, with 20.6 % of subscriptions per 100 inhabitants, had the highest take-up of fibre worldwide, i.e. double that of Sweden (Staff working document accompanying the proposal for a regulation to reduce deployment costs of broadband: SWD(2013) 0073(part 1).

3.6 Digital divide

3.6.1 The Digital Agenda for Europe Scoreboard (https://ec.europa.eu/digital-agenda/en/scoreboard) and the latest figures from Eurostat (http://epp.eurostat.ec.europa.eu/portal/page/portal/information_society/data/main_tables) show that the digital divide is growing wider, and the differences between MS are big. In 2012, 28% of the households in EU27 are without broadband connectivity. Furthermore, 90 % of households without broadband are located in rural areas. 35 million homes in rural areas are still waiting for high-speed connectivity, and unless proper attention is given to citizens living outside urban centres they will suffer increasing social and economic disadvantage.

3.6.2 The measures included in the proposed regulation from the Commission will provide a basis for reform of national and local government planning regulations, and smart infrastructure planning, investment incentives and innovative technologies can help to bridge the broadband gap.

3.7 Investment needed

3.7.1 The Committee was extremely disappointed by the decision of the Council in February to reduce the 2014-20 budget in the Multiannual Financial Framework (MFF) for digital infrastructure and services under the Connecting Europe Facility, from EUR 9.2bn to only EUR 1bn. This cut would remove MFF support for broadband rollout, and hurt the poorer and less advantaged regions of the EU most, exacerbating the growing digital divide.

3.7.2 The money included in the MFF to support broadband roll-out was intended to be used by the Commission to stimulate the broadband market, but it represents only a small portion of the funds actually needed to achieve the broadband targets in the Digital Agenda. The consultants engaged by the Commission to study the funding gap estimate that up to EUR 62bn additional public funding will be needed to meet the 2020 targets (Study on the socio-economic impact of bandwidth by Analysys Mason for the European Commission, 2012).

3.7.3 The funding for this large investment will have to come primarily from the private sector, but special measures will be needed to support private investment in rural areas where population density is too low to attract investment. The European Investment Bank has already provided funding for a number of such projects and will need to provide much more of this type of support. The Commission should put special effort into considering how European institutions and the MS could better facilitate the private sector funding of broadband rollout.

3.7.4 Action 48 of the Digital Agenda earmarked the use of structural funds to finance the roll-out of high-speed networks. The Cohesion Fund should also be considered.

3.8 Stimulate supply

3.8.1 Local government and municipal authorities can play an important role in promoting the provision of broadband connectivity in their regions by leading PPP initiatives and by implementing the measures in the proposed regulations as quickly and efficiently as possible.

3.8.2 The regulation offers the opportunity to open the market for the provision of broadband connectivity and services to more new entrants. In particular, non-telecommunications companies that have extensive infrastructure that could be used for the provision of high-speed networks. MSs and the Commission should make a special effort to encourage these new entrants.

3.8.3 The regulation also offers the potential to open-up the market to cross-border investment in infrastructure provision by firms across Europe. The Commission should consider how this single market in infrastructure could be developed by increasing Pan-European awareness of investment opportunities, reducing the risk of these investments to non-national investors, and perhaps by developing some special financial instruments (bonds) that would increase the attractiveness of investing in the most challenging regions.

3.8.4 Innovative technology solutions, including greater use of wireless technologies, must be deployed as soon as possible to speed-up broadband deployment and to address the growing digital divide between urban and rural areas.

3.8.4.1 In particular, fully implementing the European Radio Spectrum Policy Programme (RSPP) (7) in MSs is vital to ensure that sufficient and appropriate spectrum for both the coverage and the capacity needs of wireless broadband technologies will be designated and made available to achieve the targets set for 2020.

3.8.4.2 Satellite technology will provide broadband to the most remote areas of the Union. However, capacity, cost and speed issues will make it a marginal solution, perhaps only catering for less than 10 % of European 30Mbps broadband in 2020.

3.9 Stimulate demand

3.9.1 Weak demand for broadband, especially in less densely populated areas, adversely affects investment in networks; notwithstanding that there is always substantial latent demand in areas without availability to high speed connectivity.

3.9.2 The Commission and MSs must focus on broadband demand stimulation by a range of methods, including targeted public information campaigns, public WiFi hotspots, the further development of e-Government services, and by promoting digital literacy and skills training. Demand stimulation efforts should especially target rural areas.

3.9.3 Broadband costs and price transparency is critical to ensure that the citizens take-up broadband. Existing broadband consumers across Europe are complaining that their service providers are not providing them with the Internet connection speeds promised in their contracts. This contractual "non-conformity" and false advertising undermines trust in the digital market and hurts demand and must be tackled by strong measures.

4. Specific comments

4.1 Need for a regulation

4.1.1 Commercially-driven electronic communications companies lack sufficient financial incentive to invest in broadband infrastructure in many areas of the EU where population density is too low. Thus, the Committee is pleased that the proposed regulation will introduce measures to substantially reduce the costs and risks of broadband provision, and improve the investment business case for network providers.

4.1.2 To ensure that there is proper digital inclusion and to maximise the economic benefits from universal high-speed broadband, MSs and local governments need to assert stronger influence over the supply of and the demand for broadband infrastructure, by implementing broadband plans that balance the high economic returns to be earned from infrastructure investment in areas with high population density with the much less financially attractive investment required in underdeveloped regions. This proposed regulation will give them better means to achieve this.

4.1.3 In many markets there is a single dominant infrastructure provider. The Committee hopes that the effective implementation of this regulation will create better conditions for new network providers to enter the market and provide competitive offerings.

4.2 Cutting costs and improving cooperation

4.2.1 According to the Communication, civil engineering works can amount to 80 % of broadband deployment costs. The capex savings to network operators expected from the implementation of the proposed regulation is estimated in the range of 20–30 % of total investment costs, i.e. up to EUR 63 billion by 2020. The EUR 63 billion in savings can then be invested in other areas of the economy.

4.2.2 Cooperation and sharing by private infrastructure providers is essential for efficiency, speed of implementation, environmental sustainability and the availability of competitive prices for end-users. The Committee is pleased to see that the regulation will oblige private infrastructure providers to publish good information on existing and planned infrastructure, and that network providers will have obligations to cooperate, so that good planning, cooperation and efficient use of resources is facilitated.

4.3 Natural monopolies

4.3.1 In areas with low levels of population density the economics dictate that only one core broadband infrastructure provider can be supported; in other words, a natural monopoly exists.

4.3.2 Such natural monopoly conditions make the case for an "Open Access" model of broadband provision whereby a single provider, perhaps a PPP, would roll-out the core infrastructure and then open-up the network facilities by leasing capacity to smaller service providers on fair and equal terms. Perhaps the Commission should consider how this Open Access model could be developed and regulated in Europe, taking care not to distort normal competition.

4.4 Wholesale market

4.4.1 The proposed regulation would provide enabling legislation for the development of a wholesale market in broadband infrastructure. Perhaps the Commission should investigate how the regulation could be leveraged to stimulate such a market, particularly in the hard-to-reach regions of the Union.

4.4.2 A wholesale market in dark fibre or wireless bearer infrastructure could be cross-border and pan-European, if there was good quality information on consumer demand and existing infrastructure. The Commission should investigate how such a market could be stimulated and supported.

4.5 National Broadband Plans

4.5.1 The build-out of infrastructure, in rural areas in particular, demands an effective national strategy and implementation plan. All MSs now have a broadband strategy, but many are still lacking plans to deliver on the Digital Agenda targets. The national strategies need to be updated soon to include the approach to delivering ultrafast networks, with concrete targets and identified implementation measures.

4.5.2 Action 46 of the Digital Agenda requires MSs to develop their national broadband plans, but a number of MSs have not completed their plans and this action is flagged as delayed by the Commission. This delay adversely impacts the broadband rollout and funding plans of industry. The EESC calls on MSs to revise their plans in the light of this proposed regulation and complete the work as soon as possible.

4.5.3 A comprehensive National Broadband Plan, which included PPP initiatives and special incentives to facilitate rollout in rural areas, would make it much easier to draw-down European and EIB funding.

4.6 Utility companies

4.6.1 The proposed regulation will clear the way for infrastructure owners that are not electronic communications companies – i.e. energy companies, water companies, transport companies and waste disposal companies – to make their infrastructure available on commercial terms for the provision of broadband services. This will help those companies to earn new revenues, lower their costs of essential infrastructure by sharing the cost with broadband providers, and leverage synergies as they develop their own core services, for example in the development of smart girds for energy providers.

4.6.2 Efforts should be made by the Commission and MSs to alert these companies to the opportunities provided by the essential rollout of broadband infrastructure, and the potential positive impact of the proposed regulation on their business.

Brussels, 10 July 2013. The President of the European Economic and Social Committee Henri MALOSSE

(1) COM(2010) 245 final.

(2) COM(2008) 572 final.

(3) OJ C 54, 19.2.2011, pp. 58-64.

(4) OJ C 107, 6.4.2011, pp. 53-57.

(5) Digital Growth - Interim Review, OJ C 271, 19.9.2013, p. 127-132

(6) COM(2012) 784 final.

(7) COM(2010) 471 final.