COMMISSION STAFF WORKING DOCUMENT

Impact Assessment

Accompanying the document

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

Table of Contents

1........... PROCEDURAL ISSUES AND CONSULTATION OF THIRD PARTIES. 5

1.1........ Introduction. 5

1.2........ Involvement of other directorate generals. 5

1.3........ Consultation and expertise. 5

1.3.1..... Stakeholder consultation. 5

1.3.2..... Studies and other information sources. 6

1.3.3..... Dedicated events. 6

1.3.4..... Exchange of best practices. 7

1.4........ Opinion of the Impact Assessment Board. 7

2........... PROBLEM DEFINITION.. 8

2.1........ Policy context 8

2.1.1..... The importance of broadband. 8

2.1.2..... Broadband in Europe and in the world - a need to step up efforts to roll out high-speed internet 9

2.1.3..... Factors holding back high-speed broadband rollout 11

2.1.4..... New measures to stimulate high-speed broadband. 11

2.2........ Scope of the initiative. 12

2.3........ Problem definition. 13

2.4........ Underlying causes of the identified problem.. 17

2.4.1..... Persistent barriers to use existing physical infrastructures suitable for broadband rollout 17

2.4.2..... Barriers to cooperation in civil engineering works. 19

2.4.3..... Burdensome administrative procedures. 21

2.4.4..... High barriers to deploy in-house equipment in existing buildings. 23

2.5........ The main stakeholders involved. 24

2.6........ How would the situation evolve if no further EU action were undertaken. 25

2.7........ Right of EU to act 31

2.7.1..... Single Market perspective and subsidiarity. 31

2.7.2..... Proportionality. 34

2.7.3..... Legal basis. 34

3........... OBJECTIVES. 35

3.1........ Specific and general objectives. 35

3.2........ Operational objectives. 36

3.2.1..... Increasing the use of existing physical infrastructure suitable for broadband rollout 36

3.2.2..... Increasing cooperation in civil engineering projects throughout the EU.. 36

3.2.3..... Streamlining administrative procedures related to network rollout throughout the EU.. 37

3.2.4..... Increasing the provision of buildings with open high-speed broadband-ready infrastructure throughout the EU 37

4........... POLICY OPTIONS. 40

4.1........ Option 1 – "Business as usual" 41

4.2........ Option 2 – Promote efficiency gains within the electronic communications sector 43

4.3........ Option 3 – Enable efficiency gains across sectors. 46

4.4........ Option 4 – Mandate efficiency gains. 52

5........... ANALYSIS OF THE IMPACTS OF THE POLICY OPTIONS. 54

5.1........ Methodology. 54

5.2........ Impact of cost reduction measures on broadband deployment 55

5.3........ General economic social and environmental impacts of broadband deployment 58

5.4........ Impacts of the option 1 "business as usual" 61

5.4.1..... Economic impacts: 65

5.4.2..... Social impacts: 67

5.4.3..... Environmental impacts: 67

5.5........ Impacts of the option 2: promoting efficiency gains. 68

5.5.1..... Economic impacts: 68

5.5.2..... Social impacts: 70

5.5.3..... Environmental impacts: 70

5.6........ Impacts of Options 3a and 3b: enabling efficiency gains. 70

5.6.1..... Economic impacts: 71

5.6.2..... Social impact: 75

5.6.3..... Environmental impact: 77

5.7........ Impacts of Option 4 mandating efficiency gains. 78

5.7.1..... Economic impact: 78

5.7.2..... Social impact: 79

5.7.3..... Environmental impact: 80

5.8........ Summary of impacts. 80

6........... CHOICE OF THE PREFERRED OPTION.. 81

7........... MONITORING AND EVALUATION.. 87

8........... List of Annexes. 88

Table of Figures

Figure 1 - Total NGA coverage by country in the EU. 9

Figure 2 - Economies with Highest Penetration of FTTH/FTTB.. 10

Figure 3 - Simplified steps involved in a typical network rollout, involving a mix between self-digging, co-deployment, and utilisation of existing physical infrastructure. 16

Figure 4 - Range of potential cost savings in network rollout resulting from using existing physical infrastructure 18

Figure 5 - Range of potential cost savings in network rollout resulting from coordinating civil engineering works 20

Figure 6 - Comparison between legal commitments and typical timescales for issuing base station planning permissions across Europe. 22

Figure 7 – Illustration of possible solutions for in-building wiring of MDUs....................................... 23

Figure 8 - Range of potential cost savings in network rollout resulting from equipping new buildings with NGA access, as compared to retro-fitting. 24

Figure 9 - Problem Definition and Objectives. 39

Figure 10 - Option 1: Business as usual 42

Figure 11 - Option 2: Promoting measures to reduce the costs of broadband rollout 44

Figure 12 - Option 3: Enabling the utilisation of the existing regulatory framework to reduce the cost of broadband rollout 51

Figure 13 - Option 4: Mandating the full exploitation of the existing regulatory framework to reduce the cost of broadband rollout 52

Table 1 – Investment scenarios and the achievement of the DAE targets. 56

Figure 14 - Demand and supply diagram demonstrating when intervention will be required to deploy NGA 57

Figure 15 - Correlation between fixed broadband penetration and competitiveness. 58

Table 2 - Benefits of high-speed broadband in the EU27 countries, by scenario. 60

Table 3 Analysis of strengths and weaknesses and cost and benefits of good practice measures for identified inefficiencies 61

Figure 16 - Summary of main impacts of Option 1 to Option 4. 81

Table 4 - Comparison of policy options by using standard criteria of effectiveness, efficiency, coherence 83

1. PROCEDURAL ISSUES AND CONSULTATION OF THIRD PARTIES

1.1. Introduction

The Digital Agenda for Europe[1], one of the flagship initiatives of the Europe 2020 Strategy, underlines the importance of broadband connectivity for European growth and innovation and for social inclusion and employment. The Digital Agenda sets ambitious coverage and speed targets and requires Member States to take measures, including legal provisions, to facilitate broadband investment.

The 2012 Spring Council has asked for steps to be taken at EU level to achieve costs savings in the deployment of high-speed broadband networks, as part of the efforts to complete the Digital Single Market by 2015.

This impact assessment accompanies a legislative proposal that would, if adopted by the Council and European Parliament, render the deployment of high-speed broadband networks[2] less expensive and more efficient. It would do so by ensuring improved access to suitable physical infrastructure, more opportunities for cooperation in civil engineering works, streamlined permit granting procedures for rolling out broadband networks, and more buildings ready for high-speed broadband.

The Single Market Act II includes this initiative as one of its 12 key actions[3].

1.2. Involvement of other directorate generals

DG Connect set up on 1 March 2012 an inter-service steering group including the following services: Secretariat General, Legal Service, DG Competition, DG Economic and Financial Affairs, DG Energy, DG Enterprise, DG Environment, DG Internal Market, DG Mobility and Transport and DG Regional Policy. The IASG held five meetings between March and September 2012.

1.3. Consultation and expertise

1.3.1. Stakeholder consultation

In preparation of this impact assessment, the Commission services held a public consultation from 27 April to 20 July 2012. The Commission invited stakeholders to give their views on five sets of questions, covering the entire chain of network deployment, from the planning phase to the connection of end-users. Over a hundred written replies were submitted by different types of stakeholders from 26 countries across the EU and EFTA. The largest categories of respondents were electronic communications providers (27) and their trade associations (14), as well as public bodies - both central (22) and local authorities (9). Six National Regulatory Authorities (NRAs) responded. Other utilities (7) provided their input mainly via trade associations. Equipment manufacturers (5) and engineering and ICT trade associations (6) also replied. In general terms, the respondents favourably received the Commission's initiative to address civil engineering costs for broadband roll-out. A majority of them confirmed existing problems in the rollout process as well as the potential for cost reduction, thereby supporting the mandate for the Commission to act. The public consultation was an opportunity to collect feedback on the efficiency of different existing practices applicable in some Member States, regions or municipalities. Several solutions were proposed, some very ambitious and some more moderate. A report on the outcome of the public consultation can be found in Annex I, whereas references to the specific ideas provided in the consultation are made throughout the document. An Internet discussion platform for crowdsourcing ideas was also set up in the margin of the public consultation, which allowed for exchange of ideas and interaction between the interested stakeholders.

The Commission services have maintained regular contacts with major stakeholders, both public and private, across the sectors concerned. The views expressed in the framework of these consultations have been incorporated throughout the entire report.

1.3.2. Studies and other information sources

The Commission services have commissioned two studies and had recourse to a number of information sources, for the preparation of the impact assessment. More specifically, Deloitte prepared a study on cost reduction practices with regard to broadband physical infrastructure rollout[4] and Analysys Mason elaborated a study to support this impact assessment[5]. Annex III builds on the study prepared by Deloitte, as further cross-checked with other sources, whereas the study prepared by Analysys Mason forms part of Annex IV. In addition, a more extensive study carried out by Analysys Mason on the costs and benefits of broadband was used to support the analysis of impacts[6].

Furthermore, the Commission services drew upon additional information sources, studies and national best practices (e.g. DE, FR, LT, IT, PT, NL, PL, ES, SE, SI, UK). The complete list of these sources can be found in the bibliography. Detailed information was also collected by the responsible Commission services via the National Regulatory Authorities.

1.3.3. Dedicated events

The Commission services have discussed possible actions to facilitate and reduce the cost of NGA networks' deployment on various occasions, notably in the meetings of the Digital Agenda Europe High Level Group held on 17 January and 4 December 2012, in several meetings of the Communications Committee and in the Smart Grids Task Force. Furthermore, a session in one of the workshops of the 2012 Digital Agenda Assembly, held on 21-22 June 2012, was dedicated to finding ways at EU level to make the rollout of high-speed broadband easier and less expensive.

1.3.4. Exchange of best practices

The Commission services have drawn from the extensive experience of the Member States, in order to design the different policy options and assess their impact. Best practices, as well as obstacles were discussed in different fora, including the High Level Group of Electronic Communications and the DAE High Level Group.

1.4. Opinion of the Impact Assessment Board

The draft Impact Assessment was presented to the Impact Assessment Board on 7 November 2012. The Board examined it and delivered its first opinion on 9 November and its final opinion on 4 January 2013. In response to the recommendations of the Board, the document was revised introducing the following main changes:

• The problem definition (Chapter 2) was completed with an overview of the broadband situation across the different Member States as compared to Europe's global competitors (Section 2.1.2), with an overview of the current regulatory framework (Sections 2.4.1 through 2.4.4 and Annex VI) and with an analysis of the problems and entry barriers holding back the rollout (Sections 2.1.3 – 2.3); furthermore, the analysis of the baseline scenario was reinforced with developing the outlook for each of the inefficiencies (Section 2.6) and impact analysis of good practices (Section 5.4) and a more transparent account was given of the issues selected to be tackled by this initiative (Section 2.4);

• The subsidiarity arguments in Section 2.7 were strengthened to clarify why EU action is needed against the background of possible measures at Member State level and of the possibilities offered by the current regulatory framework;

• The policy options in Chapter 4 were better defined in terms of their content rather than instruments and it was explained how those address the totality of the problems identified;

• The analysis of the impacts in Chapter 5 was deepened, including, among others, cost and benefits of some existing good practices, quantification of expected costs savings and assessment of administrative burdens and social impacts and other costs and benefits of the different options (see in particular Sections 5.2 - 5.3 and Annexes VII – IX);

• The comparison of options in Chapter 6 was re-written in a more synthetic and clearer way;

• The different views of the stakeholders were better reflected throughout the entire report;

2. PROBLEM DEFINITION

2.1. Policy context

2.1.1. The importance of broadband

The achievement of Europe 2020 objectives of smart, sustainable and inclusive growth will very much depend on the availability and widespread use of the broadband. A high quality digital infrastructure underpins virtually all sectors of a modern and innovative economy and is of strategic importance to social and territorial cohesion. It is the backbone of the Digital Single Market, a major and still to a large extent untapped source of growth, and a key factor for EU's competitiveness.

Numerous international studies demonstrate the benefits of broadband for the society[7]. First, it is highly important for competitiveness and innovation and has a clear impact on GDP growth. Second, it is also a net job creator, an enabler of major societal and governmental reforms, as well as a transformational factor – reducing for example the isolation of regions, including Outermost Regions. Finally, broadband has proven to bring significant benefits for the environment. The general economic, social and environmental impacts linked to broadband access are illustrated in detail in Section 5.3.

More generally, living in a connected society changes the economic, entrepreneurial and social environment. A high quality digital infrastructure is a key enabler of economic and social changes and a condition for next generation technologies, services and applications to develop. In fact, it is considered by experts as essential for the 21st century's society as the rail was for the 19th century and electricity for the 20th century.[8]

Acknowledging the importance of broadband rollout, Member States have endorsed the ambitious broadband targets set in the Digital Agenda for Europe. These targets are as follows: 100% broadband coverage by 2013 for all Europeans and increased speeds of 30MBps for all, with at least 50% of the European households subscribing to Internet connections above 100MBps by 2020. DAE targets were set just shortly after the reform of the regulatory framework (2009).

Following the adoption of the Digital Agenda, the Commission issued a first package of measures aimed at stimulating investment in high-speed Internet in 2010. As part of the package, the objective of the Broadband Communication[9] was to assist the actions of national and local authorities in enhancing rollout. The Next Generation Access Recommendation[10] was aimed at providing regulatory guidance to national regulators, while the Radio Spectrum Policy Programme (RSPP)[11] aimed to improve the coordination and management of spectrum and hence facilitate, among others, the development of wireless broadband.

2.1.2. Broadband in Europe and in the world - a need to step up efforts to roll out high-speed internet

Although basic Internet connections are available to a great majority of European households (95.7%), the EU is currently only halfway towards its goal of 30Mbps access for all by 2020[12].

Great differences exist within the EU as regards the coverage of high-speed broadband. As can be seen in the figure below, some Member States such as the Netherlands or Malta are close to 100%, while others such as Greece and Cyprus are under 10%[13]:

Figure 1 - Total NGA coverage by country in the EU. Source: Broadband Coverage in Europe in 2011, Point Topic for the European Commission

Moreover, out of 105 million European homes with access to high-speed broadband, only 5 million are in the rural areas (12% of the total rural homes in Europe) leading to an increasing isolation of these areas. 35 million homes in rural areas are still waiting for high-speed connectivity, and bringing it to them is likely to require the most considerable effort and investment.

Thus, the digital divide becomes increasingly important in the context of high-speed broadband, as citizens are not only deprived of access to information, as it is the case with basic broadband, but also of an entire range of Internet-based digital services available only on high-speed connections, such as eHealth, eEducation, or eGovernment.

From an international perspective, investments in high-speed broadband are taking place more quickly in parts of Asia and in the United States, leading to significantly better coverage (see figure 2) and higher speeds. In the US, high-speed networks now pass more than 80% of homes, a figure that quadrupled in three years. Japan and South Korea were at 86.5% and, respectively, 68% already in 2009[14]. In addition, there is a very strong growth in coverage of high-speed broadband in Russia and China[15].

Take-up of high-speed broadband in Europe is generally also rather low, as compared to other important world economies. South Korea, with 20.6% of subscriptions per 100 inhabitants, has the highest take-up of fibre worldwide, i.e. double that of Sweden (9.7%), the best in the EU (as of December 2011)[16]. Japan has the second highest fibre take-up at 17.2%. The high take-up in Asia may be related to the relatively inexpensive high-speed connections, attractive content offerings and the growing use of multiple connected devices.[17]

Figure 2 - Economies with Highest Penetration of FTTH/FTTB. Source: FTTH Council

According to experts[18], it could cost more than 200 billion EUR to bring high-speed broadband to all Europeans in line with the Digital Agenda targets. While investments in the telecom sector amount to 12.4% of the total revenues of 256 billion EUR throughout the EU in 2010[19] – only a limited share of these are in next generation networks.

2.1.3. Factors holding back high-speed broadband rollout

· Several factors explain why investments are not occurring in Europe as fast as they do in other parts of the world.

· Operators typically point to a lack of demand. Moreover, the traditional telecommunications eco-system has changed as the boundaries between IT, telecom, broadcasting, and other media are constantly blurring. The convergence of services means that the all Internet-relevant industries need to adapt and rethink their strategies, so that value keeps flowing sustainably across the Internet value chain. In this context, creation of successful European content offers could significantly contribute, among others, to bigger demand for high-speed broadband.

· Lack of demand is often linked to a lack of awareness concerning the benefits of broadband and a lack of e-skills. In this regard, differences between Member States are significant: 54% of Romanian citizens versus 5% in Sweden have never used the Internet. Only 43% of EU population claim to have medium or high Internet skills.[20]

· On the other hand, regions where telecom operators historically profited from well-developed networks tend to be slower in their shift towards high-speed broadband, as compared to areas where electronic communications networks were relatively under-developed and which leapt forward.

· The high costs of rolling out networks and the uncertainty concerning future income and returns on investment are often quoted as factors deterring investment, in particular in a climate of financial restraint. This is particularly relevant in rural and sparsely populated areas, where rollout necessarily involves higher costs.

2.1.4. New measures to stimulate high-speed broadband

The analysis above shows that Europe needs to step up its efforts to stimulate high-speed broadband rollout. A recent study[21] shows that without public intervention, by 2020, 94% of the households would be covered with connections of at least 30 Mbps, and only 50% would be covered with connections of 100Mbps, with a take up of 26% significantly below the DAE targets.

In this context, the Commission is taking the following actions:

First, the Commission is striving to ensure a predictable and consistent regulatory framework, which enhances competition while providing the right incentives to investors.

Second, the Commission is proposing measures to foster demand, and in particular to stimulate demand for high bandwidth.

Third, the Commission is taking various measures within the framework of the Radio Spectrum Policy Programme, in an effort to ensure that sufficient spectrum is available for the further development of mobile broadband, recognising the increasing use of wireless Internet.

Fourth, the Commission is taking initiatives to ensure that, at EU level, appropriate funding is available for the rollout in areas that are underserved. While in the densely populated 'black' areas operators are ready to invest and the market will deliver on its own, in the 'grey' and 'white' areas support is needed. For the latter, structural funds and public funding within the frames of the revised Guidelines for Broadband State Aid will contribute to this objective.

The initiative discussed in this Impact Assessment, aimed at reducing the cost of deploying high-speed electronic communications networks complements the efforts described above. It follows a call from the 2012 Spring European Council, which underlined the importance of broadband and asked for additional steps to be taken to achieve costs savings as part of efforts to complete the Digital Single Market by 2015[22].

2.2. Scope of the initiative

This initiative looks at ways to facilitate and reduce the cost of rolling out high-speed electronic communications networks. It is estimated by several studies (OECD 2008, WIK 2008, Francisco Caio 2008, Analysys Mason 2008[23]) that up to 80% of the costs of deploying new networks are civil engineering costs. While these costs differ in function of the technology used, similar figures have been advanced by most respondents to the public consultation[24]. The same studies, echoed by feedback from stakeholders, show that a major part of these costs can be attributed to inefficiencies in the rollout process. Some of these inefficiencies can be eliminated and thus costs could be significantly reduced by implementing simple measures, such as a more intensive use of existing physical infrastructure, cooperation with utility companies, and improved coordination of all the actors involved in network rollout.

The current electronic communications regulatory framework contains certain tools which the National Regulatory Authorities can use to make the rollout of networks more efficient. For example, NRAs can impose companies to share their infrastructure under a well-defined set of circumstances, including in-house wiring, under Article 12 of the Framework Directive. According to the same article, the NRAs can also request providers of electronic communication networks to provide information on their physical infrastructure. Finally, Article 11 of the Framework Directive imposes a set of standards for granting rights of way. These provisions are described in detail in Annex VI. However, the provisions are mostly optional (NRAs are to decide whether or not to use the powers granted to them by Article 12), as well as limited in their scope and reach. These limitations are discussed extensively in Sections 2.4.1 through 2.4.4.

Some Member States (e.g. France, Lithuania, Germany, the Netherlands or Portugal), aware of the opportunities, started introducing more far reaching cost reduction measures going beyond the current regulatory framework. Promoting such measures at EU level would allow scaling them up, for greater efficiency gains and at the same time to ensure positive effects for the Single Market. Such measures were not promoted at an earlier phase at EU level due to the lack of experience in implementing them. At the same time, the imperative of reaching the ambitious broadband targets of the Digital Agenda only appeared after the review of the regulatory framework for electronic communications currently in force, as signalised in section 2.1.1 above.

This initiative is complementary to other actions undertaken to facilitate the development of infrastructures in Europe, such as the Inspire Directive[25] or the Broadband State Aid Guidelines as is explained in greater detail in Chapters 4 and 5.

2.3. Problem definition

The problem addressed by this initiative derives from the presence of a bottleneck in electronic communications access networks, typically between the distribution frame and the network termination point, which reaches end users, associated with economic inefficiencies. This terminating part of the network, also called "local loop" or "last mile" may not have been rolled out or often has more limited speed capacity than the core network and is economically difficult to duplicate or replace, in particular in semi-urban and rural areas where distances are longer and population density is lower. An important inefficiency in the rollout process is related to the presence of high sunk costs generated by civil engineering works – e.g. digging, ducting etc., associated with heavy administrative burdens for undertakings involved in that process.

This specific problem is one of the factors affecting investments in broadband infrastructure, as discussed in Section 2.1, conditioning the digital divide among Europeans, on the functioning of the Digital Single Market, and on EU's competitiveness.

In order to propose solutions to bring down costs and raise efficiency, it is essential to understand the main cost components and drivers of cost sensitivities in the deployment of electronic communications networks. It is equally important to understand the main administrative bottlenecks.

Both the overall costs and the cost components of rolling out networks vary greatly in function of the technology deployed. The main cost components for a Fibre-to-the-Premise connection consist of the costs of ducting, the cost of installing the fibre, the costs of the in-house wiring and the cost of consumer premise equipment. For mobile broadband, the costs are typically split into physical infrastructure, base station and microwave backhaul, on the one hand, and customer premises equipment, on the other hand. Despite the great variation in cost items, the costs of civil works (ducting and physical infrastructure) form the dominant component in both cases. It fact it is widely agreed that civil engineering works constitute the dominant part in overall network deployment costs[26], regardless of the technology used, with estimates as high as 80% for certain technologies.

There is significant variation in deployment costs per region and Member State given a number of country or region-specific factors which make deployment more or less inefficient. Whereas the cost of active equipment is relatively fixed, the other main cost elements are variable and depend, mainly on (1) labour rates, (2) topography of the concerned areas, (3) pre-existing network infrastructure, such as cables that could be upgraded or ducts that could be reused, including inside buildings (4) population density, (5) average size of multi-unit dwellings (MUDs) and (6) legislation imposing certain technical specifications for civil engineering works (such as the depth at which cables should be buried or visual rules for antennae installations).

The screening process analysing the cost drivers that can lead to inefficiencies demonstrated that some of the underlying causes of the high costs of civil engineering works in the context of network rollout cannot be tackled through an EU legislative initiative, such as national labour rates, topography, population density and average size of multi-unit dwellings. Nor can norms related to certain digging techniques be imposed at EU level, due to the technological bias they carry along.

On the other hand, the EU can ensure that the most efficient use is made of pre-existing passive network infrastructure. Yet, the use or co-deployment of pre-existing infrastructure, such as ducts, towers or poles, or to co-deploy, is often blocked or undermined by a variety of reasons. For example, lack of information is an important constraint. Indeed, access to detailed and valid information on the route, location and size of these civil engineering infrastructures is essential for letting operators prepare their deployments by taking into account availability of the existing passive infrastructure. If there is no information on its route, a duct "does not exist".

Where bottlenecks exist in the utilisation of pre-existing infrastructure or of other relatively simple solutions to cut costs (such as co-deployment), they are considered inefficiencies in the rollout process and therefore treated as underlying causes.

In order to ensure a complete picture of the inefficiencies in the deployment process that can be tackled through an EU initiative, the public consultation has specifically addressed these questions to stakeholders. Various inefficiencies and bottlenecks have been reported by several stakeholders as entry barriers, related to different stages of the deployment chain, holding back the rollout of high speed broadband. Respondents referred in particular to:

(1) The lack of transparent information on available infrastructure, which lead to unintentional duplication of networks and damages, leads to additional costs in terms of more expensive deployment due to difficulty to negotiate sharing arrangements without proper knowledge of existing physical infrastructure suitable for deployment;

(2) The fact that specific procedures for infrastructure sharing, in particular across utilities or coordination of civil works are missing leads to additional costs, e.g. duplication of civil works and permits.

(3) Administrative obstacles related to receiving permits from authorities or property owners. The number and length of uncoordinated and unclear permit granting procedures in the Member States and sometimes even within Member States, regions or municipalities, leads to additional costs due to delays, lack of transparency and sometimes even abuses;

(4) The poor in-house equipment for receiving high-speed broadband networks at home contributes to inefficiencies of investments, e.g. leading to retrofitting which implies higher cost if compared to pre-equipment of buildings.

While some stakeholders tend to insist more on certain issues (e.g. companies deploying fixed networks on duct sharing and wireless operators on administrative permits), it is widely agreed that all these are relevant problems areas regardless of the technology deployed (see for more detail Annex I on the main outcomes of the public consultation).

Finally, in order to make sure that the screening process was complete and coherent, the inefficiencies identified by stakeholders and compared with the key cost components for deploying electronic communications networks, have been also cross-checked with the main steps involved in deploying a network.

Figure 3 - Simplified steps involved in a typical network rollout, involving a mix between self-digging, co-deployment, and utilisation of existing physical infrastructure

The figure above illustrates that the problem areas are related to the typical steps and processes involved in deploying networks. It is based on the assumption that a company would like to deploy in a most efficient way (using existing ducts and/or co-deploying, if possible), but that at the same time a certain proportion of self-digging will remain necessary.

As each problem area is linked to a specific step in the rollout process, tackling these problems areas together will result in a set of coherent and mutually reinforcing actions. It is therefore essential that any solution proposed to respond to the problem of the high costs and complicated procedures covers all such areas. As an illustration, Analysys Mason (2012) estimates that if measures were taken to address the identified set of problem areas, the potential Capex savings to operators are in the range of 20–30% of total investment costs[27].

This initiative tackles the four main areas which were identified as clear underlying factors and which could potentially be addressed through EU legislation: (1) inefficiencies or bottlenecks concerning the use of existing physical infrastructure (such as, for example, ducts, conduits, manholes, cabinets, poles, masts, antennae installations, towers and other supporting constructions), (2) bottlenecks related to co-deployment, (3) inefficiencies regarding administrative permit granting, and, finally (4) bottlenecks concerning in-building deployment.

2.4. Underlying causes of the identified problem

This section examines in more detail the four areas where the highest inefficiencies and bottlenecks are encountered, focusing on the underlying causes of the identified problem. These correspond to areas which lead to unnecessary costs that could be tackled by an EU initiative.

2.4.1. Persistent barriers to use existing physical infrastructures suitable for broadband rollout

When deploying networks, undertakings may greatly reduce cost by using existing physical infrastructures suitable for broadband rollout. Using existing physical infrastructure as opposed to building from scratch can bring significant cost savings of up to 75%[28] of civil engineering works in case of shared only deployment. Based on a series of reasonable assumptions, for instance that deploying a network will always involve some self-digging, Analysys Mason estimated these savings on the initial cost for broadband deployment (i.e. CAPEX) as ranging from 29 to 58%[29] of the total costs. While savings are expected to vary greatly in function of several factors, e.g. the existence of ducts, their availability, the technical state they are in, their topography, or their specifications, in general the potential for costs reduction is widely recognised by industry (see Annex I).

The current regulatory framework for electronic communications provides the tools for NRAs to impose access to ducts belonging to telecom companies. This is generally applied to companies with significant market power (SMP), as recommended by the NGA Recommendation[30], but can also be applicable to telecom companies which do not have SMP under certain well-defined conditions (the so-called symmetric obligations regarding facility sharing[31]). The same regulatory framework also empowers the NRAs to request information concerning the ducts or other physical infrastructure of telecom companies, and to set up infrastructure inventories.

Figure 4 - Range of potential cost savings in network rollout resulting from using existing physical infrastructure (Source: Analysys Mason 2012)

Yet, this potential for savings is not properly capitalised. The provisions described above are not always applied or are not implemented consistently throughout the EU (see Section 2.6 for details). Some of this varied implementation of the current provisions can be explained by the different national circumstances (e.g. whether ducts are present). Still, studies and feedback from industry show that, even under similar circumstances, conditions for duct access vary greatly, which particularly affects cross-country operators and forms a serious barrier to the deployment of broadband networks beyond the national borders and subsequently to the provision of pan-European services and the functioning of the digital single market more generally.

Access to infrastructure belonging to other utilities (such as electricity poles or sewerage pipes) is a strongly underused solution to bring down costs. A rare example is the one of a French alternative operator that has used the sewerage network in Paris to deploy fibre. Reggefiber, the largest Dutch passive FTTH infrastructure owner is also considering making use of sewerage networks to deploy in the last mile in rural areas, and estimating savings between 20% and 25%. In France, aerial power lines of the transport network have been used to install optical fibre with more than 18,000 km of power lines of high and very high voltage equipped with optical fibres at the end of 2011. As reported by the Danish Energy Association, trench sharing between power line and fibre ducts has lowered the deployment costs of FTTH infrastructure, and stimulated infrastructure-based competition.

While the different technical specifications and increased security concerns might render, in the opinion of some telecoms operators, these solutions slightly more complicated and costly than the sharing of infrastructure inside the telecoms world, the size of the utility networks greatly expands the real choice of companies willing to expand their own networks through a mix of sharing and self-build.

Despite these advantages, this kind of cross-utility cooperation is not covered by EU law. Only a small minority of NRAs have the expertise as well as the legal tools to deal with transparency and access to infrastructure obligations across sectors (France, Germany, Lithuania, Portugal). In most cases, there is no legal basis facilitating such cooperation across utilities, making it difficult to come to commercial agreements on sharing risks and costs and to find a suitable arbitration mechanism in case of conflicts. Moreover, regulation in certain Member States discourages utility companies to cooperate with telecom operators (for example, where the profits of energy companies are regulated).

Creating legal grounds for such cooperation on a voluntarily basis is, therefore, likely to bring benefits in terms of coverage, especially where telecom incumbent infrastructure is not available or where restrictions to self-deployment apply.

It can be noted also that some provisions concerning transparency of information on existing and new physical infrastructures, as well as on access to these infrastructures may be envisaged by the current draft EU Guidelines for the application of state aid rules in relation to the rapid deployment of broadband networks. These guidelines are expected to increase transparency, but only partially (for infrastructure benefiting from state aid).

In conclusion, there are several bottlenecks or barriers that prevent the sharing of infrastructure from happening at full potential: (1) limited transparency as concerns existing physical infrastructure suitable for broadband rollout, (2) inconsistently applied regulation or lack of appropriate legal basis / institutional framework, (3) commercial issues (lack of business interest) or anti-competitive behaviour, and (4) technical unfeasibility.

2.4.2. Barriers to cooperation in civil engineering works

Coordination of civil engineering works can greatly reduce the costs of investment. Not only telecom companies can cooperate with each other in order to share costs. In principle, such cooperation is possible across sectors, and it can easily involve both private actors and public companies. For example, when undertaking road maintenance works, or when repairing water pipes, telecom companies could profit from these civil engineering works and lay ducts or networks at the same time. The incremental costs of laying ducts, while civil engineering works are already undertaken, are generally considered to be marginal[32]. In addition, coordination of works reduces nuisance to citizens.

Analysys Mason (2012) estimates the potential savings from co-ordinating civil engineering works when the project is shared between two parties at 50% of the civil engineering works cost, or up to 40% of the total costs. Furthermore, if more than two operators were to be involved, the civil engineering works per operator decrease further, producing savings up to 53% for three players. More conservative estimates, corrected for the fact that the actual network deployment plans rarely coincide entirely, range between 15% and 30% of total cost savings[33].

Figure 5 - Range of potential cost savings in network rollout resulting from coordinating civil engineering works (Source: Analysys Mason 2012)

The regulatory framework foresees that Member States may require telecom operators to take measures to facilitate the coordination of public works, in certain pre-defined circumstances (Art. 12.2 of the Framework Directive - see Annex VI). In addition, coordination of public works is currently required by several national infrastructure / civil engineering laws. A few Member States (e.g. Finland, Slovenia, France and the Netherlands) have well run mechanisms of informing telecom companies of planned public works and allowing them time to file requests for deploying networks at the same time.

Yet, such cooperation seldom occurs in practice. Rare examples include the co-deployment of LTE in the north of Sweden by two mobile operators or a more organised co-deployment involving several local authorities in Finland. These cases are however an exception rather than the rule.

When asked what lies behind this fact, most companies refer to the lack of transparency regarding planned works of other parties, together with the non-matching time horizons as important factors deterring co-deployment. The information on planned investments of other operators, utilities or public authorities is most often not widely / publicly available, or it becomes available once it is too late to plan and organise co-deployment. Companies are moreover reluctant to share their plans concerning network deployment, as they consider it commercially sensitive information (e.g. other operators might be able to move faster). On the other hand, some of the companies fear coordination of civil works could imply the risk of additional administrative burden related to the need for modification of building permits, increase of fees, delays from the need to await the replies to the call for coordination.

When it comes to co-deployment across utilities, the difference in time horizons for investments is an even greater issue: certain utility companies deploy at a slower pace than telecoms, due to security reasons, or because of the different pace of technological progress-related infrastructure obsolesce across sectors. Moreover, utility companies have often no business interest in co-deployment, nor a history or culture of cooperating with telecom operators. Just like in the case of infrastructure sharing across utilities, co-deployment might be hampered by the lack of rules regarding cost and risk sharing, or the lack of an appropriate institutional framework (e.g. a competent dispute settlement body). These barriers are affecting cross-border operators to an even greater extent, in particular the lack of transparency and the lack of a suitable legal framework.

In conclusion, it seems that the most important barriers to co-deployment are: (1) the lack of transparency concerning planned works, (2) the long and non-matching time horizons involved in planning and executing works, where discrepancies are even higher across sectors; (3) commercial considerations (scepticism to reveal commercial plans or lack of business interest), (4) the lack of an appropriate legal / institutional framework, especially as regards cross sector cooperation, and finally (5) technical incompatibilities.

2.4.3. Burdensome administrative procedures

Companies most often describe the administrative procedures and processes necessary to start rolling-out networks as burdensome and costly. The companies refer to a lack of transparency as regards the conditions for obtaining the necessary permits, to the high number of authorities involved in the process of granting permits, and a great diversity of applicable rules, requirements and procedures, with no coordination vis-à-vis other authorities and permits. In most cases, no single information point exists concerning all the necessary permits, specific planning rules applicable locally, etc. These problems have been long reported. In OECD publication 'Public rights of way for fibre deployment to the home' of 2008, the onerous procedures related to permit granting have been identified as one of the obstacles in faster broadband rollout[34]. Evidence gathered by the GSM Association [35] shows that some of the procedures can be very lengthy: in case of base stations planning permissions in Europe typical timescales are higher than 20 months in several Member States, with a tendency for these delays to increase rather than decrease over time. As raised in the OECD study, access to rights of way and ducts is crucial for new entrants in order to compete effectively in local markets and to foster facilities competition. As confirmed in the public consultations, problems occur because municipalities in some countries consider access to rights of way as a revenue opportunity, resulting in fees which can be over and above the costs incurred or in unreasonable conditions for granting rights of way.

Figure 6 - Comparison between legal commitments and typical timescales for issuing base station planning permissions across Europe (Source: GSM Association)

The current regulatory framework foresees (under Article 11 of the Framework Directive - see Annex VI) a limit of six months for the granting of rights of way, and offers general guarantees with respect to the transparency of the process. However, besides rights of way, several other permits and administrative processes are necessary to rollout electronic communications networks and these latter are not covered by the current regulatory framework for electronic communications.

Few best practices however do exist. For example certain municipalities from the Netherlands or from Finland (Tampere) take an active coordination role regarding all necessary permits besides rights of way. In some countries, such as the Netherlands, rights of way are free of charge. A recent Greek law has also established a "one-stop-shop" for obtaining all the necessary permits to roll out a radio-network. Exemptions exist for certain categories of antennae and base stations e.g. in Greece and in the Netherlands. In Italy requests for certain permits are deemed as approved when no explicit decision is taken within a given deadline ("tacit approval").

Yet, surveys and feedback from industry show that such examples are an exception rather than the rule (see results of the public consultation). Operators consistently refer to permit granting as one of the important problem areas in network development. Such delays and lack of transparency severely affect the growth and competitive dynamics in the electronic communications markets and in the wider ecosystem (e.g. equipment manufacturers).

These problems are all the more severe for companies rolling out across borders that apply for permits not just in various Member States, but also with all the various regional and local governments.

In conclusion, the most common problems quoted in relation to permit granting are (1) the high number of different, uncoordinated rules and procedures, (2) the lack of transparency of these rules and procedures, (3) the long delays and, in some cases, (4) the unreasonable conditions, including fees, attached to rights of way.

2.4.4. High barriers to deploy in-house equipment in existing buildings

Connecting customers at their premises, which normally requires deploying in-building equipment is a very expensive and cumbersome process. An operator willing to install or upgrade the wiring in an existing multi-apartment building would typically need to bear the high costs related to the vertical and horizontal wiring, connect this wiring to its terminating segment or to the terminating segment of another operator (which sometimes requires works on the common ground belonging to the building), and thus to obtain permission from each and every individual owner of the building. Similarly, in the case of wireless networks, the costs of installing equipment (in a visually acceptable way) would have to be borne and permissions would be required from all owners.

Figure 7 – Illustration of possible solutions for in-building wiring of MDUs (Source: Based on Analysys Mason 2012)

In order to guarantee a comprehensive approach to facilitating the rollout of high-speed broadband, it is therefore essential to tackle the issue of in-house equipment. This is an area where the (unnecessary) duplication of works leads to high inefficiencies as well as inconveniences for owners.

The current regulatory framework foresees that NRAs can impose obligations related to the sharing of in house wiring in cases where the duplication of such infrastructure would be economically inefficient or physically impracticable (see Annex VI).

A few NRAs have used this possibility and included mandated access to in-house wiring under SMP regulation, but these measures are in general considered to have limited impact. Other Member States have looked for ways to address these difficulties beyond the telecoms regulatory framework: in France, Spain, Poland and Portugal there are regulatory requirements of different character to deploy high-speed broadband ready wiring in new buildings. In addition, there are obligations on operators reaching existing buildings regarding the sharing of costs and, respectively, access. In the United Kingdom, the government issued guidelines for property developers for next-generation broadband networks in new buildings. Indeed, the savings resulting from equipping new buildings with next generation access, as compared to "retro-fitting" existing buildings are estimated to potentially go as high as 60%.

Figure 8 - Range of potential cost savings in network rollout resulting from equipping new buildings with NGA access, as compared to retro-fitting (Source: Analysys Mason 2012)

Nevertheless, in general, the practices concerning in-building equipment remain scarce and lack harmonisation, including as regards standardisation. Operators widely agree that this area represents one of the most problematic and difficult ones in the context of network deployment, as well as one where solutions cannot spread easily. The underlying causes in this area can be summarised as follows: (1) high costs of equipping existing buildings (2) cumbersome procedures related to working inside buildings and deploying the terminating segment on common grounds (mainly delays and difficulties to obtain owners' consent), (3) inconsistent application or lack of regulation tackling the inefficiencies associated with duplicating in-building infrastructure and (4) lack of standardisation in this area.

2.5. The main stakeholders involved

The following stakeholders may be particularly affected by the Initiative to Reduce Cost of Rolling-Out High Speed Communication Infrastructure in Europe:

– Telecom operators, utility companies, physical infrastructure owners, municipalities, communities, private funds, entrepreneurs, or any other companies seeking to roll-out broadband networks or being asked for access to their existing or to be deployed network. They should benefit most from the cost reduction measures in their deployment efforts.

– Public authorities (such as local, town planning, environmental, archaeological, and others) dealing with granting rights of way and other permits at national or local level. Streamlining permit granting procedures as well as the establishment of new coordination and transparency mechanisms for infrastructure access and civil engineering works will add to the administrative burden of certain authorities;

– Contractors of the operators and municipalities, e.g. companies executing different elements of civil engineering works. The increased efficiencies in the rollout process will change the pattern of demand for civil engineering works companies; in the medium and long term, an increased rollout of high-speed networks is expected due to the savings created, to the profit of civil engineering works companies;

– Manufacturers of the equipment and technologies related to broadband deployment; Increased rollout and duct sharing, in particular cross-utilities, will increase the demand for new solutions and will trigger innovations;

– Housing industry: Construction companies and housing developers will have to follow new requirements concerning in-house equipment, which on the other hand, brings will increase value;

– EU citizens and businesses: As concerns direct effects, more access to physical infrastructure and a better coordination of civil engineering works will imply less digging, leading to reduced public nuisance; indirectly, increased broadband rollout has positive effects on employment, e-inclusion, access to public services, general comfort of life.

2.6. How would the situation evolve if no further EU action were undertaken

As signalised in Section 2.3, some measures have been introduced in several Member States, at national, regional or local level, however not in a consistent nor coherent manner. In some Member States measures are evolving to best address the encountered issues. Before proposing any initiative in this area, it is, therefore, necessary to check to what extent the identified inefficiencies could be addressed without the EU action. Screening local, regional, and national initiatives is also necessary in order to ensure that any proposal would not lead to lowering the effectiveness of existing standards in the extent concerning measures to facilitate and stimulate broadband rollout.

A study[36] was commissioned to verify the existence, the nature and the maturity of measures of this kind throughout the EU. In addition, the inputs to the public consultation (mostly from the NRAs) provided information on specific measures. The overall analysis of the results from these and other sources is presented in Annex III – Analysis of Baseline scenario and confirms that cost reduction initiatives have been launched or are currently being planned or implemented in different EU Member States. The assessment can be summarised as follows, in the view of the identified inefficiencies:

Inefficiencies or bottlenecks concerning the use of existing physical infrastructure

As regards the transparency aspect, the number of EU Member States has implemented a local or central physical infrastructure atlas or infrastructure registry or is currently working on introducing such solutions (AT, BE, CY, CZ, DE, DK, EE, FI, FR, IT, LT, LU, NL, PL, PT, RO, SI, ES, SE, UK). Very few have developed an advanced open-access and digital infrastructure atlas, including not just telecom ducts but also other utilities and all physical infrastructures suitable for broadband roll out (DE, PT). The purpose of these atlases/registries and platforms also differs. In the case of many of them, the main purpose is to avoid damages at the time of carrying out civil works (NL, DK, FI, SE). Some of the initiatives seem to have been developed with a view to implementing the Inspire Directive (e.g. CZ, BE), whereas the initiatives in PT, DE and one of three mapping initiatives in SE are aimed at infrastructure sharing and co-deployment. For example in practice the German initiative entails that information on infrastructure location is provided to Bundesnetzagentur (NRA) in electronic form, using standard file formats. All data is collected from the infrastructure owners themselves, rather than from new ground surveys, and is done on a voluntary basis. It is envisaged that infrastructure owners will in future be mandated to provide information via a web application. The project aims to cover the entire Federal Republic of Germany. As of May 2012 501 infrastructure owners were participating in the scheme, 91 parties had requested to use the database and overall 71 497km2 of area had been mapped, covering a population of 3.5 million. In comparison, the Portuguese NRA decided in 2009 to implement a Centralised Information System, a central infrastructure atlas aimed at reducing the cost of deploying new electronic communications equipment. Providing and regularly updating information is mandatory for all organisations that own or operate infrastructure suitable for accommodating electronic communication infrastructure (including roads, railways, water and gas infrastructure). This requirement applies to local authorities, state-owned companies, utility companies, electronic communications companies, and any other bodies that may own relevant infrastructure. It extends further to the incumbent, Portugal Telecom, which must provide information on available space within its ducts. While different authorities (NRA, local authorities, Ministry) can be involved in infrastructure mapping and at different levels (central/local), most of the activity is in the hands of national authorities.

Overall, there is a positive trend of development, yet limited mostly to mapping of telecoms infrastructure. As already mentioned in section 2.4.1 the EU Guidelines for the application of state aid rules in relation to the rapid deployment of broadband networks may help to establish some EU wide rules concerning transparency of information on existing and new physical infrastructures, as well as on access on these infrastructures to the extent that the concerned infrastructure benefits from state aid.

Yet, even with further positive development of this trend the impact of business as usual measures over the three years would not be significant enough to address inefficiencies sufficiently in view of the DAE targets. For example, the existing mapping exercises hardly provides to operators interested in deployment a right to perform surveys on the spot which are crucial in the absence of reliable data on infrastructure. Moreover, the mapping of the physical infrastructure of other utilities as enhanced by the Inspire Directive, does not necessarily address transparency deficiencies, given that Inspire does not provide an EU wide right for operators to access available information. This means that bottlenecks resulting from little transparency would persist in many cases.

As regards the access conditions to the existing infrastructure, a majority of EU NRAs have imposed access obligations on operators with significant market power, setting pricing rules for ducts access. Symmetric obligations concerning ducts access on operators (FR, LT, MT, NL, PT) have been imposed by the minority of the NRAs, including those few that have imposed access obligations across sectors (FR, DE, LT, PT). For instance in Lithuania, FTTH coverage reached circa 60% of households at the end of 2011 and FFTH connections accounted for 50% of all broadband connections. The exact costs savings are unknown at this stage, however; the NRA considers that without having adopted access measures, the deployment of high-speed network would have been much more limited. In Portugal extensive legislation exists providing that all existing ducts suitable for the provision of electronic communications network must be made available to operators. Also in this case exact data on costs savings are missing but the NRA considers that the implementation of this measure has led to infrastructure competition bringing benefits to end users. Germany has put in place legislation to oblige public utility companies to provide access to their infrastructure upon request. Since July 2012 the same applies to all owners of relevant infrastructure, including private utility companies. Any related disputes would be subject to an arbitration process. Overall, decisions on granting access obligations are in hands of NRAs. In practice the authorities rarely adopt symmetric obligations and in many cases the legal basis for cooperation across utilities is missing. In other cases the legislative obstacles discouraging utility companies to cooperate with telecom operators persist (e.g. some utility companies have to respect the principle of ‘charges cover cost’, therefore if exploiting their physical infrastructure would result in a reduction of their costs, this reduction should be reflected in their charges, decreasing their business interest in sharing opportunities). The current trend of development is not likely to lead to a significant impact over the next three years.

Barriers to cooperation in civil engineering works

Coordination of civil engineering works initiatives are emerging at local level (e.g. BE, DK, FI, LU, SE, NL). In FI utility companies, municipalities and telecom companies regularly meet to share their plans and discuss cooperation options. Such cooperation occurs as formalised practice (e.g. BE, DK, DE) or ad hoc. In other Member States (FR, LV, MT, PL, PT, SI, ES,) national law provides for some elements of coordination of civil works, in particular in case of works carried out on public roads (MT, PL, UK). In France both operators carrying out installation or maintenance projects of significant length are obliged to announce their plans to the local authorities. At the same time the local authorities are required by law to inform operators of their intention to launch civil works. PT imposed, in 2009, on public sector companies and electronic communication companies an obligation to make planned works public, including on the national centralised mapping system to facilitate sharing. The notice must contain in particular information on the characteristics of intervention, the time needed for execution of works, charges and other conditions to be observed, as well as a deadline for joining the work and contact point for further clarifications. In addition to that, preclusive provisions are included affecting future interventions in the area covered by the notification. The notice must be given by the respective promoting entities no less than 20 days prior to the start of works, whereas a deadline for joining the project is set for not less than 15 days. In the opinion of some stakeholders, the existing transparency mechanisms are not always effective, among others due to the short time period between the announcement and the beginning of works. Despite the number of these positive examples and also the legal basis in the EU law allowing to Member States to require telecom operators to take measures to facilitate coordination of public works in specific circumstances (Art. 12.2 of the Framework Directive), the trend of development is not significantly positive, as there are little signs of scaling-up these local mechanisms of coordination over the next three years and in practice they rarely lead to co-deployment, especially across utilities.

Inefficiencies regarding administrative permit granting

Different examples of legislation streamlining permit granting process are emerging in some Member States. For instance, in Greece a 'one stop shop' approach was adopted recently. The one stop shop acts as a contact point dispatching requests to the competent authorities and verifying the strict respect of deadlines. Exemptions have also been made for small antennas and low emission sites. Some Member States have in place laws limiting the powers of local authorities to deny rights of way for telecoms operators wishing to deploy electronic communications networks (AT, NL, PL, PT). Some others plan to adopt relevant legislations or guidelines (CZ, IE, UK). Few local initiatives are also present (NL, FI cities). Some Member States have also streamlined the process of receiving permissions from private owners (NL, PL). Further developments in this regard depend on the willingness of authorities and/or political determination to adopt specific laws. These developments are not sufficient to establish a positive trend for the future. The existing legal basis in the regulatory framework (Art. 11 of the Framework Directive) does not guarantee either that the identified inefficiencies in permit granting would be addressed in the perspective of next three years. Besides rights of way, several other permits and administrative processes are necessary to rollout electronic communications networks and these latter are neither covered by the current regulatory framework nor by the identified practices.

Bottlenecks concerning in-building deployment

Several NRAs made use of the powers to mandate access to existing in-house installations under the SMP regulation obliging dominant operators have to open their in-house equipment to other operators. A number of Member States developed specific legislation concerning in-house installations: FR, ES, LT, PL and PT. In some Member States the efficiency of the measures has been put into question (e.g. CZ, LU, LV, MT). In IE, IT, and UK the authorities chose a soft law approach adopting guidelines or promoting standards (AT, FI and DE to some extent). The number of initiatives and their strengths in some aspects allows establishing a positive trend. Under the current regulatory framework the NRAs can impose obligations related to the sharing of in house wiring in cases where the duplication of such infrastructure would be economically inefficient or physically impracticable (see Annex VI). Yet, the pace of take-up of these best practices seems to be limited and there is no guarantee of addressing all the identified inefficiencies in a comprehensive way across the EU within the reference of period of three years. In particular, the spontaneous development of national legislation in this regard does not guarantee equal chances of telecoms operators across the EU in terms of the right to negotiate and to access existing in-building physical infrastructure. The scope and character of obligations on operators could also differ, putting in some cases technological neutrality at risk.

As shown in Section 2.3, it is essential to take action across all the relevant areas corresponding to the steps in the rollout process in order to maximise the effects. As results from the available information only a few Member States have some measures in all these fields (DE, FR, PT, in some extent IT). However, the results of the public consultation demonstrate a general perception that none of the Member States has in fact taken measures effectively addressing all the identified problem areas. As further explained in Section 4.1 the simple fact that some measure is in place does not guarantee that the identified bottlenecks and inefficiencies are sufficiently addressed. In addition, in many Member States, next to measures in some areas obstacles in others are not tackled. For example in the Netherlands, on one hand there is effective information on the physical infrastructure for the purpose of avoiding damages and on the other hand there are regulatory restrictions[37] on energy companies which reduce their business interest in cross-sector cooperation. Finally, in many Member States more efforts to date have been limited (e.g. BU, SK, CY). Overall even where measures are present across several Member States, they are usually implemented in different ways e.g. duct mapping and access to ducts are imposed either on telecom and/or non-telecom operators.

Taking into account that decision powers and responsibilities for the adoption of specific measures are located differently across the Member States (local authorities, NRAs, central authorities), prospects for a more consistent, holistic and orchestrated approach among Member States to all identified inefficiencies and bottlenecks persistent to the whole investments process, remain limited.

The first legal measures in this area appeared in the late nineties (e.g. ES first generation in-house wiring regulation of 1998). Yet until now the approaches among Member States have not converged. While in some Member States national legislation is further evolving, in others the adopted general legal basis is little used. The emulation of best practice is limited also. For example in the area of mapping, the DE project could be considered as successful or well advanced. However, Member States have not generally adopted a similar approach and the most common trend appears to be mapping for the purpose of avoiding damages (BE, NL, SE, DK). In general, there is limited consistency between national approaches or processes and the dynamic in the emulation of best practice is not satisfactory. Overall, despite a number of actions across the EU, initiatives remain too limited and scattered which does not allow to effectively overcome described entry barriers limiting broadband deployment.

Even with the continuous support from the Commission side, e.g. exchanges of best practice, it is highly improbable that such measures will spread throughout the EU at a sufficient pace and scale to ensure real efficiency gains in the network deployment process and to trigger investments in support of the Digital Agenda targets.

Moreover, the 2009 review of the regulatory framework for electronic communications which vested NRAs with new powers with a view to encourage co-location and sharing of networks elements has not ensured the development a coherent European approach addressing all steps in the investment process. Although the revised Regulatory Framework has only been implemented as of recent (transposition date of 25 May 2011) and, therefore, has not yet been fully tested. It is important to recall some of its limitations. First, regulating operators asymmetrically constrains the scope of such measures to operators with significant market power. Secondly, the possibility of intervention under Article 12 of the Framework Directive, as enhanced in the review is restricted. NRAs may only impose certain obligations on electronic communications network providers concerning facilities sharing, coordination of public works, and request of information in view of setting up inventories and access to the terminating segment including in-house wiring. The scope of measures is limited by the specific criteria of Article 11 of the Framework Directive which limits the range of issues related to procedures for the granting of rights of way. The regulatory framework cannot apply to non-telecoms physical infrastructure. Third, dispute settlement under the framework does not cover other sectors such as utilities. Finally, when it comes to in-house equipment, NRAs can only impose obligations regarding the existing wiring and are not required to act on new buildings, thereby foregoing an important opportunity to achieve savings. Generally, despite being vested with tools, NRAs are not able to effectively and comprehensively address the identified problem areas and the framework leaves significant room for variation in the way provisions can be implemented. Moreover, the application of the existing tools is not mandated by the current regulatory framework, but only allowed/left to the discretion of Member States/NRAs. For these reasons the existing electronic communications framework will not be sufficient to address all identified bottlenecks and inefficiencies in the rollout process, and it will not prevent the emerging patchwork of measures in the EU.

Other EU initiatives could likely contribute to address some of the identified inefficiencies and bottlenecks. For instance Structural Funds may co-finance mapping projects. Similarly in the future mapping could be financed from the proposed Connecting European Facility. However, generally co-financing possibilities using EU funds may not apply to the same extent to all Member States, and concern specific projects having limited possibility to holistically tackle the inefficiencies and bottlenecks in all identified areas requiring intervention. In addition the Inspire Directive already activated a process of transparency in relation to part of the relevant physical infrastructure[38]. However, given the architecture of the Inspire Directive, the operators are not in a position to directly benefit from the available information to deploy broadband.

It appears from the analysis above that current European instruments do not sufficiently and adequately address the problem of the high costs and burden related to rolling out networks. This might be explained by the adoption of the review of the Telecoms Regulatory Framework at the time when the DAE targets of broadband penetration and take-up were less clearly and explicitly spelled out. The explicit steer given at the highest EU level in the year 2010 on the Digital Agenda for Europe put high on the agenda the importance of consistent measures enabling broadband deployment in line with the ambitious EU targets.

Yet, not all Member States have moved ahead adopting measures going beyond the current regulatory framework for electronic communications. Infrastructure sharing across sectors is, for example, only mandated in LT, PT, DE. In contrast, cross-sector infrastructure sharing measures are constrained in a number of MS, due to legislative or regulatory obstacles. The tools available and level of Member State activity are not uniform across the problem areas. The legal and regulatory framework in the EU and across the Member States is currently conducive to a significant variety when it comes to measures facilitating and reducing the cost of broadband rollout. Overall, current trends do not assure sufficient progress in meeting the DAE targets, neither the existing practices have managed to set high standards which could be put at risk by the considered measures.

2.7. Right of EU to act

2.7.1. Single Market perspective and subsidiarity

According to the 2010 report on the Single Market[39], telecommunications services and infrastructures in the EU are still highly fragmented along national borders. A more recent report on the cost of non-Europe[40] has shown that the untapped potential of the Single Market corresponds to a yearly amount of 0.9% GDP, or 110 billion euros. A significant fraction of this potential can be found at the level of network infrastructures: different regulatory approaches to network rollout increase the cost of access to national markets, prevent the exploitation of economies of scale at services and equipment level and hinder the development of innovative services which could emerge on very high-speed networks running in a seamless fashion across borders.

High-speed broadband infrastructure is the backbone of the Digital Single Market. As recalled in the Single Market Act II Communication[41], a 10% increase in broadband penetration can result in a 1-1.5% increase in the GDP annually and 1.5% labour productivity gains[42]. Member States cannot afford to leave citizens and businesses outside the footprint of such infrastructures and have subscribed to the broadband targets of the Digital Agenda for Europe. These goals will only be achieved if the infrastructure deployment costs are lowered and if Member States adapt their national policies to this effect across the EU. At the Spring 2012 European Council, Heads of State and Government have called themselves for action at EU level to provide better broadband coverage in order to complete the Digital Single Market, including specifically by 'reducing the cost of high speed broadband infrastructure'.

Modifying legal and practical arrangements across the various infrastructure deployment steps can lead to significant cost reductions. As indicated above, barriers can be lowered by e.g. allowing for more intensive usage of existing physical infrastructures, more cooperation on planned civil works, removing obstacles to high-speed-ready in-house equipment.

Some Member States noticed that opportunities and started adopting specific cost reduction measures both at national and local level. The implementation or decision powers in this regard often belong to local authorities. Yet, the fact that civil works are performed at the local level is not in itself undermining the case for EU action to reduce costs related to such works. In the past the EU undertook several initiatives aimed at problems with a local connotation which included both Directives (see individual energy consumption metering in the Energy Efficiency Directive 2012/27/EU) and Regulations e.g. enabling network developments (see gas network capacity sharing and transparency requirements in Regulation 715/2009/EC; unbundling of the local access telecom network in Regulation 2887/2000/EC on the unbundling of the local loop).

Under the subsidiarity principle, which main purpose is to bring decision-making within the Union as close to the citizen as possible, the Union is entitled to act if a problem cannot be adequately settled by the Member States acting on their own. On the other hand, if the action of the Union does not give prospects for more effective solution, the national authorities are expected to act individually. Therefore, it is crucial to verify whether the possible action by the Union would provide added value, compared to individual actions by Member States.

First, the extensive research has shown that the available measures are scarce and scattered[43]. In fact, several Member States have taken no measure in this field, nor they have concrete plans as regards such actions. When present across Member States, the measures differ greatly, sometimes even from region to region and from municipality to municipality. As such, the existing initiatives do not seem to be holistic, whereas it is essential to take action across the whole rollout process, across sectors, in order to achieve a coherent and significant impact ("a 90% bridge is not a bridge"). In the absence of common rules on transparency concerning existing infrastructures and planned civil works, without proper coordination mechanisms among the different local, regional and national levels, within and across public network industries, the costs of deployment are not stable and the economies of scale cannot be properly exploited. This means a significant untapped potential regarding measures to reduce the cost of broadband rollout and facilitate it.

The uneven playground impedes the development of the Single Market. According to a research work conducted by Copenhagen Economics, "the Digital economy can potentially provide a major boost to the EU productivity and growth" and they estimate that at least 4% additional GDP (EU 27) can be gained in the longer term (between 2010 and 2020) by stimulating further adoption of ICT and digital services through the creation of a digital single market. Moreover, with large parts of the EU not being connected to high-speed broadband infrastructure due to excessive costs of rollout, the Digital Single Market will remain incomplete. Citizens and consumers in those areas will not benefit from digital services and providers will not be able to distribute their content/applications affecting the wider eco-system.

In the view of the current dynamics of regulatory development it is very likely that this emerging patchwork of rules at national and sub-national levels will persist or accentuate and, as such, will increase the fragmentation of the Single Market. This fragmentation will impede the further development and growth of European companies - be them telecom companies, equipment manufacturers, or civil engineering companies - with consequences for European competitiveness[44]. Such fragmentation constitutes an obstacle for companies wanting to reach economies of scale at European level in the face of increasingly global competition.

For instance, significant local presence and resources need to be spent on acquiring information on rights of way in each community, as well as on all other relevant permits, on acquiring information on available infrastructures suitable for broadband rollout (if any), on negotiating access and/or co-deployment and on subsequently designing detailed rollout projects. In fact, the diversity of rules in these areas is so great that it makes little sense to plan network rollout at European level. Rather, investment plans need to be adapted to local rules and works have to be subcontracted separately, in function of the solution chosen for each small area. Indeed, the great majority of respondents in the public consultation expressed that administrative permits necessary to rollout networks represent a significant source of uncertainty and a time and resource consuming process. The fact that local presence needs to be ensured in every municipality throughout very long periods (starting before rollout plans are defined through the completion of the projects) puts resource constraints on companies willing to roll across regions and countries. The lack of transparency on rights of way also prevents proper planning across borders. Pan-European providers have in particular expressed frustrations and inability to compete globally due to the variety of rules in acquiring access to existing infrastructure and making co-deployment arrangements.

Moreover, it appears that the Regulatory framework as revised in 2009 will not be sufficient for achieving significant cost reductions throughout the entire EU in the short and medium term (see Section 2.6). Even with continuous support from the Commission side, it is highly improbable that such measures will spread through the entire Union at a sufficient pace and scale to ensure real cost sensitivities in the network deployment process and to trigger more investments in support of reaching the Digital Agenda targets by 2020.

Therefore, it can be argued that the current patchwork of rules creates barriers to invest cross-border, thereby amounting to obstructions to the freedom to provide electronic communications services and networks, as guaranteed under the existing EU legislation and thus have a direct effect on the functioning of the internal market[45].

In contrast, measures at EU level would allow more efficient planning and investment processes (and thus economies of scale) for telecom players. Moreover, such economies of scale and associated savings would go beyond the telecom sector and would spread to other industries as well (e.g. equipment manufacturers could have an EU market for technical solutions enabling cross-utility cooperation; civil engineering works companies could benefits from cross-border works).

Measures at EU level would also ensure equal treatment and non-discrimination of undertakings as well as of investors, in line with "those objectives and tasks closely linked to the subject-matter"[46] of several instruments already provided for in the EU law, in particular concerning the electronic communications sector[47] but also concerning other sectors (e.g. utility companies seeking to make profit from their physical infrastructure, synergies in setting up smart grids).

In addition, specific subsidiarity safeguards are possible. For example, the decision about the most competent bodies to be appointed to perform tasks related to permit granting, transparency functions, civil works coordination and dispute resolution could be left to Member States. With regard to permit granting, the procedural autonomy of the Member States to allocate competences internally will have to be observed. It is also possible to provide exemptions for categories of buildings subject to considered obligations related to high-speed broadband ready in-house equipment.

In this light EU action concerning costs reduction measures seems to provide added value comparing to scare and scattered national practices and as such to be in the interest of the EU citizens, while respecting the subsidiarity principle.

2.7.2. Proportionality

In order to comply with the proportionality principle, action should be limited to what is necessary to achieve the objectives identified. As a result, cost reduction measures, in particular those related to national administrations and procedures, should however strictly focus on increasing coordination and transparency, and on harmonising (minimal) conditions enabling the relevant stakeholders to exploit synergies and reduce inefficiencies in the rollout, rather than on shifting competences from local level to national or European level. Also, while the measures proposed would aim at reducing barriers to access to physical infrastructures, they should not impair ownership rights and should preserve commercial negotiation, as much as possible.

For this reason the initiative should aim at removing barriers and at providing the relevant stakeholders with the minimum tools needed to fully exploit the potential synergies, without imposing specific business models and leaving open the possibility to adopt more detailed provisions. Therefore the initiative will only marginally affect on-going initiatives in Member States.

In contrast, it will allow Member States to build on their current measures and select the organisation which better suits their particularities, without necessarily imposing further costs. Furthermore, the initiative will build on and, respectively, complement existing obligations at EU level, in particular the INSPIRE Directive and the State Aid Guidelines. The synergies between these measures can bring costs down and positively impact the proportionality of the initiative.

The proportionality and subsidiarity of each of the proposed policy options will be further tested separately, in Chapter 6, in view of its particular objective.

2.7.3. Legal basis

Under these circumstances and in view of the objective of improving the conditions for the establishment and functioning of the internal market, the European Union has a legal basis to act pursuant to Article 114(1) of the TFEU[48]. Accordingly, as confirmed by the case law, this Article confers on the EU legislature discretion, depending on the general context and the specific circumstances of the matter to be harmonised, as regards the harmonisation technique most appropriate for achieving the desired result, in particular in fields which are characterised by complex technical features[49].

3. OBJECTIVES

3.1. Specific and general objectives

The specific objective of this initiative is to remove the bottlenecks and reduce the inefficiencies described in Section 2.2, thereby reducing the costs of rolling out high speed broadband infrastructure. At the same time, acting in this area at EU level will also tackle the emerging patchwork of practices, which would otherwise create further barriers in the Digital Single Market and hinder the achievement of sufficient scale for exploiting the full cost reduction potential.

To quantify this objective, a figure of 25% savings on CAPEX investment is proposed. This is based on a relatively conservative estimate provided by Analysys Mason for "a typical Member State", in the context of integrated cost reduction solutions. In comparison, as it results from the public consultations, the measures implemented under the baseline scenario are widely considered as insufficient. Yet, there is no comprehensive and reliable data to that effect, as national authorities do not perform relevant analysis. Building on the high costs of broadband rollout which are reported to deter from investments, this initiative aims at proposing a coherent and systematic set of measures in order to reduce the costs of rolling out high-speed broadband networks by 25%.

This specific objective must be seen within the general objective of stimulating broadband investment and rollout throughout the EU, in line with the Digital Agenda targets. No indicator for the general objective of stimulating broadband rollout is proposed, as its achievement would depend on a significant number of measures and factors outside the scope of this initiative. Nevertheless, any proposal should be equally checked against the general objective of stimulating broadband investment, too. As Figure 9 recalls and as argued in Sections 2.1 and 5.2, broadband investment is a pre-condition for a deepened Single Market and a reduced digital divide in Europe and has significant impacts on growth and jobs and on EU's competitiveness.

As explained in Section 2.2, while not all cost drivers can be tackled through an EU initiative, there are four main problem areas which are clear underlying factors: inefficiencies related to the use of existing physical infrastructure, bottlenecks related to co-deployment, bottlenecks regarding permit granting, and, finally inefficiencies concerning in-building deployment.

As mentioned in Chapter 2, each of these problem areas is related to a step in the rollout process (see figure 3). In order to achieve significant results, it is therefore essential that these areas are tackled simultaneously, that the corresponding operational objectives are pursued altogether, although they are distinct. The operational objectives of the initiative are described below.

3.2. Operational objectives

3.2.1. Increasing the use of existing physical infrastructure suitable for broadband rollout

Several bottlenecks and inefficiencies have been identified regarding the current regime of access to physical infrastructure suitable for broadband rollout: (1) limited transparency as concerns existing physical infrastructure suitable for broadband rollout, (2) inconsistently applied regulation or lack of appropriate legal basis / institutional framework, (3) commercial issues (lack of business interest) or anti-competitive behaviour, and (4) technical unfeasibility.

A first operational objective of this initiative is then to facilitate and increase the use of existing physical infrastructure suitable for broadband rollout. In order for this objective to be achieved, all the identified bottlenecks which can be tackled through an EU initiative should be covered, thus with the exception of the technical limitations. Therefore this objective can be further separated into two sub-objectives: achieving more transparency concerning the available infrastructure suitable for broadband rollout and achieving a more consistent and effective regulatory regime concerning access to this infrastructure regardless of its owner and purpose.

In order to reach the intended overall savings aimed at, 25% of the deployment is assumed to take place in pre-existing ducts. Therefore, measures in this area would aim at a situation where, throughout the EU, at least 25% of the deployment takes place in pre-existing infrastructure.

3.2.2. Increasing cooperation in civil engineering projects throughout the EU

The main barriers to cooperation in civil engineering works identified have to do with (1) the lack of transparency concerning planned works, (2) the long and non-matching time horizons, (3) commercial considerations (scepticism to reveal commercial plans or lack of business interest), (4) the lack of legal certainty, especially as regards cross sector cooperation, and finally (5) technical incompatibilities.

It follows that the second operational objective of this initiative is therefore to increase cooperation in civil engineering projects through the EU, in particular by ensuring transparency, while providing a reasonable time to react, and by providing increased legal certainty for cross-industry / cross-utility cooperation.

In order to reach the overall savings targeted, measures in this area would aim at a situation where, throughout the EU, at least 10% of the high-speeds networks are set up in co-deployment.

In addition, special attention should be given to ensuring that public works are used as much as possible, taking into consideration the subsidiarity and proportionality principles and state aid rules.

3.2.3. Streamlining administrative procedures related to network rollout throughout the EU

The most common problems quoted in relation to permit granting are (1) the high number of different, uncoordinated rules and procedures, (2) the lack of transparency on these rules and procedures, (3) the long delays and, in some cases, (4) the unreasonable conditions, including fees, attached to rights of way and other permits needed to deploy physical infrastructure.

It then follows that the third operational objective is to streamline the administrative procedures related to network rollout throughout the EU, mainly by increasing the transparency and coordination of the permit granting processes, while ensuring the enforcement of deadlines as well as minimum standards as regards "reasonable conditions".

Since this objective is of a rather qualitative nature, no quantitative indicator is proposed for achieving it. Progress in this area will be ensured through analysing qualitative indicators such as fair and timely decisions on applications, transparent and reasonable conditions to permits.

3.2.4. Increasing the provision of buildings with open high-speed broadband-ready infrastructure throughout the EU

Deploying high-speed broadband infrastructure inside buildings has been identified as being a bottleneck in the rollout process mainly due to (1) the high costs of equipping existing buildings (2) cumbersome procedures related to working inside buildings and deploying the terminating segment on common grounds (mainly delays and difficulties to obtain owners' consent), (3) inconsistent application or lack of regulation tackling the inefficiencies associated with duplicating in-building infrastructure, and (4) lack of standardisation in this area.

The fourth and final operational objective of this initiative is therefore to increase the provision of buildings with open high-speed broadband-ready infrastructure throughout the EU and ensure access to the terminating segment, so as to reduce the costs and burdens associated with connecting customers.

In order to reach the intended overall savings, 5% of the deployment is assumed to reach high-speed broadband ready multi-unit dwellings. Therefore, measures in this area would aim at a situation where, throughout the EU, at least 5% of the newly deployed networks reach multi-unit dwellings which are high-speed broadband ready.

The figure below summarises the relationships between the context, the defined problem and underlying factors, on the one hand, and the general, specific and operational objectives, on the other hand.

Figure 9 - Problem Definition and Objectives

4. POLICY OPTIONS

This chapter presents the policy options proposed to address the objectives of (1) increasing the use of existing physical infrastructure suitable for broadband rollout, (2) increasing cooperation in civil engineering works, (3) streamlining the permit granting procedures needed for broadband rollout and (4) increasing the existence of and facilitating access to high-speed broadband-ready buildings . All these operational objectives should contribute to the specific objective of facilitating the broadband rollout and reducing the costs of this process, in the context of the efforts undertaken by the Commission to stimulate it. Therefore, all the proposed policy options will be tested against these wider objectives.

Four broad policy options are presented, comprising measures in each of the four areas of action identified in Section 2.3, dealing with underlying causes. As underlined above, it is essential that all policy options cover each of the problem areas so that each policy option offers comprehensive solutions covering the entire process of network rollout (see Figure 3 from Section 2.3).

When defining the contents of each policy option, different solutions for tackling each of the identified problems were considered. The selection of solutions took place as follows.

First, a wide range of solutions was collected during the consultation process, mainly based on best practices encountered in Member States and in third countries, as well as on proposals made by stakeholders during the public consultation.

Second, these solutions were then pre-screened against their potential to reduce the costs of broadband rollout in the first place, as well as considering the subsidiarity and proportionality principle and other EU policy objectives such as competition and technological neutrality[50]. Remaining solutions were tested for effectiveness vis-à-vis the operational, specific, and general objectives of the initiative, as well as the main impacts[51].

Annex V presents a non-exhaustive list of the most important policy options which were discarded, prima facie, on the basis of the above-mentioned criteria[52].

Finally, these pre-selected solutions were combined in packages so as to address the totality of problem areas in a coherent and mutually reinforcing way from the conception phase until final realisation. The logic of linking the envisaged solutions the way they are presented below has to do with their scale and scope. The scale and scope of the proposed measures increase with every policy option. Passing from Option 2 to Option 3 represents for example a major increase in both scale and scope, since Option 3 would affect a larger number of stakeholders, i.e. not only telecom operators but also other utilities, and would grant rights and obligations to actors deploying broadband and other owners of infrastructure. Similarly, Option 4 is expected to affect yet more stakeholders; for instance all houses would have to be equipped with high-speed ready infrastructure; also the scale of intervention is wider (e.g. coordination of civil engineering works is in some cases made mandatory depending on the option, while there is a significant difference in the degree of harmonisation within the different options).

The public consultation generally confirmed the demand for solutions exploiting savings potential. While stakeholders did not agree in the assessment of possible measures, status quo solutions were rarely considered. Some of the stakeholders supported 'soft law' solutions, which could be adopted either under option 1 or 2, but rather as an addition to more ambitious solutions. Some of the considered solutions raised questions or indeed concerns from some stakeholders, but this did not lead to rejecting the need of measures. The critical voices have been included in the description of specific options, where relevant, to demonstrate how they were addressed.

In a nutshell, the policy option packages can be described as follows:

Option 1 || Business as usual || Monitoring and exchange of best practices, including guidance: this option is in fact building on the baseline scenario.

Option 2 || Promote efficiency gains within the telecom sec