Guide to broadband investment : final report.
Date: 2012-11-13
Institutions: Directorate-General for Regional and Urban Policy
Subjects: Internet, information network, information technology, public investment, regional development, telecommunications industry

European Union
Regional Policy

Guide to broadband investment

September 2011

Guide to broadband investment
Final report

September 2011

FOREWORD

Europe is facing an investment challenge in the financing of high speed internet infrastructure. High amounts of investments 
are needed to achieve ubiquitous coverage of state-of-the-art competitive broadband networks, yet “the benefits for society as 
a whole appear to be much greater than the private incentives to invest in faster networks “

In  its  Digital  Agenda  for  Europe,  the  European  Commission  showed  its  commitment  to  overcome  this  challenge  and  make 
“every European digital”, irrespective of geographic location or social and economic condition. Information and Communication 
Technologies (ICT) empower individuals to bring innovation at work and in the daily lives of their families, to improve their life 
chances and to bring change in society. Therefore, the Commission is convinced that from the households in sparsely populated 
areas of north Sweden or in rural Bulgaria, to the SMEs in mountainous areas, islands and other remote regions in south of Italy, 
Poland or Spain, no one should be left behind, as concerns Internet connectivity, irrespective of the short-term commercial vi-
ability of the investment.  

To achieve such ambitious targets, Europe needs to invest in an infrastructure of quality that is universally accessible and which 
provides services at an affordable price level. The important role of public funding initiatives is to complement the insufficient 
private investments by selecting those investment models that catalyse interest from a variety of private investors and foster 
open competition among all market players. 

The EU’s Cohesion policy and agricultural policy for Rural Development  can contribute to this EU pledge by joining up efforts 
with the Connecting Europe Facility  in supporting investment in high speed networks and services and in stimulating demand 
for ICT. 

This guide is the results of a joint effort from Analysys Mason, various Commission services, the European Broadband Portal 
and the Bottom up Broadband initiative born under the Digital Agenda for Europe.  It represents the first attempt by the Com-
mission to advise public authorities managing EU funds on the strengths and weaknesses of different models of investment in 
high speed internet infrastructures and on the technological, regulatory and policy issues that are at stake in the case of each 
of these models.

With cooperation by all stakeholders, the European Broadband Portal will endeavour to complete this guide by exploring other 
innovative investment models developed at national, regional or local level. Ultimately the Portal will develop into a live tool 
box at the disposal of public authorities to help them planning their interventions and maximising the absorption of EU funds. 

In the context of its proposals for the future Cohesion Policy, the Commission recommends the development of innovation 
strategies for smart specialisation. ICT and the Digital Agenda being enablers for innovation and growth are key components 
of these strategies.

Johannes Hahn
Commissioner for Regional Policy

Dacian Ciolos
Commissioner for Agriculture 
and Rural Development

Neelie Kroes
Vice-President

Joaquín Almunia
Vice-President

  1 
  2 

European Broadband: investing in digitally driven  growth COM(2010) 472.
As proposed within the Multiannual Financial Framework for 2014-2020.

Contents 

Executive summary 
Introduction and aims of the guide 
Basis and content of the guide 

1 
1.1 
1.2 
1.3  Guidance on different investment models 
1.4  Next steps following preparation and planning 
1.5 

Conclusions and recommendations 

Introduction 
Background 

2 
2.1 
2.2  Aims of this document 
2.3  Approach used to compile the guide 

Why should I invest in broadband? 
Introduction 

3 
3.1 
3.2  Overview of the regional benefits that broadband can provide 

What type of network infrastructure should I invest in? 
Introduction 

4 
4.1 
4.2  Access network 
4.3 
4.4  Other factors to consider when assessing possible network architectures 

The backhaul and core network 

5 
5.1 
5.2 
5.3 
5.4 
5.5 

How should I invest? 
Bottom-up model 
Private design, build and operate (DBO) model 
Public outsourcing 
Joint venture 
Public design, build and operate (DBO) model 

How do I manage/monitor the outcome? 

6 
6.1  Why are period monitoring and management so important? 
6.2  What are the characteristics of the monitoring undertaken by different organisations? 
6.3  What commercial aspects need to be monitored? 
6.4  What non-commercial aspects need to be monitored? 
6.5  What governance mechanisms are available? 

What can be done to ensure demand for services? 

7 
7.1  How do I understand the level of demand? 
7.2  How can I ensure that the required level of demand is reached? 

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Guide to broadband investment 

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What can be done to reduce the cost and manage risks? 
Introduction 

8 
8.1 
8.2  Measures to reduce costs 
8.3  Measures to manage risks 

9 
9.1 
9.2 
9.3 

What are the next steps that need to be taken? 
EU funding application 
State aid compliance 
Procurement and delivery 

Further work by the EC 

10 
10.1  Keeping the guide up to date 
10.2  Other actions from broader feedback 

Annex A  Glossary of terms 
Annex B  Bibliographic and other references 
Annex C  Aims and results of example projects 
Annex D 
Annex E 
Annex F  Demand activities from example projects 

Infrastructure choices from example projects 
Investment models used in example projects 

The European Union has the full ownership including copyright of this guide. 

The  guide  has  been  supported  by  the  contributions  of  the  European  Broadband  Portal,  ERISA 
(European Regional Information Society Association), Commission services and the members of 
the "Bottom Up Broadband Initiative" set up under the Digital Agenda for Europe 

Analysys Mason Limited 
Bush House, North West Wing 
Aldwych 
London WC2B 4PJ 
UK 
Tel: +44 (0)845 600 5244 
Fax: +44 (0)20 7395 9001 
london@analysysmason.com 
www.analysysmason.com 
Registered in England No. 5177472 

Error! Unknown document property name. 

 
 
 
Guide to broadband investment | 1 

1  Executive summary 

1.1  Introduction and aims of the guide 

This  document  sets  out  best  practice  examples  in  planning  an  investment  of  public  funds  in 
broadband  projects.  The  guidance  provided  is  targeted  at  all  Managing  Authorities1  in  the 
European Union (EU). The guide has been prepared by Analysys Mason on behalf of the European 
Commission  (EC),  and  details  the  issues  associated  with  investment  planning  and  procurement 
that  must  be  considered  by  any  Managing  Authority  that  is  aiming  to  implement  an  EU-funded 
broadband project. 

The EC has recognised that Member States will need to make significant investments in broadband 
infrastructure to meet the objectives set out in the Digital Agenda for Europe (DAE): by 2020, all 
Europeans  should  have  access  to  the  Internet  at  speeds  above  30Mbit/s  and  50%  or  more  of 
European households should have subscriptions above 100Mbit/s.  

The  EC  considers  this  guide  a  particularly  important  resource  for  Member  States  which 
have  the  facility  to  use  funds  from  the  current  (2007-2013)  and  the  future  programming 
period (2014–2020) to assist in the deployment of new broadband and high speed broadband 
infrastructure.  Those  Member  States  are  urged  to  use  this  guide  to  develop  an  action  plan 
that will ensure the DAE targets for 2020 are met. 

The  EU’s  aims  of  regional  policy  are  to  achieve  social,  economic  and  territorial  cohesion2. 
Territorial balance and improved quality of life in rural areas are other objectives underlying the 
EU rural development policy3. Access to an affordable, good-quality and open ICT infrastructure 
for  all  citizens  will  contribute  to  cohesion  and  rural  development  policy  aims  and  to  increase 
innovation and productivity of regional and rural actors. As a result, it is of primary importance for 
Managing  Authorities  to  be  aware  that  access  to  affordable  broadband  has  a  positive  effect  in 
terms of meeting the most basic needs of the households, communities, public administrations and 
businesses in a territory. 

By  ensuring  that  ICT  services  are  available  to  as  many  people  as  possible,  Member  States  will 
contribute  to  cohesion,  to  innovation,  and  to  social,  economic  and  political  change.  Most  of  the 
benefits of new ICT services will be derived from outside the ICT sector. Since large amounts of 

1

2

3

For the purpose of this document and for simplification reasons, Managing Authority should be understood as public 
authorities  (national,  regional,  local)  responsible  for  supporting  the  deployment  of  high  speed  networks  in  the 
context  of  the  EU  Structural  (ERDF)  and  Rural  Development  funds  (EAFRD).  In  the  context  of  this  guide,  it  also 
refers  to  agencies  (e.g.,  intermediate  bodies  such  as  regional/rural  development  agencies)  delegated  to  provide 
public support to these networks and even Paying agencies under the Common Agriculture Policy.. 

Managing Authorities should consult the EC cohesion guidelines, available at: 
http://ec.europa.eu/regional_policy/sources/docoffic/2007/osc/l_29120061021en00110032.pdf 

Managing Authorities should consult the EC rural development guidelines, available at: 
http://ec.europa.eu/agriculture/rurdev/leg/index_en.htm 

 
                                                      
  
 
  
 
Guide to broadband investment | 2 

public funds are involved, it is important for Managing Authorities to keep the goals of delivering 
socio-economic  benefit  to  entire  territories  in  mind,  and  prioritise  the  long-term  benefit  of  all 
socio-economic  actors  of  regions  and  rural  areas  over  short-term  gain  of  any  specific  socio-
economic actor. 

1.2  Basis and content of the guide 

The  main  basis  for  the  recommendations  presented  in  this  guide  is  a  series  of  interviews  with 
stakeholders  from  example  projects  which  have  already  been  successfully  implemented.  These 
example projects are summarised in Figure 1.1. 

STOKAB, Sweden
Public DBO
City-based FTTH
meshed network

Midtsoenderjylland, Denmark
Public DBO
Partnership with
electricity provider

South Yorkshire, UK
Public outsourcing
Partnership arrangement
for network management

Nuenen, Netherlands
Bottom up
Co-operative-based FTTH

DORSAL, France
Public outsourcing
Investment in backbone,
DSL and WiMAX

Rural development 
programme, Sweden
Bottom up
State-funded co-operatives

North Karelia, Finland
Private DBO and bottom up
Grant to build to within
2km of homes

RAIN, Lithuania
Public DBO
Nationwide backhaul
and core network

Alto Adige, Italy
Public DBO
Wireless to homes and 
businesses; fibre to public

Azerbaijan

Armenia

Georgia
Lombardia, Italy
Joint venture
Planned FTTH to 50%
of homes

Turkey

Auvergne, France
Public outsourcing
Cabinet-based ADSL
for very long lines

Malta

Piemonte, Italy
Public DBO
Inspired private
investment

Cyprus

Note: DBO = design, build and operate; FTTH = fibre to the home 

Figure 1.1: 

Summary of example projects [Source: Analysys Mason] 

Due to the complexity and unique circumstances of each broadband investment, this guide is not 
intended to provide a rigid, prescriptive framework within which investment decisions should be 
made. Instead, it gathers together insights from the example projects to help Managing Authorities 
understand  each  of  the  key  issues  they  must  consider  as  they  move  through  the  investment 
preparation and planning process, and to help them make informed decisions. 

In  addition  to  the  interviews  with  stakeholders  from  the  example  projects,  our  research  has  also 
included insights from the following sources: 

 
 
 
• 

feedback from the eris@ annual conference regarding a range of possible financial models for 
broadband investment 

Guide to broadband investment | 3 

•  Models  for  efficient  and  effective  public-sector  interventions  in  next-generation  broadband 
access networks, Analysys Mason report for the Broadband Stakeholder Group, 9 June 20084 
a blogosphere consultation co-ordinated by eris@ 
feedback from the first Digital Agenda Assembly held in Brussels on 16 and 17 June 2011. 

• 

• 

The  guide  is  structured  as  a  series  of  questions  that  a  Managing  Authority  must  ask  itself  when 
planning a broadband infrastructure investment. The structure of the guide is shown in Figure 1.2. 

Figure 1.2: The seven 

stages of planning a 

broadband investment 

[Source: Analysys 

Mason] 

Why should I invest in broadband?

Define project aims to tackle market failures and/or deliver socio-
economic benefits

What type of network infrastructure should I invest in?

Understand the costs and benefits of different kinds of 
infrastructure

How should I invest?

Understand the merits of each investment model and what might 
work best for you

How do I manage/monitor the outcome?

Ensure successful delivery and operation, and provide evidence 
for audit

What can be done to ensure demand for services?

Understand the commercial case and your potential role on the 
demand side

What can be done to reduce the cost and manage risks?

Include measures to reduce costs and manage risks

What are the next steps that need to be taken?

Contribute to hitting the DAE targets by using EU funds quickly 
and effectively

This guide is complementary to existing guidance material which is publicly available, including: 

4

Available at http://www.broadbanduk.org/component/option,com_docman/task,doc_view/gid,1008/Itemid,63/ 

 
 
 
 
                                                      
  
Guide to broadband investment | 4 

•  Guide to Regional Broadband Deployment (1st edition)5 
•  Check List of Actions for Public Authorities Considering Broadband Interventions in Under-

served Territories6 

•  FTTH Business Guide (2nd edition)7. 

Additional guidance for the implementation of each investment model will be made available on 
the European Broadband Portal8. 

The guide should be read in conjunction with the following important European Policy areas: 

•  The implementation of the EU’s cohesion policy, as outlined in the Strategic report 2010 on 

the implementation of the programmes 2007–20139 

•  The  implementation  of  the  EU's  rural  development  policy,  as  outlined  in  the  report  on  the 
implementation of the national strategy plans and the Community strategic guidelines for rural 
development (2007-2013)10; 

•  The  EC  Communication  on  Regional  Policy  contributing  to  smart  growth  in  Europe  202011 

and the accompanying Staff Working Document12 

•  The EC Communication on Digital Agenda for Europe13 

•  The EC Communication on European Broadband: investing in digitally driven growth14 

•  Policy actions aimed at the achievement of EU targets for broadband networks15. 

1.3  Guidance on different investment models 

A key aspect of the investment preparation and planning phase is the choice of investment model. 

5

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10

11

12

13

14

15

Available at http://www.broadband-
europe.eu/Lists/Competences/Guide%20to%20regional%20broadband%20development%20-%201st%20edition.pdf 

Available at http://www.broadband-europe.eu/Pages/checklist.aspx 

Available at http://www.ftthcouncil.eu/documents/Reports/FTTH-Business-Guide-2011-2ndE.pdf 

See http://www.broadband-europe.eu/Pages/Home.aspx 

Available at http://ec.europa.eu/regional_policy/policy/reporting/cs_reports_en.htm 

Available at: http://ec.europa.eu/agriculture/rurdev/publi/index_en.htm 

Available at 
http://ec.europa.eu/regional_policy/sources/docoffic/official/communic/smart_growth/comm2010_553_en.pdf 

Available at 
http://ec.europa.eu/regional_policy/sources/docoffic/official/communic/smart_growth/annex_comm2010_553.pdf 

Available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0245:FIN:EN:PDF 

Available at http://ec.europa.eu/information_society/activities/broadband/docs/bb_communication.pdf 

Available at 
http://ec.europa.eu/information_society/newsroom/cf/pillar.cfm?pillar_id=46&pillar=Very%20Fast%20Internet 

 
 
                                                      
  
  
  
  
  
  
  
  
  
  
  
Guide to broadband investment | 5 

The investment models presented in this guide have been selected on the basis of public data on 
broadband  projects  from  around  Europe,  and  input  from  DG  REGIO  and  eris@.  The  models 
represent  a  range  of  options  for  combining  public  and  private  investment,  and  are  presented  in 
increasing order of involvement by the Managing Authority. Each model is applicable in different 
circumstances,  depending  on  the  scope  of  the  required  infrastructure,  the  specific  aims  of  the 
Managing Authority, and the investment/risk appetite of potential private sector partners. The five 
investment models are shown in Figure 1.3 and summarised below. 

Bottom-up

Five
models

Public
design, build 
and operate

Private
design, build 
and operate

Joint venture

Public
outsourcing

Figure 1.3: 

Summary of available investment models [Source: Analysys Mason] 

Bottom-up model16  The  bottom-up,  or  local  community,  model  involves  a  group  of  end  users 
organising  themselves  into  a  jointly  owned  and  democratically  controlled 
group (frequently a co-operative) capable of overseeing the contract to build 
and operate their own local network. 

Private design, 
build and operate 
(DBO) model 

The private design, build and operate (DBO) model involves the Managing 
Authority issuing funding (often in the form of a grant) to a private sector 
organisation to assist in its deployment of a new network. The public sector 
has  no  specific  role  in  the  ownership  or  running  of  the  network,  but  may 
impose obligations in return for the funding. 

16

In this context, 'bottom-up' does not refer to the  LEADER intitiative. 

 
 
 
                                                      
  
Guide to broadband investment | 6 

Public outsourcing 
model 

Under  a  public  outsourcing  model  a  single  contract  is  awarded  for  all 
aspects  of  the  construction  and  operation  of  the  network.  The  major 
characteristic of this model is that the network is run by the private sector, 
but the public sector retains ownership and some control of the network. 

Joint venture model  A  joint  venture  is  an  agreement  under  which  ownership  of  the  network  is 
split  between  the  public  and  private  sector.  Construction  and  operational 
functions are likely to be undertaken by the private sector. 

Public design, build 
and operate model 

A  public  DBO  model  involves  the  public  sector  owning  and  operating  a 
network  without  any  private  sector  assistance.  All  aspects  of  network 
deployment  are  managed  by  the  public  sector.  A  public  sector  operating 
company  may  operate  the  entire  network,  or  may  operate  the  wholesale 
layer only (with private operators offering retail services). 

Guidance regarding the advantages and disadvantages of each investment model and the suitability 
of each to different circumstances is given in Figure 1.4. 

Model 

Advantages 

Disadvantages 

Recommended use 

Bottom up 

• 

• 

• 

• 

Private 
DBO 

Long-term, non-profit 
view, suitable for high-
cost infrastructure 
(e.g. FTTH) 

Focuses demand and 
encourages local 
social cohesion  

Larger scale (than 
bottom up) 

Low public burden, 
which can lead to 
faster deployments 

• 

• 

• 

Localised 
deployments, with 
risk of differing 
technologies 

For targeting localised areas and for 
gaining the most benefit from small 
amounts of funding 

For larger-scale investments, where 
sufficient funding is available to 
attract private interest in rural areas, 
and where the operations (and risk) 
of the network can be confidently 
transferred to a private operator  

There is a minimum 
funding threshold to 
attract private 
interest 

Limited control over 
operations, which 
may reduce the 
socio-economic 
impact  

Public 
outsourcing 

•  Public financial 

•  Reduced financial 

stability with private 
expertise 

•  Greater control (than 

benefit to private 
sector (compared to 
private DBO) 

private DBO) 

•  Additional 

bureaucracy 

Where the Managing Authority 
requires a high level of control over 
the network, and where the private 
operator has a more conservative 
risk profile than the private DBO 
model 

 
 
Guide to broadband investment | 7 

Model 

Advantages 

Disadvantages 

Recommended use 

Joint 
venture (JV) 

Public DBO 

•  Potential financial 
benefit for both 
parties, based on risk 
sharing 

• 

The creation of 
special-purpose 
vehicles (SPVs) can 
make the model very 
scalable, and allow 
alternative investment 
sources 

•  Managing Authority 
has full control to 
promote competition 
and enforce standards 

•  Managing Authority 
can ensure socio-
economic benefits are 
prioritised 

Where the interests of the public 
and private sectors can be closely 
aligned 

•  Potential conflicts of 
interest must be 
resolved and may 
block creation/ 
successful 
operation of the JV 

• 

Few examples of 
implemented JVs to 
indicate best 
practice 

•  Size and scope 
limited by public 
expertise 

•  Potentially excludes 
private sector 
expertise 

Where a Managing Authority needs 
to have absolute control over the 
operations of the network, or where 
small targeted investment will 
inspire investment from private 
sources 

Figure 1.4: 

Summary of advantages, disadvantages and recommended uses of the investment 

models [Source: Analysys Mason] 

In terms of the choice of investment model, a Managing Authority should consider the delivery of 
benefits to end users over the long term as a key criterion in making that choice. The EC believes 
that  from  a  cohesion  perspective,  longer-term  investment  models  work  best  for  financing  high 
speed  infrastructures,  promote  competition  and  allow  the  delivery  of  cheaper  and  better-quality 
services  for  end  users.  This  is  particularly  the  case  when  an  investment  focuses  on  future-proof 
passive  or  backhaul  infrastructure,  which  supports  effective  competition  among  a  wide  range  of 
service  providers.  Issues  associated  with  the  long-term  management  of  end-user  benefits  and 
effective competition are discussed in more detail in Section 1.5. 

However, the EC wishes to encourage innovation in the choice of investment models, and is keen 
to stress that there is no one model that is preferred above all others. Indeed, it is an important role 
of a Managing Authority to use an appropriate combination of investment models from different 
stakeholders to match their needs and to deliver a long-term solution for end users. 

A Managing Authority also needs to be innovative in terms of both the sources of funding and the 
available  financial  instruments  for  investment.  It  must  consider  private  investment  from  both 
within  and  outside  the  telecoms  sector,  including  operators,  institutional  investors,  utilities,  end 
users, content providers and equipment providers. In terms of financial instruments available to the 
public  sector,  the  European  Investment  Bank  (EIB)  has  developed  examples  of  innovative 
products and services,17 such as:  

17

See http://www.eib.org/products/index.htm for more information. 

 
 
                                                      
  
Guide to broadband investment | 8 

• 

Individual loans 
Intermediated loans 

• 
•  Structured finance facilities 
•  Risk sharing finance facilities 
•  Guarantees. 

Regardless of the mix of public and private investment, a Managing Authority should choose the 
investment model on the basis of its ability to offer end users a range of affordable, high-quality 
services on a long-term basis. 

1.4  Next steps following preparation and planning 

The guide also includes detailed guidance on the next steps that need to be taken, following the 
investment preparation and planning phase, as shown in Figure 1.5.  

EU funding
application

Preparation
and
planning

Procurement
design

Procurement
activity

Contract 
award

Broadband
delivery

State aid
compliance application

Figure 1.5: 

Next step activities [Source: Analysys Mason] 

There  are  three  key  activity  flows  that  follow  preparation  and  planning:  the  EU  funding 
application, complying with State aid regulations18, and the four separate activities that contribute 
to procurement and delivery. These three activity flows are carried out broadly in parallel, and a 
summary description of each activity is provided below. 

1.4.1 EU funding application 

To  complete  an  EU  funding  application,  or  any  other  relevant  funding  application,  a  Managing 
Authority  will  need  to  assess  the  funding  application  guidelines  and  application  form(s),  and 
ideally check that its understanding is consistent with that of the funding body, through the use of 
meetings and dialogue. 

18

Under the State aid regime, projects developed under the "de minimis" rule do not need a state-aid clearance. 

 
 
 
                                                      
  
Guide to broadband investment | 9 

There  are  a  variety  of  sources  of  EU  funding,  and these  can  be  combined  with  national or  local 
sources  of  public  sector  funding,  before  being  leveraged  with  private  sector  financing  where 
appropriate, as discussed in Section 1.3. 

1.4.2 Complying with State aid regulations 

The  EC  monitors  the  investment  of  public  funds  to  ensure  that  State  aid  is  not  used  to  unduly 
favour  one  or  more  private  entities  in  a  way  that  would  distort  a  market.  The  key  activities  for 
achieving  compliance  with  State  aid  regulations  relate  to  justifying  the  need  for  public 
intervention19. However, there are four situations in which a State aid notification is not required: 
• 

If the investment is made on terms that are equivalent to those available to the market  
If the level of aid is below a threshold of EUR200 000 
If the broadband network is only used for public services 
If the broadband project is being implemented as part of a national framework scheme which 
has already received State aid approval. 

• 

• 

• 

If none of the above conditions is met, an individual State aid notification must be submitted to the 
EC. A Managing Authority should prepare a State aid pre-notification paper in consultation with 
the relevant government department.  

In addition to describing the project objectives and approach in the State aid pre-notification paper, 
the Authority will need to gather and prepare  evidence about the  broadband demand and supply 
situation  in  the  localities  of  interest  for  the  project.  This  includes  a  requirement  for  detailed 
mapping and coverage analysis, to determine whether infrastructure has already been (or is about 
to be) deployed on the supply side, as well as a mapping of the expected service requirement on 
the demand side. 

Other  inputs  to  the  State  aid  process  are  derived  from  the  project  design,  the  procurement 
requirements  specifications  and  the  responses  from  bidders  during  the  procurement  process.  In 
particular, the requirements specifications and questions posed by bidders during the procurement 
should be designed to help satisfy the EC’s guidelines on State aid for broadband. 

1.4.3 Procurement design, procurement activity, contract award and broadband delivery 

The  procurement  design  is  shaped  by  a  number  of  factors  and  options  that  should  be  assessed 
methodically  by  a  Managing  Authority  and  developed  into  a  coherent,  agreed  procurement 
strategy. Due to the wide range of factors involved in procurement design, a Managing Authority 
is likely to need specialist procurement and technical support to ensure the procurement will both 
meet its objectives and comply with procurement legislation and State aid guidelines. 

19

For more detail, see Community Guidelines for the application of State aid rules in relation to rapid deployment of 
broadband networks, available at http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:235:0007:0025:EN:PDF 

 
 
                                                      
  
Each  procurement  route  will  include  a  specific  set  of  activities.  For  example,  the  OJEU 
Competitive Dialogue procedure includes the following steps:  

Guide to broadband investment | 10 

•  market awareness 
•  pre-qualification questionnaire (PQQ) 

invitation to participate in dialogue (ITPD) 

• 
•  dialogue process 

• 

• 

invitation to tender (ITT) 
contract award. 

A Managing Authority may award the contract to the winning bidder, once the key dependencies 
of State aid approval and funding confirmation have been achieved. 

The  broadband  delivery  stage  is  a  complex  undertaking  and  presents  the  contracting  Authority 
with a variety of challenges. Many areas will require close monitoring and management, including 
checking the functionality/performance of the network, checking deployment costs and checking 
the services offered / prices charged to wholesale and retail customers. 

1.5  Conclusions and recommendations 

Based on research of the example projects and analysis of the steps that need to be taken towards 
effective broadband delivery, we have derived the following conclusions and recommendations for 
any Managing Authority that is planning a public broadband investment. 

Socio-economic 
benefit must be 
managed alongside 
project 
sustainability to 
deliver long-term 
benefits 

Due to the large investment required to deploy broadband networks, public 
investment of some kind will often be required (particularly in rural areas). 
When  large  amount  of  public  funds  are  involved  to  deliver  the  socio-
economic  aims  of  EU  policies,  the  long-term  needs  of  territories  must  be 
prioritised over the commercial aims of specific private companies. 

For  this  reason,  a  Managing  Authority  might  favour  those  models  which 
provide  long-term  control  over  the  operations  of  the  project  to  ensure  that 
the needs of the entire territory are met. Effective control of the project by 
the Managing Authority will also help to ensure that access to the network 
infrastructure is made available on an open and non-discriminatory basis (as 
discussed  in  more  detail  below).  Effective  control  of  the  project  will  also 
allow  the  Managing  Authority  to  ensure  that  the  network  is  operated  in  a 
way that supports the delivery of long-term socio-economic benefits (e.g. by 
ensuring 
that  service  availability  and  performance  meet  minimum 
requirements, and also ensuring that the desire for commercial returns does 
not overtake the need to provide affordable services).  

However,  the  private  sector  can  bring  invaluable  expertise  to  broadband 
projects,  and  commercial  discipline  that  can  ensure  projects  are  delivered 
efficiently. The involvement of large-scale private operators can help to ensure 

 
 
 
The bottom-up 
model may often be 
suitable for small-
scale fibre projects 

Guide to broadband investment | 11 

the  sustainability  of  the  project,  as  their  expertise  and  experience  can  help  in 
adapting to changes in the market or embracing technological developments. 

It  is  therefore  essential  for  a  Managing  Authority  to  engage  with  potential 
private partners at an early stage of the procurement planning process to gauge 
their appetite for different investment models, while keeping the procurement 
process transparent and non-discriminatory. 

Fibre  to  the  home  (FTTH)  provides  the  very  highest  connection  speeds  to 
end  users,  but  is  usually  very  expensive  to  deploy.  Our  research  suggests 
that  the  bottom-up  model  is  a  suitable  complement  to  small-scale  FTTH 
deployments,  as  co-operatives  can  take  a  long-term  not-for-profit  view  of 
the  investment.  Larger-scale  deployments  may  be  possible,  where  an 
existing large-scale co-operative exists (e.g. a local utility company). In the 
example projects we observed bottom-up models being deployed both on a 
small scale (e.g. Nuenen and Swedish Rural Development Programme) and 
on a larger scale (e.g. the local co-operative electricity companies deployed 
fibre in Midtsoenderjylland, Denmark). 

However,  Managing  Authorities  may  face  a  challenge  in  leveraging  the 
bottom-up  model  for  a  project  involving  widespread  deployment  (if  large-
scale co-operatives do not already exist). They should explore measures to 
aggregate  discrete  co-operative  areas  and  promote  common  technical 
standards  to  enable  major  players  in  the  industry  to  participate  and  hence 
deliver  benefits  to  end  users,  particularly  regarding  the  choice  and 
affordability of services.  

Small investments 
can provide a 
catalyst through 
innovative 
partnerships 

None  of  the  example  projects  incorporates  a  formally  established  joint 
venture  (the  Lombardia  project  is  still  at  the  planning  stage).  However, 
particular elements of some projects were undertaken using a collaborative 
approach. In many cases, small investments led to innovative partnerships, 
and provided a catalyst for further investment from other sources. 

These  examples  included  the  Managing  Authority  in  Piemonte,  Italy 
investing  in  services  in  return  for  investment  in  infrastructure  by  the 
incumbent. And in North Karelia, many end users were inspired to commit 
to the bottom-up funding of the network once they saw cable being installed 
along their street. 

Managing  Authorities  should  engage  with  potential  private  partners  to 
explore the possibility of innovative partnerships to catalyse investment. 

Open access to 
infrastructure 
supports effective 

As  discussed  above,  a  Managing  Authority  should  aim  to  ensure  that  the 
broadband  investment  delivers  a  choice  of  affordable,  innovative  services 
from a range of retail suppliers over the long term. This aim is supported by 

 
 
Guide to broadband investment | 12 

competition 

promoting  effective  and  sustainable  competition  on  the  network,  which  in 
turn  is  supported  by  providing  open  and  non-discriminatory  access  for 
operators to use the infrastructure to provide services.  

Infrastructure access is possible on two broad bases: 

•  Access  to  the  passive  infrastructure,  such  as  underground  ducts,  dark 

fibre and terrestrial wireless sites 

•  Access to the active infrastructure, which refers to the active electronics 
such  as  those  attached  to  fibre  or  copper  cables,  or  terrestrial  wireless 
and satellite electronic equipment. 

The concept of open and non-discriminatory access refers to a situation in 
which any operator can interconnect with the network on the same terms as 
any  other.  The  infrastructure  operator  must  ensure  that  it  does  not  unduly 
favour  any  service  provider(s)  over  any  others.  For  this  reason  it  is 
advantageous to use a model under which the infrastructure operator is not 
also a service provider, as this reduces any incentive for favouritism. It is a 
condition of granting State aid approval that the recipient of the aid provides 
open  wholesale  access,  regardless  of  the  presence  of  significant  market 
power  (which  is  determined  by  national  regulatory  authorities  through  an 
established ‘market review’ process). 

It  is  generally  accepted  that  if  an  operator  has  access  to  the  passive 
infrastructure  (e.g.  copper,  dark  fibre  or  underground  ducts)  it  will  have 
more  freedom  to  develop  innovative  services,  and  therefore  compete  with 
other operators and hopefully deliver lower prices to consumers. However, 
access  to  passive  infrastructure  generally  requires  a  higher  level  of 
investment  both  from  the  access  provider  (which  must  ensure  sufficient 
capacity  in  ducts,  dark  fibre,  cabinets,  etc.)  and  from  the  access  seeker 
(which must provide its own active equipment). In areas where the business 
case  for  next-generation  access  (NGA)  broadband  networks  is  already 
challenging (such as rural areas), the additional investment required by the 
access seeker may mean that passive infrastructure access may be less likely 
to support effective and sustainable competition, unless alternative and more 
innovative  investment  models  are  used  which  could  mean  lower  cost  and 
lower access charges (e.g.: bottom up model)20.  

Therefore, a Managing Authority should plan an investment with a view to 

20

The majority of costs are associated with deploying the passive infrastructure. Under a passive access model, the 
access  seeker  needs  to  deploy  its  own  active  electronic  equipment  relatively  close  to  the  end  user,  in  order  to 
connect with the passive infrastructure. Although this cost is small when compared to the passive investment, it may 
still be enough to create an unviable business case in very sparsely populated areas. The alternative is an  active 
access  model,  which  allows  the  access  seeker  to  interconnect  via  active  electronics  from  a  more  centralised 
location, which provides lower control, but requires less upfront investment. 

 
 
                                                      
  
Guide to broadband investment | 13 

ensuring that any new network infrastructure is opened at as many levels as 
possible, thus allowing all market players to operate in a level playing field. 
Also,  by  investing  in  infrastructure  rather  than  directly  in  services,  a 
Managing Authority will help to ensure that it does not distort the market, 
which could be detrimental to end users. 

These  considerations  will  encourage  effective  and  sustainable  competition, 
which will help to create an environment that stimulates the availability of 
innovative  services  at  low  prices,  offered  by  a  range  of  retail  providers  to 
consumers and businesses. 

 
 
Guide to broadband investment | 14 

2  Introduction 

2.1  Background 

The Digital Agenda for Europe is one of the flagship initiatives of the EC’s Europe 2020 Strategy 
for  a  smart  and  sustainable  economy.  The  agenda  provides  a  framework  for  Member  States  to 
achieve the 2020 strategy’s objectives for broadband deployment: that is, broadband access for all 
in Europe by 2013 and at least 30Mbit/s connections for all by 202021. 

The EC recognises that significant funding will be required in order to achieve these objectives, 
and all Member States have, or are developing, broadband plans to deliver the required connection 
speeds to their population. However, only around half of the broadband plans that include roll-out 
of superfast broadband networks set out the specific measures that will need to be implemented to 
realise the targets for broadband access. 

Due to rapid developments in technologies and business models for broadband services, there is a 
risk that rural areas will get left behind as commercial operators focus on urban areas that are more 
cost effective to serve. In order to limit the emergence of a ‘digital divide’ between urban and rural 
areas, it is essential that local and regional authorities are able to use public funding effectively to 
support the roll-out of new broadband networks. 

The EC has also recognised that the sharing of best practice in terms of broadband investment has 
played a key role in improving the outcome of ICT investment programmes in some regions. 

The EC considers this guide a particularly important resource for Member States who have 
the facility to utilise EU  funds from the current programming period (2007-13) to assist in 
the deployment of new broadband infrastructure. Those Member States are urged to use this 
guide to develop an action plan that will ensure the DAE targets are met. 

2.2  Aims of this document 

In  order  to  promote  the  sharing  of  best  practice  in  implementing  broadband  investment,  this 
document aims to provide reliable and independent guidance on planning a broadband investment. 
Overall, the aims of the guide are as follows: 

•  To help ensure that the Digital Agenda for Europe (DAE) targets are met 
•  To support the aims of EU's regional policy for affordable high-quality broadband for all 
•  To support the aims of EU's rural development policy for better quality of life and improved 

provision of basic services in rural areas; 

21

These are the coverage objectives. There is also a take-up objective (for at least 50% of households to use services 
of at least 100Mbit/s). 

 
 
                                                      
  
Guide to broadband investment | 15 

•  To help some Member States exploit EU funds more effectively 
•  To learn from other projects which have been implemented and spread best practice. 

The  guide  has  been  prepared  on  the  basis  of  research  into  publicly  available  information, 
interviews  held  with  stakeholders  from  several  example  projects  which  have  already  been 
implemented,  and  feedback  gathered  from  an  online  consultation  and  from  a  workshop  at  the 
Digital Agenda Assembly in Brussels. 

The guide is aimed at Managing Authorities (and other implementing agencies) with responsibility 
for preparing projects to fund broadband, including calls for public procurement. The guide therefore 
examines a range of possible investment models and other issues that Managing Authorities need to 
consider in order to successfully leverage public funds for broadband investment. 

Structure of the document 

This guide has seven sections, addressing each of the stages that a Managing Authority needs to go 
through when planning a broadband investment. The seven stages are shown in Figure 2.1 below. 

 
 
Guide to broadband investment | 16 

Figure 2.1: The seven 

stages of planning a 

broadband investment 

[Source: Analysys 

Mason] 

Why should I invest in broadband?

Define project aims to tackle market failures and/or deliver socio-
economic benefits

What type of network infrastructure should I invest in?

Understand the costs and benefits of different kinds of 
infrastructure

How should I invest?

Understand the merits of each investment model and what might 
work best for you

How do I manage/monitor the outcome?

Ensure successful delivery and operation, and provide evidence 
for audit

What can be done to ensure demand for services?

Understand the commercial case and your potential role on the 
demand side

What can be done to reduce the cost and manage risks?

Include measures to reduce costs and manage risks

What are the next steps that need to be taken?

Contribute to hitting the DAE targets by using EU funds quickly 
and effectively

The content of each of the seven sections is summarised below. 

•  Why  should  I  invest  in  broadband?  This  section  looks  at  the  drivers  for  investing  in 
broadband  networks  and  how  public  funds  can,  if  used  effectively,  help  to  deliver  socio-
economic benefits. It is essential that Managing Authorities define their aims at the start of the 
investment planning process. This section also considers the aims of past broadband projects, 
and  how  successfully  they  were  achieved,  as  well  as  including  some  of  the  unexpected 
benefits that have arisen from these projects.  

•  What type of network infrastructure should I invest in? This section looks at the choices 
available to a Managing Authority with regard to different parts of a broadband network (e.g. 
access  vs.  transport/backhaul  networks),  and  the  ways  in  which  various  elements  of  the 
network support different aims of broadband investment. Additionally, although the majority 
of  the  example  broadband  projects  considered  specify  requirements  that  are  technologically 
neutral,  this  section  aims  to  explain  the  reasons  for  the  particular  technology  choices,  and 

 
 
 
Guide to broadband investment | 17 

assess their appropriateness for meeting various  goals. A Managing Authority must consider 
the  pros  and  cons  of  each  available  technology,  in  order  to  choose  the  option  that  meets  its 
aims in the most cost-effective manner. 

•  How should I invest? Managing Authorities must choose the right investment model for their 
particular circumstances. This section gives details of five different models of investment that 
a  Managing  Authority  could  follow.  It  considers  the  advantages  and  disadvantages  of  each 
model,  and  their  suitability  for  different  types  of  network  investment.  More  detail  on  these 
investment models is given below. 

•  How  do  I  manage/monitor  the  outcome?  It  is  essential  for  Managing  Authorities  to 
manage/monitor  the  outcome  of  the  investment  to  ensure  that  funding  is  being  used 
appropriately.  This  section  looks  at  various  methods  that  a  Managing  Authority  can  use  to 
monitor the implementation of projects and the appropriateness of each  method for different 
circumstances. It is important for a Managing Authority to consider these issues as part of the 
planning  process,  as  any  public  or  private  partners  in  the  investment  project  will  need  to 
commit to managing and monitoring provisions upfront. 

•  What can be done to ensure demand for services?  This section considers the relationship 
between  demand  for  services  and  the  overall  impact  of  the  Managing  Authority’s  network 
investment, based on insights from the research into example projects. 

•  What  can  be  done  to  reduce  the  cost  and  manage  risks?  This  section  considers  the 
measures  that  can  reduce  the  cost  of  a  broadband  deployment  (e.g.  re-using  existing 
infrastructure) and manage risks (e.g. through detailed planning). 

•  What are the next steps that need to be taken? In this section we consider the three parallel 
activity streams that need to be initiated following the investment planning process: funding, 
procurement and delivery, and State aid. 

Focus of the guide: broadband investment models 

The main focus of the guide is to consider five high-level investment models for broadband, all of 
which  are  available  to  Managing  Authorities  for  funding  broadband  network  deployment.  The 
models  below  represent  a  spectrum  of  increasing  involvement  and  commitment  from  the 
Managing Authority: 

•  Bottom up – a group of end users (frequently organised as a ‘co-operative’) decide to invest in 
the  deployment  of  a  network.  Public  involvement  is  usually  limited  to  issuing  grants  or 
guaranteeing loans, and/or facilitating access to publicly owned infrastructure such as ducts. 

•  Private design, build and operate – a private company receives funds (often in the form of a 
grant) from the public sector to assist in network deployment, but the private company retains 
full ownership.  

 
 
Guide to broadband investment | 18 

•  Public  outsourcing  –  a  public  sector  body  outsources  network  build  and  operation  to  the 
private sector under a long-term agreement, but the public sector body retains ownership of the 
network.  

•  Joint venture – public and private sector bodies both retain a stake in the network.  

•  Public  design,  build  and  operate  –  the  public  sector  constructs  and  operates  the  network 

itself, retaining full control and offering services on a retail or wholesale basis.  

In addition, we are aware that (as part of preliminary analyses) some Managing Authorities have 
considered  other  models,  such  as  public-private  partnership  (PPP)  models  of  the  kind  used  for 
other  major  infrastructure  projects,  where  availability  payments  are  made  over  a  long  period. 
However, we have not yet identified any broadband projects that have used this model for a real 
deployment, and this model is not considered in detail in this guide. 

2.3  Approach used to compile the guide 

In  order  to  provide  comprehensive  information  to  support  each  section  of  the  document,  and 
therefore  create  a  useful  guide  for  Managing  Authorities,  we  conducted  detailed  research  into 
existing broadband investment projects around Europe. As a result, we have built up an evidence 
base of case studies from previous successful projects to deploy next-generation broadband (which 
can be found in Annex A). Figure 2.2 provides a summary of the example projects on which we 
have conducted detailed research. 

STOKAB, Sweden
Public DBO
City-based FTTH
meshed network

Midtsoenderjylland, Denmark
Public DBO
Partnership with
electricity provider

South Yorkshire, UK
Public outsourcing
Partnership arrangement
for network management

Nuenen, Netherlands
Bottom up
Co-operative-based FTTH

DORSAL, France
Public outsourcing
Investment in backbone,
DSL and WiMAX

Rural development 
programme, Sweden
Bottom up
State-funded co-operatives

North Karelia, Finland
Private DBO and bottom up
Grant to build to within
2km of homes

RAIN, Lithuania
Public DBO
Nationwide backhaul
and core network

Alto Adige, Italy
Public DBO
Wireless to homes and 
businesses; fibre to public

Azerbaijan

Armenia

Georgia
Lombardia, Italy
Joint venture
Planned FTTH to 50%
of homes

Turkey

Auvergne, France
Public outsourcing
Cabinet-based ADSL
for very long lines

Malta

Piemonte, Italy
Public DBO
Inspired private
investment

Cyprus

Figure 2.2: 

Summary of example projects [Source: Analysys Mason] 

 
 
 
Guide to broadband investment | 19 

In addition to this detailed research, the guide includes insights from the following sources: 

• 

feedback from the eris@ annual conference regarding the proposed financial models 

•  Models  for  efficient  and  effective  public-sector  interventions  in  next-generation  broadband 
access networks, Analysys Mason report for the Broadband Stakeholder Group, 9 June 200822  

• 

a blogosphere consultation co-ordinated by eris@ 

• 

feedback from the first Digital Agenda Assembly held in Brussels on 16 and 17 June 2011. 

When selecting projects for detailed analysis, we aimed to collect a range of examples, including 
(where possible): various examples of each investment model, and examples of a number of types 
of infrastructure deployment. Where possible we have identified the outcomes of each project, in 
terms  of  supporting  competitive  broadband  provision  and  delivering  socio-economic  benefit. 
Figure 2.3 provides a summary of the examples considered in detail for the guide. 

22

Available at http://www.broadbanduk.org/component/option,com_docman/task,doc_view/gid,1008/Itemid,63/ 

 
 
                                                      
  
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Guide to broadband investment | 24 

3  Why should I invest in broadband? 

Define project aims to tackle market failures 
and/or deliver socio-economic benefits

3.1  Introduction 

As  a  first  stage  in  the  investment  planning  process,  it  is  essential  for  a  Managing  Authority  to 
define  the  aims  of  the  broadband  investment  project.  These  aims  will  include  what  the  project 
needs to achieve, and why. Once a clear set of aims have been defined these will guide the rest of 
the  project  (and  influence  decisions  throughout  the  planning  process).  A  Managing  Authority 
should consider the appointment of a ‘champion’ to drive the project aims forward. 

This  section  looks  at  a  selection  of  reasons  why  a  Managing  Authority  may  decide  to  make 
broadband  investments,  primarily  associated  with  delivering  socio-economic  benefits  (creating 
stronger  community  relationships,  supporting  regional  development,  promoting  competition  and 
attracting/retaining  investment).  A  Managing  Authority  may  also  derive  benefit  from  using  the 
network  for  its  own  services  (including  playing  the  role  of  anchor  tenant,  which  could  help  to 
support the business case). 

Above all, it is important for a Managing Authority to be aware that access to affordable broadband 
has a positive effect in terms of meeting the most basic needs of the individuals, communities and 
businesses in a territory. It is important for a Managing Authority to keep these goals in mind, and 
prioritise the long-term benefit of individuals over short-term gain for private entities. 

The majority of the example projects which were studied for this guide were considered to be a success 
by the stakeholders who were interviewed. However, several interviewees, including those for North 
Karelia (Finland) and the Digital Region (UK) project, commented that it was too early to objectively 
measure the impact of the broadband project on the region’s economy, and also highlighted that it was 
difficult to exclude the effects of the recent economic crisis on such a measurement. 

The aims of the example broadband projects, and how successfully they were achieved, are set out in 
Annex C (which also highlights some of the unexpected benefits that have arisen from these projects). 

3.2  Overview of the regional benefits that broadband can provide 

The key regional benefits of broadband investment that were identified through our interviews and 
further  research  are:  supporting  economic  development,  minimising  the  digital  divide  and 
improving social cohesion, as discussed below. 

 
 
Guide to broadband investment | 25 

Supporting economic development 

Throughout our analysis, three main project aims relating to economic development were identified:  

•  Contribution of broadband to GDP growth and productivity gains. This has been shown 
in academic work for the World Bank by Christine Qiang23 (2009), who demonstrated that a 
10%  increase  in  basic  broadband  penetration  enlarged  GDP  growth  by  an  additional  1.21% 
when  looking  at  66  high-income  countries;  and  by  1.38%  in  the  remaining  120  low-  and 
middle-income countries. In some cases, the aim is to prevent a decline in GDP. For example, 
the  DORSAL  project  in  France  “was  motivated  by  regional  enterprises  threatening  to  leave 
their local premises and move to another region, where telecommunications services would be 
cheaper and have higher quality”. 

•  The creation of new jobs or businesses, which may be directly linked to the telecoms sector 
or may be from other sectors using the infrastructure that the programme has put in place. A 
direct  example  of  this  was  seen  in  the  Piemonte  project  in  Italy  where  a  development 
programme was run by the exchange created through the project. The programme consists of 
around  100  participating  enterprises,  which  are  given  hardware  and  resources  (such  as 
bandwidth)  at  a  discount, with  the  successful  enterprises  being  spun  off  as  new  independent 
businesses. 

•  An increase in consumer surplus, or the amount that consumers pay for a service, compared 
to the value they feel they receive from the service outcomes. In the case of broadband, service 
outcomes  can  range  from  quick  access  to  large  amounts  of  information  (e.g.  learning  and 
health services), to access to the  world’s largest portal for social and entertainment services. 
While  none  of  the  interviewed  projects  has  measured  this  gain  directly,  a  paper  by  Shane 
Greenstein and Ryan McDevitt24 (2009) showed that the consumer surplus gain generated by 
broadband adoption in the USA between 1999 and 2006 was approximately USD7.5 billion. 

In  some  projects,  specific  reports  were  issued  that  analysed  the  individual  region  and  linked  the 
possibility  of  economic  advancement  of  the  region  to  an  increase  in  broadband  capabilities.  For 
example, in the Digital Region project in South Yorkshire, UK, a report produced at the start of the 
project helped to generate initial interest and buy-in from all the project stakeholders. 

Minimising the digital divide  

One of the more crucial aims of broadband investment projects for rural areas is to minimise the 
‘digital divide’, a distributional objective25 to ensure that all regions within a country enjoy similar 

23

24

25

Qiang,  C.  Z.  and  Rossotto,  C.  M.,  Economic  Impacts  of  Broadband,  Information  and  Communications  for 
Development: Extending Reach and Increasing Impact, World Bank (Washington, DC, 2009), pp. 35–50. 

Greenstein,  S.  &  McDevitt,  R.  (2009),  The  Broadband  Bonus:  Accounting  for  Broadband  Internet’s  Impact  on  US 
GDP (NBER Working Paper 14758). 

A  distributional  objective  in  this  context  is  the  attempt  to  promote  equality  of  welfare  between  regions  (with  a 
comparison either nationally or internationally), frequently through wealth distribution. 

 
                                                      
  
  
  
Guide to broadband investment | 26 

levels of digital connectivity. Minimising the digital divide is one of the main targets that the EC’s 
Directorate General for Regional Policy (DG REGIO) tries to promote through the distribution of 
its available funds. Given the rate of development of broadband in urban areas throughout Europe, 
these divides are becoming more marked. 

Below we consider some of the specific situations that can cause a digital divide, and hence the 
areas  where  public  investment  in  broadband  networks  will  have  the  most  impact.  The  situations 
described  below  will  make  a  commercial  business  plan  more  challenging,  and  so  discourage 
investment in the area by commercial operators. 

•  Difficult geographical characteristics. Broadband network development can be restricted by 
challenging  geographical  characteristics,  such  as  the  mountainous  terrain  of  an  area  (as 
highlighted  in  the  Piemonte  and  DORSAL  projects)  or  the  sparsity  of  population  (as 
highlighted  in  the  South  Yorkshire  project).  These  factors  greatly  increase  the  cost  and 
financial  risk  of  developing  broadband services  in  an  area,  especially  fibre  solutions,  and  so 
discourage commercial investment.  

•  Low affluence of an area. A low level of disposable income in a region is likely to reduce the 
demand for more expensive (newer) services, and so reduce the potential return on investment. 
There  may  be  various  reasons  why  a  region  has  a  lower  affluence  level,  such  as  historical 
economic  factors.  For  example,  in  South  Yorkshire  where  the  Digital  Region  project  is 
situated,  the  area  suffered  from  the  loss  of  the  two  core  industries  of  the  region  (coal  and 
steel), and is now classified as an ‘Objective 1’ area by the EU26. 

• 

Investment inertia. This occurs in regions that are able to provide some financial return, but 
are  often  overlooked  by  a  commercial  operator  in  favour  of  the  more  obvious  investment 
opportunities, or lower-risk opportunities available in other regions. This was demonstrated in 
the Piemonte region of Italy: the region was suffering from investment inertia and required a 
public  investment  catalyst  to  inspire  confidence,  and  highlight  the  potential  of  the  area.  The 
public sector invested in a new core network, a new Internet exchange and new services, and 
this attracted investment from the incumbent to upgrade local exchanges. 

If  a  Managing  Authority  can  use  an  innovative  investment  model  to  fund  the  deployment  of 
infrastructure,  so  that  commercial  operators  only  have  to  develop  a  business  case  for  providing 
services,  then  the  effects  of  a  digital  divide  can  be  minimised.  Furthermore,  broadband  projects 
can  act  as  catalysts  either  to  demonstrate  demand  for  broadband  in  the  region  (as  in  the  Rural 
Development Programme in Sweden), or to stimulate a reaction from the market in the region (as 
was seen in both Piemonte and the Digital Region projects). 

26

An  EU  Objective  1  region  is  a  region  debilitated  from  any  of:  low  level  of  investment;  higher  than  average 
unemployment rate; lack of services for businesses and individuals; and poor basic infrastructure. 

 
                                                      
  
Guide to broadband investment | 27 

Improving social cohesion 

Our  research  highlighted a  number  of  projects  whose  aims  included  strong  social  drivers.  These 
projects  aimed  to  achieve  a  range  of  benefits  from  the  social  impact  of  broadband.  A  report  by 
University of Siegen (2010) report on the social impact of ICT classified the benefits as follows: 

•  Provision of e-health services. The ability to access information on healthcare is often listed 
as a major reason for obtaining access to the Internet. The availability of better health-related 
information  has  led  to  an  improvement  in  the  perception  of  healthcare  in  both  the  USA  and 
Canada. In the Nuenen project in the Netherlands, the initial concept for the project was driven 
including  video 
by  a 
communications, in new-build homes for the elderly and disabled. 

local  housing  company’s  wish 

install  e-health  services, 

to 

• 

Improved  contact  with  community  and  family.  A  number  of  social  researchers  have 
concluded  that  the  Internet  promotes  contact  with  friends  and  family,  and  allows  people  to 
maintain  contact  with  people  who  share  similar  interests.  Indeed  in  the  OnsNet  example, 
recent  research  demonstrated  that  the  project  had  helped  to  promote  social  cohesion  among 
members of the co-operative. 

•  Remote working. Access to ICT enables flexible working practices, in terms of both time and 
location.  This  provides  benefits  for  both  employers  and  employees  (e.g.  parents  with  young 
children,  who  may  be  unable  to  work  away  from  home,  can  now  join  the  workforce).  The 
introduction  of  remote  working  is  one  way  in  which  the  Rural  Development  Programme  in 
Sweden may achieve its objective of promoting entrepreneurship, employment and helping to 
sustain Sweden’s sparse rural population.  

•  Education  and  lifelong  learning.  While  there  is  little  evidence  that  e-learning  is  likely  to 
replace traditional face-to-face interaction between teaching staff and students, increased ICT 
penetration  can  provide  large  sections  of  the  community  with  the  opportunity  to  engage  in 
long-term, informal learning. 

•  Projects can become targets for further research into the effects of broadband on various 
socio-economic factors, as occurred in OnsNet and Midtsoenderjylland, and it can be hoped 
that this research will help to inspire and guide future projects. The existence of strong links 
with  the  local  university  was  highlighted  as  a  key  success  point  in  the  Midtsoenderjylland 
project,  and  so  by  providing  universities  with  access  to  data  for  research,  a  Managing 
Authority may be able to benefit from similar links in future projects.  

 
Guide to broadband investment | 28 

4  What type of network infrastructure should I invest in? 

Understand the costs and benefits of 
different kinds of infrastructure

4.1  Introduction 

The second stage of the investment planning process is for a Managing Authority to consider the 
type of network infrastructure in which it is going to invest. Investing in infrastructure, rather than 
investing directly in services, will help  to ensure that a Managing Authority does not distort the 
market, which could be detrimental to end users. 

The  Managing  Authority  must  consider  the  type  of  infrastructure  along  three  dimensions:  the 
scope  of  the network,  the performance  of  the  network,  and  the  ability  of  the  network  to  support 
competition. 

4.1.1 Scope of the network 

This section looks at the options available for a Managing Authority to invest in different parts of a 
broadband network, and the various technologies available for each part.  

There are two main options for investing in broadband infrastructure: 

•  The  access  network,  which  comprises  the  connection  between  the  end  user  and  the  nearest 
network  node  (e.g.  local  exchange  or  central  office).  Various  options  are  available  for 
providing  broadband  connections  in  the  access  network,  depending  on  the  requirements  and 
available  funding  (including  existing  copper  lines,  new  fibre-optic  cables  and  wireless 
networks). 

•  The  backhaul  and  core  network,  which  provides  links  between  network  nodes  to  allow 
connectivity over large distances (e.g. between towns and cities). Because traffic from a large 
number of end users is aggregated as it passes through the backhaul and core networks, fibre-
optic cable is often the technology of choice due to its high capacity. High-capacity wireless 
microwave links are also used. 

The extent of the access and backhaul/core portions of the network is shown in Figure 4.1 for three 
example NGA technologies. 

 
 
Guide to broadband investment | 29 

Access network

Backhaul and core network

Fibre to the cabinet

Fibre to the premises

Terrestrial wireless

Radio base station

Switch Node

Figure 4.1: 

Extent of access and core/backhaul networks for some NGA technologies [Source: 

Analysys Mason] 

Sections  4.2  and  4.3  examine  which  of  these  network  components  and  technologies  have  been 
used  in  the  example  projects,  to  identify  different  circumstances  which  lend  themselves  to  a 
particular choice. 

4.1.2 Performance of the network 

It  is  essential  that  a  Managing  Authority  has  at  least  a  broad  understanding  of  the  candidate 
technologies  and  architectures  that  can  be  used  to  meet  its  requirements,  so  that  it  has  an 
appreciation  of  the  trade-off  between  cost  and  performance.  Analysys  Mason  has  conducted 
studies which are available in the public domain on the cost and capabilities of both wireline27 and 
wireless28 technologies. 

However,  EU  State  aid  rules  mean  that  a  Managing  Authority  must  specify  its  network 
requirements in a technology-neutral way. For example, a Managing Authority may specify that a 
broadband  network  must  provide  connections  at  a  certain  speed,  and  be  able  to  be  upgraded  to 
some  higher  speed  over  time,  but  it  must  not  specify  which  technology  is  used  to  deliver  that 
speed.  

27

28

Available at http://www.broadbanduk.org/component/option,com_docman/task,doc_details/gid,1036/ 

Available at http://www.broadbanduk.org/component/option,com_docman/task,doc_view/gid,1246/Itemid,63/  

 
 
                                                      
  
  
Guide to broadband investment | 30 

It  should  be  noted  that  a  complementary  mix  of  technologies  may  be  appropriate  in  a  particular 
region.  While  fibre-optic  cable  usually  delivers  the  highest  connection  speed,  it  is  expensive  to 
deploy over wide areas, and wireless and satellite technologies are likely to have a role to play in 
providing cost-effective wide area coverage.  

4.1.3 The ability of the network to support competition 

Another important consideration is the impact that technology will have on competition.  

A condition for granting State aid is the obligation for the aid recipient to provide open wholesale 
access, regardless of the presence of significant market power. It is generally accepted that if an 
operator has access to the passive infrastructure (e.g. copper, dark fibre or underground ducts), it 
will  have  more  freedom  to  develop  innovative  services,  and  therefore  compete  with  other 
operators and hopefully deliver lower prices to consumers. 

Under  State  aid  guidelines29,  the  access  obligations  imposed  on  the  infrastructure  operator  must 
include  access  to  both  passive  and  active  infrastructure  level  for  at  least  seven  years  without 
prejudice  to  any  similar  regulatory  obligations  that  may  be  imposed  by  the  national  regulatory 
authority (NRA). The subsidised network has to be designed in a way that guarantees that several 
alternative  operators  can  have  access  to  the  subsidised  infrastructure  at  all  levels:  the  supported 
infrastructure  will  have  to  offer  sufficient  place  in  the  ducts,  shall  have  sufficient  dark  fibre 
capacity,  place  in  the  cabinets,  and  capacity  on  active  access  equipment.  In  the  case  of  NGA 
networks,  an  argument  may  be  put  forward  that  in  low-density  areas  access  to  the  passive  level 
will  not  result  in  additional  competition  since  it  may  be  not  economically  feasible  to  create  an 
alternative network. Therefore the State aid guidelines for broadband require that the new network 
should  be  opened  at  as  many  levels  as  possible,  thus  allowing  market  forces  to  decide  which 
access products suit them best. 

It is also essential to ensure that the infrastructure access (at which ever point it is offered) is open 
and  non-discriminatory.  This  will  require  the  Managing  Authority  to  design  wholesale 
requirements which ensure that operators can compete effectively, regardless of who actually owns 
and  operates  the  network.  The  design  of  wholesale  requirements  is  discussed  in  more  detail  in 
Section 9.3.1. 

Competition considerations will influence the choice between the two main options for providing 
fibre to the home. A ‘point-to-point’ network provides a dedicated fibre connection to each home. 
This means that an operator can easily access an end user by connecting to the relevant fibre. An 
alternative network is a ‘GPON’ architecture, whereby some of the access network is shared like a 
cable network, but each customer has their own connection into their premises. A GPON network 
may  involve  lower  costs  than  a  point-to-point  network,  but  the  options  for  competition  are  less 

29

State  aid  to  broadband:  primer  and  best  practices,  Filomena  Chirico  /  Norbert  Gaál,  Directorate-General  for 
Competition, forthcoming 

 
                                                      
  
straightforward  as  access  to  different  customers  must  be  managed  electronically  by  the  network 
operator30.  

Guide to broadband investment | 31 

4.2  Access network 

4.2.1 Fibre to the home (FTTH) 

Fibre to the home (FTTH)  involves laying a fibre-optic cable all the way from the central office / 
local exchange (or suitable local access node, such as a public sector building) to the home. FTTH 
is  the  technology  with  the  highest  capacity,  and  therefore  provides  the  highest  degree  of  future 
proofing. However, due to the long distances involved in deploying a connection all the way to the 
home,  the  deployment  costs  of  FTTH  can  be  very  high.  To  date,  commercial  deployments  of 
FTTH have been limited due to this high cost. 

There are two main options for an FTTH architecture: GPON and point to point (P2P).  

GPON  networks  may  require  less  capital  expenditure  (CAPEX)  to  be  deployed  (in  particular  in 
less densely populated, rural areas). Previous studies have shown that the cost of deploying a PTP 
architecture is on average between 10-20% more than an equivalent GPON architecture31. The cost 
difference is higher in rural (less dense) areas than in urban (more dense) areas.  

However, as discussed above, the benefit of point-to-point networks is that they allow all operators 
to  have  full  use  of  a  fibre  between  the  local  exchange  and  the  end  user,  hence  allow  full 
unbundling, thus they tend to be viewed more favourably from a competition point of view. State 
aid  policy  (see  section  9.4)  also  emphasizes  that  pro-competitive  broadband  architectures  will 
result in "lower prices and higher level of services for end user" which in turn can help to deliver 
better penetration rates in areas affected by cohesion problems.   

In contrast, the primary method of competition on GPON networks is via an electronic interface, 
which  may  restrict  the  level  of  control  that  an  alternative  service  provider  has  over  its  services. 
The  use  of  wavelength  unbundling  on  PON  networks  may  in  the  future  offer  a  similar  level  of 
control  as  a  dedicated  fibre  on  a  P2P  network,  but  at  the  time  of  writing  of  this  guide,  this 
technology was still being standardised.  

Point-to-point networks may also be better suited to providing symmetric services and are able to 
provide  higher  capacities  to  the  end-users  hence  they  are  considered  to  be  more  future  proof 
solutions, particularly taking in the prospect of both households and businesses moving gradually 
towards cloud-computing. 

30

31

It  is  often  stated  that  point  to  point  readily  allows  for  passive  (infrastructure-level)  access  whereas  GPON  readily 
allows for active (service-level) access. As GPON technology evolves over time this distinction is likely to become 
less clear as access to individual wavelengths becomes viable. 

see 

Please 
and 
http://www.vodafone.com/content/dam/vodafone/about/public_policy/position_papers/vodafone_report_final_wkcons
ult.pdf. 

http://www.broadbanduk.org/component/option,com_docman/task,doc_view/gid,1036/, 

 
                                                      
  
  
Guide to broadband investment | 32 

It should be strongly emphasized that, in the case of both architectures, the cost of deployment to 
the managing authority is much more dependent on the ability to re-use existing infrastructure and 
the model of investment than on the choice of technology. This issue is discussed in more detail in 
Section 8. Furthermore, the sustainability of the project (and therefore the ability to deliver long 
term  socio-economic  benefits)  is  more  dependent  on  the  choice  of  business  model  and  the 
expertise of project partners, than the choice of technology. 

In  terms  of  the  projects  reviewed  in  the  development  of  the  guide,  those  projects  which  have 
already  deployed  FTTH  infrastructure  have  used  PTP  architecture.  Project  interviewees  gave  a 
variety  of  reasons  for  choosing  PTP  infrastructure,  including  the  ability  to  support  high  speed 
connections, the ability to provide symmetric services, the more future proof nature of PTP and the 
ability to more easily support competition from multiple service providers. One project (which was 
still  in  the  planning  phase)  was  considering  the  use  of  GPON,  due  to  this  technology  being  the 
favoured technology of the incumbent, who was involved in the project. 

A  number  of  the  example  public  projects  researched  for  this  guide  have  featured  investments  in 
FTTH in the access network. The example projects which deployed FTTH were as follows: 

•  OnsNet, Nuenen, Netherlands: for delivery of new video-based e-health services 
•  Rural  Development  Programme,  Sweden:  to  help  meet  a  national  target  to  provide 

100Mbit/s broadband to 90% of homes 

•  Midtsoenderjylland,  Denmark:  FTTH  infrastructure  was  deemed  important  for  economic 

• 

development 
eRegio,  North  Karelia,  Finland:  to  help  meet  a  national  target  to  provide  100Mbit/s 
connectivity 

•  STOKAB, Sweden: FTTH was chosen as the most future-proof technology 
•  Lombardia,  Italy:  different  FTTH  architectures  will  be  deployed  (GPON  and  P2P), 

influenced by the preferences of both the incumbent and alternative operators. 

Further details of these examples of FTTH deployment can be found in Annex D. 

4.2.2 Fibre to the cabinet (FTTC) 

Fibre to the cabinet (FTTC) involves laying fibre from the central office (or local exchange) to a 
street cabinet or basement of an apartment block. Because the fibre is only laid for some portion of 
the distance to the home, significant cost savings can be realised relative to FTTH. However, as 
the copper network is used for the last part of the connection to the home, the speeds available on 
an FTTC network are also significantly lower than with FTTH (around 80% in terms of the cost to 
connect a home). As with FTTH technologies, the cost is strongly affected by the ability to reuse 
existing infrastructure. 

We observed two examples of projects that featured FTTC infrastructure:  

 
Guide to broadband investment | 33 

•  Digital  Region,  South  Yorkshire,  UK:  FTTC  infrastructure  was  chosen  for  its  ability  to 

deliver significant increases in connection speeds, without the high cost of FTTH  

•  Auvergne, France: FTTC infrastructure was used to provide basic broadband, as there were 

still a number of houses that were some distance from the cabinet. 

Further details of these projects can be found in Annex D.  

4.2.3 Terrestrial wireless and satellite 

Terrestrial wireless technologies provide a link between the home and the nearest network node 
without  the  need  for  a  physical  wireline  connection.  Terrestrial  wireless  networks  are 
complementary  to  fixed  networks,  and  can  be  advantageous  in  areas  where  the  installation  of  a 
wireline  network  is  difficult  and/or  expensive  (e.g.  in  mountainous  terrain).  However,  because 
several users access the network via the same last-mile link (i.e. the wireless link), the contention32 
for services can be much higher than on wireline networks, and the realised speed may be much 
lower  than  the  maximum  speed  quoted  by  the  service  provider.  In  order  to  ensure  an  end  user 
receives an assured level of service more base stations will have to be added, which will increase 
costs. It should also be noted that demand for high-speed rates from a large number of users on a 
wireless network tend to require additional investment in the fixed infrastructure that supports the 
wireless network. 

Satellite  networks  offer  a  useful  solution  for  areas  that  are  not  covered  by  terrestrial  networks 
(either  wireline  or  wireless),  e.g.  where  the  existing  networks  have  left  ‘not-spots’.  Satellite 
technologies can contribute to reaching the Digital Agenda’s target of 100% coverage by 2013. As 
with  terrestrial  wireless  technologies,  many  users  are  accessing  the  same  node  (i.e.  the  satellite 
transponder) and so the effects of contention may have a greater impact than on fibre networks. 

Wireless  technologies  which  could  provide  effective  next-generation  broadband  services  include 
terrestrial  wireless  broadband  technologies  such  as  the  3GPP  LTE-advanced  or  IEEE  802.16m 
WiMAX standards, and high-capacity satellites, using Ka-band multi-spotbeam technology. 

The costs of terrestrial wireless technologies vary according to a number of factors, including the 
terrain over which they are deployed, the data rate that must be delivered at the furthest point from 
the  base  station  and  the  overall  traffic  demand.  Indeed,  for  both  terrestrial  wireless  and  satellite 
access  technologies,  the  cost  of  deployment  depends  very  heavily  on  the  traffic  demand  to  be 
supported. This is in contrast to the fibre technologies, for which costs do not vary as strongly with 
traffic demand. 

Three  of  the  example  projects  included  wireless  and  satellite  networks  to  complement  the  fixed 
infrastructure.  In  these  projects,  terrestrial  networks  were  used  to  cover  most  of  the  more  rural 

32

Network  contention  is  a  measure  of  the  number  of  users  that  are  served  by  a  single  network  node  (e.g.  a  local 
exchange  or  a  terrestrial  wireless  base  station).  The  capacity  available  to  each  end  user  at  any  point  in  time  is 
dependent  on  the  capacity  supplied  to  the  node,  divided  by  the  number  of  users  on  that  node  that  are  currently 
using services. 

 
                                                      
  
Guide to broadband investment | 34 

areas,  with  satellite  playing  an  important  role  in  covering  hard-to-reach  areas.  The  example 
projects which featured wireless and satellite technologies were: 

•  DORSAL,  France:  a  WIMAX  network  has  been  deployed  in  the  mountainous  region,  and 

satellite serves those premises which are unable to obtain a terrestrial connection 

•  Piemonte,  Italy:  initial  investment  was  in  public-only  wireless  services.  Once  regulations 
were changed, however, private operators were able to follow with their own investment. 

•  Alto Adige, Italy: wireless services have been used to cover mountainous areas. 

Further details of these example projects can be found in Annex D. 

4.2.4 DSL (copper-based) broadband technologies 

Basic  broadband  services  are  most  often  delivered over  the  existing  copper  network,  using DSL 
technology.  DSL  technology  has  the  advantage  that  it  makes  use  of  the  existing  access 
infrastructure  and  is  therefore  relatively  cheap  to  deploy.  However,  the  nature  of  the  technology 
means  that  download  speeds  are  heavily  affected  by  the  distance  between  the  local  exchange 
(central office) and the home, and in many cases are limited to below around 10Mbit/s. 

Two of the example projects involved investment in current-generation broadband (i.e. ADSL). In 
both cases, this was because the original investment was initiated some time ago (more than five 
years ago), and at the time this technology was considered to be sufficient to meet market needs. It 
was  recognised  by  one  of  the  example  projects  that  an  upgrade  to  FTTH  would  be  very  costly, 
while  the  other  project  maintains  that  there  is  no  demonstrable  demand  for  FTTH  and  so  no 
upgrade is required. 

Further details of the example projects that deployed DSL (copper-based) technologies can be found 
in Annex D. 

4.3  The backhaul and core network 

A large number of the example projects featured investment in backhaul and core networks. A fit-
for-purpose backhaul network is essential for providing effective broadband services. Due to the 
way  that  a  backhaul/core  network  connects  large  areas,  this  is  a  cost-effective  way  of  providing 
coverage to a large number of end users. However, investments in backhaul/core networks rely on 
the existing access network (or a new access network deployed through a separate investment) to 
deliver services to end users. Backhaul/core investment can be effective at delivering services to 
end  users  where  access  infrastructure  is  already  sufficient  for  broadband  (e.g.  basic  broadband 
over copper lines) or where the investment provides a catalyst for investment to upgrade the access 
network. It is important for a Managing Authority to ensure that the new backhaul/core network is 
built using established technical standards, to allow effective competition in the access network. 

The example projects which included investment in the backhaul and core network were: 

 
Guide to broadband investment | 35 

•  OnsNet,  Nuenen,  Netherlands:  included  a  backhaul  connection  for  the  FTTH  network  to  a 

nearby university 

•  DORSAL, France: included a 1200km fibre-optic backbone to support the investment in the 

access network 

•  Midtsoenderjylland,  Denmark:  included  a  fibre  ring  between  four  city  halls  (this  was 

subsequently used by a co-operative electricity company to connect to FTTH) 
eRegio, North Karelia, Finland: built a backhaul network to within 2km of each home 

• 
•  Piemonte, Italy: included the deployment of a new core network, and a new Internet exchange 
•  RAIN  project,  Lithuania:  deployed  a  nationwide  backhaul  and  core  network  to  provide 

improved connectivity to existing access infrastructure. 

Further details of these example projects can be found in Annex D.  

4.4  Other factors to consider when assessing possible network architectures 

There  are  a  number  of  other  factors  which  it  is  important  for  a  Managing  Authority  to  consider 
when choosing network architecture. 

Technical expertise  Technical experts should be involved early in the design process. 

• 

In  the  Midtsoenderjylland  project  in  Denmark,  the  municipalities  made 
their  first  “fibre  master  plan”,  designed  by  the  Centre  for  Network 
Planning at Aalborg University, freely available. This master plan was a 
design  of  an  optimal  fibre  network  for  the  region,  and  where  the  fibre 
should  be  laid,  with  estimated  savings  of  up  to  25%  compared  to  what 
had  previously  been  planned.  The  fact  that  the  municipalities  made  the 
plan and the methods from Aalborg University available to the electricity 
companies was seen as an important catalyst in the success of this project. 

However, problems can occur when expertise is not used effectively: 

• 

In  the  DORSAL  project  in  France,  the  network  operator  had  to  install 
more  wireless  transmitters  than  planned.  The  Managing  Authority  was 
protected from the additional cost as the network operator had agreed to 
bear such risks. 

 
Technology 
obsolescence 

Technology  obsolescence  is  a  common  issue  in  telecoms,  as  technologies 
are constantly evolving.  

Guide to broadband investment | 36 

Minimising 
adoption barriers 

• 

• 

In terms of the choice between copper- and fibre-based technologies, 
the  DORSAL  project  has  already  implemented  one  upgrade  and  any 
future project would potentially require substantial funds, and probably 
funding from the EU. 

In terms of the choice between fibre technologies (FTTC vs. FTTH): 
it is difficult to know which solution is appropriate, as even operators in 
well developed markets like the USA have adopted different strategies 
(e.g. Verizon is pursuing an FTTH strategy, while AT&T is deploying 
FTTC). 

Public broadband investments should be structured to minimise the barriers 
to adoption for both end users and service providers – to ensure that services 
are  available  and  people  actually  use  them.  For  service  providers  it  is 
important to define operational areas of an appropriate size: if there are too 
many small areas this may impose a large burden on service providers that 
tender  for  all  of  the  projects;  conversely,  too  few  large  areas  may  make  it 
difficult  for  an  operator  to  create  a  viable  business  if  those  areas  include 
large proportions of low-density users. Barriers for end users can include the 
cost  and  accessibility  of  services.  Deploying  the  right  infrastructure  and 
promoting  effective  competition  can  help 
to  minimise  cost,  while 
developing new services that (for example) do not require the use of a PC 
can ensure that services are accessible. 

 
Guide to broadband investment | 37 

5  How should I invest? 

Understand the merits of each investment 
model and what might work best for you

In  this  section  we  present  five  investment  models  which  we  believe  have  potential  for  use  for 
broadband projects in Europe. The models are shown in Figure 5.1. 

Bottom-up

Five
models

Public
design, build 
and operate

Private
design, build 
and operate

Joint venture

Public
outsourcing

Figure 5.1: 

Summary of available investment models [Source: Analysys Mason] 

There is no single model that suits every situation, and a Managing Authority must consider the 
pros  and  cons  of  each  model  and  how  it  might  fit  the  Authority’s  current  situation.  This  guide 
therefore presents the merits of each model to enable an Authority to make an informed choice. 

Due to the large investment required in deploying broadband networks, public investment of some 
kind  will  often  be  required  (and  this  is  more  likely  in  rural  areas).  However,  as  discussed  in 
Section 3.1,  the  long-term  needs  of  individuals  must  be  prioritised  over  the  commercial  aims  of 
private partners. For this reason, a Managing Authority might favour those models which allow a 
higher degree of control over the operations of the project to ensure those long-term needs are met. 

However, working with the private sector can bring a number of advantages, including invaluable 
expertise,  and  commercial  discipline  that  can  ensure  that  the  project  is  delivered  efficiently.  A 
Managing Authority must consider private investment from both within and outside the telecoms 
sector,  including  operators,  institutional  investors,  utilities,  end  users,  content  providers  and 

 
 
 
Guide to broadband investment | 38 

equipment providers. Furthermore, the involvement of large-scale private telecoms operators can 
help  to  ensure  the  sustainability  of  the  project,  as  their  expertise  and  experience  will  prove 
invaluable in adapting to changes in the market or embracing technological developments. 

Therefore it is essential for a Managing Authority to engage with potential private partners at an 
early  stage  of  the  procurement  planning  process  to  gauge  their  appetite  for  different  investment 
models. 

5.1  Bottom-up model 

The  bottom-up,  or  local  community,  model  involves  a  group  of  end  users  (comprising  local 
residents  and/or  businesses)  organising  themselves  into  a  jointly  owned  and  democratically 
controlled  organisational  group  (frequently  a  co-operative)  capable  of  overseeing  the  contract  to 
build their own local network. In this model it is likely that the public sector has no role in owning 
or running the project, but rather passes the funding to the group itself to oversee the investment 
project.  Given  the  composition  of  the  local  group  it  is  likely  that  the  day-to-day  running  of  the 
network will be outsourced to a telecoms operator with the necessary expertise. 

We have identified example projects which have implemented bottom-up models from both a local 
point of view, and also as part of larger-scale (regional) initiatives. Bottom-up funded projects tend 
to be of a smaller scale than projects that use the other funding models outlined below. 

Advantages of bottom-up model 

•  As the investment is generally undertaken by non-profit organisations comprising end users, it 
is usually considered on a long-term basis and so high-bandwidth infrastructure (such as fibre 
to the home) can be deployed which provides the highest level of future-proofing. 

•  Co-operative organisations have the effect of generating and aggregating demand in an area, 
which  ensures  that  maximum  social  benefit  is  derived  from  the  investment,  even  if  only  a 
small amount of funding is available. 

Disadvantages of bottom-up model 

•  This approach may not be suited to providing widespread coverage, as individual projects can 
be very localised. This may mean that some areas are missed out and those networks that are 
built  have  differing  technical  standards,  which  may  mean  that  competition  from  other 
operators is limited. 

•  The  co-operative/partnership  organisations  are  unlikely  to  have  specific  telecoms  network 

expertise, and so high-cost ‘turnkey’ solutions may be required. 

 
Guide to broadband investment | 39 

• 

If the funding is to come from the end users themselves, then producing this funding upfront 
may create a barrier. In this case, the public sector can help by guaranteeing or underwriting 
loans. 

Overall, the bottom-up model should be used for targeting localised areas and for gaining the most 
benefit from small amounts of funding. 

Below we provide illustrations of how the bottom-up model has been used by some of the example 
projects. 

•  OnsNet,  Nuenen,  Netherlands:  the  bottom-up  approach  included  a  six-week  demand 

aggregation scheme and free services for the first year 

•  Rural Development Programme, Sweden: end users provided investment (either financial or 

• 

‘in kind’) to attract additional bottom-up investment 
eRegio,  North  Karelia,  Finland:  end  users  provided  the  investment,  and  demand  often  did 
not materialise until the network deployment reached their premises. 

Further details of these example projects can be found in Annex E. 

5.2  Private design, build and operate (DBO) model 

The  private  design,  build  and  operate  (DBO)  model  involves  a  private  sector  organisation 
receiving some level of public funding (often a grant) to assist in its deployment of a new network 
offering open wholesale access. Critically, in this model, the public sector has no specific role in 
the ownership or running of the network, but it may impose obligations relating to either of these 
in return for the funding. 

Advantages of private DBO model 

• 

• 

• 

It  is  more  suitable  for  funding  widespread  deployments  than  the  bottom-up  model,  as  the 
public  funding  (grant)  can  be  given  to  an  established  commercial  operator  to  deploy  and 
operate the network. 

It  imposes  only  a  limited  burden  on  the  public  sector,  which  is  not  involved  in  running  the 
network. This in turn can lead to faster deployments than other funding models. 

It has a number of advantages for the private operator, particularly because ownership of the 
network assets is likely to prove valuable in the long term. 

Disadvantages of private DBO model 

• 

It is essential that the available funding is sufficient to attract interest from private operators, 
as  significant  funding  may  be  required  to  make  a  viable  business  case  for  deployment, 
especially in rural areas.  

 
Guide to broadband investment | 40 

•  As  the  Managing  Authority  has  limited  on-going  control,  the  social  benefit  that  the  public 
sector  is  looking  to  create  may  be  restricted  if  the  private  operator  has  little  interest  in 
delivering social benefit and instead focuses on generating a financial return (although this can 
be offset by the terms of the agreement). 

The private operator will be exposed to more risk in this model; in other models (where the public 
sector  continues  to  have  more  of  a  stake),  the  private  entity  continues  to  share  some  portion  of 
financial exposure with the public sector throughout the project. An additional risk premium will 
be  included  by  potential  private  partners  when  they  determine  the  funding  requirements  for  the 
project. 

Overall,  the  private  DBO  model  should  be  used  for  larger-scale  investments  than  the  bottom-up 
model,  where  sufficient  funding  is  available  to  attract  interest  from  operators  to  work  in  rural 
areas,  and  where  the  operations  (and  risk)  of  the  network  can  be  effectively  transferred  to  an 
operator with little on-going control from the Managing Authority. 

The private DBO model has been used by one of the example projects: 

• 

eRegio,  North  Karelia,  Finland  (and  its  successor  Broadband  for  all  in  Eastern  and 
Northern  Finland):  a  grant  was  used  to  fund  the  backhaul  and  core  network  serving  the 
FTTH network built using a bottom-up model. The grant provided for the eRegio project was 
only sufficient to attract interest from a single local operator. 

Further details of this project can be found in Annex E. 

5.3  Public outsourcing 

Under  a  public  outsourcing  model  a  single  contract  is  awarded  to  a  private  sector  organisation, 
covering all aspects of the design or construction of the network. The major characteristic of this 
model is that the network is built and operated by the private sector, but the public sector retains 
ownership and some control of the network. 

Advantages of public outsourcing model 

• 

It is able to leverage the stability of the Managing Authority, and the commercial and technical 
acumen of the private sector on an on-going basis. 

•  The  public  sector  retains  ownership  of,  and  a  large  degree  of  control  over,  the  network 

infrastructure. 

Disadvantages of public outsourcing model 

•  Next-generation  broadband  networks  can  typically  take  10  to  15  years  or  more  to  achieve  a 
return on investment, and the fact that public network outsourcing agreements typically revert 

 
Guide to broadband investment | 41 

to public operational control after 10 or 20 years (or at least must be outsourced again under a 
new contract) could reduce the incentive for some private companies to invest. 

•  The  outsourcing  relationship  can  create  an  added  layer  of  bureaucracy  between  the  private 

operator and the Managing Authority. 

•  Depending on whether the public outsourcing arrangement is facilitated by a legal framework, 
the provisions of that framework may impose unfavourable constraints on the operation of the 
project (e.g. constraining investment in the future). 

Overall,  the  public  outsourcing  model  should  be  used  for  widespread  deployments  where  the 
Managing  Authority  requires  a  high  level  of  control  over  the  network,  and  where  the  private 
operator prefers the risk profile of greater financial stability but a lower potential return than that 
offered by the private DBO model. 

Three of the example projects featured the public outsourcing model: 

•  DORSAL,  France:  undertook  the  investment  within  a  legal  framework  which  facilitated 
outsourcing  of  the  network  build  and  operations  to  a single  operator  by  a  collective  of  local 
authorities. While the legal framework was effective in allowing the separate organisations to 
procure together (and so realise economies of scale) it also includes provisions which can be 
restrictive  (for  example,  limiting  the  amount  that  can  be  reinvested  to  provide  capacity 
upgrades)  

•  Auvergne, France: chose the public outsourcing model to address a market failure, leverage 
the  technical  expertise  of  the  private  operator,  and  make  effective  use  of  public  funds  to 
provide services to commercially unviable sparsely populated areas  

•  Digital Region, South Yorkshire, UK: included a slight variation on this model. The network 
build  was  entirely  publicly  funded  (due  to  a  lack  of  commercial  interest),  but  the  operating 
company  is  a  joint  undertaking  between  the  local  Managing  Authorities  and  the  private 
consortium  that  built  and operates  the  network.  A  revenue  share  arrangement  is  in  place  for 
any returns from the network. 

Further details of these projects can be found in Annex E. 

5.4  Joint venture 

A joint venture is any agreement where ownership of the network is split between the public and 
private  sector.  Construction  and  operational  functions  are  likely  to  be  undertaken  by  a  private 
sector organisation. 

 
Guide to broadband investment | 42 

Advantages of joint venture model 

•  A  joint  venture  has  a  number  of  advantages  over  a  public  outsourcing  arrangement  (as 
described in Section 5.3 above), as both parties are able to maintain a long-term financial stake 
in the network. Some Managing Authorities may be reluctant to relinquish full ownership of 
the network as they may see long-term strategic value in owning the assets. 

•  The  joint  venture  model  offers  the  ability  to  broadly  balance  the  interests  of  the  public  and 
private sectors and also balance the sharing of risk. Indeed some forms of joint venture have 
required the private partner to increase its stake in the project when certain key performance 
indicators are achieved (such as take-up), which represents a form of risk-sharing arrangement. 

•  This model often features the creation of special-purpose vehicles (SPVs). These SPVs can be 
of almost any size, which makes the model very scalable (i.e. from local communities to sub-
national  regions).  The  SPV  mechanism  also  allows  investment  to  be  gathered  from 
comparatively innovative sources, such as institutional investors. 

Disadvantages of joint venture model 

•  With two stakeholders in the network each with different interests, it may be difficult to align 

those interests and set up and/or continue the operation of the joint venture. 

Overall, the joint venture model should be used only where the interests of the public and private 
sectors can be closely aligned. Indeed, in our review of the example projects, we were unable to 
identify  any  existing  formal  joint  venture  arrangements.  The  Lombardia  project  in  Italy  is 
proposing  an  innovative  model  of  sharing  ownership  between  the  Managing  Authority, 
institutional  investor  and  other  public  and  private  partners,  but  the  project  has  not  yet  been 
implemented. 

However,  there  are  some  examples  where  particular  elements  of  a  project  were  undertaken  in  a 
collaborative sense. These examples of partnering are summarised below, as they reflect the spirit 
of the joint venture model. 

The  partnering  ideas  below  may  be  useful  for  attracting  investment  from  other  industries  –  for 
example,  from  utilities  for  investment  in  access  infrastructure,  or  from  media  and  technology 
companies for investment in services. 

•  Lombardia,  Italy:  although  not  yet  in  deployment,  this  project  is  proposing  an  innovative 

structure involving SPVs, whereby investment can be sought from a number of sources 

•  Midtsoenderjylland, Denmark: included an agreement between the Managing Authority and 

a local co-operative electricity company to deploy the network 

•  Piemonte, Italy: included an agreement between the Managing Authority and the incumbent 
to  deploy  new  infrastructure  in  return  for  investment  in  new  services.  The  project  also 

 
Guide to broadband investment | 43 

included  a  public–private  partnership  arrangement  for  the  operation  of  a  new  Internet 
exchange 

•  Digital  Region,  South  Yorkshire,  UK:  includes  a  profit  sharing  arrangement  between  the 

Managing Authority and the network operator. 

Further details of these example projects can be found in Annex E. 

5.5  Public design, build and operate (DBO) model 

A  public  DBO  model  involves  the  Managing  Authority  operating  without  any  private  sector 
intervention,  except  at  a  service  provider  level  (involving  either  wholesale  or  retail  service 
providers). All aspects of network deployment and operation are managed by the public sector. A 
network  company  is  formed  by  the  Managing  Authority  and  typically  offers  wholesale  services, 
with the potential to offer retail services (although this is not common). 

Advantages of public DBO model 

•  This  model  allows  the  Managing  Authority  to  retain  control  of  the  network  and  may  have 
benefits  such  as:  ensuring  that  social  capital  targets  are  given  a  high  priority,  ensuring  that 
there  are  no  conflicts  of  interest  in  achieving  effective  competition,  and  enforcing  common 
technical standards. 

•  This  model  is  also  suitable  when  the  Managing  Authority  does  not  have  confidence  in  the 
available legal mechanisms (e.g. competition regulations) for ensuring effective competition. 

Disadvantages of public DBO model 

•  Sole ownership of the network by the Managing Authority increases its exposure to the risk of 
a  failed  venture.  Organisations  set  up  in  this  manner  may  struggle  to  meet  targets  (e.g.  for 
coverage  and  take-up),  which  may  be  due  to  a  lack  of  commercial  and  technical  expertise 
(which  few  public  sector  organisations  possess).  The  public  will  be  aware  that  its  money  is 
being  spent,  and  if  any  failings  receive  substantial  publicity  this  could  result  in  a  loss  of 
confidence in the project. 

•  Networks deployed under this model may be limited in size and scope due to the finite amount 
of  expertise  held  within  the  Managing  Authority.  Therefore  the  ability  for  investment  under 
this  model  to  provide  widespread  network  coverage  may  be  reliant  upon  the  network 
providing a catalyst for other investments. 

•  The model may potentially exclude certain aspects of private sector expertise, which could be 
valuable in ensuring the efficient deployment and operation of the network. More broadly, this 
model  does  not  exploit  the  economies  of  scale  and  scope  that  private  sector  operators  can 
bring. 

 
Guide to broadband investment | 44 

Overall,  the  public  DBO  model  should  be  used  where  a  Managing  Authority  needs  to  have 
absolute control over the operations of the network (perhaps to ensure competition), or where the 
Managing  Authority  is  confident  that  a  targeted  public  DBO  investment  will  inspire  investment 
from other sources. 

Although examples of the public DBO investment model can be found across Europe, its primary 
use appears to be for relatively small-scale deployments (e.g. those confined to a single city or to 
provide core/backhaul connections between different towns).  

Five of the example projects featured the public DBO model: 

•  Midtsoenderjylland,  Denmark:  to  connect  four  city  halls  together  (although  this  network 

was used by an electricity company to backhaul a fibre-based access network  

•  Piemonte, Italy: to invest in a variety of small broadband projects, including a new Internet 
exchange,  a  regional  backbone,  some  dark  fibre,  a  public-only  wireless  network  and  new 
services 

•  RAIN  project,  Lithuania:  to  ensure  absolute  control  of  (and  therefore  promote  effective 

competition on) a new national backhaul and core network 

•  STOKAB,  Sweden:  to  provide  dark  fibre  on  an  equal  basis  to  any  customer,  through  a 
management company set up by the city. The company uses framework contracts to procure 
services on an on-going basis 

•  Alto Adige, Italy: the local authority is fully funding a project which will use a combination 

of wireless and wireline networks to link local homes and businesses. 

Further details of all of these projects can be found in Annex E. 

 
Guide to broadband investment | 45 

6  How do I manage/monitor the outcome? 

Ensure successful delivery and operation, 
and provide evidence for audit

This section looks at various methods by which a Managing Authority can monitor/manage public 
broadband  projects  and  their  appropriateness  for  different  situations.  Where  possible,  the 
information  presented  below  is  based  on  how  various  levels  of  monitoring  and  governance 
mechanisms have been used in practice. 

6.1  Why are period monitoring and management so important? 

It is essential for a Managing Authority to implement effective governance mechanisms. This is to 
ensure that public money is being used appropriately, to check how decisions are being made, and 
to make sure stakeholders are behaving in the right way. It is also important to ensure that public 
money that is invested in broadband projects is seen to deliver tangible benefits to Member States, 
so that funding continues to be provided for this type of activity.  

6.2  What  are 

the  characteristics  of 

the  monitoring  undertaken  by  different 

organisations? 

Periodic monitoring can be undertaken by public organisations with varying remits, as discussed 
below.  The  monitoring  is  usually  conducted  by  the  Managing  Authority  undertaking  the  project 
(whoever that may be). This section is not intended to guide the Managing Authority in making a 
choice between the options below, but rather to provide an overview of the constraints that it may 
experience, depending on its management remit. 

Monitoring by the local group (or co-operative) 

Monitoring  can  be  conducted  by  the  local  group  or  co-operative  that  is  undertaking  the  project. 
The advantage of this approach is that the monitoring organisation is very close to the operations 
of the project and so will be able to identify any issues very quickly. However, a small monitoring 
organisation may not have the financial or political strength to maintain effective monitoring of the 
project, as illustrated by the Nuenen example below. 

 
 
Guide to broadband investment | 46 

OnsNet, Nuenen, Netherlands 

95%  of  the  network  is  owned  by  the  co-operative  and  5%  by  the  construction  company  (but  the 
construction  company  has  full  voting  control).  This  ownership  split  was  not  originally  planned  but 
occurred due to financial complications during the project. 

Overall oversight of the project was intended to be undertaken by the board of the co-operative. Now, 
however,  due  to  the  ownership  structure  of  the  co-operative,  the  board  has  limited  oversight  of  the 
project.  No  monitoring  is  done  by  the  government  or  municipalities,  and  there  has  been  no 
government involvement in the project beyond the initial money given. 

Monitoring by regional municipalities (or a syndicate group on their behalf) 

Monitoring by regional or municipal public bodies can bring greater financial or political strength 
to the monitoring activity. However, as the public body is further removed from the project, there 
is  likely  to  be  a  need  for  a  formal  process  whereby  the  operating  organisation  reports  to  the 
regional municipality on a regular basis, as illustrated by the DORSAL example below. 

DORSAL, France 

In  order  to  ensure  compliance  with  the  two-year  construction  timetable,  a  technical  committee  was 
created to oversee the progress of the project. In addition, a representative from Axion/Sogetrel would 
provide monthly updates on the state of the project to representatives from the local authorities which 
make up the DORSAL collective. DORSAL publishes an annual report which captures all the activity 
on  the  project,  specifies  the  use  of  funds  and  provides  additional  insight.  A  third  party  audited  the 
project to ensure that funds were used appropriately.  

Monitoring by a central government body 

Finally,  a  project  may  be  monitored  by  a  central  government  body.  This  situation  has  the 
advantage  that  the  monitoring  body  has  a  greater  awareness  of  the  high-level  objectives  of  any 
national broadband policy, and may also have strong links to the market-specific expertise of the 
regulator.  However,  despite  a  central  government  body  having  responsibility  for  all  broadband 
operations in the country, its formal monitoring remit is likely to be limited to those projects which 
have benefited from public sector investment.  

Rural Development Programme, Sweden 

The majority of investments are monitored at the county level. Investment has to be used as specified 
in  the  application  for  a  period  of  five  years  following  the  project  (this  is  monitored  by  the  Board  of 
Agriculture). There is also a condition of open access imposed on all the projects. Approximately 5% 
of projects are being monitored/controlled by the Board of Agriculture to ensure the above conditions, 
as this is the proportion of broadband projects which have received public sector investment. 

For all monitoring organisations, monitoring requirements could be set out in the contract with the 
network  supplier,  with  obligations  possibly  linked  to  the  payment  of  public  money  (e.g.  roll-out 
milestones, ‘ready for  service’ (RFS) dates, Internet  service providers (ISPs)  signed up, customers 
connected).  

 
Guide to broadband investment | 47 

A government body (likely to be the Managing Authority) could hold such a contract, but we are 
not aware of any examples of a regulator being party to a contract like this. It should be noted that 
any  measures  that  a  regulator  may  apply  (such  as  penalties  and  remedies)  are  separate  and 
determined  by  the  regulator  itself,  and  so  do  not  need  to  be  duplicated  in  any  contract  with  a 
network supplier. In other words, the investment contract provides ‘project-specific’ monitoring, 
while the regulator provides ‘market’ monitoring.  

6.3  What commercial aspects need to be monitored? 

There are a number of options for monitoring the commercial aspects of a broadband investment 
project, as outlined below. 

Milestone and deployment controls 

Milestone  bonuses  and  penalty  payments  are  a  form  of  control  over  network  deployment. 
Payments are linked to specific deliverables or achievement of a roll-out plan or wholesale take-up 
by  ISPs  or  take-up  by  end  users.  Another  link  to  milestones  is  widespread  publication  of  RFS 
dates.  Public  relations  announcements  of  this  type  could  be  stipulated  as  part  of  a  deployment 
contract. 

It  may  be  necessary  to  include  payment  profiles  (i.e.  schedules  for  paying  the  organisations 
responsible for building the network) as part of this type of monitoring, which set out how the 
bonuses and penalties should adapt to changing market conditions during roll-out. For example, 
if Supplier A is awarded public funding, but partway through the project Supplier B decides to 
extend  its  roll-out  to  areas  targeted  for  public  funding,  the  payment  profile  may  need  to  be 
adjusted (because Supplier A is less likely to reach the take-up levels it expected at the start of 
the project). 

It is good practice for Managing Authorities to use milestones and deployment controls to ensure 
that the roll-out goes according to plan. 

Price benchmarking and clawback mechanisms 

The Community Guidelines for the application of State aid rules in relation to rapid deployment of 
broadband networks33 set out two important commercial considerations for Managing Authorities 
to ensure State aid compliance. With respect to a benchmarking pricing exercise, the Guidelines 
state: 

33

Available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:235:0007:0025:EN:PDF 

 
                                                      
  
Guide to broadband investment | 48 

In  order  to  ensure  effective  wholesale  access  and  to  minimise  potential  distortion  of 
competition,  it  is  crucial  to  avoid  excessive  wholesale  prices  or,  by  contrast,  predatory 
pricing or price squeezes by the selected bidder. Access wholesale prices should be based 
on  the  average  published  (regulated)  wholesale  prices  that  prevail  in  other  comparable, 
more  competitive  areas  of  the  country  or  the  Community  or,  in  the  absence  of  such 
published prices, on prices already set or approved by the NRA for the markets and services 
concerned.  Thus,  where  ex  ante  regulation  is  already  in  place  (i.e.,  in  a  grey  area) 
wholesale  prices  for  access  to  a  subsidised  infrastructure  should  not  be  lower  than  the 
access  price  set  by  the  NRA  for  the  same  area.  Benchmarking  is  an  important  safeguard 
since  it  enables  Member  States  to  avoid  having  to  set  in  advance  detailed  retail  or 
wholesale  access  prices,  as  well  as  to  ensure  that  the  aid  granted  will  serve  to  replicate 
market  conditions  like  those  prevailing  in  other  competitive  broadband  markets.  The 
benchmarking criteria should be clearly indicated in the tender documents. 

With respect to a clawback mechanism to avoid over-compensation, the following text is included 
in the Guidelines: 

To ensure that the selected bidder is not over-compensated if demand for broadband in the 
target  area  grows  beyond  anticipated  levels,  Member  States  should  include  a  reverse 
payment  mechanism  into  the  contract  with  the  successful  bidder.  The  provision  of  such  a 
mechanism  can  minimise  ex  post  and  retroactively  the  amount  of  aid  deemed  initially  to 
have been necessary. 

Further guidance on the issues surrounding tender documents and selecting bidders can be found 
in Section 9. 

6.4  What non-commercial aspects need to be monitored? 

There  are  also  non-commercial  aspects  of  a  project  that  should  be  monitored  that  a  Managing 
Authority must monitor, as outlined below. 

Ensuring that open-access principles are maintained 

It is a key principle of State aid guidelines that publicly funded broadband projects must use an open-
access model. This model helps to promote competition among multiple service providers, supports 
innovation in products and services, and minimises market distortion. It is important to ensure that 
open access is defined in terms of access to specific services and products (e.g. wholesale bandwidth 
or dark fibre or duct access). Access should be provided to all products, all of the time. 

The majority of example projects involving public funding included requirements for mandatory 
non-discriminatory  wholesale  open  access.  For  example,  in  the  Midtsoenderjylland  project  “The 
agreement to rent the dark fibres had to be priced at the accepted market level as it was against 
Danish  law  to  disturb  the  market  by  subsidising  FTTH,  or  preferring  one  company  to  another”, 

 
Guide to broadband investment | 49 

and  in  the  Swedish  Rural  Development  Programme  “There  is  also  a  condition  of  open  access 
imposed on all the projects. Approximately 5% of projects are monitored/controlled by the Board 
of Agriculture”. 

Monitoring of operational metrics 

The  metrics  below  represent  some  of  the  operational  aspects  that  a  Managing  Authority  should 
consider  monitoring  on  at  least  an  annual  basis,  to  ensure  that  wholesale  and  retail  users  are 
receiving  a  service  which  is  fit  for  purpose,  and  overall  usage  of  the  network  is  progressing 
according to plan. The metrics below are based on the annual report that is issued by the network 
operator to the Managing Authority on the DORSAL project.  

Operational 
readiness 

The  Managing  Authority  should  monitor  the  number  of  deployed  network 
infrastructure elements (e.g. fibre termination electronics, wireless transmitters), 
and the overall service availability on different parts of the network. 

Fault occurrence 

The  Managing  Authority  should  monitor  the  occurrence  of  faults  on  the 
network,  including  those  that  are  notified  by  customers  (e.g.  residential  vs. 
business vs. public sector) and those that are discovered by network staff. The 
fault monitoring should include analysis of how the number of faults varies with 
increasing usage, and seek to identify any common causes of faults. 

Maintenance 

Network take-up 

that 

is  required  on 

The  Managing  Authority  should  monitor  the  frequency  and  nature  of 
including  scheduled 
maintenance 
maintenance,  corrective  maintenance  and  preventative  maintenance.  In  the 
case  of  scheduled  and  preventative  maintenance,  the  Managing  Authority 
should  look  to  ensure  that  this  is  done  at  a  time  when  it  will  cause  least 
disruption to customers. 

the  network, 

The  Managing  Authority  should  monitor  the  take-up  of  the  network  by 
wholesale  and  retail  customers.  For  retail  customers  this  could  include  the 
number  of  new  connections,  while  for  wholesale  customers  this  could 
include measuring the installation of their equipment or the take-up of other 
services.  Where  a  network  operator  has  specific  responsibilities  to  market 
the broadband services or stimulate demand, the Managing Authority should 
also separately monitor that these activities are taking place (in addition to 
monitoring the resultant take-up). 

Network 
performance 

The  Managing  Authority  should  monitor  the  speed  and  quality  of  services 
being delivered to end users, to ensure  that the benefits of next-generation 
broadband can be realised, and to allow comparison with other projects. 

 
Guide to broadband investment | 50 

6.5  What governance mechanisms are available? 

From  the  example  projects,  we  have  observed  a  broad  spectrum  of  options  for  a  Managing 
Authority  to  influence  the  decision  making  on  a  project,  as  discussed  below.  The  choice  of 
governance mechanism will tend to be guided by the choice of investment model, but a Managing 
Authority needs to be aware of the different options. 

Full ownership and control by a public body 

If  the  network  infrastructure  is  fully  owned  and  operated  by  the  Managing  Authority,  then  the 
Authority  has  full  control  over  any  decision  making.  However,  this  approach  may  require  a 
separate  public  organisation  to  be  set  up  that  has  the  appropriate  network  operating  skills.  In 
addition,  on  larger  projects,  the  lack  of  involvement  from  commercial  operators  may  make  it 
difficult to align operation of the broadband network with the needs of the market.  

Midtsoenderjylland, Denmark 

The backbone network was owned and operated by the municipality – with a repair contract taken out 
with an external company. The fibre used by the public network is seen as part of the municipalities’ 
ICT  networks  and  so  is  looked  after  by  the  municipalities’  ICT  administrators,  to  ensure  they  have 
control over how it is used.  

RAIN, Lithuania 

A  ‘Joint  Activity  Partnership  Agreement’  was  made  between  the  Ministry  of  Transport  and 
Communications (MTC) and PEPI. The MTC agreed to undertake the project application, collection of 
funds, and participation in the Supervisory Committee (SC).  

The  SC  supervises  implementation  of  the  project,  work  timeliness,  achievement  of  planned  results, 
assesses the  project’s long-term impact and encourages the  distribution  of the  project’s results. The 
SC gives guidance on the project’s activities and implementation. The SC was created by the minister 
of  Transport  and  Communications  and  consists  of  representatives  of  ministries,  local  governance 
authorities,  educational  establishments,  etc.  The  Supervisory  Committee  meets  at  least  once  a 
quarter. 

A public-only board or small SPV which oversees all decision making 

An alternative approach is to have a board of public body stakeholders or a small special-purpose 
vehicle  (SPV)  to  oversee  all  decision  making.  This  approach  has  the  advantage  of  leveraging 
private operator expertise to operate the network while retaining overall control within the public 
sector.  However,  caution  must  be  exercised  with  this  approach,  to  avoid  a  situation  where  too 
many layers of bureaucracy cause project delays. 

 
 
Guide to broadband investment | 51 

Digital Region, South Yorkshire, UK 

Originally  a  management  team  sat  underneath  the  board,  to  oversee  contact  with  the  network 
operator,  Thales,  who  in  turn  managed  any  sub-contractors.  Now  Digital  Region  and  Thales  form  a 
joint team at management level. This collaborative approach has speeded processes up by removing 
a layer of bureaucracy. 

A mixed ownership model with the public sector maintaining a majority stake 

A variant of the public-only board is to have a mixed board of public and private stakeholders. In 
this way, the public sector has the opportunity to maintain control with a majority stake (e.g. 51%) 
but the private sector can exert significant influence on the running of the project. 

Piemonte, Italy 

In  Piemonte,  the  public  body  invited  the  private  sector  to  control  49%  of  the  newly  built  Internet 
exchange, allowing the private sector to help manage the project (while keeping ultimate control in the 
public sector) and thus give the impression of working with, rather than against, the market. 

Alternative methods of influence 

Finally, governance can be exercised through alternative methods of influence. This approach may 
be  necessary  when  no  formal  governance  arrangement  is  possible  between  the  Managing 
Authority  and  the  network  operating  organisation.  However,  even  in  these  circumstances  the 
Managing  Authority  is  still  able  to  monitor  activity  on  the  project,  and  refer  any  undesirable 
activity to another enforcing body (e.g. the regulator). 

North Karelia, Finland 

The telecoms company that wins each project has to guarantee 30  years of service on the network. 
One  of  the  Regional  Council’s  jobs  is  to  check  that  the  network  is  running  in  accordance  with  the 
agreement,  though  it  has  no  specific  tools  to  use  in  this  task.  The  majority  of  monitoring  comes 
through customer feedback. When problems are highlighted, a flag is raised with the Finnish regulator 
(FICORA) to apply penalties.  

 
Guide to broadband investment | 52 

7  What can be done to ensure demand for services? 

Understand the commercial case and your 
potential role on the demand side

This  section  considers  the  importance  of  the  demand  for  services  in  in  the  context  of  network 
investment  by  a  Managing  Authority.  We  look  at  two  key  issues  –  understanding  demand  and 
encouraging demand to reach the levels needed to make an investment deliver the required socio-
economic benefits.  

Details of the initiatives to foster demand from the example projects can be found in Annex F. 

7.1  How do I understand the level of demand? 

Understanding the current level of demand for broadband technology and services within an area 
should  be  a  fundamental  consideration  when  a  Managing  Authority  is  planning  a  broadband 
network investment. 

One  critical  success  factor  for  completion  of  a  broadband  project  is  that  the  project  must  be 
initiated at a time that is appropriate, given the prevailing balance of supply and demand.  

Our  research  has  shown  that  investments  involving  demand-side  initiatives  tend  to  reach  break-
even relatively quickly (the OnsNet, Nuenen project in the Netherlands providing a good example 
of this). Many of the project interviews highlighted the importance of the current understanding of 
demand held by the private telecoms operators. Given that most of the investment models involve 
some  level  of  interaction  with  operators,  this  is  also  an  issue  for  the  Managing  Authority.  It  is 
possible that if the telecoms operator has a good understanding of the demand, it may be willing to 
accept  a  transfer  of  risk  from  the  public  body  (as  is  the  case,  for  example,  in  French  DSP 
agreements34. 

Having  established  the  importance  of  understanding  demand,  some  example  projects  also 
identified  various  difficulties  associated  with  its  measurement.  For  example,  the  stakeholders  in 
the Rural Development Programme in Sweden were not fully aware of the true demand at the start 
of  the  project,  and  North  Karelia’s  new  project  is  having  measurement  difficulties  due  to 
variability  of  the  price  estimates  used  to  gauge  interest  from  end  users.  In  many  cases,  new 
demand is also created once a new network has been built and it is demonstrated that services are 
of interest to end users. This effect was seen in the North Karelia project, for example. 

34

Délégation de Service Public (a model set by French law under which a private actor is granted the opportunity to 
manage public services by a public body). 

 
 
                                                      
  
Guide to broadband investment | 53 

Even projects which undertook demand analysis before they began have been affected by the fact 
that demand changes over time, especially given the rapid pace of developments in the telecoms 
industry. An example of this evolution of demand is provided by the DORSAL project in France, 
which reported that users were soon demanding higher speeds and capacities. 

In  some  of  the  example  projects  both  the  Managing  Authorities  and  the  telecoms  operators 
perceived there to be a low level of demand initially. Indeed, this perception of low demand was 
one reason why private investors had previously shown little interest in the areas concerned (and 
hence created the need for an intervention). However, it is possible that the initial assessment of 
demand may not have reflected the real demand, due to one of the following factors: 

•  Managing Authorities may not have asked the right questions (e.g. if people with low levels of 
IT literacy are asked about their interest in technologies they do not understand, they may not 
be able to indicate their true level of demand as they have not actually seen the technologies in 
operation) 

•  The  initial  demand  may  be  truly  latent,  and  so  not  even  be  apparent  to  the  population  itself 

until it is stimulated through a development such as the introduction of a new service. 

If the real level of demand is low, projects can benefit from demand aggregation or stimulation, as 
discussed in the next section.  

7.2  How can I ensure that the required level of demand is reached? 

Demand aggregation and stimulation schemes are likely to be important in ensuring the success of 
a  broadband  investment  project,  and  so  must  be  considered  by  a  Managing  Authority.  The 
schemes should ideally be structured to include an element of commitment from users, since this 
helps to give the Managing Authority and operator(s) confidence that benefits can be derived from 
the significant investments required for a new network. Furthermore, once the investment has been 
made,  it  may  act  as  a  catalyst  in  revealing  latent  demand  or  generating  additional  investment. 
These issues are discussed below. 

Demand registration and aggregation 

With first-generation broadband, demand registration schemes were rather like an ‘expression of 
interest’ with no firm commitment. In contrast, the demand registration schemes seen to date for 
next-generation broadband have all involved consumers making a contractual commitment to take 
a service several months before that service becomes available.  

The  aggregation  of  commitment  (and  demand)  from  urban  and  rural  areas  allows  costs  to  be 
shared across both, which can help to ensure a feasible business case for investment in rural areas 
that  would  otherwise  be  impossible  to  achieve.  In  this  case  the  urban  areas  are  effectively 
subsidising the rural, as was the case in the OnsNet project in Nuenen. 

 
Guide to broadband investment | 54 

Demand stimulation 

In order to stimulate the greatest possible increase in demand, a Managing Authority must consider 
two interlinked factors. 

•  Creation of new services requiring broadband. A Managing Authority can create demand 
by producing useful services that people will use, especially where the technology is used to 
achieve goals that would not have been possible over previous networks. A good example of 
this was the creation of alternative customer premises equipment in the Piemonte project, so 
that  elderly  people  could  use  services  without  knowing  how  to  use  a  PC.  While  this  adds 
complexity  to  a  project,  it  should  be  viewed  as  providing  very  useful  additional  value  to  a 
broadband  investment  project.  Furthermore,  a  Managing  Authority  may  have  good  contacts 
with  other  organisations  that  can  assist  in  the  development  of  new  services.  For  example,  a 
public body can work with local universities to develop e-teaching services, or can work with 
local  hospitals  to  develop  e-health  services  (again  as  demonstrated  in  the  Piemonte  project, 
where  the  incumbent  offered  to  upgrade  multiple  exchanges  in  return  for  a  similar  value  of 
service product creation). 

•  Marketing  of  the  uses  of  broadband.  As  well  as  making  services  available,  it  is  also 
essential to advertise them to the local people, to ensure that they are aware of their existence. 
One  of  the  main  points  of  feedback  from  the  OnsNet  (Nuenen)  project,  which  undertook  a 
successful marketing campaign, is that a project should not try to sell its advanced technology 
but rather advertise itself as a service – especially when dealing with elderly members of the 
population. 

In  addition,  demand  stimulation  should  be  timed  so  that  it  coincides  with  an  increase  in  supply, 
whether  from  the  private  sector  or  from  any  form  of  supply  stimulation.  A  Managing  Authority 
should also recognise the impact that a strong community-based dimension can have on a localised 
intervention. Local interest can also be increased through local demand stimulation initiatives; for 
example, the OnsNet (Nuenen) project provided a one-year free period for users who signed up to 
the project. Of course such a promotion will have an inevitable short-term financial impact on the 
project. 

Catalyst effects 

One of the key outcomes from many of the example projects is that the investment project itself 
can act as a catalyst that stimulates demand. This can happen in one of two ways: 

•  A project’s technology or services may inspire latent demand. This is especially true where 
the  initial  demand  has  been  underestimated  due  to  latent  demand  that  only  emerges  once 
people  see  their  friends  and  family  using  the  technology  and  services.  Although  this  could 
mean inspiring demand at the beginning of the project (as in the North Karelia example), it is 
also possible to inspire demand for future projects (as was the case in the Rural Development 
Programme in Sweden). 

 
Guide to broadband investment | 55 

•  Public  infrastructure  development  may  overcome  private  investment  inertia.  As 
discussed  earlier  (see  page 26  above),  a  new  infrastructure  project  can  frequently  act  as  a 
catalyst  in  dispelling  investment  inertia,  helping  to  attract  private  sector  investment  as  the 
project develops. As a result, either the cost of the project to the public can fall or the scope of 
the project can be expanded. Examples of this are provided by the Piemonte project in Italy 
(where  the  incumbent  changed  its  investment  attitude  towards  the  region),  and  the 
Midtsoenderjylland  project  in  Denmark  (where  initial  public  investment  helped  to  stimulate 
the local electricity company into undertaking a large investment). 

 
Guide to broadband investment | 56 

8  What can be done to reduce the cost and manage risks?  

Include measures to reduce costs and 
manage risks

8.1  Introduction 

Deploying broadband infrastructure is an inherently expensive undertaking, and any measures to 
reduce the cost of the deployment can help to make public funds go further, make business cases 
more attractive to private operators, and generally maximise the social and economic impact of the 
investment. 

8.2  Measures to reduce costs 

A  key  source  of  cost  savings  measure  is  the  re-use  of  existing  infrastructure.  For  example,  if 
existing  ducts  can  be  re-used  this  avoids  the  hugely  expensive  activity  of  digging  new  trenches 
when installing fibre infrastructure. Some of the example projects were able to use existing ducts 
to avoid digging new trenches (e.g. the DORSAL and Midtsoenderjylland projects used the duct of 
existing utility providers to deploy new fibre connections). However, in the case of Nuenen, the 
use of existing duct was discounted due to the time and effort it would have required to negotiate 
access.  

In  such  circumstances,  the  Managing  Authority  can  play  a  role  in  facilitating  access  to  ducts, 
especially  if  there  are  other  public  organisations  with  duct  holdings  that  could  be  persuaded  to 
support  the  Authority’s  broad  socio-economic  aims.  For  example,  in  the  STOKAB  example 
project  the  Managing  Authority  sought  to  co-ordinate  its  network  installation  with  other  civil 
works  by  other  utilities.  The  State  aid  guidelines35  recommend  that  if  a  Managing  Authority 
decides to undertake some civil works (such as the construction of new ducts) in order to enable 
and accelerate the deployment of infrastructure by operators, then such civil works should not be 
“industry or sector specific”. In principle, the civil works should be open to all potential users and 
not just electronic communications operators (i.e. also open to electricity, gas and water utilities, 
etc.). 

The Broadband Communication from  DG INFSO36 also includes a number of  other measures to 
reduce the costs of broadband deployment: 

35

36

Community Guidelines for the application of State aid rules in relation to rapid deployment of broadband networks, 
available at http://www.broadband-europe.eu/Pages/DocumentDetail.aspx?ItemID=72 

Broadband Communication from DG INFSO, available at 
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0472:FIN:EN:PDF 

 
 
                                                      
  
  
Guide to broadband investment | 57 

•  Making the installation of new passive infrastructure and in-building wiring a requirement for 

planning authorisations.  

•  Encouraging local authorities and regulators to use their powers to require the disclosure of the 
existence  and  condition  of  local  access  infrastructure  from  operators,  with  the  aim  of 
stimulating  competition.  In  particular,  national  regulators  should  use  their  powers  under 
Directive  2002/21/EC  to  obtain  all  relevant  information  on  the  location,  capacity  and 
availability of ducts and other local loop facilities, to give alternative operators the opportunity 
to  deploy  their  fibre  networks  at  the  same  time  as  incumbents,  and  share  the  costs  of  civil 
engineering works. 

•  Co-ordinating  civil  works  (such  as  digging  and  the  construction  of  ducts)  to  enable  and 

streamline the deployment of network elements. 

•  Provision  of  general  powers  for  the  acquisition  of  rights  of  way  by  streamlining  laws  and 
regulations  concerning  civil  works,  town  planning,  environment,  public  health  and  general 
administration to simplify and accelerate procedures (e.g. for granting rights of way or  mast 
planning), if necessary by establishing a one-stop shop for these purposes. 

•  Planning  authorities  could  also  reduce  the  investment  cost  for  the  roll-out  of  wireless 
broadband, by removing administrative obstacles (e.g. difficulties in obtaining permission for 
new base stations or in renewing contracts for existing ones). 

An  arrangement  whereby  a  Managing  Authority  can  facilitate  discussions  with  planning 
authorities to enable the smooth deployment of the network was observed on the Digital Region 
project  in  South  Yorkshire,  UK.  This  was  also  seen  on  a  more  localised  basis  in  the 
Midtsoenderjylland,  Denmark  project,  whereby  the  co-operative  based  funding  model  facilitated 
access to end users’ property for network deployment. 

8.3  Measures to manage risks 

When designing public broadband investments, careful consideration should be given to potential 
market developments that may lead to the infrastructure being superseded by other technologies. 
For this reason, contracts should be structured so that they can react to significant changes in take-
up,  pricing  or  wholesale  product  requirements.  It  is  also  important  for  a  Managing  Authority  to 
arrange for thorough due diligence to be conducted as part of a project, to ensure that its plan is 
credible and will not be subject to significant delays, cost increases or other potential difficulties. 
A Managing Authority should ensure that it has access to the necessary skills, either internally or 
externally, to design interventions and identify any risks that could emerge in future. 

An example of a project for which planning aimed to reduce costs and manage risks is the RAIN 
project in Lithuania: 

 
Guide to broadband investment | 58 

RAIN, Lithuania 

The following principles were followed in the planning of the network: 

1  Cables only to be laid to areas where no other cables existed, with information on planned routes 

being provided to operators, allowing them to highlight any doubling of lines.  

2  Ensure coverage of 98% of Lithuania and to knowledge centres (schools, libraries, Internet cafes, 

etc.).  

3 

Install  fibre  connection  points  in  all  settlements  the  line  passes,  allowing  future  connections  to 
network 

4  Fibre lines to terminate at locations agreed by the municipalities and the operators 

5  Minimise the total distance of cable, while considering how to avoid natural obstacles (lakes etc.) 

and use protective zones such as those under roads.  

A simultaneous network access project entitled “Creation of a Broadband Data Transmission Network 
in Lazdijai Region and Alytus Region Municipalities” (PDPT) and the infrastructure created during its 
implementation,  were also taken into account  when selecting fibre routes for the RAIN network. The 
towers  built  during  the  implementation  of  the  PDPT  project  were  connected  to  the  RAIN  network.  In 
addition, the remaining unconnected infrastructure assets of other operators as well as establishments 
and organisations throughout the region were also connected to the RAIN network. 

Operators  provided  PEPI37  with  information  about  the  communications  infrastructure  that  they 
managed to aid in planning of the fibre routes. In return, PEPI provides information about planned fibre 
routes  to  any  interested  parties,  with  precise  information  about  planned  lines  (i.e.  with  co-ordinates) 
provided  to  parties  who  enter  into  a  confidentiality  agreement.  Planned  fibre  routes  are  adjusted 
through  working  procedures  upon  receipt  of  operators’  comments  on  their  future  plans,  including 
changes in the use of their infrastructure and other comments.  

37

Public Enterprise Plačiajuostis Internetas (PEPI), a state-founded non-profit public enterprise. 

 
                                                      
  
9  What are the next steps that need to be taken?  

Guide to broadband investment | 59 

Contribute to hitting the DAE targets by 
using EU funds quickly and effectively

Figure 9.1  summarises  the  three  key  activity  flows  that  follow  preparation  and  planning  of  a 
broadband  investment:  EU  funding  application,  procurement  and  delivery,  and  compliance  with 
State aid regulations. 

EU funding
application

Preparation
and
planning

Procurement
design

Procurement
activity

Contract 
award

Broadband
delivery

State aid
compliance application

Figure 9.1: 

Next step activities [Source: Analysys Mason] 

These  three  activity  flows  are  carried  out  broadly  in  parallel.  A  summary  description  of  each 
activity is provided below. 

9.1  EU funding application 

To  complete  an  EU  funding  application,  or  any  other  relevant  funding  application,  a  Managing 
Authority  will  need  to  assess  the  funding  application  guidelines  and  application  form(s),  and 
ideally  check  there  is  a  common  understanding  of  the  funding  application  requirements  through 
meetings  and  dialogue  with  the  funding  body.  For  example,  a  constructive  dialogue  with  the 
European  Commission  services,  when  necessary  and  before  submitting  the  application,  could 
prove useful. 

9.1.1 Preparing the application 

As guidance for preparing funding applications, there are two specific aspects to consider. 

 
 
 
Guide to broadband investment | 60 

•  The  application  form  is  likely  to  require  the  completion  of  relevant,  evidence-based 
quantitative and  qualitative  analysis  such  as  a  cost–benefit  analysis  and  a  socio-economic 
analysis,  to  demonstrate  the  project  will  provide  benefits,  that  project  risks  will  be  managed 
and the project will be sustainable.  

• 

It may be necessary to re-position the aims of the project so that it satisfies the funding 
body’s objectives. For example, a project may be designed such that the outcome is delivery 
of  broadband  to  residential  and  business  premises,  proposed  by bidding  suppliers  to  achieve 
market efficiencies and minimise intervention funding. However, the objectives of the ERDF 
stipulate that only businesses are eligible for funding. In this case, the funding application may 
need  to  demonstrate  how  State  aid  is  designated  for  businesses  only,  even  though  the 
broadband roll-out includes delivery to residential premises. One approach could be to include 
a  contractual  mechanism  that  withholds  release  of  State  aid  funding  to  the  supplier  until 
obligations associated with broadband delivery to businesses have been satisfied.  

9.1.2 Timing of the application 

Activities to prepare funding applications should begin in parallel with the procurement process, 
but  the  actual  funding  application,  along  with  supporting  details  such  as  a  cost–benefit  analysis, 
cannot be fully developed and completed until the details of the solution and costs are available, 
which  is  only  possible  once  the  winning  bidder(s)  have  been  identified  at  the  end  of  the 
procurement process. Only after the funding application has been approved is the Authority in a 
position to award the contract to the winning bidder(s). 

9.1.3 Sources of EU funding 

EU funding is distributed through a range of policies and financial instruments designed to satisfy 
the  various  objectives  of  the  EU.  A  number  of  these  are  applicable  to  broadband  projects,  as 
summarised in Figure 9.2 below. 

Broadband  projects  will  often  be  funded  using  a  variety  of  sources,  and  many  of  the  financial 
instruments below can be used in combination. EU funding can also be combined with national or 
local  sources  of  public  sector  funding,  and  should  also  aim  to  leverage  private  sector  financing 
where possible, as discussed in Section 5. 

The  financial  instruments  summarised  in  Figure 9.2  are  potential  funding  sources  that  were 
available at the time of writing, but this availability is subject to change and up-to-date information 
on EU funding should be sought at the time of application. 

 
Guide to broadband investment | 61 

No.  Name 

Description 

1 

European 
Regional 
Development 
Fund (ERDF) 

2 

European 
Agricultural 
Fund for Rural 
Development 
(EAFRD) 

3 

European Social 
Fund (ESF) 

4 

Joint European 
Support for 
Sustainable 
Investment in 
City Areas 
(JESSICA) 

This fund has been made available by EC to strengthen economic and social 
cohesion in the EU by correcting imbalances between its regions. The ERDF can 
intervene in three objectives of regional policy: 

• 

• 

• 

Convergence – focuses its intervention on modernising and diversifying 

economic structures, and safeguarding and creating sustainable jobs 

Regional competitiveness and employment – prioritises innovation and 
the knowledge-based economy, environment and risk prevention, and access 
to transport and telecoms services 

European territorial co-operation – focuses on development of economic 

and social cross-border activities, establishment and development of trans-
national co-operation, and increasing the efficiency of regional policy through 
inter-regional promotion and co-operation  

ERDF money is used for co-financing of project costs; therefore it should be 
supplemented by other funding sources, which may be from European, national or 
local government, or from the private sector.  

The EAFRD is designed to contribute to improving:  

(cid:131) 

(cid:131) 

(cid:131) 

the competitiveness of agriculture and forestry;  

the environment and the countryside; and  

the quality of life and the management of economic activity in rural areas.  

As  part  of  this  remit,  a  key  objective  is  to  encourage  ICT  development  in  rural 
areas.  EAFRD  money  can  be  used  for  infrastructure  investment,  but  also  in 
development  of  services  and  IT  businesses  in  rural  areas,  demand  stimulation 
measures, and vocational training in ICT. 

EAFRD funding must be supplemented with other funding sources, which may be 
from national or local government, or from the private sector. 

Under the European Economic Recovery Plan, which was endorsed by the 
Council at its meeting on 11-12 December 2008, in total EUR 1.02 billion were 
made available for broadband in rural areas and new challenges as defined under 
the Common Agricultural Policy (CAP). This money was injected in the EAFRD. 
The programming that followed by Member States for injection of these funds into 
their total budgets, led to the provision of EUR 360 million solely for broadband 
investments in rural areas. 

The ESF was set up to reduce differences in prosperity and living standards 
across Member States and regions, and thereby promote economic and social 
cohesion. The ESF is devoted to promoting employment in the EU, and helps 
Member States make Europe’s workforce and companies better equipped to face 
new, global challenges. It contributes to projects that provide training, and helps 
businesses, communities and individuals to make the most of broadband and IT. 

JESSICA is a joint initiative for financing sustainable urban development, operated 
by the EC in co-operation with the European Investment Bank (EIB) and the 
Council of Europe Development Bank (CEB). JESSICA aims to co-ordinate the 
approach of these bodies with the objective of providing financing for urban 
renewal and development actions as well as for social housing, using a 
combination of grants and loans. Under the new procedures, Member States have 
the option of using some of their EU grant funding to make repayable investments 
in projects that form part of an integrated plan for sustainable urban development. 
The investments can be equity, loans and/or guarantees, and are delivered to 
projects via Urban Development Funds and, if necessary, Holding Funds. The 
JESSICA initiative allows Managing Authorities the possibility of providing funding 
for public–private partnership or other urban development projects that are 

 
 
 
 
Guide to broadband investment | 62 

No.  Name 

Description 

capable of repaying in the long term. JESSICA is also expected to attract 
contributions from international financial institutions, banks and the private sector, 
thereby achieving greater leverage from scarce grant resources. 

Figure 9.2: 

EU initiatives and financial instruments applicable to broadband projects [Source: 

Analysys Mason] 

Managing Authorities from Member States in Central and Eastern Europe should note that support 
is  available  to  help  them  apply  for  and  invest  EU  funds.  JASPERS  (Joint  Assistance  to  Support 
Projects  in  European  Regions)  assists  the  12  Central  and  Eastern  EU  Member  States  to  prepare 
applications for grant financing for major projects, under the Structural and Cohesion Funds. 

The  aim  is  to  increase  the  quantity  and  quality  of  projects  that  are  sent  for  approval  to  the  EC. 
JASPERS’ assistance, which is provided free of charge, is geared towards accelerating absorption 
of the available funds38. 

9.2  State aid compliance 

The  key  activities  for  achieving  State  aid  compliance  are  associated  with  justifying  the  need  for 
public intervention. 

9.2.1 The need for State aid compliance 

State aid compliance is not always required. The section below outlines the circumstances under 
which State aid compliance is and is not required. 

No need for an individual State aid notification 

There are four situations under which State aid is not required: 

Project is viable on 
market terms 

If public funding is invested in a broadband project on terms that are in line 
with  the  market  (i.e.  in  line  with  the  market  economy  investor  principle, 
MEIP), there is no need for State aid clearance.  

The following conditions must be met: 

•  The  investment  of  the  Managing  Authority  shall  be  made  under  the 

same terms and conditions as the private investor 

•  The private operator shall have a significant share in the project 
•  The public investment is pursued on the basis of a commercially viable 

business plan. 

If  these  conditions  are  met,  the  Managing  Authority  should  implement  the 

38

See http://www.jaspers-europa-info.org/ for more information. 

 
                                                      
  
Guide to broadband investment | 63 

project in line with the EC’s Amsterdam precedent decision (C53/2006).  

Low level of aid 

If  the  aid  amount  is  very  low  (less  than  EUR200 000),  the  aid  will  most 
likely  fall  under  the  de  minimis  threshold.  However,  discussion  with 
national State aid authorities will be required to confirm this. 

Public only 
network 

The  broadband  project  will  not  constitute  State  aid  if  the  network  to  be 
constructed will only serve the needs of public bodies (like libraries, police, 
cultural centres, etc.), and will not be open for exploitation by commercial 
operators.  

However,  if  spare  capacity  on  the  network  will  be  offered  to  third-party 
operators, State aid clearance will be needed. 

Implementation 
under a national 
framework scheme 

If  the  broadband  project  is  to  be  implemented  under  a  national  framework 
scheme  that  has  already  received  State  aid  clearance,  then  no  separate 
clearance is needed, even though State aid is being used. 

The  Managing  Authority  needs  to  ensure  that  the  project  is  implemented 
according to the conditions of the relevant framework scheme. 

A State aid notification is required  

If none of the above conditions is met, an individual State aid notification will be required to the 
EC. It is advisable for all granting authorities to begin by submitting a State aid pre-notification 
paper. 

9.2.2 Achieving State aid compliance 

A  Managing  Authority  should,  ideally,  prepare  a  State  aid  pre-notification  paper  in  consultation 
with the relevant government department. 

In addition to describing the project objectives and approach in the State aid pre-notification paper 
the Authority will need to gather evidence about the broadband demand and supply situation in the 
localities of interest for the project: 

•  An Authority can prepare evidence of demand for broadband by conducting local surveys and 

referencing other surveys conducted on a larger (e.g. national) scale.  

•  For  the  supply-side  perspective,  an  Authority  will  need  to  prepare  maps  of  current 
infrastructure and a coverage forecast analysis of the likely broadband supply situation for a 
minimum of three years into the future. 

 
Guide to broadband investment | 64 

With  respect  to  detailed  mapping  and  coverage  analysis  for  the  supply  side,  the  State  aid 
guidelines for broadband include the following39: 

Member  States  should  clearly  identify  which  geographic  areas  will  be  covered  by  the 
support  measure  in  question.  By  conducting  in  parallel  an  analysis  of  the  competitive 
conditions and structure prevailing in the given area and consulting with all stakeholders 
affected  by  the  relevant  measure,  Member  States  minimise  distortions  of  competition  with 
existing providers and with those who already have investment plans for the near future and 
enable these investors to plan their activities. A detailed mapping exercise and a thorough 
consultation exercise ensure accordingly not only a high degree of transparency but serve 
also as an essential tool for defining the existence of “white”, “grey” and “black” zones40. 

The results of the mapping must be validated via a public consultation in which the project plans 
are  published  on  a  suitable  webpage.  The  Managing  Authority  must  leave  sufficient  time  (a 
minimum of one month) to allow commercial operators to comment on whether they have credible 
investment plans in the area concerned.  

Mapping of both current infrastructure and future investment in infrastructure provides important 
information  for  the  broadband  investment.  However,  it  should  be  noted  that  the  Managing 
Authority must also map the service requirement of the target area or territory. The requirements 
for the broadband investment will be defined by the gap between:  

•  What  is  currently  available  from  the  commercial  sector  (or  will  become  available  within  a 

short timeframe, currently defined as three years), and 

•  The needs of users seen from a mid-/long-term perspective, taking into account both the need 

to ensure that the investment is future proof and EU and national objectives. 

Beyond the mapping requirement, other inputs used to prepare  the State aid  pre-notification and 
formal  notification  papers  are  derived  from  the  project  design,  the  procurement  requirements 
specifications  and  the  responses  from  bidders  during  the  procurement  process.  In  particular,  the 
requirements  specifications  and  questions  posed  during  the  procurement  should  be  developed  to 
help satisfy the EC’s State aid broadband guidelines.  

When the requirements specification for a broadband project is being developed and refined, the 
Authority must also consult the relevant National Regulatory Authority. This is to ensure that the 
requirements  specifications  and  outcomes  expected  from  the  procurement  process  will  be 
compliant with current regulations and legislation and are aligned, as far as is practically possible, 
with  future  potential  regulation  and  legislation.  The  consultation  can  also  be  useful  for  seeking 

39

40

Community Guidelines for the application of State aid rules in relation to rapid deployment of broadband networks, 
available at http://www.broadband-europe.eu/Pages/DocumentDetail.aspx?ItemID=72 

The EC makes a distinction between areas where no broadband infrastructure exists or is unlikely to be developed 
in the near term (white areas), areas where only one broadband network operator is present (grey areas) and areas 
where at least two or more broadband network providers are present (black areas). 

 
                                                      
  
  
Guide to broadband investment | 65 

views about bidders’ approaches to solutions, and the issues bidders raise that may relate to market 
regulation rather than the project itself. 

9.2.3 Timing of the State aid application 

The  activities  associated  with  achieving  State  aid  compliance  could  begin  and  theoretically  be 
completed  through  to  an  approval  decision  before  the  procurement  process  begins.  In  many 
instances, however, details about the likely solution and the costs of meeting coverage objectives 
may not be clear until suppliers have had the opportunity to propose solutions during, or near the 
end of, a procurement process. Therefore, as a minimum, if State aid approval cannot be achieved 
before  the  procurement  process  begins,  the  State  aid  application  should be  developed  in  parallel 
with  the  procurement  process.  In  previous  State  aid  decisions,  the  final  State  aid  notification 
assessment has not been completed until the details of the technical solution and costs have been 
investigated  thoroughly  by  EC  clarifications  of  the  winning  bidder(s)  proposal  at  the  end  of  the 
procurement process.  

The detailed coverage analysis and mapping, along with an open market consultation, should also 
ideally occur before the procurement process begins, and the Authority should request suppliers to 
continue  providing  updates  to  the  Authority  after  the  initial  consultation  has  ended,  so  that  the 
mapping can be kept up to date. 

9.2.4 Additional recommendations on State aid applications 

We have included below several recommendations from an article41 on best practice in State aid 
applications  for  broadband  projects.  It  should  be  noted  that  although  the  article  was  written  by 
representatives  from  DG  COMP,  the  recommendations  below  are  based  on  private  and  personal 
opinion of the authors and do not represent the official position of the EC. Managing Authorities 
should  continue  to  use  the  Broadband  Guidelines42  or  State  aid  Commission  decisions43  as  a 
reference. 

The recommendations outline the factors which can lead to successful broadband projects and are 
as follows: 

•  A State aid measure is more effective when it is part of a more comprehensive (national) 
broadband strategy, containing not only a vision on how to develop the infrastructures, 
but also a clear action plan on the complementary demand and supply side measures, 
administrative,  regulatory  and  simplification  initiatives  with  the  common  objective  to 
increase broadband penetration and coverage and to support competition. 

41

42

43

Chirico, F. and Gaál, N., State aid to broadband: primer and best practices, EC Directorate-General for Competition, 
unpublished at the time of writing. 

Available at http://www.broadband-europe.eu/Pages/DocumentDetail.aspx?ItemID=72 

Summary available at http://ec.europa.eu/competition/sectors/telecommunications/broadband_decisions.pdf 

 
                                                      
  
  
  
Guide to broadband investment | 66 

•  Full transparency as regards the aid measure together with the active involvement of all 
stakeholders  (commercial  operators,  the  NRA,  local  authorities,  etc.)  in  the  design  of 
the projects is crucial to find the right balance between commercial incentives and the 
public interest. 

•  The  availability  of  adequate  fibre  backhaul  networks  in  each  region  is  a  fundamental 

prerequisite for any broadband development. 

• 

In the vast majority of cases and given the economics of networks, widespread (or even 
universal)  broadband  coverage  can  only  be  achieved  via  the  use  of  a  mix  of 
technologies.  

•  Aid  limited  only  to  passive  infrastructure  elements  could  support  the  NGA  roll-out  of 

several operators. 

•  Public ownership limited to passive infrastructure elements only could be a good way to 
benefit  all  market  operators  in  a  non-discriminatory  way.  At  the  same  time,  the 
distortion  of  competition  arising  from  such  intervention  could  be  limited,  since  public 
companies  do  not  compete  directly  in  the  core  activities  of  the  telecommunication 
operators (wholesale and retail service provision). 

•  To  create  a  competitive  market  for  broadband,  with  lower  prices  and  higher  level  of 
services  for  end  user,  granting  authorities  should  support  crucial  pro-competitive 
features,  in  particular:  full  and  effective  wholesale  access  to  the  subsidised  networks 
and  network  architectures  conducive  to  long  term  competition  (such  as  multiple  fibre 
deployment, point to point infrastructures).  

9.3  Procurement and delivery 

9.3.1 Procurement design 

The  procurement  design  is  shaped  by  a  number  of  factors  and  options  that  should  be  assessed 
methodically and developed into a coherent, agreed procurement strategy. These are summarised 
in Figure 9.3 and Figure 9.4 below and are also influenced by the commercial  model chosen for 
the project (which is discussed in detail in Section 5). The decisions and definitions set out in the 
procurement strategy should enable Managing Authority to create a procurement contract notice if 
OJEU is the selected procurement route. 

Due  to  the  wide  range  of  factors  associated  with  procurement  design,  it  is  likely  that  many 
Authorities  will  need  specialist  procurement  and  technical  support  to  ensure  the  procurement  is 
appropriately designed to satisfy their objectives, and complies with procurement legislation and 
State aid guidelines.  

 
Guide to broadband investment | 67 

Area of interest 

Options 

Procurement route: 
There are risks that some of the listed 
options would not satisfy the State aid 
guidelines for an Open Tender Process 

•  Single source (framework or existing contract options) 

•  Competitive open tender (e.g. on Authority website) 

•  Private tender (e.g. only to invited suppliers) 

•  Mini-competition using a framework contract 

•  OJEU procedures – further explored in Figure 9.4 

Contractual structure 

(Depends on governance and legal 
structure between parties, scope of 
requirements and operational 
considerations) 

•  Single contract 

•  Multiple contracts 

•  Framework contract 

• 

Interfaces / relationships / contracts between parties 

Operational models 

•  Contractual responsibility for management of supplier 

Beneficiaries 

Form of contract 

(The contract needs to satisfy the State aid 
guidelines (e.g. by including a reverse 
payment mechanism)) 

• 

Infrastructure management – with the public sector or 
part of the supplier’s obligations 

Define the scope of the expected beneficiaries in terms of 
who receives funding and services 

•  Funding body 

•  Bespoke 

•  Authority’s own 

•  Standards or procurement body 

•  Hybrid of the above 

Contract term 

•  Number of years – minimum State aid requirement is 

Specification 

Technology 

(State aid requires the principle of 
technology neutrality to be applied, but the 
specifications should aim to satisfy the 
State aid guidelines) 

seven years 

•  Extension options 

•  Termination flexibility 

•  Technical  

•  Services 

•  Outcome based 

•  Hybrids of above 

Specify: 

•  Supplier choice 

•  Refresh options 

•  Hybrid of above 

Suppliers / market segments 

•  Network operators 

(Market is not segmented ‘cleanly’, so it is 
sensible to name likely suppliers to get a 
feel for likely match-up. A list of probable 
suppliers influences the choice of 
procurement route) 

•  Network service providers (use network operator 

infrastructure)  

•  Systems integrators 

•  Equipment vendors 

•  Others, including consortia 

Figure 9.3: 

Factors relevant to the design of a procurement [Source: Analysys Mason] 

 
Guide to broadband investment | 68 

OJEU procedure options 

Considerations 

Open (no pre-qualification) 
or 
Restricted (pre-qualification) 

•  Certainty of requirements 

•  No dialogue after OJEU notice issue 

•  No negotiation throughout the process, only clarification 

•  Ability to recourse to negotiated process 

• 

‘Open’ has no ability to pre-qualify so number of tender 
responses is unlimited 

Competitive Dialogue 

•  Uncertainty of requirements or high degree of complexity 

(must justify why the option is chosen) 

•  Pre-qualification to select appropriate bidders 

•  Ability to discuss requirements (dialogue) against 

potential supplier solutions pre-Tender 

•  No recourse to negotiated process 

•  No negotiation following submission of Tender, only 

clarification provided this does not distort competition 

•  Recommended route ahead of ‘negotiated’ 

Negotiated 

•  Uncertainty of requirements or high degree of complexity 

•  Pre-qualification to select appropriate bidders 

•  No ability to discuss requirements against potential 

supplier solutions pre-Tender 

•  Ability to negotiate post-Tender 

Figure 9.4: 

Considerations relevant to selection of procurement procedure [Source: Analysys Mason] 

Two of the most important aspects of procurement design include designing wholesale obligations 
and using lots. These aspects are discussed in more detail below. 

Designing wholesale obligations in broadband procurement 

Wholesale obligations will need to be detailed in the requirements specification document used in 
the procurement. Through consultation with the NRA, requirements should be specified so they do 
not  contradict  the  wholesale  obligations  stipulated  by  the  NRA,  and  assurances  should  also  be 
sought regarding future wholesale obligations that the NRA might advise of. New networks should 
be  operated  on  a  transparent  and  non-discriminatory  basis  to  allow  for  fair  competition  between 
retail service providers and wholesale access should be provided at both the passive infrastructure 
and active levels.  

It may be justifiable to allow a single provider to operate the passive layer in certain localities (e.g. 
areas  of  low  population  density  where  costs  are  excessive)  in  order  to  increase  the  revenue 
opportunity for bidders and hence maximise levels of private investment. However, if wholesale 
access  is  not  provided  at  the  passive  layer,  bidders  must  be  required  to  explain  how  sufficient 
competition  will  be  delivered  at  different  active  levels,  and  potentially  the  supplier  should  be 
obliged to comply with wholesale access at the passive level at a later date. If multiple wholesale 
models are being considered, the procurement should be designed in such a way as to include an 
assessment  of  actual  cost  impact  and  effect  on  competition  of  multiple  models  before  the  final 
tender.  

 
Guide to broadband investment | 69 

Bidders responsible for wholesale provision should be asked to explain how they will attract take-
up of services by retail service providers and ultimately take-up by end users; this could include 
details  of  the  proposed  service  propositions  and  pricing,  and  an  explanation  of  the  expected 
penetration  rate.  The  contract  could  include  take-up  targets  that  should  be  delivered  during  the 
contract, potentially with appropriate penalty and reward mechanisms linked to achieving the take-
up targets. 

Using lots in broadband procurement 

The  scope  of  procurement  for  a  broadband  intervention  project  could  be  split  into  multiple  lots. 
The method of determining how to choose lots will depend on the project situation and objectives, 
and  an  assessment  of  the  advantages  and  disadvantages  of  creating  multiple  lots  should  be 
undertaken.  Procurement  with  multiple  lots  would  typically  be  based  on  dividing  infrastructure 
requirements or geography, but it could be a combination of both of these aspects of the project, as 
appropriate.  However,  any  decision  to  use  multiple  lots  should  consider  the  following 
implications: 

•  The attractiveness of  multiple lots to different suppliers (e.g. smaller lots  may allow smaller 

bidders to apply and increase bid competition) 

•  Risks may be introduced by dividing up delivery responsibility 

•  The level of management required for multiple contracts and suppliers may be higher than a 

single lot 

•  Multiple lots may bring a decrease in economies of scale and/or increase in costs compared to 

doing a procurement using a single lot. 

Using  network  requirements  as  one  example,  the  civil  works  and  broadband  network 
implementation could be divided to create two lots. This would allow bidders to tender for a single 
lot (such as the requirements for civil works) or for both lots, according to their capabilities. In this 
example it might increase the likelihood of a bid from companies specialising in civil works.  

Alternatively, the lots could divide up the backhaul and access networks (outlined in Section 4). In 
general it is advisable to invest in the backhaul network first and then monitor the reaction of the 
market  to  see  whether  this  initial  investment  encourages  investment  in  the  access  network  to 
provide  services.  If  this  does  not  happen  within  a  reasonable  time  then  a  second  wave  of 
procurement on selected areas will be required to provide the access network.  

In some cases, the mapping exercise may already have identified those areas where the market will 
not  invest  to  provide  the  access  network  (as  discussed  in  Section 9.2.2).  In  these  situations,  the 
procurement  for  both  the  backhaul  and  access  networks  may  take  place  at  the  same  time,  but  it 
would still be advisable to split these portions of the network into different lots to allow for greater 
technological neutrality. 

 
Guide to broadband investment | 70 

Using  geography  as  another  example,  multiple  lots  could  be  created  based  on  local  authority 
boundaries, or based on different categories of geography, e.g. a  lot for rural  areas and  a lot for 
extremely  remote  areas.  Dividing  the  procurement  into  multiple  lots  may  also  be  helpful  if  the 
different areas being targeted are small and isolated, and geographically separated from each other. 
Having  lots  defined  by  small  geographical  areas  might  encourage  smaller  companies  to  bid, 
however  this  should  be  balanced  against  the  loss  of  economies-of-scale,  and  the  greater 
complication in managing delivery.  

If  procurement  is  split  into  lots  that  result  in  a  number  of  small  networks  being  deployed  by 
different  suppliers,  it  may  be  appropriate  to  consider  aggregating  service  delivery  using  one 
market-facing  wholesale  operator.  Having  one  wholesale  market-facing  entity  serving  all  retail 
service providers should make it easier for retail service providers to offer services over all of the 
small networks and benefit from the combined scale. 

9.3.2 Procurement activity 

Procurement activity covers a range of sub-activities, some of which are dependent on the chosen 
procurement route. A summary of the main activities is included in Figure 9.5, assuming use of the 
OJEU  Competitive  Dialogue  procedure  (which  is  a  likely  procurement  route).  The  activities 
described  are  based  on  practical  experience  and  provide  general  guidance;  however,  it  is 
recommended  that  a  Managing  Authority  seeks  up-to-date  specialist  internal,  or  external,  legal 
advice, given the dynamic nature of procurement legislation and case law. 

Step  Procurement activity 

Sub-activities 

1 

Market awareness 

Preparation of project materials to encourage private sector 
participation in the procurement process, e.g.: 

2 

Pre-qualification questionnaire 
(PQQ) 

• 

supplier day(s) 

•  OJEU Prior Information Notice 

• 

proof of concept workshop(s). 

Preparation of a detailed questionnaire to pre-qualify, or select, a 
limited number of suppliers that demonstrate they should have the 
capability and capacity to meet the project’s objectives.  

Detailed evaluation criteria need to be set out in the PQQ and the 
method of selection defined. 

Evaluation of supplier responses to the PQQ needs to be 
conducted by appropriately qualified resources. Selected and non-
selected suppliers should be given an evaluation de-brief explaining 
the outcome of the selection process and the results of their 
individual evaluation.  

 
Guide to broadband investment | 71 

Step  Procurement activity 

Sub-activities 

3 

Invitation to participate in 
dialogue (ITPD) including 
initial requirements 
specification, draft contract 
and evaluation criteria 

4 

Dialogue process 

5 

Invitation to submit final bid 
(ITSFB) / invitation to tender 
(ITT) including final 
requirements specification, 
evaluation criteria and 
contract 

Preparation of a document set as the basis for inviting the selected 
suppliers from the previous pre-qualification stage to participate in 
dialogue. The ITPD will comprise a set of instructions that explain 
the dialogue process in detail and outline expectations of the 
suppliers as bidders, a requirements specification, a draft contract, 
and the evaluation criteria for determining the winning bidder using 
the principle of the ‘Most Economically Advantageous Tender’.  

Typically, an ITPD will request outline proposals from bidders and a 
shortlisting of bidders may take place by conducting an evaluation 
of outline proposals. All suppliers should be given a de-brief of the 
evaluation. 

The dialogue process usually consists of a series of formal 
meetings, and accompanying written clarifications, between the 
Managing Authority and each bidder. The purpose of the meetings 
is to explore proposed broadband solutions and for the Authority to 
refine the requirements specification and contract terms that will be 
used in the invitation to submit final bid (ITSFB) or invitation to 
tender (ITT). 

During the dialogue a further shortlisting of bidders may take place. 

The dialogue process should also include consultation with the 
NRA to ensure requirements are appropriate, particularly in terms 
of wholesale access obligations (as discussed in Section 9.2.1). 

Preparation of the ITSFB or ITT that invites bidders to submit their 
final proposal, comprising a set of instructions for bidding, the final 
requirements specification, the final contract, and the final 
evaluation criteria for determining the winning bidder using the 
principle of the Most Economically Advantageous Tender. 

The evaluation of bidder responses to the ITSFB or ITT will identify 
the winning bidder that will be awarded a contract, subject to State 
aid approval and confirmation of funding.  

All bidders should be given a debrief of the evaluation. 

6 

Standstill period and contract 
award 

See Section 9.3.3 below. 

Figure 9.5: 

Main procurement activities [Source: Analysys Mason] 

9.3.3 Contract award 

After completing the main activities in the procurement process, as outlined in Section 9.3.2, the 
Managing  Authority  may  award  the  contract  to  the  winning  bidder,  provided  that  the  key 
dependencies of State aid approval and funding confirmation have been achieved and any final bid 
clarifications have been resolved. When the Authority is ready to sign the contract it must initiate a 
formal standstill period by notifying all suppliers that submitted a PQQ response of the Authority’s 
intention to award the contract to the winning bidder. Providing no complaints are received during 
the standstill period, the Authority may sign the contract. 

 
Guide to broadband investment | 72 

9.3.4 Broadband delivery 

The  broadband  delivery  stage  is  a  complex  undertaking  and  presents  the  contracting  Authority 
with  a  variety  of  challenges.  Many  of  the  issues  presented  during  delivery  should  be  typical  of 
those  routinely  faced  by  a  supplier  when  rolling  out  broadband  services,  whose  financial 
motivators  (such  as  cashflow  and  profit  targets)  will  themselves  act  as  a  self-controlling  / 
motivational function. Nevertheless, many areas will require close monitoring and management (as 
discussed in Section 6), as even experienced suppliers may be delivering completely new network 
infrastructure and services. 

Key issues that should be addressed include: 

•  Establishing  that  coverage  and  any  agreed  technology  mix  satisfies  contractual  obligations, 
using  robust  technical  definitions  for  coverage  and  technology  compliance,  including 
assessment of potential coverage overspill 

•  Checking that supplier’s costs and take-up revenues are in line with its proposed business plan 
and,  if  necessary,  ensuring  mitigation  plans  are  put  in  place  to  keep  the  business  plan 
sustainable 

•  Analysing  network  performance  and  ensuring  that  network  improvements  are  initiated  if 

performance is below contractual targets 

•  Using benchmark data to confirm tariffs are consistent, remain competitive in the market and 

do not distort the market 

•  Validating  that  proposed  changes  by  the  supplier  are  technically  and  commercially  justified, 

potentially using independent expert advice 

•  Ensuring that data provided by the supplier is timely and accurate and allows for appropriate 

payment of State aid at agreed milestones. 

 
Guide to broadband investment | 73 

10  Further work by the EC 

In this section we describe two areas of further work for the EC following initial publication of this 
guide: keeping the guide up to date (Section 10.1) and carrying out other actions that arise from 
the broader feedback gathered through development of the guide (Section 10.2). 

10.1 Keeping the guide up to date 

This  guide  has  been  developed  by  examining  12  example  projects  in  detail,  and  the 
recommendations and insights are derived primarily from this evidence base. Additional guidance 
on  the  implementation  of  each  of  the  models  will  be  developed  by  the  European  Broadband 
Portal44.  

Over  time,  however,  the  guidance  material  will  need  to  be  updated  under  the  following 
circumstances: 

•  As  new  projects  are  successfully  implemented,  these  should  be  included  to  broaden  the 
evidence  base  of  best-practice  examples.  In  particular,  any  examples  of  a  successful  joint 
venture investment should be included in future versions of the guide. 

•  As the recommendations in the guide are implemented, feedback from stakeholders may mean 
that  some  recommendations  in  the  document  should  be  strengthened,  while  others  are  given 
lower prominence. 

10.2 Other actions from broader feedback 

Through the various feedback mechanisms used to influence the content of the guide (including an 
online consultation and a workshop at the Digital Agenda Assembly), we have received feedback 
on a number of issues. Suggested actions that could be taken in response to this feedback are given 
below. 

44

See: http://www.broadband-europe.eu/Pages/Home.aspx  

 
                                                      
   
Guide to broadband investment | 74 

Removing barriers 
to acquiring 
funding 

We received feedback that raising finance for projects has been identified as 
a key concern, and there is uncertainty regarding the process for accessing 
EU funds. 

The  on-going  consultation  on  the  revision  of  the  State  aid  guidelines  on 
public  funding  to  broadband  networks  is  welcome,  but  the  EC  should 
undertake the following additional actions: 

•  Co-ordinate  and  channel  funding  applications  from  several  small 
projects  to  allow  the  applicants  to  gain  scale  and  reduce  the  overhead 
associated with their individual application  

•  Set  up  clear  points  of  contact  to  provide  guidance  and  support  in 

accessing finance, including EU funds. 

Clarification of the 
DAE aims 

The  EC  should  provide  more  guidance  as  to  what  the  30Mbit/s  target 
actually means (i.e. whether this figure is a peak speed or an assured speed), 
as this can have a significant impact on the requirements for (and costs of) 
broadband networks. 

Further stimulation 
of demand 

The  focus  of  this  guide  is  on  funding  models  to  deploy  infrastructure.  We 
received a lot of feedback that demand for services is an essential ingredient 
in  the  deployment  of  infrastructure,  as  it  ensures  that  funds  are  requested 
and commercial partners are sought. 

We  have  included  guidance  in  this  document  on  stimulating  demand,  and 
the  EC  should  explore  a  complementary  initiative  to  promote  the  value  of 
the services that run over broadband infrastructure, rather than the value of 
the infrastructure itself. Those services could include: 

•  Private  sector  services  (e.g.  triple  play,  banking,  retail  and  other 

e-commerce) 

•  Public  sector  services  (e.g.  education,  health,  local  and  national 

services). 

Supporting 
standardisation 

Standardisation  of  technology  is  essential  in  achieving  economies  of  scale 
and so reducing costs and lowering prices that consumers will pay. 

Technology  standardisation 
in  small-scale 
is  especially 
deployments, as the use of non-standard technologies would create a barrier 
to  large-scale  operators  offering  services  and  reduce  the  prospects  for 
competition. 

important 

 
Annex A  Glossary of terms 

Guide to broadband investment  |  A–1 

Access network 

The portion of a telecoms network between the central office (also known as 
a local exchange) and the end-user premises 

Active 

ADSL 

ADSL2 

ARCEP 

Backbone 

Backhaul 

The  portion  of  the  infrastructure  which  includes  active  electronics  (as 
opposed to passive infrastructure such as fibre and underground ducts)  

Asymmetrical Digital Subscriber Line 

Asymmetrical Digital Subscriber Line 2 (ITU-T G.992.3 and G.992.4)  

Autorité  de  Régulation  des  Communications  Électroniques  et  des  Postes 
(French telecoms regulator) 

The  portion of  the  telecoms  network  that  links  towns  and  cities  across  the 
country (also known as the core network) 

The portion of the telecoms network that connects the central office (local 
exchange) to the core/backbone network. Also used to refer to any portion 
of the network that connects into the centre of the network 

Bitstream 

A method of infrastructure access whereby an operator connects via active 
electronics 

Broadband 

Network or circuit capacity of 256kbit/s or more 

BST 

BT 

Cabinet 

British Summer Time  

British Telecom  

A piece of passive infrastructure that houses active electronics close to the 
end-user premises 

Cloud computing 

The concept of accessing data and applications from remote servers via the 
Internet, rather than from local storage 

Core network 

The  portion of  the  telecoms  network  that  links  towns  and  cities  across  the 
country (also known as the backbone network) 

CSI 

Organisation  that  operates  the  public  administrative  ICT  systems  in 
Piemonte, Italy 

 
Guide to broadband investment | A–2 

DAE 

Digital Agenda for Europe 

Dark fibre 

Fibre-optic cable which has not yet been connected to active electronics and 
carries no data  

DBO 

Design, Build and Operate (an investment model) 

Digital divide 

A socio-economic effect whereby one area of a country (usually rural areas) 
falls behind another area  (usually urban areas) in the availability of digital 
services such as broadband 

DSL 

Digital Subscriber Line 

DSLAM 

Digital Subscriber Line Access Multiplexer  

DSP 

Duct 

EC 

ERDF 

Délégation  de  Service  Public  (a  model  set  by  French  law  under  which  a 
private  actor  is  granted  the  opportunity  to  manage  public  services  by  a 
public body) 

An underground tube used to house telecoms cabling (including copper and 
fibre-optic cable 

European Commission 

European Regional Development Fund 

Ethernet 

A widely used networking protocol  

EU 

EUR 

Exchange 

Fibre 

FTTB 

FTTC 

FTTH 

GDP 

European Union 

Euros 

A  network  node  that  serves  anywhere  between  about  2000  to  20 000  lines 
(also called a central office) 

A type of cable whereby information is transmitted as light waves through a 
thin filament of glass  

Fibre To The Building 

Fibre To The Cabinet 

Fibre To The Home 

Gross Domestic Product 

GPON 

Gigabit Passive Optical Network 

 
Guide to broadband investment | A–3 

GVA 

ICT 

ID 

Incumbent 

Gross Value Added 

Information and Communication Technology 

Identification 

The  telecoms  operator  in  each  country  that  is  or  used  to  be  owned  by  the 
government. Passive infrastructure such as ducts and copper cable is usually 
owned by the incumbent. 

ISP 

JV 

Internet Service Provider 

Joint Venture (an investment model)  

Last-mile 

Another name for the access network 

LLU 

Local Loop Unbundling 

Managing 
Authority 

Meshed 

MoU 

MPLS 

MTC 

A  public  authority  with  responsibility  for  supporting  the  deployment  of 
broadband networks with respect to EU Structural and Rural Development 
funds.  In  the  context  of  this  guide,  Managing  Authority  also  refers  to  an 
agency  (e.g.  an  intermediate  body  such  as  a  regional/rural  development 
agency) delegated to provide public support to these networks 

A  network  configuration where  each  node  must  be  able  to  act  as  relay  for 
data from any other node, in addition to its own 

Memorandum of Understanding 

Multi-Protocol Label Switching 

Ministry of Transport and Communications (Lithuania) 

Narrowband 

Network or circuit capacity of less than 256kbit/s 

NBS 

NGA 

NGN 

Node 

NRA 

OLO 

National Broadband Strategy 

Next-Generation Access 

Next-Generation Network 

A  point  of  aggregation  in  a  telecoms  network,  whereby  data  from  several 
users is collated to be sent through the network 

National Regulatory Authority 

Other Licensed Operator 

 
Guide to broadband investment | A–4 

Outsourcing 

A  business  model  whereby  a  third  party  is  contracted  to  undertake  a 
business process or service (e.g. building and operating a network) 

Overlay 

P2P 

Passive 

PC 

PDPT 

The  concept  of  deploying  new  broadband  infrastructure  without  removing 
the existing infrastructure  

Point to Point  

Referring  to  the  portion  of  the  infrastructure  which  includes  passive 
infrastructure,  e.g.  fibre  and  underground  ducts  (as  opposed  to  active 
electronics)  

Personal Computer 

A  project  in  Lithuania  for  the  creation  of  a  broadband  data  transmission 
network in the Lazdijai region and the municipalities of Alytus region 

Penetration 

The amount of take-up of a service within an area 

PEPI 

POP 

PPP 

PTS 

RDA 

RFP 

RFS 

Ring 

SaaS 

SEK 

SME 

SMP 

Public  Enterprise  Plačiajuostis  Internetas  (a  not-for-profit  public  enterprise 
established  in  Lithuania  to  implement  the  RAIN  project  and  manage  the 
new infrastructure) 

Point of Presence 

Public–Private Partnership (an investment model) 

Post-och Telestyrelsen (Swedish postal and telecoms regulator) 

Regional Development Agency 

Request for Proposals 

Ready For Service 

A  network  topology  which  provides  redundancy  whereby  all  nodes  are 
connected  on  ring.  If  a  section  is  cut  or  damages,  the  other  portion  of  the 
ring can continue to provide services 

Software as a Service 

Swedish Krone 

Small and Medium-sized Enterprise 

Significant Market Power 

 
SPV 

Switch 

Telco 

TI 

TPST 

Guide to broadband investment | A–5 

Special-Purpose Vehicle 

A portion of telecoms network equipment that directs traffic from one point 
to another  

Telecoms operator 

Telecom Italia 

Très  Petit  Site  Technique  (‘a  very  little  technical  site’,  between  the  Main 
Distribution Frames and the end users) 

Triple-play 

A broadband service proposition which includes TV, Internet and voice 

TV 

UK 

USA 

USD 

USO 

Television 

United Kingdom 

United States of America 

US Dollars 

Universal Service Obligation 

WDM 

Wavelength Division Multiplexing 

WiMAX 

Worldwide Interoperability for Microwave Access 

Wireless 

Wireline 

Any  telecoms  connection  that  is  made  using  radio  waves  (e.g.  mobile 
technologies, satellite)  

Any  telecoms  connection  that  is  made  with  a  cable,  e.g.  copper  or  optical 
fibre 

 
 
Guide to broadband investment  |  B–1 

Annex B  Bibliographic and other references 

B.1 

Bibliographic references 

B.1.1 European Commission publications 

Community strategic guidelines on cohesion, EU Council Decision, 6 October 2006, available at 
http://ec.europa.eu/regional_policy/sources/docoffic/2007/osc/l_29120061021en00110032.pdf 

Cohesion policy: Strategic report 2010 on the implementation of the programmes 2007–2013, DG 
REGIO, available at http://ec.europa.eu/regional_policy/policy/reporting/cs_reports_en.htm 

EC Communication on Regional Policy contributing to smart growth in Europe 2020, 
DG REGIO, available at 
http://ec.europa.eu/regional_policy/sources/docoffic/official/communic/smart_growth/comm2010_
553_en.pdf 

Document accompanying the Commission Communication on Regional Policy contributing to 
smart growth in Europe 2020, DG REGIO, available at 
http://ec.europa.eu/regional_policy/sources/docoffic/official/communic/smart_growth/annex_com
m2010_553.pdf 

EC  Communication  on  A  Digital  Agenda 
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0245:FIN:EN:PDF 

for  Europe, 

available 

at  http://eur-

EC Communication on European Broadband: investing in digitally driven growth, available at 
http://ec.europa.eu/information_society/activities/broadband/docs/bb_communication.pdf 

Policy actions aimed at the achievement of the EU targets for broadband networks, available at 
http://ec.europa.eu/information_society/newsroom/cf/pillar.cfm?pillar_id=46&pillar=Very%20Fas
t%20Internet 

Community  Guidelines  for  the  application  of  State  aid  rules  in  relation  to  rapid  deployment  of 
broadband  networks,  Communication  from  the  European  Commission,  available  at  http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:235:0007:0025:EN:PDF 

Chirico,  F.  and  Gaál,  N.,  State  aid  to  broadband:  primer  and  best  practices,  EC  Directorate-
General for Competition, unpublished at the time of writing  

Summary  of  European  Commission  decisions  on  State  aid  to  broadband,  available  at 
http://ec.europa.eu/competition/sectors/telecommunications/broadband_decisions.pdf 

 
Guide to broadband investment | B–2 

B.1.2 Publications from other sources 

Models for efficient and effective public-sector interventions in next-generation broadband access 
networks, Analysys Mason report for the Broadband Stakeholder Group, 9 June 2008, available at 
http://www.broadbanduk.org/component/option,com_docman/task,doc_view/gid,1008/Itemid,63/ 

Guide to Regional Broadband Development, 1st edition, eris@, available at 
http://www.broadband-
europe.eu/Lists/Competences/Guide%20to%20regional%20broadband%20development%20-
%201st%20edition.pdf 

Check List of Actions for Public Authorities Considering Broadband Interventions in Under-
served Territories, 1 April 2009, European Broadband Portal, available at http://www.broadband-
europe.eu/Pages/checklist.aspx 

FTTH Business Guide, 2nd edition, 12 January 2011, FTTH Council Europe, available at 
http://www.ftthcouncil.eu/documents/Reports/FTTH-Business-Guide-2011-2ndE.pdf 

Qiang, C. Z. and Rossotto, C. M., Economic Impacts of Broadband, Information and 
Communications for Development: Extending Reach and Increasing Impact, World Bank 
(Washington, DC, 2009), pp. 35–50 

“The Broadband Bonus: Accounting for Broadband Internet’s Impact on US GDP”, Greenstein, S. 
& McDevitt, R., 2009, NBER Working Paper 14758 

The costs of deploying fibre-based next generation broadband infrastructure, Analysys Mason 
report for the Broadband Stakeholder Group, 8 September 2008, available at 
http://www.broadbanduk.org/component/option,com_docman/task,doc_details/gid,1036/ 

The costs and capabilities of wireless and satellite technologies – 2016 snapshot, Analysys Mason 
report for the Broadband Stakeholder Group, 26 October 2010, available at 
http://www.broadbanduk.org/component/option,com_docman/task,doc_view/gid,1246/Itemid,63/ 

Sadowski, B., Matzat, U. and Kwaaitaal, J., Towards an integral vision on broadband in 
Eindhoven (2008) 

B.2 

Websites 

The European broadband Portal, http://www.broadband-europe.eu/Pages/Home.aspx 

EU regional policy, http://ec.europa.eu/regional_policy/index_en.cfm 

EU information society and media policy, 
http://ec.europa.eu/dgs/information_society/index_en.htm 

EU competition policy, http://ec.europa.eu/competition/index_en.html 

 
Guide to broadband investment | B–3 

Digital Agenda Assembly, http://ec.europa.eu/information_society/digital-
agenda/daa/index_en.htm  

European Investment Bank products and services, http://www.eib.org/products/index.htm 

Joint Assistance to Support Projects in European Regions (JASPERS), http://www.jaspers-europa-
info.org/ 

Digital Agenda for Europe: key publications, http://ec.europa.eu/information_society/digital-
agenda/publications/index_en.htm 

B.3 

Other sources of information 

Feedback from the eris@ annual conference regarding a range of possible proposed financial 
models for broadband investment, held in Krakow from 12 to 14 April 2011 

Blogosphere consultation co-ordinated by eris@ between 1 May and 3 June 2011 

Feedback from the first Digital Agenda Assembly held in Brussels on 16 and 17 June 2011 

 
Annex C  Aims and results of example projects 

Guide to broadband investment  |  C–1 

This  annex  includes  extracts  from  interviews  with  example  project  stakeholders,  which  describe 
the aims and results of example projects. 

OnsNet, Nuenen, Netherlands 

Aims:  The  initial  aims  of  the  investment  stemmed  from  a  local  housing  company’s  wish  to  install  e-
health  style  services,  including  video  communications,  in  new-build  homes  for  the  elderly  and 
disabled. The prices quoted by the incumbent for the services, however, were prohibitively expensive, 
leading  to  considerations  of  creating  its  own  network.  Also,  the  area  had  previously  had  ADSL  and 
cable  service  available:  the  maximum  speed  was  estimated  to  have  been  less  than  10Mbit/s,  and 
connections were viewed as expensive and with poor quality of service.  

The key aim behind the funding given by the Ministry of Affairs was to achieve economic development 
as well as acting as a test of different technology and practices. 

Results:  The  project  is  seen  as  a  major  success,  with  take-up  of  85%  in  Nuenen  and  churn  being 
almost non-existent. While there was no formal measure of increased gross value added (GVA), there 
was anecdotal evidence of increased entrepreneurship and a growing number of knowledge workers 
and high-tech industry entering the region due to the high level of connectivity.  

Recent  research45  has  been  undertaken  showing  how  the  project  has  helped  aid  social  cohesion 
among members of the co-operative. 

Rural Development Programme, Sweden 

Aims: This project fits into the aims of both Sweden’s Rural Development Programme, as well as its 
National  Broadband  Strategy  (NBS).  The  main  objective  of  both  of  these  programmes  is  to  promote 
entrepreneurship, employment and help sustain Sweden’s sparse rural population (with as few as two 
people per km2 in some areas). Also broadband is seen as a basic service that all people should have 
access to. 

Before the Rural Development Programme there was no real broadband investment in Sweden’s rural 
areas,  and  although  most  areas  had  DSL  quality  was  seen  as  a  major  issue.  There  was  no  market 
interest in the areas covered by the scheme, due both to lack of demand as well as the high cost of 
infrastructure given the terrain covered.  

Results: Overall the project is seen as a success, with the number of applications for the grant money 
being  much  higher  than  anticipated.  Following  the  project  the  government  has  redistributed  an 
additional  EUR15  million  from  the  county  administrative  boards  towards  broadband  projects.  The 
counties have also applied to the government for more funding to try to meet the significant unfulfilled 
demand. 

45

Sadowski, B., Matzat, U. and Kwaaitaal, J., Towards an integral vision on broadband in Eindhoven (2008). 

 
 
 
                                                      
  
Guide to broadband investment | C–2 

DORSAL, France 

Aims:  The  aims  of  the  investment  were  to  tackle  a  market  failure.  Limousin  (the  second  most  rural 
region in France) was considered unattractive for telecoms services operators, and it was difficult for 
the region’s only operator, France Telecom, to justify further investment. Prior to the deployment of the 
DORSAL network, prices in the region’s main cities (e.g. Limoges) were much higher than in cities like 
Paris  and  Lyon,  and  services  could  only  be  provided  to  around  30%  of  end  users.  Also,  certain 
enterprises  were  threatening  to  leave  their  local  premises  and  move  to  another  region,  where 
telecoms services would be cheaper and have higher quality. 

Results: Since the launch of the network, prices have fallen significantly (equivalent to levels in Paris), 
while  quality  has  improved  dramatically.  Customers  are  now  able  to  choose  from  a  variety  of 
operators.  Individual  end  users  now  have  access  to  triple-play  services,  and  those  who  cannot  be 
reached by ADSL can rely on WiMAX or satellite connectivity.  

The  investment  had  a  positive  impact  on  the  local  economy  and  job  creation,  as  local  telecoms 
operators have started offering retail services. Some local operators have expanded to other regions, 
while operators from other regions have also launched in Limousin. 

Piemonte, Italy 

Aims:  The  main  aim  of  the  investment  was  to  increase  broadband  utilisation  and  availability 
throughout  the  region  of  Piemonte.  In  2003/4,  low  broadband  penetration  was  seen  as  a  major 
problem  with  only  30%  of  the  territory  covered,  equivalent  to  around  80%  of  the  population.  The 
incumbent  had  no  commercial  interest  in  the  area,  due  to  the  mountainous  and  rural  nature  of  the 
region. 

Results:  There  is  now  60%  Internet  penetration  with  only  2%  of  the  population  using  narrowband 
services. The fact that 40% of the population is not using the Internet is attributed to the large elderly 
population, a fact which has led to the development of ‘black-box solutions’, especially for areas such 
as e-health, so that end users do not need to interact with PCs.  

The project was seen as successful in working as a catalyst for investment by the incumbent, causing 
it to upgrade  many of the  exchanges. The Internet  network is currently  used by  a range  of vendors, 
telecoms operators and public organisations. The project was successful in involving the private sector 
early in the process, and so is viewed as helping the market rather than fighting it. 

Midtsoenderjylland, Denmark 

Aims: The goals of this investment were to create a ‘networked community’, to support public sector 
ICT  services  and  start  momentum  behind  the  vision  of  ‘fibre  to  all’.  FTTH  is  seen  as  an  important 
piece of infrastructure for economic and social development. Smaller towns had basic cable services, 
but most rural areas had almost no connectivity, and received only two airborne TV channels46. The 
municipalities  asked  the  incumbent  to  consider  deploying  FTTH  to  rural  areas  of  the  region,  but  the 
incumbent concluded that there was no business case.  

46

Note: The most important driver for the investment was the very slow connections or lack of Internet access. There 
was  no  access  to  cable  TV  in  rural  areas,  but  the  two  airborne  TV  channels  could  be  supplemented  by  satellite-
based channels. 

 
 
 
                                                      
  
Guide to broadband investment | C–3 

Results:  In  2002,  90%  of  the  population  had  access  to  broadband  via  copper  but  now  100%  of  the 
region has FTTH access, and around 50% of the population takes services. In rural areas this take-up 
increases  to  80%  due  to  lack  of  alternative  ways  to  access  TV  content.  The  project  has  led  to 
increased business development, including the creation of an ‘Innovation House’ which is home to 15 
new companies. Since 2004 more than 50 new companies have been established and supported by 
the ‘Innovation House’. 

Syd  Energi,  the  co-operative  electricity  company  which  rolled  out  much  of  the  access  network,  has 
made calculations based on its investments and experience to date, and it expects to make a return 
on its investment (which provides FTTH connections to each of its 250 000 customers in the region) 
within 20 years. 

North Karelia and “Broadband for all in Eastern and Northern Finland”, Finland 

Aims:  The  aims  of  both  projects  are  to  create  increased  economic  value  in  a  rural  area  of  Finland. 
The projects aim to provide equal opportunities for rural and urban areas throughout Finland. The end 
goal is to increase the vitality of the countryside – with broadband seen as a key factor in the health of 
the region, especially given the connectivity requirements of both agriculture businesses and tourism. 

The  investment  was  further  motivated  by  the  lack  of  interest  in  these  regions  among  telecoms 
operators.  Prior  to  the  North  Karelia  eRegio  project,  in  2008,  98%  of  the  population  had  access  to 
connectivity  but  in  rural  areas  this  mostly  took  the  form  of  wireless  connectivity  (which  was  seen  as 
slow and unreliable). 

These projects also form part of the implementation of Finland’s National Broadband Strategy (NBS).  

Results: The original eRegio project increased the connection availability from 74% to 98% within the 
region;  however,  actual  take-up  was  significantly  lower.  Although  not  complete,  the  new  project  has 
been very successful to date, with completed areas reporting take-up of around 60%. 

It  was  felt  too  soon  to  have  conclusive  information  on  the  creation  of  new  businesses  from  the  two 
projects.  It  was  expected  that  the  overall  result  will  be  a  decline  in  businesses  leaving  the  region 
(rather than getting new businesses to move to a rural region, which is quite difficult).  

Digital Region, South Yorkshire, UK 

Aims:  Prior  to  the  project  the  region  had  patchy  ADSL  coverage  from  local  loop  unbundling  (LLU). 
The aim of the project was to provide FTTC connections to 80% of South Yorkshire and then use the 
revenues generated from to extend the scheme to provide 97% coverage. The Digital Region project 
included  public  investors  with  different  aims:  the  regional  development  agency  (Yorkshire  Forward) 
was interested in the economic benefits that would arise from the project, while the Local Authorities 
had a greater focus on the social improvements, and the resulting transformation of the infrastructure 
available for public services. The commercial partner undertook the project to derive a financial return. 

First-generation broadband was already available in most of the area, but the project aimed to bring a 
step  change  into  the  region  to  kick  start  the  local  economy.  At  the  start  of  the  project  the  view  from 
commercial  operators  was  that  there  was  no  commercial  case  for  next-generation  broadband  in  the 
region. 

Results: Network build is ongoing, having started in 2009. Project planning started in 2004, and there 
was a long time prebuild period due to procurement difficulties, and a change of partnership structure 
that required additional due diligence before the project could start. Because of this time delay, BT has 
deployed an FTTC network in similar locations to those covered by the Digital Region infrastructure. 

 
 
Guide to broadband investment | C–4 

To date, Digital Region has struggled with customer acquisition, especially following competition from 
other infrastructure operators. The network is slowly picking up new customers but currently lacks the 
major providers, as they are able to integrate into BT’s competing network much more easily.  

RAIN project, Lithuania 

Aims:  An  advanced  broadband  network  is  seen  as  necessary  for  Lithuania’s  population  to  use  ICT 
and access content, and to allow businesses to develop and become more competitive. Currently rural 
areas  (32%  penetration)  are  far  behind  urban  areas  (99%  penetration)  in  network  connectivity.  The 
rural  areas  have  received  little  private  investment  in  the  last  five  years  due  to  their  commercial 
unattractiveness (due to low subscriber density), creating a digital divide.  

The RAIN project aims to provide opportunities for residents, public institutions and businesses to use 
broadband in the country’s rural areas. It has three socio-economic goals:  

1.  Reduction of Lithuania’s digital divide by creating favourable broadband infrastructure conditions 

throughout the whole country, including areas that are unattractive to businesses.  

2.  Promotion of competition in the broadband sector. An open-access policy will directly contribute to 
competition  and  development  of  new  business  opportunities,  and  contribute  to  making 
infrastructure more economically efficient. 

3.  Acceleration of the development of an information society in Lithuania. The creation of advanced 
infrastructure  in  areas  that  currently  do  not  have  it  will  help  to  provide  access  to  broadband 
networks for public institutions. 

The infrastructure built helps in meeting the goals of both the Lithuanian Broadband Communications 
Infrastructure Development Strategy for 2005–2010 and the Information Society for All component of 
the  Economic  Growth  Action  Programme.  Once  the  project  is  finished,  it  is  hoped  that  favourable 
conditions will have been created in rural areas of the country for: 

1.  People to use e-services and access content, as well as work and study on distance programmes; 
giving  the  opportunity  for  Lithuanians  to  acquire  knowledge,  skills  and  qualifications  to  adapt  to 
rapidly changing living and working conditions.  

2.  Businesses  to  use  ICT  in  their  operations,  thus  a  creating  a  positive  environment  for  IT 
businesses as well as increasing the level of productiveness by creating favourable conditions for 
innovation and SMEs. 

3.  Public institutions to modernise their activities and provide e-services, contributing to developing 

the use of IT to increase the efficiency of the decisions taken by public institutions. 

Indicator (unit of assessment) 

Current level  Goals for 2015 

Increase broadband network service users penetration 

72% (2005) 

+23% 

Connected towns and villages to the created broadband 
network 

430 (2005) 

770 

Figure C.1: 

Summary of RAIN project goals [Source: information from stakeholder] 

Results:  Project  implementation  is  ongoing  (it  is  planned  to  finish  by  March  2013).  The  progress  of 
the project is being monitored and all project activities so far have been done on time. 

 
 
 
Guide to broadband investment | C–5 

Auvergne, France 

Aims: The overall aim of the network was to guarantee that 100% of households have access to high-
speed broadband (with a minimum speed of 512kbit/s). It aims to cover the white areas47 (4% of the 
territory  and  353  communes)  in  which  affordable  and  efficient  Internet  access  (minimum  512kbit/s) 
was unavailable.  

High-speed  broadband  access  constitutes  a  decisive  factor  in  the  competitiveness  of  territories.  The 
network aimed to deliver a number of economic, social and territorial goals: 

– 
– 

– 

– 

build up an innovative knowledge society and strengthen economic competitiveness 
attract new residents and businesses (newcomers check ADSL broadband eligibility before their 
installation), maintain the presence of those already settled 
avoid  the  digital  divide  between  rural  and  metropolitan  areas  by  bringing  high-speed  broadband 
access in the rural areas and preserve the coherence between territories 
bringing new services for leisure, family life, and professional use. 

In those areas which are sparsely populated, private operators in telecommunications are not ready to 
invest.  The  deployment  and  operation  of  infrastructure,  and  the  commercialisation  of  High-Speed 
broadband services would not be profitable for them. 

Results: The impacts of the project are: 

–  Development  of  the  broadband  market:  99.6%  of  the  14 000  lines  targeted  benefited  from  an 
increased speed beyond the minimum 512kbit/s. Beyond the 14 000 lines targeted, 35 000 lines 
benefited  from  an  increased  speed.  One  month  after  the  deployment  of  these  new  facilities, 
around  30%  of  the  households  that  previously  did  not  have  a  high-speed  broadband  Internet 
access, subscribed to a contract 

–  Development of new service offers and economic impact: small businesses can start more easily; 
agricultural  holdings  are  connected  and  can  improve  their  organisation  and  use  the  online 
declaration for Common Agricultural Policy subsidies; the work of independent nurses is facilitated 
through the use of online services; 103 interactive terminals of Visio-Public Points device (PVPs) 
are  spread  across  rural  areas  to  facilitate  access  to  public  services;  Numeric  Spaces  of  Work 
(ENTs)  are  developed  in  schools  and  can  improve  relationships  between  parents,  pupils  and 
teachers. 

STOKAB, Sweden 

Aims: The company STOKAB was started in 1994 following deregulation of the telecoms market. The 
company  was  started  when  no  operator  showed  any  interest  in  dark  fibre  in  Stockholm,  but  the 
municipality  felt  there  was  a  commercial  need  for  it.  The  city  wanted  good  IT  infrastructure  to  help 
contribute to growth, and so formed STOKAB, a company 100% owned by the municipality. It was felt 
important  that  the  broadband  infrastructure  and  services  were  split  in  order  to  fully  promote 
competition. 

Results:  One  indication  of  success  is  the  price  of  Internet  access  throughout  Stockholm.  A  recent 
publication,  ”Computer  Sweden”  marked  the  price  of  100Mbit/s  broadband  in  Stockholm  at  EUR550 
(compared  to  an  average  of  EUR950  for  the  rest  of  Sweden).  This  is  helped  by  the  90+  service 
providers in Stockholm, which is much more than in most other cities in the EU. 

47

The EC makes a distinction between areas where no broadband infrastructure exists or is unlikely to be developed 
in the near term (white areas), areas where only one broadband network operator is present (grey areas), and areas 
where at least two or more broadband network providers are present (black areas). 

 
 
                                                      
  
Guide to broadband investment | C–6 

In total STOKAB has over 800 business customers. The first of these customers came from banks and 
finance houses who wished to control their own networks. 

One of the key success factors was that STOKAB did not try to compete with its customers. STOKAB 
maintained this role to promote stability for its customers. 

Between 1994 and 2008 the total investment amounted to approximately EUR300 million, but between 
2009 and 2012 the rate of investment has increased to EUR150 million per annum. This has mostly 
been  driven  by  the  move  to  FTTH,  which  has  higher  costs.  So  far,  250 000  households  have  been 
connected (which will rise to 400 000 by 2012) and 100% of business premises. 

Lombardia, Italy 

Aims:  The  main  aims  of  Progetto  BUL  (Banda  Ultra  Larga,  meaning  ‘ultra-broadband’)  Lombardia 
(Progetto  Lombardia)  are  linked  to  the  offering  of  new  services  to  homes  and  businesses  through  a 
more capable network. The services which are of interest to the Lombardia region include: 

– 
– 
– 
– 
– 
– 
– 
– 
– 

services related to digital public administration and “digital democracy” 
digital healthcare and telemedicine 
digital school and professional education through e-learning 
digital justice and safety 
intelligent transportation systems and digital logistics 
teleworking and digital collaboration 
software as a service (SaaS) services and cloud computing for enterprises 
smart grid and energy efficiencies 
tourism. 

Regarding  infrastructure  targets,  the  project  aims  to  bring  FTTH  to  50%  of  population  of  Lombardia. 
The Milan municipality is excluded (as it has already been passed). 

Expected results: Results in terms of penetration will depend on the treatment of the existing copper 
network. The following figures are based on estimates from the Lombardia region: 

– 

– 

if there is a complete total switch-off of the copper network, penetration of the new infrastructure 
should reach about 100% of the population in the 167 served municipalities 
if  the  copper  network  is  left  in  situ  (an  overlay  scenario),  the  new  infrastructure  should  have  a 
population penetration of about 60% in the 167 served municipalities. 

Implementation  is  expected  to  begin  by  mid-2012  and  to  be  completed  by  2015  (the  Expo  year  in 
Milan). 

Alto Adige, Italy 

Aims: Deployment of the fibre network is in response to requests made to the public administration by 
several  businesses  and  end  users  that  are  seeking  broadband  connectivity  in  the  region.  Regarding 
business entities, there are very many  hotels in the  area  have been considered as  business entities 
due to the high level of employment they provide and their importance for tourism in the region. 

The  broadband  project  defined  coverage  targets,  including:  all  businesses  employing  three  or  more 
people, 95% of those with fewer than three employees and 90% of the population. Its objective is also 
to  cover  all  the  116  local  municipalities  in  the  Alto  Adige  sub-region.  Initially  each  city  hall  is  being 
connected  (primary  network),  and  then  the  main  public  institutions  will  be  connected  (secondary 
network) (i.e. schools, libraries, hospitals, sites for transmission of signals, etc.). 

 
 
 
Guide to broadband investment | C–7 

Before  2004,  broadband  coverage  in  the  Alto  Adige  sub-region  was  the  responsibility  of  the  single 
telecoms  operator  providing  services  in  that  area.  This  meant  that  broadband  coverage  in  a  certain 
area was influenced by the return on investment that the operator sought for that specific investment. 
Thus  the  Alto  Adige  sub-region  had  fibre  solutions  provided  by  the  Italian  incumbent  operator  and 
other local telephone operators only in the Bolzano city (the ‘capital’ of the sub-region). All other local 
municipalities were not covered by the high-speed fibre broadband connectivity. 

Results: Both the wireless and wireline aspects of the project are considered to have been a success 
and have met all of their targets.  

The local Council could have invested slightly more and earlier in order to avoid having to work to an 
even tighter deadline than the one originally set (i.e. 2013).  

 
Guide to broadband investment  |  D–1 

Annex D 

Infrastructure choices from example projects 

This  annex  includes  extracts  from  interviews  with  project  stakeholders,  which  describe  the 
infrastructure choices from example projects. 

D.1 

FTTH 

OnsNet, Nuenen, Netherlands 

For the OnsNet project, FTTH was chosen, with two fibres laid to each house (one delivering Internet 
and  the  other  TV).  FTTH  was  considered  to  be  the  ideal  choice  to  deliver  e-health  style  services, 
including video communications, in new-build homes for the elderly and disabled. 

Although  FTTC  was  estimated  as  EUR200  cheaper  per  house  than  FTTH,  the  co-operative  was 
described as wanting the ‘best of the best’, in terms of service, rather than focusing on cost. 

Rural Development Programme, Sweden 

The project requirements were technologically neutral but the choice of fibre is indirectly driven by the 
2020  broadband  aims  of  the  Digital  Agenda  for  Europe.  Sweden’s  broadband  goals  include  two  key 
aims: by 2020, 90% of Sweden is to have 100Mbit/s broadband; and by 2020, the whole population is 
to have at least basic broadband access. The choice of fibre is seen as the only way to achieve the 
first of these goals. 

Due  to  being  primarily  awarded  to  local  co-operatives,  the  money  given  tended  to  fund  access 
networks rather than core network projects, although this was not specified as a formal criterion. This 
was mainly because local groups tend to be more interested in projects that have an immediate and 
direct effect on end users. 

Midtsoenderjylland, Denmark 

A consultant was commissioned to analyse the difference between installing a WiMAX network and a 
fibre network in a rural area (65km, 500 termination points). The conclusion of this work was that the 
WiMAX  would  initially  be  cheaper,  but  that  there  was  an  eight-year  breakeven  point  for  the  fibre 
network, given the extra revenue for operators due to opportunities to sell services such as TV.  

In addition to supporting public sector ICT services, another aim of this project was to start momentum 
behind  the  vision  of  ‘fibre  to  all’.  FTTH  is  seen  as  an  important  aspect  of  infrastructure  for 
development. In the smaller towns there  were basic cable services, but most rural areas had almost 
no connectivity (for example, receiving only two airborne TV channels). At the start of the project the 
municipalities  were  also  advised  by  Aalborg  University  that  symmetrical  connections  would  be  more 
useful in the future than asymmetrical.  

 
 
 
Guide to broadband investment | D–2 

Following  the  installation  of  a  core  ring  between  several  city  halls,  discussions  were  held  with  Syd 
Energi, which felt that if it could supply electricity to rural areas it could just as easily supply FTTH. A 
large  storm  in  1999  had  destroyed  a  large  portion  of  Denmark’s  overground  electricity  network, 
meaning  that  local  electricity  companies  were  slowly  migrating  much  of  their  electricity  network 
underground. This gave Syd Energi a good opportunity to install FTTH at the same time as it installed 
the new electricity cables. To operate this network it agreed to rent the backbone of its network from 
the municipalities. 

A  point-to-point  network  was  installed,  inspired  by  projects  in  Sweden,  as  GPON  was  felt  to  limit 
different service providers, and the benefits of point to point were felt to outweigh the additional costs. 

eRegio, North Karelia, Finland 

Following the eRegio project which looked at basic broadband provision (2005–2008), a new project 
has  been  started  with  a  greater  focus  on  providing  high-speed  broadband,  “Broadband  for  all  in 
Eastern and Northern Finland”. 

Both  of  these  projects  form  part  of  the  implementation  of  Finland’s  National  Broadband  Strategy 
(NBS).  The  NBS  has  two  key  parts:  since  summer  2010  Finland  has  had  a  universal  broadband 
service  obligation  (1Mbit/s)  in  place  (supported  by  the  eRegio  project,  and  similar  projects  in  other 
regions);  the  second  part  consists  of  a  high-speed  broadband  strategy  (the  key  driver  of  the  new 
project),  which  requires  100Mbit/s  by  2015  for  all  the  population.  To  date  all  implementations  have 
included  fibre  in  the  access  network  despite  the  projects  being  technologically  neutral,  due  to  the 
100Mbit/s requirement in the NBS.  

STOKAB, Sweden 

STOKAB  was  set  up  in  1994,  well  before  fibre  had  become  a  mainstream  access  network  method. 
The  decision  to  go  with  fibre  was  influenced  by  the  presence  in  Stockholm  of  Ericsson  (one  of  the 
world’s main fibre developers at the time). The city also wanted to minimise digging in the future, and 
felt that fibre was future proof. 

One of the main lessons that had been learned was the difficulty of starting out at such an early stage 
of  a  new  technology.  It  was  also  felt  that  it  was  important  to  install  a  sufficient  number  of  fibres. 
STOKAB started out installing 48 fibres (a number that most people felt was too high at the time), but 
is now having to upgrade some areas to as many as 684 fibres.  

Lombardia, Italy 

The  network  will  provide  FTTH  and  will  be  characterised  by  a  hybrid  GPON  and  P2P  infrastructure: 
this actually reflects operators’ implicit preferences regarding network infrastructure, as the incumbent 
(Telecom  Italia)  prefers  the  GPON  architecture  while  other  OLOs  show  a  preference  for  the  P2P 
architecture. 

Two different scenarios have been developed for the precise make-up of the network architecture: 

– 

– 

base  case:  whereby  GPON  is  the  prevalent  access  technology,  with  P2P  links  only  if/where 
required (i.e. significant businesses) 
evolutionary  case:  whereby  a  higher  number  of  end  users  have  a  dedicated  fibre  from  the  local 
termination point.  

 
 
 
 
Guide to broadband investment | D–3 

In both cases access to the network is provided by the relevant SPV at the request of operators; the 
SPV maintains access ownership and provides access to operators on a client basis. In fact the two 
scenarios are not alternatives, but the second one can be seen as an evolution of the first. 

Progetto  Lombardia  also  plans  to  optimise  the  project  by  carrying  out  civil  works  together  with  other 
works conducted by third parties, by using existing infrastructure that is able to host the network (e.g. 
public  lighting,  district  heating  and  sewer  networks)  and  by  minimising  charges  from  road  surface 
repairs.  

D.2 

FTTC 

Digital Region, South Yorkshire, UK 

The Digital Region project features a deployment of FTTC infrastructure to 80% of homes in the region 
(representing 546 000 homes and 40 000 businesses). 

The original tender requirements were technology neutral, but set out requirements for a certain level 
of  speed  and  quality  of  service.  Research  was  published  about  the  difference  that  high-quality,  fast 
broadband would make to South Yorkshire. The original requirement was guaranteed 25Mbit/s service 
to everyone, but following talks with industry this target was changed to 40Mbit/s. 

FTTC  was  seen  as  a  cost-effective  way  of  delivering  the  required  service  level.  The  Managing 
Authority did not receive any tenders which proposed an FTTH solution as the cost was considered to 
be too high. 

Auvergne, France 

The project includes the deployment of two types of passive infrastructure: 

– 

– 

a  “very  little  technical  site”  (in  French  “Très  Petit  Site  Technique”,  TPST)  between  the  Main 
Distribution Frames and the end users. A TPST consist of an existing building, shelter or cabinet 
connected  to  the  local  cabinet  and  converted  in  order  to  accommodate  the  DSLAM  of  another 
operator. 
optical fibre (860km) between the Main Distribution Frames and the “very little technical sites”.  

The winning technology was “NRA-ZO” (Subscriber Node for eligibility improvement), which appeared 
during  the  competitive  dialogue  and  was  chosen  as  the  technically  and  economically  most 
advantageous  technology.  This  technology  has  been  available  since  June  2007,  when  it  was 
approved  by  the  ARCEP.  It  is  a  well  proven  technology,  based  on  commonly  known  standards  and 
already  deployed  on  a  large  scale.  It  will  also  support  further  evolution  of  the  network  and  speed 
increases thanks to a further fibre deployment. 

The  infrastructure  is  open  to  competition.  The  Contractor  operates  and  commercialises  the 
infrastructure,  and  also  acts  as  an  Internet  access  provider.  Alternative  operators  can  rent  active 
infrastructure from the Contractor (i.e. use the Contractor’s DSLAM via bitstream access technology), 
or they can rent passive infrastructure (i.e. space in a “very little technical site” in order to install their 
own DSLAM). The end user therefore has a choice of Internet provider.  

The  cabinets  have  been  built  to  house  two  DSLAMs:  one  from  the  Contractor  and  one  from  an 
alternative  operator.  This  is  sufficient  to  meet  current  market  demand.  If  further  operators  want  to 
install their own DSLAM, the Auvergne region will finance an enlargement of the cabinet. 

 
 
D.3 

Wireless and satellite 

DORSAL, France 

Guide to broadband investment | D–4 

Due to the fact that Limousin is a rather mountainous region, WiMAX is used to provide coverage in 
locations where no other Internet access was available. Although the current network uses 72 WiMAX 
transmitters,  WiMAX  does  not  provide  coverage  of  the  entire  region.  End  users  who  cannot  receive 
connectivity through the network receive a subsidy for the equipment installation costs to connect to a 
satellite Internet provider. 

Initially 40 transmitters were planned for deployment, but as these did not provide sufficient coverage 
as specified in the contract terms, the network operator Axion/Sogetrel was obliged to deploy another 
32 transmitters, with this extra investment fully financed by the network operator.  

For  the  WiMAX  part  of  the  network,  Axion/Sogetrel  collaborated  with  mobile  operators  and  public 
bodies such as the French Defence Ministry which own towers in order to obtain rights of use. Where 
possible, WiMAX equipment was installed on existing towers. Such collaborations were envisioned in 
the  terms  of  reference  and  mentioned  by  applicants  in  their  proposals.  These  external  relations  and 
collaborations were managed by Axion/Sogetrel as specified by the DSP framework48. 

Piemonte, Italy 

Prior to 2005, strict regulation of wireless networks in Italy did not allow commercial networks to use 
free frequencies to provide services to the general population. However, the market was stimulated by 
investment  exclusively  in  public  sector  services,  leading  to  a  change  in  wireless  regulations  in  late 
2005.  

Once  the  regulations  changed,  many  wireless  network  managers  expanded  into  the  private  sector 
through their existing networks and the experience they had gained from the public network. However, 
the  majority  of  operators  are  still  small  and  cautious,  with  the  largest  having  only  10 000  customers 
and most being in the 500–1000 customer range. 

The  bands  used  were  mostly  2.4  and  5GHz  unlicensed  bands,  although  nowadays  17GHz  is  also 
used  because  of  frequency  congestion  in  some  areas.  Some  of  the  largest  wireless  operators  are 
using licensed links in the backhaul network to guarantee bandwidth to customers. It should be noted 
that  wireless  offers  are  coming  very  close  to  ADSL  download  speeds  (with  much  more  upload 
bandwidth than ADSL). 

Alto Adige, Italy 

The broadband project includes a wireless network to provide services to homes, and a fibre network 
for services to business and public buildings. 

48

The investment was executed under the framework of délégation de service public (DSP), a model set by French 
law under which a private actor is granted the opportunity to manage public services by a public body. The contract 
is  usually  set  in  a  manner  which  establishes  a  link  between  the  quality/outcome  of  management  and  the 
remuneration  of  the  actor.  This  model  is  commonly  used  for  the  management  of  public  services  such  as 
transportation,  water,  electricity  and  others.  The  framework  enables  local  collectives  to  formulate  provisional 
contract,  with  defined  quality/outcome  requirements,  which  serves  as  basis  for  negotiations  and  execute  a  public 
tender procedure through which they select a partner. 

 
 
 
                                                      
  
Guide to broadband investment | D–5 

Wireless services were provided to 90% of the population by 2009. Wireless technology was chosen 
due to its ability to provide coverage quickly to the sparsely populated areas of mountainous terrain. 

D.4 

DSL (copper-based) broadband technology 

Piemonte, Italy 

Between 2004 and 2009 the project received a continuous stream of investment, but some areas are 
still only at 1Mbit/s. An agreement has been made with Department of Commerce to undertake further 
upgrades in the future. It is felt that a FTTH network is still not really needed due to a lack of services 
that would use it; also there is a lack of available public money to fund it. 

DORSAL, France  

The network choice was determined by DORSAL’s ambition to deploy a network which was extensive 
in  terms  of  coverage,  open  and  attractive  to  all  network  operators,  and  used  future-oriented 
technology. The network needed to be compatible with the technology used by different operators. It 
combined  1200km  of  fibre-optic  backbone  with  ADSL  used  to  provide  broadband  services  to  end 
users over the copper infrastructure.  

The initial speed needs estimated in 2004, and for which the network was designed, were a minimum 
of 10Mbit/s symmetrical for enterprises and a minimum 1Mbit/s asymmetrical for end users. However, 
due to the rapid developments in technology, the speed requirements are now much higher. Following 
an  upgrade,  the  network  currently  provides  triple-play  services  with  20Mbit/s  over  ADSL.  Any  future 
upgrade to FTTH is felt to be difficult due to the nature of the DSP framework (see below). Any future 
project is thought to potentially require substantial funds, including EU grants. 

D.5 

Core and backhaul 

OnsNet Nuenen, Netherlands 

Backhaul was laid from Nuenen to an Internet exchange point at the University of Eindhoven just 7km 
away.  The  cost  was  approximately  EUR200 000  to  build  the  backhaul  and  a  POP  to  serve  7000 
connections. The project was seen as both a good investment per house and, given the high take-up 
rate of the Nuenen project, the backhaul investment per house was seen as relatively low. 

DORSAL, France  

The network choice was determined by DORSAL’s ambition to deploy a network which was extensive 
in  terms  of  coverage,  open  and  attractive  to  all  operators,  and  used  future-oriented  technology.  The 
network needed to be compatible with the technology used by different operators.  

The  choice  of  network  architecture  was  influenced  by  the  fact  that  Limousin  is  a  very  rural  and 
mountainous  area,  thus  the  actual  network  deployed  features  from  a  variety  of  technologies,  all 
supported by 1200km of fibre-optic backbone. 

 
 
 
 
Guide to broadband investment | D–6 

Midtsoenderjylland, Denmark 

In  2003,  an  opportunity  arose  when  four  municipalities  (including  Vejen)  decided  to  collect  their  ICT 
together into a centralised hub. To do this required a fibre connection between the four city halls, but 
the incumbent quoted a high price to provide this and the municipalities decided to create the network 
themselves.  

In  the  end  a  48-fibre  optical  ring  was  designed,  linking  the  four  city  halls  and  various  other  large 
institutions. The 48 fibres gave extra capacity for the future, and allowed spare dark fibre to be rented 
out. 

The municipalities paid for two rings (the second of which was built in 2006 before the reorganisation 
of municipalities), which were owned and operated by the municipalities for their own use. Attached to 
these  rings  are  two  FTTH  networks,  built  and  owned  by  two  separate  electricity  companies  (across 
two different regions).  

eRegio, North Karelia, Finland  

Public funding is provided to a telecoms operator as a grant for it to build the core infrastructure. The 
backbone it builds has to reach within 2km of each house, with the last-mile access being financed by 
individual households (in reality the backbone passes within around 100–300m of each household).  

Piemonte, Italy 

The  project  featured  two  major  investments  in  core  network  infrastructure:  a  regional  backbone  was 
created  connecting  major  cities,  and  a  new  Internet  exchange  was  created  to  be  run  by  a 
public/private  consortium.  It  was  identified  that  an  upgrade  to  the  backbone  would  be  the  most 
effective use of funds in terms of delivering a useful increase in bandwidth to end users. Previously the 
closest Internet exchange  was in Milan, and had to be accessed across multiple telecoms operators 
(who had no interest in making the access easy). 

The backbone is split into two key parts: the public sector part is operated by CSI (the local public ICT 
administration  organisation),  while  the  private  sector  part  is  operated  by  the  not-for-profit  exchange 
consortium which included public and private members.  

In order to fully distribute the network, nodes were spread across multiple cities – which was felt to be 
very useful for smaller operators. The project also increased competition by allowing smaller operators 
to obtain bandwidth on the same terms (price and non-price terms) as larger players. 

RAIN project, Lithuania 

Across  most  of  Lithuania  there  is  sufficient  last-mile  infrastructure  for  broadband,  but  the  necessary 
core/backhaul network infrastructure and capacity are missing. 

The  network  is  to  adhere  to  principles  of:  open  access,  technological  neutrality  and  promoting 
competition.  The  infrastructure  is  to  be  built  only  in  rural  areas  and  where  it  does  not  already  exist. 
The technical solutions chosen provide for the relevant needs for no less than ten years. 

The  goal  of  the  RAIN  network  is  to  promote  the  use  of  broadband  communications  in  rural  areas. 
Whilst preparing the project, the following alternative techno-economic aspects were analysed: 

 
 
 
 
Guide to broadband investment | D–7 

I.  Transmission medium: fibre-optic cables; copper cables; wireless technologies 
II.  Data transfer solutions: MPLS technology to be used in the entire network; MPLS technology to 
be used on the network distribution levels; Ethernet technology to be used in the entire network 
III.  Asset management systems: multiple (up to ten) operators of the RAIN network; one operator of 

the RAIN network (PEPI); one operator of the RAIN network (a private enterprise). 

The following economic alternatives were also analysed: development of the RAIN network not to be 
implemented;  network  development  to  be  implemented  by  creating  only  the  transmission  medium; 
network  development  to  be  implemented  by  creating  the  transmission  medium  and  installing  data 
transfer solutions. 

Due to the wide geographical coverage, the types of service to be provided and the large number of 
users, high standards of reliability and speed were required. In addition, the infrastructure that is built 
has  to  remain  in  service  for  a  minimum  of  ten  years  and  be  technology-neutral  to  allow  as  many 
technologies as possible to compete in the market. This is to give service providers a free choice of 
technology  while  still  being  able  to  compete  in  providing  services.  It  should  be  noted  that  the  RAIN 
project did not involve the creation of a whole new network but rather the creation of missing parts of 
the current networks. Given the ideal of the network allowing everyone to use it who wishes to do so, it 
is important that the connection capacity is sufficient with the possibility of future expansion, and that 
there are enough resources for all providers.  

Whilst carrying out a survey of the providers about the resources they need, it was determined that the 
most  acceptable  solution  was  fibre.  Since  not  one,  but  several,  providers  plan  to  use  the  same 
communications channel at the same time, and they plan to use different technologies, a medium is 
needed  that  provides  sufficient  resources  for  all  the  operators  and  is  suitable  for  any  technology. 
Fibre-optic  cable  was  chosen  as  the  most  acceptable  solution.  Given  the  number  of  potential 
operators it was decided that no fewer than 24 fibre cables were to be used in principal links and no 
fewer than 12 fibre cables in inputs of network objects. 

The infrastructure created during the project did not include the last-mile segment of the network. The 
infrastructure  allowed  the  connection  to  the  network  of  last-mile  segments  using  all  types  of 
technological solution without modifying the network. The infrastructure aimed to encourage operators 
to provide broadband to end users, attracting investment of private capital into access infrastructure in 
rural  areas  and  promoting  competition.  The  infrastructure  created  during  the  project  gives 
communications operators the opportunity to provide broadband communications services and allows 
users to freely choose a service provider in at least 98% of the country’s rural areas.  

Alto Adige, Italy 

The broadband project includes a wireless network to provide services to homes, and a fibre network 
for services to business and public buildings. 

Fibre services are being targeted at all businesses employing three or more people, and 95% of those 
with  fewer  than  three  employees.  However,  the  network  is  being  prioritised  to  connect  city  halls  first 
(primary network), and then to connect the main public institutions (secondary network) (i.e. schools, 
libraries, hospitals, sites for transmission of signals etc.).  

There  are  a  significant  number  of  local  utility  companies  (i.e.  district  heating  companies,  power 
stations, etc.) which had previously laid fibre from their local exchange stations to the residential and 
business  premises,  therefore  allowing  the  telecoms  operators  to  rent  their  fibres  and  easily  provide 
connectivity to their customers. These entities will be valuable to the project, as through the civil works 
they undergo to renew or extend their infrastructure, they are easing the completion of the entire fibre 
network  roll-out,  in  terms  of  both  time  saved  and  investment  reduced  (for  instance,  when  the  civil 
works are used both to meet the needs of these entities and to lay more or new fibre). 

 
 
Guide to broadband investment  |  E–1 

Annex E 

Investment models used in example projects 

This  annex  includes  extracts  from  interviews  with  project  stakeholders,  which  describe  the 
investment models used in example projects. 

E.1 

Bottom-up models 

OnsNet, Nuenen, Netherlands 

The  Nuenen  project  was  started  through  the  creation  of  the  Nuenen  Internet  co-operative,  where 
members  were  given  the  opportunity  for  an  FTTH  connection.  It  was  considered  advantageous  for 
local  citizens  if  the  Internet  was  to  be  turned  into  a  utility  –  with  ownership  falling  on  either  the 
government or the local population itself. 

Following a six-week demand aggregation programme, an independent local co-operative was created 
to build and own the network, and a business plan submitted to the Ministry of Affairs. By the end of 
the  six-week  period  around  90%  of  the  area’s  population  had  joined  the  co-operative.  The  co-
operative supplied its members with free triple-play broadband for the first year, followed by a charge 
of EUR60 per month thereafter. The network was operational after five months and following the first 
year’s  free  period  80–85%  of  the  citizens  continued  to  use  the  service.  In  addition,  recent  research 
has shown how this project has helped aid social cohesion throughout the co-operative’s members.  

Due to the co-operative’s lack of expertise it decided to outsource both the building and operation of 
the  network.  A  turnkey  solution  was  required  for  building  the  network,  and  a  construction  company 
was  chosen  that  offered  this.  For  network  operation,  the  co-operative  undertook  an  outsourcing 
arrangement  with  Edutel,  an  existing  semi-public  telecoms  operator  affiliated  with  a  number  of  high 
schools in the area. 

Many of the technological choices were driven by the co-operative’s aims of achieving ‘the best of the 
best’,  and  supported  by  the  co-operative  investment  model  being  able  to  take  a  longer-term  view  of 
benefits rather than just focusing on a short-term business case and the reduction of costs. 

Rural Development Programme, Sweden 

Under the Rural Development Programme in Sweden, a typical local investment project was initiated 
by  residents  and  enterprises  showing  interest  and  forming  into  co-operatives  or  economic 
associations.  These  organisations  applied  to  the  local  authority  (county  board)  for  support,  and 
contributed  either  financial  support  or  support  in  kind  (often  digging  to  install  new  ducts).  While  the 
private  contribution  was  non-compulsory,  a  public  grant  was  more  likely  to  be  awarded  if  interest  in 
local  investment  was  demonstrated.  Due  to  this  additional  investment,  a  local  model  was  seen  as  a 
good way to scale up the initial investment. The public money given to these projects was made up of 
75% EU funding and 25% other public funding. 

An advantage of the co-operative structure was that one of the key cost-saving elements came from 
easier access to private land, due to the local initiative and investment in the project. However, it was 
agreed that one of the downsides of allowing grant money to be directed through local interests was 
that  less  organised  or  more  sparsely  populated  rural  areas  may  miss  out  on  grants,  and  that  those 
networks  that  were  built  may  not  have  common  technical  standards.  This  was  not  seen  as  a  major 
problem, however, and it was felt more important to ensure the money was going to an entrepreneurial 
region with proven demand. 

 
 
Guide to broadband investment | E–2 

The grants tended to fund  access networks  rather than core networks, as local groups tended to be 
interested in projects that offered an appreciable benefit to end users. In the majority of cases the local 
group  owns  the  resultant  infrastructure,  but  occasionally  the  local  group  was  allowed  to  sell  the 
infrastructure  to  a  third  party  (though  specific  market  mechanisms  had  to  be  used  to  ensure  a  fair 
price).  The  network  itself  was  run  by  an  independent  telecoms  operator  as  a  condition  of  the  grant 
being awarded. 

Another important part of this project was the partnership between the regulator and a non-telecoms 
department: the project was the first to involve co-operation between the Board of Agriculture and the 
Swedish postal and telecoms regulator (PTS), with PTS helping to design the scheme and the Board 
of  Agriculture  undertaking  marketing  and  information.  This  enabled  the  Board  of  Agriculture’s  rural 
expertise to be complemented by the PTS’s expertise in broadband. The actual implementation  was 
done  regionally  by  the  County  Administrative  Boards,  who  allocated  the  money  to  the  local  co-
operatives.  

eRegio, North Karelia, Finland 

A bottom-up approach features in the composite funding model of this example project. Public funding 
is  given  to  a  telecoms  operator  as  a  grant  for  it  to  build  the  core  infrastructure  (i.e.  a  private  DBO 
approach,  as  explained  in  the  next  section).  However,  the  backbone  that  is  built  has  to  reach  within 
2km of each house, with the last-mile access being financed by individual households (i.e. a bottom-
up  approach,  and  in  reality  the  distance  to  the  backbone  is  much  less).  Each  household  signs  an 
agreement, and provides payment, at the time of the project initiation so that all the fibre can be laid at 
the  same  time.  It  was  highlighted  that  a  key  driver  of  people  signing  up  was  being  able  to  see  the 
construction  happening  outside  their  houses,  and  the  additional  incentive  was  that  while  houses  are 
able to buy access after the project has finished it will cost them significantly more. 

An  improvement  to  the  model  has  been  implemented  in  the  successor  project,  “Broadband  for  all  in 
Eastern  and  Northern  Finland”.  In  the  new  project,  surveys  are  run  to  check  the  demand  before 
construction starts in each area. However, as only price estimates can be used to gauge demand, the 
response  may  vary  from  reality  given  variance  of  the  actual  price.  The  real  demand  is  only  realised 
once the project is underway, with the ‘excavators on the ground’ effect that was highlighted above. 

E.2 

Private DBO model 

eRegio, North Karelia, and “Broadband for all in Eastern and Northern Finland”, Finland 

A  private  DBO  approach  features  in  the  composite  funding  model  of  this  example  project.  Public 
funding is given to a telecoms operator as a grant for it to build the core infrastructure. However, the 
backbone that is built has to reach within 2km of each house, with the last-mile access being financed 
by individual households (i.e. a bottom-up approach, as explained in the previous section). 

 
 
Guide to broadband investment | E–3 

The  ongoing  “Broadband  for  all  in  Eastern  and  Northern  Finland”  project  was  launched  to  create 
demand,  and  give  information  and  manage/co-ordinate  the  broadband  promotion  and  operations 
between  neighbouring  regions  in  eastern  and  northern  Finland.  This  project  receives  funding  for  its 
high-speed  broadband  investments  from  the  Finnish  government  and  EU  agriculture  funding.  The 
Finnish government has reserved EUR66 million of State aid, and EUR25 million will be received from 
the  EU  (agriculture  funding)  for  the  whole  of  Finland.  The  basic  financing  model  is  that  around  one 
third of the funding is State or EU aid, another third comes from a local municipal fund, and the final 
third is from the telecoms operator that is building the network. Municipalities have to pay 8%, 22% or 
33%  of  the  cost  of  their  investments,  depending  on  their  financial  capacity  and  according  to  criteria 
defined  by  the  government.  The  predecessor  project,  eRegio,  used  the  ERDF  mechanism  for 
investment projects that were launched while it was underway. In most cases half of the finance came 
from the municipality and half from the ERDF, although investment was sometimes also received from 
private telecoms operators. All normal State aid rules were followed, with Finland having to notify the 
EU of the model being used. 

For  the  “Broadband  for  all  in  Eastern  and  Northern  Finland”  project,  the  Regional  Council  gave  the 
permit for the grant money through a public procurement which followed appropriate EU procurement 
regulations. The overall project was divided into relatively small lots (1–3 lots per municipality for each 
of the 14 municipalities under Regional Council of North Karelia). This was due to smaller lots being 
seen as easier to manage and also a way of keeping the lots relatively inexpensive, to allow smaller 
operators the chance to bid.  

In the case of the eRegio project, 11 lots were offered, but the only bids received were from a single 
local  telecoms  operator  (a  similar  situation  was  seen  across  the  rest  of  Finland’s  projects).  The 
national telecoms operators were not interested in the rural projects despite the available funding, and 
this led to a lack of competition in the process. It was felt that local telecoms operators are more willing 
to wait longer for payback (as their focus is on maintaining their reputation among the local population, 
rather than on meeting the needs of shareholders), so will apply for grants that the national players are 
not interested in. 

Due  to  the  problems  with  lack  of  competition,  the  Regional  Council  is  now  looking  at  the  option  of 
awarding  grants  to  local  co-operatives  (made  up  of  local  residents  and  businesses)  to  fund  the 
backbone network (and so effectively make the entire project bottom up). The co-operative would build 
and own the network and make an agreement with a telecoms operator to operate it. 

The telecoms company that wins each project has to provide a guaranteed 30 years of service on the 
network.  One  of  the  Regional  Council’s  jobs,  together  with  the  municipalities,  is  to  check  that  the 
network  is  running  in  accordance  with  the  agreement,  though  it  has  no  specific  tools  to  use  in  this 
task. The majority of monitoring comes through customer feedback. When problems are highlighted, a 
flag is raised with the Finnish regulator (FICORA) to apply penalties.  

E.3 

Public outsourcing 

DORSAL, France  

This  project  was  among  the  very  first  of  its  kind,  whereby  a  group  of  local  authorities  formed  a 
territorial collective to invest in deploying a network. In March 2002, the syndicate know as DORSAL 
was formed, representing a number of French ‘départements’ (regional sub-units) and larger regional 
cities. Following DORSAL’s initial examination of the prospects for financing and deploying a regional 
network, several more départements joined the syndicate which then launched the project execution 
phase. 

 
Guide to broadband investment | E–4 

DORSAL decided to execute the project under a public outsourcing framework called a délégation de 
service public (DSP)49. It would then arrange a concession of the public service, enabling it to benefit 
from  private  investment,  attain  greater  economic  efficiency  and  benefit  from  the  experience  of 
collaborating with a specialist enterprise. The DSP framework enables local collectives to formulate a 
provisional  contract  with  defined  quality/outcome  requirements,  which  serves  as  a  basis  for 
negotiations,  and  execute  a  public  tender  procedure  through  which  they  select  a  partner.  This 
framework also transfers risk from the collective of public bodies to the private partner.  

After  three  months  of  discussions,  Axion/Sogetrel  was  unanimously  selected  to  deploy  the  network 
and  manage  the  service  for  a  period  of  20  years.  The  DORSAL  network  was  conceived  as  a 
wholesale  network,  with  Axion/Sogetrel  providing  only  wholesale,  rather  than  retail,  services.  The 
network currently provides connectivity to 20 operators, including France Telecom. Overall, 45% of the 
investment was made with public funds, with the remaining 55% funded by the partner.  

The management and ownership model was decided under the framework of DSP. The concession is 
given for 20 years during which all revenues from operating the network go to the private partner. The 
partner  has  an  obligation  to  maintain  the  network.  At  the  end  of  the  20-year  period,  the  network 
becomes the property of the territorial collectives syndicate. At this point a new procedure to select a 
partner  will  be  initiated,  but  the  collectives  will  set  the  contract  so  as  to  receive  a  share  of  the 
revenues.  DSP  also  ensures  that  DORSAL  is  updated  monthly  by  Axion/Sogetrel,  with  DORSAL 
publishing an annual report which captures all the activity on the project.  

One of the key lessons taken from this project was the feeling that having a collective call for proposals 
facilitated  the  establishment  of  economies  of  scale,  as  selecting  a  single  candidate  to  deploy  an  inter-
departmental  network  reduced  the  cost  for  the  départements  and  cities  which  are  part  of  DORSAL.  If 
each had undertaken the process on its own, it was felt the total cost would have been greater.  

In  addition,  it  was  felt  that  the  public  outsourcing  model  worked  well  here  given  the  reliable  private 
partner and local structures capable of organising themselves and representing the collective interest. It 
was felt that Internet connectivity is a public good and the public should be able to have control over it. 

A problem highlighted is that the current contract terms for a DSP framework, as set by French law, do 
not allow for re-investment of funds which represent more than 20% of the value of the initial capital, 
over the term of the contract (20 years in this case). For the telecoms sector, which is capital intensive 
and features rapidly evolving technologies, this amount may well be insufficient. For example, if FTTH 
is to be rolled out in the future, 20% (EUR17 million) of the initial investment of EUR85 million would 
be  inadequate  for  any  deployment  at  scale.  Any  future  project  is  thought  to  potentially  require 
substantial funds, including EU grants. 

Auvergne, France 

The  chosen  model  is  a  public–private  partnership  between  the  Auvergne  Regional  Council  and  a 
private  operator  (the  Contractor).  The  Auvergne  Region  provides  the  funding  for  the  required 
infrastructures (EUR38.5 million from the Region, the départements, the French State and the ERDF) 
through an income provided to the operator during the ten-year contract period. The operator designs, 
operates  and  commercialises  the  infrastructures  on  behalf  of  the  Auvergne  Regional  Council.  The 
Region Auvergne owns all the infrastructure deployed.  

A PPP appeared to be the best solution for legal, economic and technological reasons: 

49

A  délégation  de  service  public  (DSP)  is  a  legal  model  in  French  law  under  which  a  private  actor  is  granted  the 
opportunity to manage public services by a public body. The contract is usually set in a manner which establishes a 
link between the quality/outcome of management and the remuneration of the actor. This model is commonly used 
for the management of public services such as transportation, water, electricity, etc. 

 
 
                                                      
  
Guide to broadband investment | E–5 

– 

– 

– 

– 

the market failure (lack of private operator’s investments in these sparsely populated areas) called 
for a public intervention 

the  Region  was  unable  to  define  the  technical  means  that  could  meet  its  needs,  and  could  not 
establish  the  legal  and  financial  parts  of  the  project  construction.  It  fell  to  the  Contractor  to 
recommend  a  comprehensive  technological,  economic  and  financial  solution.  Thus,  the  Region 
would benefit from private sector innovations 

only a PPP would enable both a speedy selection process for the Contractor, and income for the 
Contractor  in  zones  where  the  return  on  investment  is  too  weak  (because  of  low  population 
density) 

the  PPP  allows  a  sharing  of  the  risk.  The  Contractor  take  on  a  part  of  risk  and  responsibility, 
especially in terms of technical exploitation. 

The timetable for the project was as follows: 

– 

an  agreement  was  signed  in  December  2005  between  the  Auvergne  Regional  Council  and  the 
four departments of the territory; a preliminary study concluded that a PPP was the best solution 

– 

a competitive dialogue was led by the Region between January and July 2007 

– 

the PPP contract with the Contractor (France Telecom) was signed in October 2007. The contract 
transferred the Contracting Authority to the Contractor 

– 

the project was deployed by the Contractor, under the supervisory control of the Region 

– 

the deployment was completed in March 2009. 

The State aid regulation did not cause any problems. The French Regulatory Authority for Electronic 
Communication and Posts (ARCEP) approved the technical solutions. 

The  Contractor  operates  the  infrastructure  for  a  ten-year  period  on  behalf  of  the  Auvergne  Region, 
both  technically  and  commercially.  It  receives  an  income  from  the  Auvergne  Regional  Council 
covering  its  investment  and  operating  costs.  Thus,  the  role  of  the  Contractor  is  to  design,  finance, 
build, technically operate and commercialise the infrastructure. The Contractor also acts as an Internet 
access provider alongside other potential providers. 

The  Auvergne  Regional  Council  is  the  Managing  Authority;  it  defined  and  published  the  notice  for  a 
competitive public tender and led the competitive dialogue which requested the bidders to make one 
proposal  for  several  provisions  (one  lot  for  several  provisions):  Design,  Financing,  and  Building; 
Technical  operating;  and  Commercialisation  of  electronic  communication  services  on  behalf  of  the 
Auvergne Region.  

A  Selection  Committee  set  up  by  the  Auvergne  Regional  Council  evaluated  and  selected  the 
proposals according to the criteria mentioned in the tender and through several rounds of dialogue. 

Digital Region, South Yorkshire, UK 

The network is fully publicly owned. The network operating company, Digital Region Limited, is run as 
a not-for-profit organisation, with the board consisting of the regional development agency (Yorkshire 
Forward) and members of each of four city councils. The funding model (100% public ownership of the 
network) was chosen partly due to a view that there was a lack of other viable options, given the lack 
of market interest in the region.  

 
 
Guide to broadband investment | E–6 

The project is purely publicly funded and so 100% owned by the local authorities. However, the project 
also  includes  a  revenue  sharing  agreement  with  the  company  which  built  and  now  manages  and 
operates the project (Thales). It should be noted that Thales does not hold any equity in Digital Region 
Limited. 

The  public  procurement  was  led  by  local  authorities,  and  went  through  the  normal  processes  of 
securing  State  aid  clearance.  A  large  amount  of  information  was  required  during  a  long  iterative 
process – however, this did help to focus on the project aims. 

The  tender  was  won  by  a  consortium  led  by  Thales  (and  including  Kingston  Communications  and 
Alcatel–Lucent),  whose  skills  and  experience  were  considered  the  best  fit  for  the  project’s 
requirements. 

Originally  a  management  team  sat  underneath  the  board  ,to  oversee  contact  with  the  network 
operator,  Thales,  who  in  turn  managed  any  sub-contractors.  Now  Digital  Region  and  Thales  form  a 
joint team at management level. This collaborative approach has speeded processes up by removing 
a layer of bureaucracy. 

E.4 

Joint venture model (and examples of partnering) 

Lombardia, Italy 

The structure of the investment has not yet been defined; but based on the currently available public 
documents, Lombardia region will act as an enabler, mediator and facilitator of investor interests, with 
a neutral role in intermediation and management. 

The  project  foresees  the  creation  of  a  holding  which  manages  a  number  of  local  SPVs;  the 
mechanisms for participation illustrated in the figure  below  vary according to how  partners decide to 
participate in the equity (i.e. swapping cash, assets, infrastructure, and/or equipment for equity): 

Base 
hypothesis

Initial equity will be financed by FinLombarda 
(part of Lombardia region) and also by exploiting 
public or community funds

Possible 
participations

Managed through a 
build–operate–transfer 
(BOT) model

Partners

Subsoil 
operators and 
municipalities

National 
telecoms 
operators

Suppliers and 
OEMs

Institutional 
investors

Debt 
~70%

Equity
~30%

Holding

Possible 
participations

Cash

Asset 
infra-
structure

r 
s fo
ism
n
a
h
c
e
M

n
tio
a
rticip

a
p

SPV 1

SPV 2

…

SPV 8

Equipment

-

(cid:43)

-

(cid:43)

(cid:43)Transfer

agreement
to be defined

-

(cid:43)

-

(cid:43)

Figure E.1: 

Ownership and financing structure of Progetto Lombardia [Source: Analysys 

Mason based on public data] 

Institutional  investors  include  all  suitable  lenders,  such  as  (investment)  banks  and  (pension)  funds. 
Subsoil operators are all organisations which have underground networks for their business (e.g. the 
tube company, the gas company, the sewer company (if not owned by the municipality)). 

 
 
Guide to broadband investment | E–7 

The  SPVs  will  have  a  remit  which  is  primarily  defined  by  geographical  area.  Every  SPV  will  have 
ownership  of  planning,  realisation,  wholesale  commercialisation,  provisioning  and  maintenance 
activities:  this  means  that  it  will  own  all  processes  related  to  planning,  construction,  provision  and 
maintenance of the dark fibre infrastructure (i.e. excluding civil infrastructure). 

Total estimated investment is EUR1.0–1.4 billion, with an estimated realisation time of 5 to 7 years. 

The  philosophy  of  Progetto  Lombardia  aligns  with  the  terms  of  a  Memorandum  of  Understanding 
(MoU),  signed  between  the  Italian  government  and  main  Italian  telecoms  operators.  The  main 
principles of the MoU relating to the management and ownership model are: 

– 

– 

– 

use of the public–private partnership (PPP) model to realise the passive infrastructure needed to 
deploy the next-generation network (NGN) 

the  sharing  of  planning  and  financing  activities  for  the  realisation  of  passive  infrastructure 
between the central government, telecoms operators, local public authorities (especially Regions) 
and public and private financial institutions 

the definition and management of local initiatives at the operating level are delegated to Regions, 
as already happened with Lombardia region for Progetto Lombardia. 

Regarding service management, Progetto Lombardia will have an independent infrastructure manager 
which provides access to dark fibre to operators on an open-access/neutral-net basis. Final decisions 
and amendments to this general framework are subject to two main issues: 

– 

– 

the role and involvement of the incumbent, Telecom Italia in these projects 
(which in turn could affect) 
the actual ownership structure of the new holding company. 

The participation of Telecom Italia (TI) also affects the evolution of possible scenarios: 

– 

– 

total  replacement:  if  TI  participates  in  Progetto  Lombardia,  the  existing  copper  network  will  be 
switched off (which is already planned for the Milan municipality by 2015) and all remaining users 
will be migrated to the fibre infrastructure 

overlay: if TI does not participate in Progetto Lombardia, the existing copper  network  is likely to 
continue  in  operation  with  only  some  of  the  remaining  users  being  migrated  to  the  fibre 
infrastructure. 

Midtsoenderjylland, Denmark 

The investment featured the deployment of a fibre ring connecting four local city halls. 

Following  the  installation  of  the  core  ring,  discussions  were  held  with  Syd  Energi,  which  felt  that  if  it 
could supply electricity to rural areas  it could just as easily  supply FTTH. A large storm in 1999 had 
destroyed  a  large  portion  of  Denmark’s  overground  electricity  network,  meaning  that  local  electricity 
companies were slowly migrating much of their electricity network underground. This gave Syd Energi 
a  good  opportunity  to  install  the  fibre  at  the  same  time  as  it  installed  the  new  electricity  cables.  To 
operate  this  network  it  agreed  to  rent  the  backbone  of  its  network  from  the  municipalities,  until  such 
time as its own backbone network was ready. 

 
 
 
Guide to broadband investment | E–8 

The  electricity  company  and  local  municipalities  had  a  common  interest  and  so  set  up  a  less  formal 
agreement  rather  than  a  contract  (as  it  included  no  details  of  financial  recourse)  which  allowed  the 
electricity company to use the publicly funded fibre backbone. Denmark has a strong tradition of co-
operative  companies,  so  the  municipalities  were  used  to  working  with  the  organisational  structure  of 
the  electricity  company.  Overall  this  partnership  led  to  the  municipalities  paying  only  1%  of  the  total 
network costs, with private investment funding the remaining 99%. 

Piemonte, Italy 

An arrangement was made between the Managing Authority and the incumbent to attract investment 
to the area. The incumbent committed to upgrading a large number of exchanges at a cost of around 
EUR50  million,  with  the  region  agreeing  to  provide  an  equivalent  value  of  resources  in  kind  through 
developing services: e-health, telemonitoring, etc. 

A  further  partnering  arrangement  was  created  for  the  operation  of  the  newly  created  Internet 
exchange, to ensure that management of the exchange is seen as neutral. It was felt to be important 
that telecoms companies were included, to ensure that companies felt the exchange was run in a way 
that  considered  their  interests.  The  exchange  is  now  self-funded  through  member  fees  and  requires 
no additional public funding. 

In  order  to  maintain  control  of  the  consortium  the  public  has  the  majority  stake  (51%),  and  tight 
governance arrangements are followed. 

Digital Region, South Yorkshire, UK 

As described in Section 5.3 above, the network operating model for Digital Region represents a form 
of partnering arrangement. 

The network operating company, Digital Region Limited, is run as a not-for-profit organisation, with the 
board  consisting  of  the  regional  development  agency  (Yorkshire  Forward)  and  members  of  each  of 
four city councils. The project also includes  a revenue sharing agreement  with Thales (the company 
which built and now manages and operates the project). 

Originally a management team sat underneath the board to oversee contact with the network operator, 
Thales who in turn managed any sub-contractors. Now Digital Region and Thales form a joint team at 
management  level.  This  collaborative  approach  has  speeded  processes  up  by  removing  a  layer  of 
bureaucracy.  

E.5 

Public DBO model 

Midtsoenderjylland, Denmark 

In  2003,  an  opportunity  arose  when  four  municipalities  (including  Vejen)  decided  to  collect  their  ICT 
together into a centralised hub. To do this required a fibre connection between the four city halls, but 
the  incumbent  quoted  a  very  high  price  to  provide  this  and  the  municipalities  decided  to  create  the 
network  themselves.  A  standalone  business  case  was  developed  to  link  up  the  ICT  of  the  four 
municipalities.  

The  tender  for  installing  the  network  was  offered  to  seven  different  companies,  with  the  final  offer 
being judged on both best economic and technical value. It was specified that the tender was for 48 
fibres, but few other details were specified, to try and allow for creativity. 

 
 
 
Guide to broadband investment | E–9 

Several of the final bids were similar to the winning bid, with one having the same overall price. This 
bid, however, involved the electricity company owning the fibre and renting it back to the municipality, 
and was rejected as the municipalities wanted to own the whole ring (to ensure security of price and 
allow  for  more  flexibility  in  the  future).  This  turned  out  to  be  useful  as  it  allowed  additional 
municipalities  to  join  the  project  later  in  2006,  during  preparations  for  reorganisation  of  the  Danish 
municipalities and regions in 2007. 

The municipality now owns and operates the ring  –  with a repair contract taken out  with an external 
company.  Spare  fibres  are  rented  out  to  and  operated  by  external  companies,  but  the  fibre  used  by 
the public network is seen as part of the cities’ ICT networks and so is looked after by the cities’ ICT 
administrators, to ensure they have control over how it is used. The general access network is owned 
and operated by the electricity co-operative. 

The agreement to rent the dark fibres had to be priced at the accepted market level as it was against 
Danish law (and EU State aid rules) to disturb the market by subsidising FTTH, or to give preference 
to  one  company  over  another.  However,  given  the  extra  competition  created  by  this  project  the 
incumbent’s fibre prices dropped to approximately one third of their previous level. In addition, external 
companies rented shared space within the ducts (which they used to add additional fibres), and they 
are paying for that access over a ten-year period. 

Piemonte, Italy  

The  Piemonte  project  included  a  range  of  broadband  investments,  which  were  primarily  publicly 
funded: 

–  A  new  regional  Internet  exchange,  built  with  public  funds.  Operations  are  undertaken  by  a 

public/private consortium (with the public owning 51% to maintain control) 

–  A regional backbone with cloud computing infrastructure at regional nodes, built with public funds. 
Public traffic is operated by CSI (the organisation that operates Piemonte’s public administrative 
ICT systems); private traffic is operated by the exchange consortium 

– 

700km  of dark fibre primarily to commercial premises (e.g. industrial areas and offices) but also 
locations of public interest, built with public funds. Access to the dark fibre is managed by a third-
party wholesaler, selected through public procurement 

–  A  public-sector-only  wireless  network,  built  with  public  funds.  The  initial  constraint  on  public-
sector-only traffic was due to licensing constraints, but this inspired parallel private investment at 
a later date 

–  Public investment in new services (e.g. e-health, tele-monitoring, tele-control), in return for which 

the incumbent upgraded a number of exchanges in the area to DSL. 

Most of the above investment was entirely publicly funded. This was done initially due to a low level of 
interest  in  the  area  among  private  telcos.  This  can  be  seen  by  comparing  the  economic  value  in 
different areas of Piemonte: for example, Turin accounts for around 90% of the region’s economy but 
only  50%  of  the  population,  making  it  a  far  more  attractive  prospect  for  private  companies  than  the 
more  rural  areas.  This  is  reflected  in  the  fact  that  the  Turin  exchange  currently  carries  20Gbit/s  of 
traffic: ten times the average traffic on a regional node of the Piemonte backbone.  

However, after a few  years the private sector started becoming more  involved in the project, though 
there was still a bias towards the more urban areas. It was felt important by the Managing Authority to 
make sure the project worked with the market rather than against it. 

 
 
Guide to broadband investment | E–10 

Overall the public sector funded 60–70% of the overall infrastructure cost, as the incumbent joined the 
project later on by making a commitment to upgrade a large number of exchanges at a cost of around 
EUR18 million.  This  was  done  in  return  for  the  region  agreeing  to  provide  an  equivalent  value  of 
resources in kind by developing services such as e-health, telemonitoring, etc. 

The procurements were structured into a series of lots, with the provinces split into roughly balanced 
values  in  terms  of  the  potential  commercial  return.  There  were  two  main  calls  for  proposals:  one 
focused on the fibre network and equipment for the backbone linking cities (with an estimated payback 
period of 15–20 years); the second call focused on laying around 700km of dark fibre, a combination 
of  new  fibre  (using  existing  ducts)  and  existing  fibre  (15–20%,  which  came  from  the  incumbent’s 
underused  fibre,  with  ownership  transferred  to  the  Piemonte  region  or  CSI).  The  incumbent  was 
awarded more points for using more existing fibre and won several of the lots.  

As the project was initially fully publicly funded, tenders were run using public procurement procedures 
– and because CSI itself is public owned it was also subject to public procedures. 

RAIN project, Lithuania 

Across  most  of  Lithuania  there  is  sufficient  last-mile  infrastructure  for  broadband,  but  the  necessary 
core/backhaul network infrastructure and capacity are missing. The investment need is large and it is 
felt  it  would  be  carried  out  inefficiently  if  split  among  providers.  It  is  envisaged  that  the  project  will 
connect  public  services  to  rural  broadband  network  hubs  and  allow  private  users  to  connect  in  rural 
areas, thus helping to complete the national broadband strategy. 

Three management models were considered for the infrastructure: 

1  A collection of up to ten operators, one from each region, which provides wholesale services 
2  The  creation  of  a  public  management  company  which  provides  wholesale  services,  where  the 

introduction of new services and infrastructure maintenance is outsourced 

3  A private company, which manages and uses the network to provide wholesale services. 

Two main problems were identified: the monopoly situation created under the last two models and the 
difficulty of ensuring that only wholesale services were offered under the first and third models (both of 
which may increase prices for users). Within Lithuania, the legal basis exists to control the monopoly 
situation  (and  would  be  especially  easy  under  model  2);  however,  it  is  very  difficult  to  prevent  any 
private  enterprises  from  providing  services  to  the  bulk,  individual  and  vertical  service  markets  at  the 
same  time.  It  was  therefore  decided  to  go  with  the  second  management  model.  To  this  end  a  non-
profit  organisation,  controlled  by  the  state,  was  formed  to  perform  the  exclusive  functions  of 
infrastructure management and control of the provision of services. 

The state founded a non-profit public enterprise (Public Enterprise Plačiajuostis Internetas (PEPI)), to 
implement the project and manage the new infrastructure. All the assets and infrastructure belong to 
the state. Technology-neutral infrastructure is provided for institutions and end-user service providers 
to use (open access). 

 
 
Guide to broadband investment | E–11 

End users 

Customer  
Services 

Bulk operator of the RAIN 
network 

Bulk services 

PEPI 

Companies for the 
performance of 
maintenance works 
of the RAIN network 

Individual service 
providers 

Individual service 
providers 

Individual service 
providers 

Individual service 
providers 

Figure E.2: 

Service provision diagram [Source: RAIN Project]  

In  order  to  avoid  market  distortions,  PEPI  controls  the  network  but  does  not  provide  services  to 
individual users. It is intended that the infrastructure will encourage providers of broadband services to 
invest in connecting users in rural territories. 

It is important that PEPI is non-profit as it means service charges are based only on costs necessary 
to maintain the RAIN network. The chosen management model aims to maximise total investment by 
providers  in  order  to  provide  the  opportunity  for  users  to  choose  among  services,  providers  and 
technologies.  

Procurement tenders of fibre-optic lines were structured geographically, with one tender for each two 
administrative  regions  (ten  in  all  in  Lithuania).  In  total  there  were  five  tenders  for  fibre-optic  lines. 
Tenders  for  network  equipment  were  structured  by  equipment  type:  data  transmission  equipment, 
WDM equipment, network management systems and so on. 

The  tenders  were  evaluated  differently:  some  by  smallest  price,  others  by  economical  usefulness, 
depending on the complexity of the tender. The prices that were proposed during the tender were very 
close to the planned prices in the budget of the project. 

STOKAB, Sweden 

The  city  paid  the  initial  set-up  fees  (EUR5000),  but  after  this  there  was  no  public  investment  in  the 
company.  Following  its  creation,  STOKAB  applied  to  a  bank  for  a  commercial  loan  and  used  this  to 
start  the  network.  The  profits  from  STOKAB’s  business  are  reinvested  to  expand  the  fibre  network, 
and  if  STOKAB  stops  investing  the  money  it  is  legally  required  to  reduce  the  price  it  charges 
customers for fibre. 

The  municipality  of  Stockholm  chose  this  model  as  it  was  felt  that  all  other  methods  would  have 
required  a  telecoms  partner,  which  may  have  created  conflicts  of  interest  which  would  stifle 
competition. 

 
 
 
 
 
Guide to broadband investment | E–12 

STOKAB  runs  the  backbone  and  access  network  (essentially  a  fibre  meshed  network)  only,  and 
provides  no  services  to  end  users.  Once  STOKAB’s  customers  have  rented  the  dark  fibre  they  can 
use it for any purpose. In addition, all of STOKAB’s investment is made in response to demand from 
customers; so STOKAB knows it will not build dark fibre that will be unused.  

Initially STOKAB’s main customers were large businesses (for example, banks that required their own 
secure networks), however it quickly expanded into supplying broadband-intensive businesses, before 
moving onto SMEs and finally apartment blocks and housing. 

To  save  money  there  was  some  re-use  of  ducts.  Several  agreements  were  made:  first  with  a  cable 
company  (owned  by  the  city),  then  with  Stockholm’s  private  subway  company,  and  with  the  local 
electricity  companies.  However,  it  was  felt  that  this  re-use  was  limited  due  to  the  different  type  of 
network design and infrastructure required for fibre compared to other utility networks. 

It  was  highlighted  that  STOKAB  received  no  special  help  from  the  municipality,  and  had  to  pay  the 
same  price  for  digging  up  the  streets  as  other  operators.  In  addition,  because  of  the  hands-off 
approach taken by the municipality no State aid or competition regulations needed to be considered. 

STOKAB  has  many  different  types  of  customer,  covering  all  sizes  and  businesses.  The  main 
operators that work with STOKAB do so under a framework developed over time between them and 
STOKAB. This  framework  helps  ensure  that  STOKAB  builds  in  the  areas  they  most  need  and  helps 
maximise  utilisation  of  the  STOKAB  network.  The  smaller  customers  send  STOKAB  a  request  and 
STOKAB  gives  them  a  quote.  A  key  point  is  that  no  matter  how  small  an  organisation  is,  it  always 
receives the same contractual terms and price as the larger customers. 

STOKAB uses fibre patch panels as the handover points to customers. STOKAB will supply a patch 
cable  into  a  space  owned  by  the  customer.  It  was  explained  that  STOKAB  does  not  build  vertical 
networks  within  multi-dwelling  buildings.  To  date,  both  FTTH  and  fibre-to-the-building  (FTTB)  style 
access have been installed, but the current trend is moving towards FTTH, driven by the city’s largest 
housing company. 

In Sweden it is felt that public companies such as STOKAB should aim to do as little as possible that 
could  have  been  undertaken  by  the  private  market.  This  meant  that  STOKAB  tried  to  outsource  / 
procure  as  much  as  possible,  and  had  to  follow  the  usual  procurement  rules.  The  procurement  was 
split into two parts: one tender for the digging and the other for the production of fibre to a particular 
technical specification. 

All  of  STOKAB’s  procurement  is  undertaken  under  a  ‘procurement  framework’  that  was  created  (for 
both  deployment  and  management  of  the  network).  A  number  of  subcontractors  are  awarded 
preferred  status  and  then  these  subcontractors  are  allowed  to  bid  for  each  tender.  However,  it  was 
noted that when STOKAB started, fibre was such a new technology that in certain cases STOKAB had 
to educate the contractors about how to install it properly. 

A  building  co-ordination  procedure  exists  in  Stockholm  to  try  and  ensure  that  building  works  are 
synchronised. This allows STOKAB to install fibres at the same time as other companies are digging 
trenches  throughout  the  city.  The  city  set  up  this  procedure  because  it  thought  it  would  be  both 
cheaper and less disruptive for the city if all digging works were condensed into as short a period as 
possible. 

Alto Adige, Italy 

The  Alto  Adige  fibre  broadband  project  is  to  be  fully  funded  by  the  public  administration  of  Bolzano, 
which is the owner and operator of the infrastructure. The administration will then then rent part of its 
capacity  to  the  telecoms  operators  to  provide  broadband  connections  to  the  local  premises  and 
businesses. 

 
 
Guide to broadband investment | E–13 

The  Italian  regulator  is  not  directly  involved  in  this  project.  The  only  entity  which  regulates  this  fibre 
roll-out project is the Bolzano local Council.  

The Bolzano local Council carried out all necessary technical and economic valuations and also took 
care of the network design and the procurement phase. 

In particular, although not directly involved in the execution of civil works, the local municipalities have 
a role in gathering information and co-ordinating with all other entities that are present in the area to 
improve the scheduling of future works. 

All  suppliers  involved  in  this  project  have  been  shortlisted  and  selected  through  a  combination  of 
public tenders (in particular when the amount of work and therefore the investment is significant) and 
through selection from a sample of pre-qualified suppliers which have previously worked for the local 
Council on other projects. 

The critical success factor which enabled both the previous and the current project to be completed on 
time  and  meet  all  of  their  targets  is  the  centralisation  of  the  responsibilities,  management  and  co-
ordination of the network within a single entity (i.e. the local Council). In fact, this was believed to have 
been paramount in avoiding duplication of activities (whether paper based or actual civil works). 

 
Guide to broadband investment  |  F–1 

Annex F  Demand activities from example projects 

This  annex  includes  extracts  from  interviews  with  example  project  stakeholders,  which  describe 
the demand activities from example projects. 

OnsNet, Nuenen, Netherlands 

Before  the  project  broadband  demand  was  estimated  to  be  in  the  region  of  30%.  In  order  to  create 
demand the project undertook an ‘education programme’, showing people that fibre is useful, focusing 
on how it enhances quality of life (especially for the elderly), rather than emphasising the technology. 
The  range  of  services  that  FTTH  brings  was  also  emphasised,  with  a  key  focus  on  communication, 
such as video calling relatives, remote attendance at church services and e-health style facilities. On 
completion of the project around 50% of the people were thought to have bought new wireless routers 
or new computers. 

On  creation  of  the  co-operative  85%  of  the  population  signed  up  with  a  six-week  period  of  demand 
aggregation, showing that there was real demand once the project was started. 

Rural Development Programme, Sweden 

When  the  project  was  started  the  Board  of  Agriculture  had  almost  no  picture  of  the  demand  and 
worried  that  it  would  be  unable  to  find  sufficient  demand  from  local  communities  to  get  the  grant 
money  working  efficiently.  However,  on  initiation  of  the  project  it  was  found  that  demand  from  local 
communities was actually much higher than anticipated: applications became so strong that the initial 
tranche of funding was allocated within only a year.  

Following  this  initial  round  of  funding,  the  government  has  given  additional  money  on  a  temporary 
basis,  and  EUR15  million  has  been  redistributed  by  the  county  administrative  boards  towards 
broadband projects. The counties have also applied to the government for more funding to try to meet 
the significant unfulfilled demand. 

One of the key lessons learned from the project  was the importance (and difficulty) of establishing a 
clear picture of the actual demand at the outset of a project. Having a clear picture would have allowed 
a redistribution of funding from other government sources to occur much earlier in the process.  

DORSAL, France 

Demand  was  considered  as  part  of  the  initial  study  undertaken  prior  to  the  project,  which  sought  to 
determine the needs of individuals and enterprises in the Limousin region in terms of broadband, and 
how these could be satisfied.  

The  initial  speed  requirements  estimated  in  2004,  and  for  which  the  network  was  designed,  were  a 
minimum  of  10Mbit/s  symmetrical  for  enterprises  and  a  minimum  of  1Mbit/s  asymmetrical  for  end 
users.  It  is  felt  that  these  speeds  are  no  longer  sufficient,  due  to  rapid  developments  in  technology. 
However,  the  technology  used  to  build  the  core  network  is  future-proofed  as  it  can  cater  for  higher 
speeds and allows for upgrades.  

 
 
 
 
Guide to broadband investment | F–2 

Piemonte, Italy 

At the beginning there was a lack of visible demand, with broadband penetration at around 25%. Now, 
however, there is 60% Internet utilisation  with only 2% of the population using narrowband. The fact 
that  40%  of  the  population  is  not  using  the  Internet  is  attributed  to  the  large  elderly  population.  This 
has led to the development of ‘black-box solutions’, especially in areas such as e-health, so that end 
users do not need to interact with PCs. 

In  terms  of  the  new  Internet  exchange,  from  the  start  of  the  project  the  exchange  was  open  to 
everyone, not just telcos, and currently it is used by a range of vendors, telecoms operators and public 
organisations. A survey is run every year to monitor current demand at the exchange. 

Furthermore, the public consortium invested in new services to create demand for Internet connectivity 
(such  as  e-health,  tele-monitoring  and  tele-control).  In  return  for  this  investment,  the  incumbent 
committed to invest in the upgrade of a large number of local exchanges. 

Midtsoenderjylland, Denmark 

There  are  three  examples  on  the  project  of  how  demand  had  emerged  following  the  fibre  network 
installation: 

–  Farms which need good ICT infrastructure to store/transfer information on cattle IDs etc. now use 

the fibre network to back up this information securely. 

–  A car  wash company that previously had slow ADSL now uses its fast fibre connection to allow 

the owner to manage the site remotely using video cameras. 

–  An  architect  in  a  rural  area  is  now  able  to  transmit  his  digital  drawings  quickly  and  efficiently  to 

central offices/clients, and so can sustain his rural practice. 

North Karelia, Finland 

It was felt that having knowledge of the demand in a region was a key factor in any telecoms operator 
decisions, and therefore important to understand before a project is started.  

For  the  eRegio  project,  the  actual  demand  was  not  measured,  but  instead  calculated  using  the 
estimate that 50% of people would be interested in signing up initially and more would join the project 
at  a  later  date.  With  this  estimate  a  demand  figure  could  be  calculated  just  using  the  Regional 
Council’s population data. 

In  the  new  project  surveys  are  run  to  check  the  demand  before  construction  starts  in  each  area. 
However, as only estimates of price can be used to gauge demand, the actual demand realised may 
vary if the actual price is different from the estimate. The real demand is only seen once the project is 
underway, with the ‘excavators on the ground’ effect that was highlighted earlier. 

 
 
 
 
Guide to broadband investment | F–3 

South Yorkshire, UK 

The  project  had  a  reasonable  understanding  of  demand  due  to  the  amount  of  research  undertaken 
before the project began. This was largely due to the State aid process, which required a large amount 
of  information  to  be  delivered  during  a  long  iterative  process.  It  was  felt  that  this  process  had  the 
added bonus of helping to focus the aims of the project. 

The  Digital  Region  project  had  planned  many  demand  creation  projects;  however,  following  the 
economic  downturn  and  a  shift  in  UK  governmental  policy,  there  was  a  reduction  in  the  budgets  of 
Regional Development Agencies (RDAs) and they were later abolished. 

This  has  meant  that  many  demand-side  programmes  did  not  come  to  fruition  as  originally  planned. 
The  newly  created  Local  Economic  Partnerships  (LEPs)  (which  replaced  the  RDAs)  have  started 
looking at demand programmes themselves, but it is still too early for any demand projects to have re-
emerged. 

RAIN project, Lithuania 

In  order  to  determine  the  need  for  broadband  in  Lithuania’s  rural  areas,  a  survey  was  carried  out, 
allowing the municipalities to help estimate the need in all of the country’s rural areas. The results of 
the  survey  show  that  there  are  more  than  11 000  organisations  in  the  country’s  rural  areas,  which 
would  want  to  connect  to  a  broadband  network.  A  significant  proportion  of  them  (about  19%)  were 
various businesses, including large farms, rural tourism and other types of business. About 15% of the 
identified organisations in rural areas were educational establishments. A large part, about 13%, were 
healthcare  establishments  and  another  11%  of  the  identified  organisations  in  rural  areas  were 
libraries. 

About  1200  libraries  in  rural  areas  are  participating  in  the  Libraries  for  Advancement  project.  The 
project aims to: make it possible for every resident of Lithuania to use computers and the Internet free 
of charge in all public libraries; and  encourage residents to make active use of this  opportunity. The 
Ministry of Culture has provided a list of libraries where a strong need for broadband communications 
has been identified. 

In order to accurately estimate the demand for, and ensure the provision of, broadband in rural areas, 
the operators provided a list of infrastructure that could be used to provide services to end users. The 
operators  also  agreed  to  allow  third  parties  (other  operators)  to  place  equipment  necessary  for  the 
provision of the services in objects that will be connected to the infrastructure of the RAIN network. 

Auvergne, France 

The identification of the lines which  were unable to receive broadband Internet  was technical, based 
on  data  purchased  from  the  incumbent  operator.  The  technical  data  was  compared  with  the 
complaints from end users and public officials.  

A  website  was  also  created  to  present  the  project  and  to  inform  the  inhabitants  on  deployment 
progress, commercial opening dates, and the available Internet providers. 

 
 
 
 
Guide to broadband investment | F–4 

STOKAB, Sweden 

The majority of demand was driven by the operators. Outside of this, a lot of demand was driven by 
outsourced ICT networks for business. In addition, the city holds activities to teach IT skills to people 
who are not used to using the Internet. 

STOKAB  only  builds  its  networks  in  areas  to  which  its  customers  wish  to  expand,  and  so  a  small 
proportion of the demand risk is shifted to the customers. 

Lombardia, Italy 

Regione  Lombardia  plans  to  stimulate  demand  for  superfast  broadband  by  developing  targeted 
services by demand type (Public Administration (PA), businesses, private users), by creating initiatives 
to promote digital service use and by making a larger number of PA documents available online. 

Investments  will  also  be  made  to  digitalise  and  centralise  services  on  one  regional  system.  Finally, 
ICT-producing  sectors  will  be  strengthened  and  collaboration  between  businesses  aimed  to  improve 
ICT education will be enhanced. 

Alto Adige, Italy 

The fibre roll-out has been sized to prioritise the provision of services to remote areas which are not 
covered by fibre. In particular, the network has been designed to take account of businesses seeking 
fibre network connectivity first (including touristic areas).