FITCE 2011

ETNO Executive Board Chairman, Luigi Gambardella, spoke at the FITCE 2011 Conference.

Intervention by Luigi Gambardella
ETNO Executive Board Chairman

• First of all, let me thank the Forum for European ICT and media professionals, for inviting ETNO to speak at your Congress here in Palermo.
• Bridging the digital divide, which is not only geographical but also social, is a pre condition for Europe to benefit from the Internet economy. It has always been a key priority for ETNO. ETNO members, through their investment in new networks and their e-inclusion and digital literacy initiatives, are addressing both the social and geographical ones. 
• Regarding first generation broadband, at the end of 2010, DSL access was available to 95.3% of the EU population, up from 94.4% one year earlier. DSL coverage in rural areas on the other hand reached 82.5% of the rural population.
• As highlighted in the first EU Digital Scoreboard released last June, trends in fixed and wireless coverage between 2005 and 2010 suggest that the 2013 target of providing all EU households with a basic broadband connection, will be achieved, through a combination of fixed and wireless platforms.
•  ETNO members have played an important role to achieving this objective, by bringing broadband connectivity to populations in non-densely inhabited areas, for example in the form of public-private partnerships.
•  Moving to fast and ultra-fast networks, the 2020 broadband targets of the Digital Agenda – providing all households with at least 30 Mbps and half of them with up to 100Mbps – represent however an even more challenging target, in particular for less profitable areas.
• Investment in fibre to the home or to the building (FTTH/FTTB) is held back by uncertainty around demand and the willingness of the consumer to pay a premium as well as by the high costs involved in particular for civil works and in-house wiring. Investment in upgraded cable networks and VDSL fibre networks, which are less costly to deploy than FTTH, is meanwhile progressing in a number of EU markets.

• How to boost the deployment of fast and ultra-fast networks was one of the main objectives of a CEO Round Table initiated by Commissioner Kroes earlier this year, in which leading players of the Digital Economy were involved.
• In the recommendations presented at the closing meeting on July 13th, CEOs reiterated that the goal of deploying fast and ultra-fast networks should be faced wherever possible by private forces.
• ETNO believes that investments needed to deploy broadband infrastructure – ie,  for the upgrade of traditional networks and for the deployment of new, NGNs -- should come primarily from the private sector wherever commercially viable, to avoid any distortion of competition.  As a general rule, the use of public funding may be useful in those cases where commercial plans of private companies are not in place in order to bring broadband and all the related social and economic benefits to remote white areas.  In other words, public funding should never crowd-out private investments.

• Public authorities have also a key role to play to encourage private investments by reducing civil works costs and stimulating consumer demand for new services.
• Our members are committed to the ambitious targets of the Digital Agenda for fast and ultra-fast broadband infrastructure and contribute to meeting the targets either through own deployments, in cooperation with other private partners or in private-public partnerships, as best adapted to market needs and realities.
• For instance, in Italy, Telecom Italia signed a partnership with the Autonomous Province of Trento for the deployment of a NGN that aims to provide broadband fibre-optic access to over 150.000 customers, which is about 60% of the whole province population. The investment will be achieved through the public-private partnership instrument, creating a Special Purpose Entity with a €60 million capital. This is the first time that an entity is established to carry out a NGN infrastructure in Italy.
• But there should certainly not be a one size fits all solution. Any approach to NGA should closely reflect the local market and competition realities.
• Co-investment is certainly one valid option and it is already happening in some countries, for instance in the Netherlands or more recently in France. Such cooperation models should be driven by the market needs of the players involved and reflect local realities.
• On the contrary, to impose such models against the interest of players in the market or to force a change in the structure of the sector would risk putting investment on hold for the foreseeable future.
• Defining the best framework for broadband network deployment should not be disconnected from the overall trends and economic development of our sector.
• Despite an overall increase in data traffic volumes and broadband take up, revenues of telecoms operators are declining, endangering their capacity for investment. The overall growth of the telecom sector in Europe is negative in 2009 and 2010. Revenues for the EU electronic communications sector were down from €350 billion in 2008 to €332 billion in 2009.
• As recognised by the Commission in its Scoreboard, “the evolution of the access revenues from access to the network is in sharp contrast with the increasing revenues coming from activities taking place within the network themselves...”.
• Traffic data is increasing by 100% over mobile networks and 35% over mobile networks, mainly driven by Over the Top Applications and increased usage of new mobile devices allowing access to bandwidth hungry applications.
• And at the same time, there is increasing pressure from alternative operators to reduce wholesale access prices, which will surely flow-through to even lower retail broadband access subscriptions.
• To conclude, let me insist that ETNO members believe that an investment recovery is possible – under the right conditions.
• First of all: the overall sustainability of the current economic model of the Internet needs to be addressed. We need to find a new equilibrium which would encourage all players of the value chain to contribute to the challenges ahead. The approach adopted so far by the European Commission to allow new business models to emerge from market players is an important prerequisite for a sustainable internet model.
• Secondly, in line with new instruments included in the revised EU Directives, the Commission and BEREC, through the new notification process, should encourage national regulators to make full use of the more proportionate and targeted regulatory instruments:
  •  regulators should take into account varying competitive situations within different geographic areas in a member state;
  • They should apply appropriate symmetric obligations for all NGA investors to provide a level playing field and ensure choice for all end-users;
  • Regulation must allow for more flexibility in pricing access to NGA networks as well as mechanisms for investors and access seekers to share the risks of NGA roll-out.
  • During the transition period to new fibre networks, the price of current wholesale access products should remain predictable and consistent with current regulatory practice.
  •  A study by Plum recently carried out for ETNO, demonstrated that artificially reducing wholesale access prices for copper broadband networks would undermine the NGA investment case, inter alia by discouraging consumers to take up high speed broadband.

• Finally, achieving the Digital Agenda targets and bridging further the digital divide, will require a mix of technologies. Mobile broadband networks will play a key role in many areas, in particular in remote and rural areas.  The opening of the digital dividend frequency bands to mobile services will accelerate the deployment of broadband networks in rural and remote areas. This band would require four times less investment than in higher bands and require up to three times less base stations.
• This is why ETNO relies on the European Parliament and the Council to support a swift adoption of the Commission decision on the Radio Spectrum Policy Programme, to open up the digital dividend band to mobile services and identify additional spectrum capacity.
• Achieving the objectives of the Digital Agenda is not only essential for the sector. It is a driver of the EU economy as a whole and it is a key instrument to realise the vision of the EU 2020 Strategy. 2020 is already tomorrow so it is urgent we find the right approach, with the involvement of all players. ETNO members are keen to continue playing their role.
• Thank you for your attention.

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