No. 80 - Broadband for All
Communications & Strategies - 04/11/2010
4th quarter 2010
All over the world, internet access is becoming a societal expectation expressed towards the electronic communications industry and the public authorities which regulate this industry. As our personal and professional lives become ever more digitalised, broadband access is becoming the key to full participation in this digital life and future economic growth. Societal e-inclusion implies the widest possible availability of broadband access.
The papers presented in this issue illustrate different aspects of this growing demand.
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Dossier
Broadband for All
Edited by Ken DUCATEL & Marc LEBOURGES
Introduction
By the Editors
General Overview of Broadband Markets
Didier POUILLOT
Papers
Broadband Universal Service in Europe:
A Review of Policy Consultations 2005-2010
Erik BOHLIN & Orada TEPPAYAYON
From the "Broadband Ditch" to the Release
of the 2010 US National Broadband Plan
A short History of the Broadband Penetration Debate in the US
Jean-Paul SIMON
Replacement of the Legacy High-Cost Universal Support Fund
with a Connect America Fund
Key Economic and Legal Considerations
Christian DIPPON, Christopher HUTHER & Megan TROY
Computer Literacy, Online Experience
or Socioeconomic Characteristics
What are the Main Determinants of Broadband Internet Adoption
and Internet Usage?
Joeffrey DROUARD
Interviews
Robert MADELIN, Director General of DG INFSO, European Commission
Cheikh Tidiane M'BAYE, CEO of Sonatel
Other paperThe Effects of Lower Mobile Termination Rates (MTRs)
on Retail Price and Demand
Christian GROWITSCH, J. Scott MARCUS & Christian WERNICK
Features
Regulation and Competition
NGA Regulation
A Rocky Road to the Data Superhighway
Christoph PENNINGS & Tiana RAMAHANDRY
Technical Innovations
Ultra-Broadband via Satellite in Europe and North Africa
What Outlook for the Residential Market?
Maxime BAUDRY, Valérie CHAILLOU & Stéphanie VILLARET
Public Policies
Public Fundings and FTTx
Assessing the Impact of Public Action
Roland MONTAGNE & Valérie CHAILLOU
Book Review
Annastassios GENTZOGLANIS & Anders HENTEN, Regulation and the Evolution of the global Telecommunications Industry
By Johannnes M. BAUER
Author biographies
Future events
26th EuroCPR Conference
Ghent, Belgium – March 27-29, 2011
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Dossier : Broadband for All
Broadband Universal Service in Europe:
A Review of Policy Consultations 2005-2010
Orada TEPPAYAYON & Erik BOHLIN
Key words: universal service obligation, broadband, legislations, public consultations.
Recognition of the growing importance of broadband to the public presents challenges for policy-makers in introducing efficient strategies, not only to serve the increasing demand for broadband among people in society but also to increase their economic contribution both in the short run and in the long run. Different measures and strategies have been implemented in many countries and regions in order to encourage broadband deployment. Among them, the inclusion of broadband in the scope of universal service has been discussed.
In the European Union, the discussion on broadening the scope of the Universal Service Directive (USD) to include broadband has been raised since the first periodical review in 2005. At that time, the European Commission concluded that only a small, although rapidly growing, minority of European consumers currently make use of broadband services. Therefore, the conditions for including broadband services within the scope of universal service as set out in the USD were not fulfilled.
Later, the European Commission launched the second periodical review of universal service in 2008 with the preliminary conclusion that broadband has not yet reached the majority of people, implying that the conditions of the USD for expanding the scope of universal service were not yet fulfilled. However, the public consultation on broadening the scope of the USD to include broadband has been opened since March 2010 and was last on May 7, 2010. In the meantime, the public workshop organized in the context of the public consultation on universal service principles in e-communications was held on March 30, 2010. The workshop provided wide-ranging views on the topic, including an assessment of the cost of broadband availability and also the rapid change of broadband penetration rate throughout Europe.
Against this background, this paper provides an analytical survey of the current state and trends of universal service with focus on broadband access in the European Union. First it presents an overview of broadband deployment and regulation in Europe. Then, it analyzes the USD reviews by taking into account the previous and the recent review, in particular by comparing the discourse evolution of the public submissions from stakeholders in the two consultations. A framework to evaluate broadband universal service will be provided. In conclusion, the paper will identify selected issues regarding broadband universal service in Europe, especially the pros and cons of broadband universal service.
From the "Broadband Ditch" to the Release
of the 2010 US National Broadband Plan
A Short History of the Broadband Penetration Debate in the US
Jean-Paul SIMON
Keywords: broadband, competition, industrial policies, government intervention, universal service, open internet, deregulation, rankings/ benchmarking countries.
The paper provides an historical account of the policy debate that took place in the United States after the 2007 release of the OECD's broadband statistics. It explains why and in what context such a debate occurred (lack of relevant statistics from the FCC, dissatisfaction of some stakeholders with the deregulation of broadband, role of new players). The paper reviews the policy options proposed by the main players to foster the deployment of broadband, among others the potential inclusion of broadband in the scope of the US universal service, the need for a national policy, and implementation/funding issues. It puts into perspective the national broadband plan proposed by the FCC in March 2010.
Replacement of the Legacy High-Cost Universal Support Fund
with a Connect America Fund
Key Economic and Legal Considerations
Christian DIPPON, Christopher HUTHER & Megan TROY
Key words: universal service fund, national broadband plan, connect America fund, universal service economic and legal issues.
On April 21, 2010, the Federal Communications Commission (FCC) released a Notice of Inquiry (NOI) and a Notice of Proposed Rulemaking (NPRM) that seek the public's input on the FCC's effort to replace the legacy high-cost universal service fund (USF) with a broadband "Connect America" fund (CAF). In effect, the FCC seeks to implement cost-cutting measures for existing voice support (USF) and create a new fund (CAF) to support the provision of broadband communications in areas that would be unserved without such support or that depend on USF support for the maintenance of existing broadband service. An initial review of the NOI/NPRM raises a number of key economic and legal considerations. In the following, we identify some of the considerations, questions, and challenges raised by the FCC's USF reform attempt, which is likely to have far-reaching consequences not only for operators that currently rely on USF subsidies or broadband providers in high-cost regions but for the entire communications industry.
The purpose of this note is not to provide an all-inclusive list of, or responses to, the critical questions raised by the NOI/NPRM, but rather to illustrate the complexities of this proceeding and the impact the proposed reforms may have on industry performance. As the CAF is necessary for the success of the FCC's National Broadband Plan (NBP), the policy directions taken by the FCC in establishing it are critically important. USF reform is also essential to the performance and competitiveness of the U.S. communications industry and policy missteps could have serious economic and legal consequences.
Computer Literacy, Online Experience or Socioeconomic Characteristics
What are the Main Determinants of Broadband Internet Adoption and Internet Usage?
Joeffrey DROUARD
Key words: Digital Divide; Broadband Internet Adoption; Internet Usage; Diversity.
In this paper, we analyze the broadband Internet adoption/usage decisions. To this end, we estimate a sample selection model. In the first stage, we analyze whether the individuals have adopted broadband Internet; in the second stage, we analyze the Internet usage diversity given adoption. We show that low income and less-educated people are less likely to have adopted broadband Internet, but they do not have a less diversified Internet usage given adoption. Furthermore, after controlling for a set of socioeconomic factors and the computer skills, we show that online experience is a powerful determinant of usage diversity.
Other paper
The Effects of Lower Mobile Termination Rates (MTRs)
on Retail Price and Demand
Christian GROWITSCH, J. Scott MARCUS & Christian WERNICK
Key words: interconnection, mobile telephony, mobile termination rates, MTRs, price elasticity of demand, retail price, wholesale price, retention.
Policy initiatives to lower or eliminate Mobile Termination Rates (MTRs) reflect the belief that lower MTRs would tend to lead to lower retail unit prices for most end-users, and that these lower retail unit prices would lead to higher consumption of mobile services per user on average. Not all experts agree with this prediction. We review the theory and the literature, consider relevant European experience, and use econometric methods to study the impact of MTRs on retail price and demand for 61 mobile operators from 16 European countries in the period from 2003 to 2008. We find that lower MTRs tend indeed to result in a lower average retail unit price, with a highly significant coefficient of +0.71. That the coefficient is less than +1.0 confirms the existence of a "waterbed effect". Our results also demonstrate, with high significance, that lower MTRs (presumably operating through the mechanism of lower retail prices) tend to result in greater consumption of mobile services in terms of minutes of use per month per subscription. Long term elasticity (in the range of -0.52 to -0.61) is much greater than short term elasticity (-0.097).
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The Editors
Ken DUCATEL holds a Ph.D. in economic geography from Bristol University and an MSc in transport policy from Cranfield University in the UK. He has worked on information society policy for twenty years. He was a member of the Faculty at the University of Manchester for 14 years. His first experience in the European Commission was in DG Employment in 1995, where he worked in the secretariat to the High Level Group on the Information Society led by Professor Luc Soete. From 1997 to 2003, he worked at the European Commission's Institute for Prospective Technological Studies in Seville, where he led the Institute's flagship "Futures Project." At the end of 2003, he moved to DG Information Society to become Head of sector for eEurope. In November 2004 he was invited to join Commissioner Reding's Cabinet where he was in charge, among others, of the portfolio for Lisbon Strategy & Policies for the Information Society as well as for the coordination of Research policy. In January 2009, he was appointed Head of the "Digital Agenda: Policy Coordination" unit in DG Information Society.
Marc LEBOURGES is now in charge of European and Economic Regulation for France Télécom Group Regulatory Affairs. He graduated from the Ecole Nationale Nationale Supérieure des Télécommunications and holds a Ph.D. in Computer Science from University Paris VI. First involved in Operation Research and Traffic Engineering at France Télécom Research Center, now Orange Labs, he moved to the Economics and Strategic Department of France Telecom HeadQuarters where he contributed to interconnexion pricing, universal service obligations costing, Internet strategy and network strategic planning. He was then appointed marketing director for domestic wholesale products, before joining Regulatory Affairs and his current position.
The authors
Maxime BAUDRY is a senior consultant at IDATE since April 2006. His main area of endeavour is monitoring the satellite industry, the telecommunications services market and operator strategies. Before coming to IDATE, Maxime worked for two years for a major strategy consulting firm specialised in the space industry, where his work focused primarily on industrial analysis of satellite telecommunications for space agencies and the sector’s equipment providers. Mr. Baudry holds a Masters degree in Technology & Management (Ecole Centrale de Paris), and is a graduate of the Ecole Multinationale des Affaires/Bordeaux Business School (E.S.C Bordeaux & Fachhochschule Münster’s ERASMUS programme).
m.baudry@idate.org
Erik BOHLIN is currently Head and Professor in Technology Assessment at the Division of Technology & Society, Department of Technology Management & Economics at Chalmers University of Technology. He has published in a number of areas relating to the information society - policy, strategy, and management. He is Chair of the International Telecommunications Society and Chief Editor of Telecommunications Policy. He obtained his graduate degree in Business Administration and Economics at the Stockholm School of Economics (1987) and his Ph.D. at Chalmers University of Technology (1995).
erik.bohlin@chalmers.se
Valérie CHAILLOU is a Senior Consultant at IDATE since 2000. Valérie’s prime areas of expertise are the Internet and broadband sectors, and access technologies in particular. Valérie has been the Project Manager for several market reports, including: FTTH, World Internet Atlas, Wi-Fi, Powerline Carrier Systems and WiMAX, in addition to contributing her talents to various studies dealing with IP networks and services, on behalf of operators or local authorities. Before coming to IDATE, Valérie took part in a variety of computer science projects, working as a consulting engineer for Cap Gemini. She holds a Telecommunications Engineer degree from ENST Bretagne (Ecole Nationale Supérieure des Télécommunications de Bretagne, 1997) and a Master’s Degree in Physics (Université II de Montpellier,1995).
v.chaillou@idate.org
Christian DIPPON is a Vice President in NERA's Communication Practice. With 14 years of telecommunications experience, he specializes in the economics, business, and regulation of the communications and high-tech industries and the evaluation of economic damages in telecommunications litigation disputes. He advises his clients in complex communications litigation and policy matters and provides strategic advice to cope with changes in competition, regulation, and technology. Mr. Dippon has extensive, first-hand experience with analyzing and building bottom-up and top-down costs models for wireline and wireless providers. He was involved in analyzing the HCPM and many other USF models during the mid to late 1990s. Since then, he has built his own cost models for international regulators and domestic operators. Mr. Dippon has also extensive auction experience. Most recently, he is leading a team of NERA regulatory and auction experts in designing, implementing and administrating the 3G spectrum auction in Thailand. Mr. Dippon serves on the Board of Directors of the International Telecommunications Society (ITS) and on the Editorial Board of Telecommunications Policy. He is a member of the American Economic Association and the Federal Communications Bar Association.
Joeffrey DROUARD is a Jean Monnet fellow at the Florence School of Regulation at the Robert Schuman Centre for Advanced Studies. He obtained his Ph.D. in economics at Telecom ParisTech. His research interests include the regulation of media and telecommunications markets, industrial organization and applied econometrics.
joeffrey.drouard@eui.eu
Christian GROWITSCH is Director Applied Research at the Institute of Energy Economics (EWI) and University Lecturer at the University of Cologne since September 2010. He holds a doctorate from the University of Lueneburg and a Dr. habil. from the University of Halle. Before joining EWI, Christian , worked as a senior economist at the Halle Institute for Economic Research and Head of the Department ‚Energy Markets and Energy Regulation‘ at WIK in Bad Honnef. His research and consulting experience covers various aspects of empirical regulatory economics
Johannes M. BAUER is a Professor in the Department of Telecommunication, Information Studies, and Media at Michigan State University where he is also the Director of Special Programs of the Quello Center for Telecommunication Management and Law at Michigan State University. Dr. Bauer joined Michigan State University in 1990 after receiving his doctorate in economics from the Vienna University of Economics and Business Administration, Vienna, Austria. He taught and researched as a visiting professor at the Delft University of Technology, the Netherlands (academic year 2000-2001), the University of International Business and Economics in Beijing, China (May 2002), and the University of Konstanz, Germany (summer 2010).
bauerj@msu.edu
Christopher HUTHER is a partner in the Washington, DC office of Sheppard Mullin Richter and Hampton LLP and leader of the firm's Communications practice. He is an experienced litigator, appearing regularly before federal and state trial and appellate courts, the FCC, and other federal and state regulatory agencies. Mr. Huther advises and represents domestic and international communications companies on a broad range of issues including local telephone competition and policy, interconnection, universal service, rate and contract disputes, and the development of regulatory strategies. He has counseled clients in organizing their businesses, the negotiation and drafting of interconnection, joint use, and service agreements, and has substantial experience in the development, defense, and critique of telecommunications cost models and methodologies. Mr. Huther serves on the Board of Directors of the International Telecommunications Society and the Advisory Board for Pike & Fisher's Communications Environmental & Land Use Report. He is a frequent speaker nationwide and was recently recognized by SmartCEO Magazine as one of Washington DC's Legal Elite. Mr. Huther received his JD from the Georgetown University Law Center and is licensed to practice in Washington, DC and Virginia.
J. Scott MARCUS is a Director, Department Manager and Senior Consultant for WIK-Consult GmbH (the consulting arm of the WIK, a research institute in economics and regulatory policy for network industries, located in Bad Honnef, Germany). Previously, he served as Senior Advisor for Internet Technology for the United States Federal Communications Commission (FCC), a position equivalent in rank to the Chief Economist or Chief Technologist. Prior to that, he was the Chief Technology Officer (CTO) of GTE Internetworking, one of the world's largest Internet backbone service providers at the time. In 2004, Mr. Marcus was attached to the European Commission (DG INFSO) as a Transatlantic Fellow of the German Marshall Fund of the United States. Mr. Marcus is a member of the Scientific Committee of the new Communications and Media program at the Florence School of Regulation (FSR), a unit of the European Union Institute (EUI). He is also a Fellow of GLOCOM (the Center for Global Communications, a research institute of the International University of Japan), and a Visiting Fellow of the University of Southern California's Center for Communication Law and Policy. He is a Senior Member of the IEEE, and has served as co-editor for public policy and regulation for IEEE Communications Magazine. Mr. Marcus holds a B.A. in Political Science (Public Administration) from the City College of New York, and an M.S. from the School of Engineering, Columbia University.
Robert MADELIN was educated in England at the Royal Grammar School, High Wycombe and at Magdalen College, Oxford. He has also studied at the Ecole Nationale d’Administration in Paris. Born in 1957, a British civil servant since 1979, Robert has served in the Commission since 1993: as Director General for Health and Consumer Policies from 2004 to 2010, as a Director in DG Trade, and in the Cabinet of Sir Leon (now Lord) Brittan, European Commission Vice-President. Robert became Director-General for the Information Society and Media at the European Commission in April of this year.
Cheikh Tidiane MBAYE is an Engineer in Telecommunications graduated from the Ecole Nationale Supérieure des Télécommunications de Paris (ENST now Telecom Paristech) and a Statistician graduated from the Ecole Nationale de la Statistique et de l’Administration Economique de Paris (ENSAE). After holding several positions in the high administration of the Office des Postes & Télécommunications du Sénégal (OPTS: ancestor of Sonatel) from 1982 to 1988, he became Chief Executive Officer of Sonatel in April 1988. Active member of several international organisations and of several scientific and technical international commitees in telecommunications, he is acknowledged as one of the leading developers of telecommunication in Senegal and Western Africa. As a pre-eminent manager, he received several awards from numerous national and international socio professional organisations and he has made of Sonatel a large subregional Group (Senegal, Mali, Guinea, Guinea Bissau) by far leader of telecommunications in Western Africa with already more than 10 million customers.
Roland MONTAGNE is Director of Studies, Head of Broadband Practice at IDATE. In recent years, Roland has managed several assignments focused on DSL, cable and wireless access network economics – exploring global issues such as bundled offers over DSL, and the economics of bitstream access and unbundling. Roland is also in charge of all of IDATE’s FTTx activities. In the area of satellite, he has conducted a variety of assignments devoted to satellite broadband access economics (AGORA) and to market opportunities for a satellite mobile TV offer (S-DMB). Before joining IDATE, Roland achieved several developments in the area of digital radiocommunications and mobile services. He worked for a year for AT&T as a Bell Labs research engineer in New Jersey, and has conducted a variety of research projects on optical networks (DWDM) and ATM technologies. He has also attended several research training programmes on optical communications at CNET (France Telecom R&D). Roland Montagne is a regular speaker in key events related to FTTH topics at an international level (FTTH Councils Europe, Asia Pacific and US, FTTH Forum and Digiworld Summit).
r.montagne@idate.org
Christoph PENNINGS has been a senior consultant with IDATE since April 2008. His assignments include market studies on regulation and competition issues as well as strategic studies for operators in the fixed and mobile industries. Prior to joining IDATE Christoph worked as a telecoms analyst at McKinsey & Company. Christoph holds a master's degree in Economics from Maastricht University, the Netherlands .
c.pennings@idate.org
Didier POUILLOT is Director of Studies and Head of Practice "Telecom Economics and Business modelling" at IDATE. A specialist in telcos and telecom services markets, he contributes to a variety of research and study assignments on the sector’s regulatory, technological and industrial issues (ultra-broadband outlook, telecommunications investments and employment, European industry’s competitiveness, …). Didier is also the Editor-in-Chief of the annual DigiWorld Yearbook on the stakes and challenges of the digital economy. Before joining IDATE, Didier worked as a consultant for Paris firm, B.I.P.E. He is a graduate from the ESSEC business school in Paris, France (1982).
d.pouillot@idate.org
Tiana RAMAHANDRY is a Senior Consultant at IDATE since 2005. Tiana works primarily on infrastructure-related projects on behalf of equipment providers and carriers such as Alcatel-Lucent, Cisco, ZTE, NTT, Saudi Telecom. She is the key contributor to the Online Service regarding the World Telecom Equipment Market. Tiana also provides her expertise on issues related to fixed broadband access technologies. Ms. Ramahandry holds a post-graduate professional degree in Cable Networks, from the Université de Lille, and a Masters in Business Administration from the IAE de Bordeaux IV.
t.ramahandry@idate.org
Jean-Paul SIMON is Senior scientist at the Institute for Prospective Technological Studies (IPTS), European Commission, Directorate-General JRC, (Sevilla, Spain) since January 2010. He works on the economic assessment of the IT sector. Prior to that he held different positions in the industry and worked as a consultant specialised in media/ telecom law and regulation. He holds a Ph.D. in Philosophy (1975) and is a graduate from the Ecole des Hautes Etudes Commerciales (HEC) (econometrics) 1971. He has written several books and articles on communications and public policy. He is a frequent speaker on telecommunications and media in Europe and the USA.
Orada TEPPAYAYON is currently a Ph.D. candidate at the Department of Technology Management and Economics, Chalmers University of Technology. She obtained her Bachelor’s Degree in Law from Thammasat University and her Master of Law from Chulalongkorn University in Thailand. From 2005 to 2008, she worked as a legal assistant to the Commissioner at the National Telecommunications Commission of Thailand.
orada@chalmers.se
Megan TROY is a partner in the Communications practice of Sheppard Mullin Richter & Hampton LLP's Washington, DC office. Ms. Troy focuses her practice on telecommunications litigation, regulation, and policy. She counsels clients on a broad range of issues including FCC regulatory matters, competition policy, equipment manufacturing, and authorization, and legislative and regulatory developments in the communications industry. She advises and represents communications companies in litigation, as well as FCC complaint and rulemaking proceedings, involving local telephone competition, universal service, pole attachment and joint use disputes, and the development, defense and critique of telecommunications cost models and methodologies. She regularly appears before federal and state courts, the FCC, the U.S. Congress, and regulatory agencies across the United States and in Washington, DC. Ms. Troy is on the Advisory Board of Pike & Fisher's Communications Regulation, and is a Member of the Federal Communications Bar Association, American Bar Association, and the DC Bar Association. She is a regular speaker in the U.S. and internationally on issues related to legal and regulatory developments in the communications industry, competition policy, and network deployment issues. Ms. Troy received her JD from the Georgetown University Law Center and is licensed to practice in Washington, DC and California.
Stéphanie VILLARET joined IDATE’s Marketing and Strategies Department in 1998. After several years in the Media Economics Division as a Senior Consultant, she is currently Co-Head of the Satellite Practice. Stéphanie works primarily on reports concerning the satellite industry, but also deals with the analysis of consumer ICT usages and services. Ms. Villaret is a graduate of the Institut National des Télécommunications, with a major in Information and Communication Technologies Applied Marketing, and holds a Masters Degree in Management Sciences (1997).
s.villaret@idate.org
Christian WERNICK works for a German ISP. Prior to that he was employed as a senior consultant at WIK-Consult. He holds a Ph.D. from Munich University and has published on various issues in the area of telecommunications. His fields of interest include the impact of regulation on business and market developments as well as the deployment of high speed broadband access.
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Sophie NIGON
