Monti's proposal of keeping investments for BB and EDA out of fiscal compact: what do you think?
It seems that the Italian prime minister, Mario Monti, will propose at EU level to mantain out of fiscal compact investments for broadband and digital agenda:
1) do you think this should be limited to non profitable areas (as it is mainly now given State Aids rules) or else it should start a path where public bodies are more involved in setting up wider infrastructures?
2) should these investments then cover digital divide areas or else focus on real NGAN?
Looking forward to hear from you and I hope it will pop up an interesting debate.
Luigi @luigiscorca
Group audience:









Comments
Luigi,
Luigi,
on point 1): public bodies have important role in the frame of Connecting Europe Facility proposal - http://ec.europa.eu/commission_2010-2014/president/news/speeches-stateme... which will be discussed in the EU Parliament in second half of 2012. It's important that there is a coherent and effective approach on broadband investment at EU, National and Regional/Local level.
On point 2) all EU government are called to be active in overcoming digital divide, since one of the Digital Agenda objectives aims at 100% internet coverage >= 30 Mbps in Europe by 2020.
Wireless, Satellite, Fiber, Mobile are all solutions to be considered area by area cause there is no 'one solution fits all' on this subject.
Maybe interesting conclusions on Italian case, that can be further discussed on this platform, will come from forthcoming Broadband Forum http://www.broadband4italy.it/news/agenda-digitale-a-roma-il-broadband-f...
We are looking forwards to contributions by national and regional policy makers and business communities. Thanks for disseminating the #da12 platform initiative.
Luigi
Luigi
While Carmela's comment may be right at a policy level the impact of the fiscal compact is that a government would be explicitly denied the opportunity to invest in infrastructure if that would take the deficit above 0.5% or 1% of GDP depending on the level of deficit at the time. What Monti appears to be saying is that he predicts that Italy will be in such a position but recognises that investment in infrastructure is an essential part of any growth package.
The alternative is to have a situation such as we have in the UK where it is estimated that the Government's current committment to Next Generation Access is one billion GBP below what is required.
The question on State Aid is somewhat sidelined in this respect. A decision to effectively remove the state aid regulations would, in my opinion, have two consequences. Firstly it would threaten the necessary conditions for competition. In the UK we have an effective monopoly at the national infrastructure level and although this is regulated it is to all intents and purposes a bar on innovative service development. Secondly it runs the risk of opening the door for huge investment in the profitable market at the expense of the less profitable but equally important rural areas.
Next Generation Access Networks in the city region should be profitable in its own right and therefore support a market driven approach. I personally have huge reservations about the value of the current gigabit networks initiative in selected UK cities but I am prepared to wait and see.
In the meantime I believe that Mario Monti is right to call for this exemption if only to reduce the risk that infrastructure investment will suffer at the hands of the deficit reduciton programme.
Concerning State Aid
Concerning State Aid regulation
Here is a freshly released document on a subject that is undergoing revision.
http://ec.europa.eu/competition/state_aid/modernisation/sam_communicatio...
"A more systematic assessment of the potential
negative effects of State aid - notably in terms of distortions of allocative and dynamic efficiency, subsidy races and market power - will also need to be
pursued. Thus, for example, revised Rescue and Restructuring Guidelines for nonfinancial firms will become a very important instrument for controlling that very
distortive type of aid in order to ensure that the market process of exit is interrupted by State intervention only when truly justified. Similarly, when market
conditions permit, a new set of rules for rescuing and restructuring financial institutions will be put in place for the post-crisis environment, consistent with the
future proposals for EU crisis management and resolution. Finally, the identification of best practices with regard to Europe 2020 spending priorities should allow for rapid clearance of cost-effective and growth enhancing aid.
As for the streamlining, in a first stage, several guidelines, including guidelines for Regional Aid, Research & Development & Innovation, Environmental aid, Risk
Capital and Broadband (types of aid which account for more than two-thirds of aid granted in the EU), could be aligned and possibly consolidated with the common
principles by the end of 2013."
This is interesting not least
This is interesting not least because it recognises the importance of Broadband investment as part of a growth package post recession. There are still a number of "could be" and "possibly" but at least the thought is there.
Thanks for your posts.
Thanks for your posts.
Even given the aim of a "market driven approach", sometimes public involvement for the deployment of an open (passive?) network might overcome a situation where there is a market failure (low profitable areas, f.eg): what do you think?
I think that is a brilliant
I think that is a brilliant idea Luigi, in the UK we have this theory that 'digital parish pumps' which provide a fibre feed could enable many start up 'altnets' to build out the last mile. This would provide connectivity in the harder to reach places and also competition to the incumbents, which has to be a win win situation for the country.
Interesting discussion and a
Interesting discussion and a learned a few things from the references here. One thing to consider is sort of covered towards the end of the posting on Rural Broadband by my colleague Charlie Watt... The scale of the 'cost' seems to be discussed - and comes to a large amount. The scale of the 'investment' needed is a much lesser amount - because once an infrastructure is up and running it should generate income to the investors. Are we confusing these issues sometimes?
Good thinking...
Good thinking...
For properly built sustainable fibre networks the payback will be slower in rural areas, but that isn't a worry if the investors aren't in a rush for a quick profit. Over time, these networks would become extremely profitable as they prove their worth and start to harvest income from the urban fringe. The added bonus if the government has invested is to see urban networks rush to catch up with the speed and reliability of the rural fibre ones, thus delivering their dearest wish, to be a market leader in the digital revolution, and save a fortune when everyone goes online. Many people won't go online because the connectivity they have experienced is just too useless to inspire them to use it and they remain analogue, at a great cost to government.
I meant to add that you would
I meant to add that you would therefore not need as much investment to start-up a municipal digital pump... and with contributions up front from local subscribers plus more realistic costing of infrastructure provision - the whole prospect might look very feasible. It works in Sweden.
I presume when you talk about
I presume when you talk about "maintain out of fiscal compact investments for broadband and digital agenda" the suggestion is to give those investing in broadband a tax break? If so, I find the whole issue of tax on fibre infrastructure as well as the muddled state aid rules that are imposed by Europe as one of the MAIN BARRIERS to clear thinking in this whole debate. In the UK, interpretation of State Aid (as well as the consulting that come up with mechanisms to get round it) has become an industry in its own right and so far it is bigger than the fibre investment that is it trying to encourage! This is down to one fundamental problem. The political desire to help the European economy by funding the next generation of digital infrastructure is flawed because the incumbent structures are buzzing around the pots of investment like bees round a honey-pot - whilst the governments don't understand what to invest in, what to tax and what to leave alone. The fundamental reason is that Europe is being smothered by fear, uncertainty and doubt (FUD) campaigns from the Fibre camp, the incumbent telcos are driving forward looking in the rear-view mirror of copper telephone networks and the public sector is getting on and investing in the most lucrative part of the digital infrastructure - the cloud and data centres. At INCA, we have looked at the problem from a number of dimensions and are calling for a much clearer set of guidelines tied to TRUE economic regeneration - rather than the FUD campaigns of the supply-side of the industry. This requires a new way of looking at the problem which, in our view, really could help get Europe back on its feet and focus investment and tax-breaks on the right parts of the digital infrastructure so that we can kick-start each of the Eurozone economies. If Europe is TRULY interested in a different approach, then I hope those listening to this channel can help get the right people to listen to the case. It is logical, coherent and inclusive. Not illogical, incoherent and exclusive - like many parts of the current policy agenda.
I agree about state aid
I agree about state aid issues, and the UK is going to explode with them shortly so its to be hoped the consultants are up to the challenge. Many councils are handing money over to the incumbents and it looks like there will be infringements.
;)
Regarding your INCA proposals, would you like to ask them to put a post on here outlining the basics under its own heading as I have seen many references to them scattered amongst all the threads?