Is Policy Adapting to its Market, or Vice-Versa? Evaluation of Policy Measures on the FTTH Market
Posted: 31 Mar 2015
Date Written: March 30, 2015
The telecommunications sector has long been in the hands of national monopolies in Europe and Asia, while a limited number of private undertakings were in charge of the market in the United States. Liberalization and regulation efforts brought a new dynamic to this market, while the introduction of broadband, and more recently Fiber-to-the-Home (FTTH), provides opportunities for new players, both on the infrastructure and service market.
On the infrastructure side, the deployment of FTTH networks is becoming more and more an economic challenge, rather than a technological one, as the deployment of this new infrastructure requires a significant upfront investment.
While some countries stimulate the involvement of the government into deploying the infrastructure – like Japan or New Zealand, others are working to rise new barriers for public institutions to invest their funds into deploying new networks (US or Europe). Exceptions in both regions are rural and difficult access areas, where public funds are allowed under certain conditions.
Furthermore, there is a plethora of regulatory obligations and guidelines, which strongly differ across countries. One of the more important points refers to obligations or recommendations for infrastructure sharing. In May 2014, the European Parliament published a Directive that gives advice to all countries to grant access to any conduit and pole from any existing infrastructure, not only carriers’ infrastructure (also gas, sewage, energy, railway and public administration buildings). Recently, also the FCC (2015, Feb.), which under Title II enforcement in the US, pointed out to give fair access to poles and conduits to broadband providers.
The other discussion point is about the need for unbundling or open access on fiber infrastructure, similar to unbundling obligations on copper-based networks. Where the US ruled that broadband providers shall not be subject to last-mile unbundling, some other countries from Europe (Portugal, Spain), as well as countries in the Asia-Pacific region (Japan, New Zealand) are regulating it with different approaches.
Apart from clear regulatory obligations, some countries or regions also set dedicated targets for broadband coverage and uptake. The most well-known example can be found in Europe’s Digital Agenda (30Mbps to all by 2020), while the FCC in the US now follows with a minimum target of 25Mbps. While these targets aim at stimulating network deployment in less populated regions, they seem to be a new tool to show evidence of not upgrading the network in other areas.
Although these regulatory recommendations, guidelines and targets all aim at providing high-quality, yet affordable, services to end users in a competitive market, their aimed impact does not always reach its goals. Therefore, this paper aims at giving a survey of regulatory obligations and issues worldwide, in order to evaluate the impact of policy on the business case outcome of FTTH deployment. The paper approaches the analysis from both a qualitative and quantitative angle, using a framework that maps the incentives, actions and market results of the different players in the field on the policy structure present. This framework builds upon different concepts and models for industry development and evaluation (Porter, Wheelan and Hunger, etc.), and is applied on a case-by-case basis. From this application on a multitude of worldwide cases (15-20 deployments in Europe, Asia-Pacific and America), useful conclusions can be drawn on the impact of policy measures on the business case success of a FTTH deployment. Examples include: the impact of unbundling obligations on the incumbents’ speed of deployment, the consequences of following a coverage-target, rather than a coverage-and-uptake target (e.g. the case of New Zealand).
Keywords: Fiber-to-the-Home, policy, regulations, techno-economics
JEL Classification: L01, L05
Suggested Citation: Suggested Citation