Progress Needs Broadband: Private Investment Requires More Government Stimuli

Abstract

Besides transport and energy infrastructure, communications infrastructure is steadily gaining in importance in the regional competition to attract investment. As the appeal of data-intensive services and networked devices rapidly increases, modern networks become more and more important. Empirical studies show the positive impact of broadband on economic growth, although they also point to the huge amount of investment necessary.

Germany scores below average to date in terms of availability of high-speed broadband infrastructure. It is also worrying that Germany is not up to speed in meeting its political targets of providing future-proof broadband connectivity rates of at least 50 Mbit/s. On the basis of fibre-optic technology this rollout could cost at least EUR 85 bn.

Differences in infrastructure raise concern about competitiveness in rural regions. In Germany, broadband coverage shows a significant gulf both between west German and east German federal states as well as between urban and rural regions. While the rollout is progressing in the heavily populated regions there is usually no viable business model for projects in rural areas with-out government subsidies. Under the current political and regulatory guidelines, the specific cost structure for broadband projects will not result, on sound business calculations, in the rural rollout making any decisive progress in the near future. This applies especially to many parts of Mecklenburg-Western Pomerania, Brandenburg and even the Oberpfalz region of Bavaria.

Keywords: Telecommunications, broadband, NGN, NGA, regulation, network, fiber, ICT

JEL Classification: O31, O33, O38, L96, L63, G18