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Summary

Recent announcements from the German and Italian governments have cast the spotlight on superfast broadband strategies, and the two countries have allocated billions of euros to their respective plans. Germany is ahead of the curve on NGA deployment, and the German government’s new objectives are likely to be achieved on time. However, the objectives set out by the Italian government look unrealistic unless Italy’s NGA coverage starts growing at an unprecedented pace.

Public funding is still crucial for countrywide broadband deployment

Germany is already close to 70% coverage for 50Mbps connections (68.7% according to the German Federal Ministry of Transport and Digital Infrastructure). As a result, on September 8, 2015, the German government announced that it was going to replace its previous broadband strategy, which aimed to achieve 75% coverage by 2020, with a new target to ensure full coverage by 2018. This target is more ambitious than that of the EC’s Digital Agenda, which aims to give all EU households access to 30Mbps speeds by 2020.

The plan will largely rely on community schemes, which is hardly a surprise given that Germany is a federal state. Communities will either follow a “profitability gap” model, whereby they subsidize the deployment of networks in areas deemed to be unattractive for the market, or an “operator” model, whereby they build passive infrastructure themselves for it to be leased out to telcos. A combination of the above options will also be possible where necessary. A total of €2.7bn ($3.1bn) is available for the scheme.

The Italian government recently unlocked the first €2.2bn ($2.5bn) of a predicted €6bn ($6.8bn) of public funding for Italy’s ultrafast broadband strategy. The plan aims to cover 85% of the population with 100Mbps connections by 2020 and – in line with the EC’s Digital Agenda – ensure that the whole country has access to 30Mbps broadband by the same year.

However, Italy’s targets look unrealistic. At the end of 2014, NGA coverage in the country stood at 36%, including VDSL connections, and only 3.8% of broadband subscriptions were 30Mbps connections or faster. To meet its targets, Italy will have to continue to improve its broadband infrastructure at the same rate as last year for the next five years – a rate that has never been achieved in previous years.

Operators and the Italian regulator, AGCOM, will play a key role in the improvement of Italy’s NGA landscape. Operators will have to continue to invest in their respective networks and AGCOM will have to set out sensible regulatory frameworks when reviewing the wholesale broadband access market. The ongoing review of that market – which AGCOM is expected to conclude by the end of 2015 – suggests that a new approach is about to be adopted, distinguishing between areas with little or no investment in superfast broadband (30Mbps or more) and areas where at least two operators (including the incumbent, Telecom Italia) have covered at least 66% of cabinets with NGA. In the latter areas, price controls are likely to be less strict and could be even be removed entirely.

Appendix

Further reading

Superfast-Access Policy Tracker: 2014, TE0007-000825 (September 2014)

Regulation of wholesale broadband access differs widely across the EU, TE0007-000899 (April 2015)

Author

Luca Schiavoni, Senior Analyst, Regulation

luca.schiavoni@ovum.com

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