Linking Linking the the Digital Ag Digital Agend enda to r to - - PowerPoint PPT Presentation

SEDEC Commission Meeting, Committee of the Regions Brussels, 20 April 2016

Linking Linking the the Digital Ag Digital Agend enda to r to rur ural al and spar and sparsel sely popula y populated ted ar areas eas to to boost boost their their growt wth h pote potent ntial ial

PROGRESS CONSULTING

Consortium: Progress Consulting S.r.l. (IT) (coordinator) Fondazione FORMIT (IT) (partner)

www.progresscons.com

Rossella Soldi Progress Consulting S.r.l.

www.formit.it

Framework Contract CDR/DE/56/2013/1

Main Main in inves estiga tigated ted to topic pic The he fi fina nanc ncin ing g of

• f br

broad

• adba

band nd ne netw twor

• rks

ks de deplo ployme yment/ nt/up upgradi ading ng by by LRAs LRAs in n those those ar area eas s co cons nsider idered ed un unpr profit

• fitabl

ble e by by priva private te op

• per

erato tors s (i (i.e. .e. rur ural, al, remo emote te an and d sp spar arse sely y po popu pula late ted d – RRS RRS – ar area eas) Framing aming ba backg kgrou

• und

nd

• DAE ta

AE targe gets ts: : by by 20 2020 20, , 10 100% 0% co cover erage ge of

• f br

broad

• adban

and d abo bove e 30 30 Mbp Mbps s (‘fast’), and penetration of ‘ultra-fast’ broadband (i.e. subscriptions above 10 100 0 Mbp Mbps) s) in 5 in 50% 0% of

• f Eur

Europe

• pean

an ho hous useh eholds

• lds
• EUR 22

EUR 22 bill billion of ion of EU pub EU publi lic c fund funds s ar are e po poten tentiall tially y ava vail ilable ble for

• r th

the e up upgrad adin ing/ g/de depl ployme yment nt of

• f I

ICT CT infr infras astr truc uctu tures es (2014 (2014 - 20 2020) 20)

• Est

Estima imated ted fund fundin ing g ga gap p of

• f at

t leas least t EUR 13 EUR 13 bill billion. ion. Wha hat t is is impor importan tant? t?

• Ef

Effi ficien cient t ac acce cess ss to to an and d ef effectiv ective e us use e of

• f EU

EU fund funds, s, inc including luding for

• r th

the e le lever eraging ging of

• f pr

priva ivate te in inves estme tments nts

• App

ppraise aise th the e ne need ed for

• r ne

new w initia initiativ tives es aimed aimed at t bo boos

• sting

ting an and/or d/or en enhan hancing cing ac acce cess ss to to/use /use of

• f EU f

EU fun unds ds

Ra Rationale tionale of

• f the

the study study

• 2. C
• 2. Cha

harac acte terising rising br broad

• adba

band d de deplo ploymen yment t in R in RRS RS ar area eas Cha Chall llen enges ges to to de deplo ployme yment, nt, ba barrier riers s to investments…but also also ne new w op

• ppor

portu tuniti nities es (g (growth th po poten tenti tial) al) for

• r bu

busine siness sses es an and d citiz citizen ens s as as con confi firmed ed by by li lite teratur ture

• 3. W
• 3. Way

ays of s of fi fina nanc ncin ing g th the e de deplo ployme yment nt of

• f

br broad

• adba

band d infr infras astr truc uctu ture e by by LRAs LRAs Con Contr trac actu tual al ar arran angeme ements ts, , multi multi-st stak akeh eholde

• lders

s en enga gage gemen ents ts, , st strate tegic gic fr framew amewor

• rks

ks, , EU fund EU fundin ing g instruments…some suitable instruments are un under deruse used d

• 1. S
• 1. Sta

tate te of

• f th

the e ar art t of

• f br

broad

• adba

band nd co conne nnectivity ctivity in r in rur ural al ar area eas NGA NGA br broad

• adba

band d co cover erage, e, NGA NGA te techn hnol

• logies,
• gies, br

broad

• adba

band nd access…evidence clearly points to a urban-rural al digita digital l divide divide an and d to to a dif a differ eren entia tiate ted d co cond nditio ition n ac acros

• ss

s rur ural al ar area eas s

• 4. Ho
• 4. How

w to to bo boos

• st

t ac acce cess ss to to an and d us use e of

• f EU

EU fund funds? s? A A few ew su sugge gestio stions ns on

• n en

entr try- po points ints on

• n th

the e to top p of

• f w

wha hat t is is alr alrea eady dy ava vail ilable ble or

• r do

done ne

Main par Main parts ts of

• f the

the repor eport

NGA broadband coverage, total and rural, by country, end of 2014

68% 25%

• 1. Sta
• 1. State of

te of the ar the art: the urban/r t: the urban/rur ural al digital divide digital divide

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

AT BE BG HR CY CZ DK EE FI FR DE EL HU IE IT LT LV LU MT NL PL PT RO SK SI ES SE UK

VDSL FTTP DOCSIS 3.0

300%

Contribution of main NGA technologies to rural coverage, by country, end of 2014

NGA coverage in rural, remote and sparsely populated areas (NUTS3), 2014 Share (%) of households with broadband connection (broadband access), 2015, NUTS3

• 1. Sta
• 1. State of

te of the ar the art: dif t: differ erentia entiated situa ted situation acr tion across RRS

• ss RRS ar

areas (NUTS eas (NUTS3) 3)

High ICT preparedness: share of households having a broadband connection > 70% NGA coverage < 35% 35% ≤ NGA coverage ≤ 65% NGA coverage > 65% Low ICT preparedness: share of households having a broadband connection ≤ 70% NGA coverage < 35% 35% ≤ NGA coverage ≤ 65% NGA coverage > 65%

• 1. Sta
• 1. State of

te of the ar the art: our c t: our classifica lassification of tion of RRS ar RRS areas eas

n° of NUTS3 per country classified as RRS areas We identify six groups

• f areas

RRS RRS ar areas eas face ace challeng hallenges to to infr infrastr astruc uctur ture deplo deployme yment t and and bar barrier riers to to ICT i ICT infr nfrastr astructur ture in investme stments ts…

Challenge Barrier Lower demand Capital intensive Fragmented demand Size of the market (niche markets) Higher deployment cost Lower revenue More difficult selection of the technology Higher risk Higher maintenance costs Longer pay-back period Lower availability of other existing infrastructures The competition dilemma

…but the few e ew evidenc vidence points points to a to a positiv positive e socio socio-ec economic mic ter territ ritorial impact

• rial impact of
• f br

broad

• adband de

deplo loyme yment on t on bo both th busine business sses es an and citiz citizens ens  growth wth poten potential tial

Businesses (impact variable depending on sector) Citizens Employment (short-term/long-term) More high-paying jobs  higher incomes Growth in GDP Improved technological skills Incremental revenues Costs savings Improved competitiveness Access to better services Increased innovation Social inclusion and civic engagement

2. . Char Characteris acterising ing br broadband deplo

• adband deployment

yment in RRS ar in RRS areas eas

• Contr

Contrac actua tual l ar arran angem ements ts Public Design, Build and Operate Norrbotten (SE), Wielkopolska (PL) Public outsourcing Nordhessen (DE) Subsidy to a network operator North Karelia (FI) Joint Venture Pays de la Loire (FR)

• Multi

Multi-stak stakeh eholde lders s enga engageme ments ts Community broadband Scotland (UK) Federation of LRAs Evora (PT), Siena (IT) Crowdfunding (Rural Nottinghamshire (UK))

• Str

Strate tegic ic fr framew amewor

• rks

RIS3  ESIF

• EU funding

EU funding instr instrum uments ts The European Fund for Strategic Investments (EFSI) The Connecting Europe Facility (CEF) The EIB Project Bond Initiative European Bank for Reconstruction and Development (EBRD)

3.

• 3. Main tools

Main tools & instr & instruments uments to f to finance inance br broadband

• adband deplo

deployment by yment by LRAs LRAs

Some of the examples included in the report

• Higher spendin

Higher spending g in RRS ar in RRS areas f eas for

• r br

broadband

• adband

infr infrastr astructur uctures es deplo deployment/ yment/upg upgrading ading is justified by is justified by social social – besides besides economic economic – consider considerations. tions.

• Some

Some of

• f the contr

the contractual ar actual arrangements angements and multi and multi- stak stakeholder eholders enga s engagements gements r review viewed ed for ICT

• r ICT

in invest estmen ments ts in R in RRS ar RS areas eas by L by LRA RAs w s wor

• rk bette

k better than r than

• ther
• thers i

s in inc n including social cons luding social consider iderations (e.g. P tions (e.g. Public ublic DBO DBO, , Feder ederation tion of

• f LRA

LRAs). s).

• The use

he use of

• f Str

Structur uctural al Funds Funds is still significant f is still significant for

• r ICT

ICT in investment estments s (considering als (considering also

• the Gener

the General Bloc al Block k Ex Exemption R emption Regula gulation) but tion) but ther there e is r is room f

• om for
• r

impr improvement of ement of LRAs LRAs’ capacity to use these funds. funds.

• Some other

Some other tools/ tools/instr instruments uments may benefit fr may benefit from higher

• m higher

tak take e up b up by LR y LRAs As (e.g. eq (e.g. equity uity cr crowdfund dfunding) ing) or fr

• r from t
• m the

he design of design of suppor supportiv tive e sc schemes (e.g. f hemes (e.g. for access

• r accessing

ing EFSI EFSI). ).

• 4. Conc

. Conclusions: gener lusions: general al remar emarks ks

• Pooling
• oling of
• f small financial shar

small financial shares thr es through equity

• ugh equity

cr crowdfunding dfunding Fitting areas with a good awareness of the benefits brought about by fast or ultra-fast broadband, i.e. RRS with broadband access > 70%. Structuring and aggregating internal demand, involving a myriad of external (small) investors.

• Suppor

Support sc t scheme f heme for secur

• r securing

ing EFSI EFSI financ finance f e for

• r ICT

ICT infr infrastr astructur ucture e in in RRS RRS ar areas eas Fitting better those areas characterised by a (very) low level of NGA coverage, i.e. the so called ‘white areas’. EFSI perfectly matches the characteristics of ICT infrastructures projects in RRS areas, i.e. having a higher than the average risk profile and addressing strategic areas of the real economy.

• Public

Publicly-spons sponsor

• red

ed ventur enture e ca capital pital for

• r le

lever eraging ging mar market et ca capita pitals ls Fitting better RRS areas which are characterised by a low level of NGA coverage and therefore needing a substantial investment in terms of size. ‘Professionalising’ the venture capital approach and creating/raising demand are essential to secure a return on investment.

• 4. Conc
• 4. Conclusions: our

lusions: our sug suggestions gestions (by (by type of type of regions) gions)

• Identifica

Identification tion of

• f non

non-con conventional br entional broadband in

• adband investor

estors Fitting RRS areas which are characterised by a low level of coverage of NGA, i.e. the so called ‘white areas’. Taking advantage of the increasing dependency of the management of physical infrastructures through ICT (i.e. remote mode) and involving utilities companies (this is apparently the way Italy is going to pursue the 2020 DAE targets in terms of fast and ultra-fast broadband).

• Maximising

Maximising the ef the efficienc ficiency y of

• f public financial suppor

public financial support t within the public within the public DBO DBO Fitting RRS areas which are characterised by an average level of coverage of NGA, hence areas belonging to ‘intermediary’ groups. Public DBO is particularly suited for RRS areas as it easily allows the consideration of social benefits. However, it implies the mobilisation of a large pool of public funds. Higher reliance on EU instruments such as the Project Bond Initiative (PBI) of the EIB may boost the positive potential of this approach.

• 4. Conc
• 4. Conclusions: our

lusions: our sug suggestions gestions (by (by type of type of regions) gions) (cont.) (cont.)

SEDEC Commission Meeting, Committee of the Regions Brussels, 20 April 2016

Thank you!

PROGRESS CONSULTING

www.progresscons.com

Rossella Soldi

www.formit.it

Thank hank you!

• u!

Rossella Soldi

Progress Consulting S.r.l.