entrepreneurship

Leporello_EN_20131202.pdf

developing a new product (production of new kinds of consumer goods and services), introduction of a new production process (or transportation method), entering into a new market,

or inventing a new business model, establishing a new enterprise's or industrial organisation. R&d unit:

Every enterprise, organisation is an R&d unit, whose main activity is R&d or the company's R&d is connected to its main activity,

and its R&d activity is conducted by its own employees and its own infrastructure. R&d expenditure:

Investment in the future: National Research, Development and Innovation Strategy (2013 2020) 4 w w w. n i h. g o v. h u/e n g l

R&d expenditure by size of the enterprises The large enterprises spend 30%more on R&d,

The smaller an enterprise is, the bigger the share of the governmental and the smaller that of the foreign sources'are in their R&d expenditure.

Large enterprises Micro sized enterprises and SMES 0 50 100 150 billion HUF 56.8 30.9 13.7 98.9 5. 5 28.4 Medium

sized enterprises Micro sized enterprises Small enterprises 30.5 8. 5 8. 4 1. 2 7. 1 7. 9 4. 1

Business Government Abroad enterprises 8 w w w. n i h. g o v. h u/e n g l i s h How much is R&d

and information and communication services) are below the national average in this respect. 45 40 35 30 25 20 15 1050 million HUF per researcher Manufacture of pharmaceuticals, medicinal

and other nonmetallic mineral products Manufacture of basic metals and fabricated metal products, except machinery and equipment Human health services Manufacture of machinery and equipment n e c.

electronic and optical products Information and communication NATIONAL ECONOMY'S Average Data is for 2012.

i h. g o v. h u/e n 9 What is the share of the foreign owned enterprises in R&d?

Corporate sector research units and number of researchers at Hungarian and foreign owned enterprises Number of research units (1 583 total) foreign 13.9%76.2%9

. 9%Hungarian Hungarian unknown r&d personnel (14 742 total) foreign 50.9%44.5%4. 6%unknown more than half of the researchers work at foreign owned enterprises.

almost 2/3 of the researchers are work in the capital. It is remarkable, that in the eastern counties the number of corporate sector research units are 15%higher than in the western ones. 18 21 11 28 12 13 21 25 55

Income per employee of innovative and non-innovative enterprises in Hungary the average income per employee of enterprises with both technological and non-technological innovations*is two times higher than that of their non-innovative competitors

Innovative enterprises according to diferent aspects 217.7 €/capita Non-innovative enterprises 101.3 €/capita*The company introduced both technological and non-technological innovations to the market.

Technological innovation is the introduction of a new or signiicantly improved product (or service) to the activity of the enterprise.

Share of innovative enterprises in Hungary and in the EU the larger an enterprise is,

In Hungary one-quarter of the small enterprises are innovative, which number is almost two times higher

if we consider the medium sized enterprises. Furthermore, seven out of ten Hungarian large enterprises are active in innovation. hungary eu average Innovative enterprises Non-innovative enterprises Small enterprises Medium sized

enterprises Large enterprises Data is for 2010. Source: Eurostat, CIS, 2012 74%51%35%21%54%26%30%49%65%79%46%70%14 w w w. n i h. g

o v. h u/e n g l i s h What is the result of R&d?

and the emloyment of the fast-growing enterprises of the innovative industries. 60 80 81 90 91 110 111 130 The SII*,2011 proportional to the EU average in 2010 16

RDI strategic analysis and planning provides innovation management services operates the Kaleidoszkóp system, a comprehensive register of domestic RDI actors is involved in the development

and facilitates international RDI cooperation attracts foreign investments to Hungary harmonises international and EU RDI policies coordinates bilateral scientiic and technological cooperation provides SME-support activities provides easier access to domestic RDI results for market players supports research-related cooperation

promote networking within the RDI sector assist facts-based decision-making assist national and international statistical activity provides solid foundations for RDI strategy-making Kaleidoszkóp's services:

and mapping project opportunities Kaleidoszkóp (the name refers to the multifaceted nature of RDI) is the name of the information system used by the National Innovation Oice.

LGI-report-Re-thinking-the-Digital-Agenda-for-Europe.pdf

Facilities-based infrastructure competition 7 Overall assessment 8 Glossary 9 1 Introduction 11 2 Key goals of the Digital Agenda for Europe (DAE

16 2. 4 What are the implications of realistic consumer bandwidth demands? 20 3 Potential benefits of broadband in Europe 22 3. 1 Assessments of the benefits of broadband 22 3. 2 Consumer Willingness to Pay as a measure of benefits

) 7 Facilities-based infrastructure competition 68 7. 1 The Regulatory Framework and facilities-based competition 69 7. 2 Societal welfare benefits from facilities

-based competition 70 7. 3 Facilities-based competition as a stimulus for fibre-based NGA deployment 71 7. 4 Prospects for achieving sufficient facilities-based competition 72 References 75 III FIGURES

Figure 1: Global Internet consumer traffic growth trends over time 16 Figure 2: Global consumer Internet traffic 17 Figure 3:

The evolution over time of consumer bandwidth demand during the busy hour 20 Figure 4:

Investment subsidies required per customer for each geographic cluster 46 Figure 19: The traditional one-way cable TV network 50 Figure 20:

Facilities-based competition and NGA deployment 72 IV Rethinking the Digital Agenda for Europe (DAE) TABLES Table 1:

Impacts of high speed broadband investment in Europe 2012-2020 26 Table 4: Typical maximum achievable speeds for various wireless solutions 33 1 EXECUTIVE SUMMARY The goals of the Digital Agenda for Europe (DAE),

thus enhancing competition. Wireless also functions in a useful complementary role (1) to provide coverage in low density and/or high cost areas,(2) as a competitive alternative to fixed network solutions,

may be greater in countries where competition is more effective. The goals of the Digital Agenda for Europe The goals of the Digital Agenda for Europe (DAE) are well known:(

rather, the interpretation should track trends in consumer demand for broadband. 2 Rethinking the Digital Agenda for Europe (DAE) Consumer demand for bandwidth has grown steadily over the last decade,

Even so, consumer bandwidth demand per household is less than many assume, even though total global bandwidth demand is substantial.

Per projections based on Cisco VNI data, average global bandwidth demand per household in 2020 (the target data for achieving the DAE's objectives for ultra-fast broadband) is less than 2 Mbps

. The evolution over time of consumer bandwidth demand during the busy hour Source: Cisco VNI 2011 data, 1 WIK calculations.

but in light of realistic consumer demand it is not necessary to assume that every broadband user will consume maximum capacity all the time.

Ability of different technologies to meet realistic consumer demand Eurodocsis 3. 0 cable systems already comfortably exceed the 100 Mbps called for in the DAE.

as well as fixed and mobile wireless services. In assessing the current status, it is important to distinguish between the coverage or deployment of each technology,

and (2) driving fibre progressively closer to the end-user as and when needed to meet customer demand.

because there has been little customer demand for upstream data bandwidth. The biggest single impediment is that such a shift would conflict with analogue FM radio

The recently published study by J. Hätönen of the European Investment Bank (EIB), represents one of the few studies of the costs of achieving DAE goals that explicitly considers technologies other than FTTX.

rather than a gain in facilities-based competition, is a separate question. The Feijoo/Barroso and EIB studies seem to be in reasonably good agreement for Spain,

Facilities-based infrastructure competition The European regulatory framework for electronic communications has advocated always an approach to regulation that is,

and for infrastructure competition, it is striking that the Digital Agenda for Europe contains only a single reference to cable television and that an altogether backward-looking statement.

Cable provides facilities-based infrastructure competition. The value of infrastructure competition is recognised explicitly in the European Regulatory Framework.

Infrastructure-based competition is important in the long term. A European network environment where only a single medium provides last mile access is a European network environment where detailed regulation to address market power is needed forever.

Cable tends to enjoy low unit costs in providing broadband services at whatever speed. This puts pressure on incumbents to innovate,

and to operate efficiently. Infrastructure competition is a valuable complement to SMP-based regulation. For instance

it can help to correct for any errors in regulatory price-setting. A recent WIK study found a strong link between DOCSIS 3. 0 coverage

and FTTN/VDSL roll out (typically by the incumbent), but no statistically significant relationship between DOCSIS 3. 0 coverage and FTTH/FTTB roll out.

A recent analysis by Feijoo and Barroso of potential NGA deployment in Spain distinguishes between areas of 2+competition, where the fixed network,

versus 1+competition, where only fixed and mobile compete. Facilities-based inter-modal competition even if limited to discrete geographic areas,

may have the tendency to constrain prices to reasonable levels across much larger geographic areas. 8 Rethinking the Digital Agenda for Europe (DAE) Overall assessment A more technologically neutral approach to the DAE,

the most common technology for providing consumer broadband services over copper telephone lines ARPU Average Revenue per User BW Bandwidth;

it connects multiple costumer digital subscriber lines to the network EIB European Investment Bank EU European union FTTX Fibre to the x;

an architecture based on a single dedicated fibre strand (or a fibre pair) for each end user between an Optical Street Distribution Frame and the end user ROI Return on Investment RSPG Radio spectrum Policy

that is to say a position of economic strength affording it the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers (Framework Directive) SMTP Simple Mail Transfer Protocol TB Terabyte (1 Terabyte

see Section 4. 1. 1 VNI Virtual Networking Index (published by Cisco) Vod Video-on-Demand;

a Video on Demand enables end-users to select and watch video content over a network Wimax Worldwide Interoperability for Microwave Access WTP Willingness to Pay 4g Fourth-generation mobile communication standard 11.1 INTRODUCTION Key

Findings The goals of the Digital Agenda for Europe (DAE), which seeks to ensure widespread deployment

http://ec. europa. eu/information society/digital-agenda/documents/digital-agenda-communication-en. pdf. Key Findings 12 Rethinking the Digital Agenda for Europe (DAE

3 while current consumer incremental willingness to pay for high bandwidth services is estimated at a mere € 5 per month4 too little to support so broad a deployment of fibre.

thus enhancing competition. The key issues addressed in this study are: To what extent is cable coverage available in Europe today?

To what extent has existing cable already been upgraded for broadband communications purposes? What is expected the time frame in

See also European Investment Bank (2011), Productivity and growth in Europe; ICT and the e-economy. 4 Costa Elias, H. 2011:

When and why PPPS are an option for NGA? EPEC workshop, Caisse des dépôts, 15 february 2011, available at:

rather, the interpretation should track trends in consumer demand for broadband. Consumer demand for bandwidth has grown steadily over the last decade,

albeit at a percentage rate of growth that is declining over time. Bandwidth demand per household is less than many assume,

even though total global bandwidth demand is substantial. Per projections based on Cisco VNI data, average global bandwidth demand per household in the busy hour in 2020 is less than 2 Mbps. Ultra-fast broadband access is useful,

but it is not necessary to assume that every broadband user will consume maximum capacity all the time.

A series of studies by the European Investment Bank appropriately raised the question: What do the bandwidth targets in the DAE signify?

rather, the interpretation should track trends in consumer demand for broadband. Consumer demand for bandwidth has grown steadily over the last decade,

albeit at a percentage rate of growth that is declining over time (see Figure 1), and this trend can be expected to continue.

We would argue that the DAE objectives should be interpreted in a manner that tracks this evolution of consumer bandwidth demand over time. 6 DAE,

What bandwidth are customers likely to want going forward? It is not as difficult as one might think to construct a reasonable estimate.

Even though total demand is enormous, the bandwidth demand of individual households tends to be far less than many have assumed.

Moreover, it is clear that even in 2015 a very small fraction of households can be expected to require more than 1, 000 GB

Cisco VNI (2011). 11 Translating the above Cisco data into Mbps demand, during the average hour and during the busy hour,

Estimation of the mean aggregate bandwidth demand during the busy hour from the data is straightforward,

The evolution over time of consumer bandwidth demand during the busy hour Source: Cisco VNI 2011 data, 15 WIK calculations.

What is particularly striking is that the mean global bandwidth demand per household is far less than most have assumed,

Even in 2020, the average demand during the busy hour is well below 2 Mbps. This has important implications,

What are the implications of realistic consumer bandwidth demands? Many policy implications flow from the bandwidth demand characteristics noted in Section 2. 3. In this respect,

it is important to distinguish between the access network (e g. the last mile) and the core networks that connect those access networks to one another and to the world.

Different customers will have different bandwidth needs. Different networks will have different customers and their customers may use their respective networks in different ways (especially fixed versus mobile.

All of this argues against a onesize-fits-all approach, and also against a one-technology-fits-all approach.

Again, networks should be designed so as to evolve over time to meet the needs of their respective customers.

Eurodocsis 3. 0 cable systems already comfortably exceed the 100 Mbps called for in the DAE. Even with current technology, cable networks are capable of meeting realistic consumer bandwidth demand well in excess of that which is likely to be present in 2020,

and the degree to which bandwidth demands differ from those of fixed network users (due, for example, to smaller screen size).

which customers are located, to the capabilities of networks already deployed there, and to the evolution over time of customer needs and of technological capabilities of different transmission media. 17 This follows from the basic mathematics (queuing theory) that governs network performance.

may be greater in countries where competition is more effective. Caution is appropriate in interpreting any of these results.

and providers of Internet applications, services and content benefit by selling services to consumers or by selling advertising to a wide range of firms.

he found that an increase in broadband penetration of 10%yields only a 0. 25%increase in economic growth. 19 A study by Micus Management Consulting

and by 10%in the services sector. Thompson and Garbacz21 found that an increase in broadband penetration produces macroeconomic benefits.

2009) 22 find that an additional £5 billion investment in broadband networks would create or retain an estimated 280,500 UK jobs for a year.

Broadband Infrastructure and Economic growth; CESIFO Working paper no. 2861; Munich; December 19 See Koutroumpis, P. 2009.

LSE Enterprise ltd. & The Information technology and Innovation Foundation; April 23 Grimes, A.,Ren, C. and P. Stevens (2009:

paper presented at the 33rd Research Conference on Communication, Information, and Internet Policy (TPRC), Arlington, Virginia, September 23-25;

Issues in Economic policy no. 6, The Brookings Institute, July 27 Greenstein, S. and R. Mcdevitt (2012), Measuring the Broadband Bonus in Thirty OECD Countries, OECD Digital economy Papers, No. 197

Countries with large Internet economies, including the United states, Japan and Germany, are receiving large benefits from broadband.

and Mcdevitt base their analysis on OECD retail broadband prices as published in Tables 7. 17 and 7. 18 in the OECD Communications Outlook 2011, multiplied by the estimated subscribers by access type.

These are all, not coincidentally, countries with substantial competition between the fixed telecommunications network and cable.

where cable competition is strong, also does quite well by this measure. At the same time, countries where cable is absent do not necessarily perform poorly,

It may well be that these differences in broadband surplus are primarily a function of the level of competition.

A strong cable presence contributes strongly to competition; however, competition may be weaker than otherwise expected for other reasons (for example, an institutionally weak regulatory system),

or stronger than otherwise expected due to effective use of competitive remedies such as unbundled local loop (ULL).

however, preliminary results have been presented publicly. 30 One part of the Analysys Mason study deals with an empirical assessment of the socioeconomic impact of high-speed broadband investment in Europe.

Input-output impact, Return on investment (ROI), and Cumulative impact on GDP. Table 3: Impacts of high speed broadband investment in Europe 2012-2020 Expenditure (EUR bn) Expenditure per head (EUR) I/O benefit (EUR bn) ROI Cumulative

impact on GDP EU27 220 436 485 2. 2 2. 0%Source: Yardley et al. 2012a);

which takes into account the respective investment expenditures for electronic equipment, construction and telecoms. 30 Intermediate results were presented at a public workshop in Brussels in February 2012.

thus corresponding to a return on investment (ROI) of 2. 2. The cumulative impact on GDP is estimated to be 2. 0%.The study has addressed also the issue of consumer surplus,

If inflation is taken into account the expected average price for ultra-fast broadband access in 2020 is estimated to be 61.8%of the cost in 2010.

and Turkey) assuming an incremental willingness to pay of 10 Euro for ultra-fast Internet access, 31 and taking inflation into account.

Household Demand for Broadband Internet Service; Final report to the Broadband. gov Task force, Federal Communications Commission;

3 february 2010.1.2 1. 0 0. 8 0. 6 0. 4 0. 2 0. 0 1. 2 1. 0 0. 8

Consumer surplus (EUR billion) Consumer surplus (EUR billion) Inflation adjustment EUR 10 willingness to pay 28 Rethinking the Digital Agenda for Europe (DAE) 4 THE BASELINE TODAY:

as well as fixed and mobile wireless services. In assessing the current status, it is important to distinguish between the coverage or deployment of each technology,

Study on the Implementation of the existing Broadband Guidelines Final Report DG Competition; December 7; available at:

http://ec. europa. eu/competition/consultations/2011 broadband guidelines/index en. html 33 Vectoring has the potential for very significant bit rate increase,

modern Hybrid Fibre Coaxial (HFC) cable solutions are capable of simultaneously carrying voice, data and video services.

), central intelligence facilities (Cable Modem Termination Systems, CMTS), optical nodes (fibre hubs) defining a specific cable cluster of customers,

The customers within a given cable cluster, however, share this capacity. 40 We discuss cable capabilities at length in Section 5. 4. 1. 3 Wireless solutions Wire less solutions based on Orthogonal Frequency Domain Multiplexed (OFDM) technologies such as LTE

Last but not least, the advantages of ubiquitous broadband access for customers are considerable and they could well compensate for lower guaranteed speeds. 41 One might well add that mobility offers advantages of its own.

which aims to deliver fast broadband internet in the future network-based knowledge economy, with an ambitious target for universal broadband coverage with speeds of at least 30 Mbps for all Europeans by 2020.39 See Chapter 5 for more details. 40 Apart from the very different physical infrastructure,

In the cable system, the customers in a given cable cluster share the available capacity, while in a GPON system this is the case for the customers connected to a given splitter. 41 Feijoo,

C.,Gómez-Barroso, J.-L.,Ramos, S. and R. Coomonte (2011a: The Mobile Communications Role in Next Generation Networks:

The Case of Spain, 22nd European Regional ITS Conference, Budapest, 18-21 september 2011.33. The Radio spectrum Policy Group (RSPG) has looked also at the issue, and observed:

which aims to deliver fast broadband internet in the future network-based knowledge economy, with an ambitious target for universal broadband coverage with speeds of at least 30 Mbps for all Europeans by 2020.42 Steady technological improvements are noteworthy.

The economic impact of fixed and mobile high-speed networks, European Investment Bank (EIB. 45 See Feijóo, C,

The Mobile Communications Role in Next Generation Networks: The Case of Spain, op cit. 46 See IDATE (2011), Broadband Coverage in Europe, Final Report, 2011 Survey Data as of 31 december 2010,2011,

and on the capabilities of deployed services for different kinds of conventional and ultra-fast broadband.

Meanwhile, the gap between cable coverage and cable broadband penetration represents a significant opportunity for Europe and for the industry.

In conclusion, the graph shows a pattern of investment relatively close to the distribution of the proportion of the total population among the different geotypes. 52 See Feijoo

and business and residential customers. These particular results were computed for Germany, but they are consistent with previous less detailed results,

The Economics of Next Generation Access; published by ECTA, Brussels, 16 september 2008.6.5%14.4%8. 2%18.6%10.1%22.5%7. 2%9. 6%1. 9%1. 1%459.16 470.97

520 540 560 580 600 I II III IV V VI VII VIII IV X%of the total investment Average price per subscriber EUR

If customers paid for their fibre-based ultra-fast access based on the individualised cost of deploying it,

If a market player sought to maximise coverage without losing money, rather to maximise profits,

Investment subsidies required per customer for each geographic cluster Source: WIK. 57 57 See Jay, S,

13 14 15 16 17 18 19 20 Cluster Investment subsidy per customer (at 70%penetration) AFTER CROSS SUBSIDIES Investment per customer (at 70%penetration

) Investment per customer EUR Profitable clusters profitable through cross subsidy additional invest subsidies required 47.

or else an investment subsidy of up to €2, 500 per access would appear to be required. 58 It is worth noting that these results are very sensitive to profit,

and (2) driving fibre progressively close to the end-user as and when needed to meet customer demand. Both upgrades have been in progress for some time.

because there has been little customer demand for upstream data bandwidth. The biggest single impediment is that such a shift would conflict with analogue FM radio

and (2) driving fibre progressively close to the end-user as and when needed to meet customer demand. Both upgrades have been in progress for some time.

GPON) for some customers, for example in greenfield development settings. The upgrades that we are considering in this chapter are concerned primarily with capacity,

The Cisco VNI report (2011) notes that Internet traffic demand contrary to what many have assumed, is becoming more asymmetric over time, not less.

because there has been little customer demand for upstream bandwidth. 50 Rethinking the Digital Agenda for Europe (DAE) 5. 1 Architecture

and topology The traditional cable TV network was optimised to deliver one-way analogue broadcast TV services to cable network subscribers.

The architecture and topology of a modern cable network that is able to offer triple play services is different in fundamental ways.

facilities for the provision of television, IP and telephony services; and supraregional, regional and local physical infrastructures.

and servers for providing a range of services. 60 Where there are multiple headends, they are linked typically via supraregional backbones based on fibre optics.

Virgin Media has announced plans to offer 1. 5 Gbps service to selected customers on a trial basis,

whatever data capacity is available is shared by all connected customers. With proper management, however, the data capacity can meet realistic customer requirements under quite a wide range of assumptions.

Upgrade of the traditional analogue broadcast cable network to enable digital broadband communications, Upgrade to a Eurodocsis 3. 0 enabled network,

Fibre Hub Active digital equipment 55.5.3.1 Upgrade of traditional broadcast cable networks to enable broadband communications Considerable work is needed to enable a traditional cable network to deliver broadband connectivity;

Replacement of the DOCSIS 2. 0 modem at the customer‘s premises for those customers who require

As with any shared medium, competition for resources with other users can introduce delay, affecting the performance seen by the user.

Cable operators are able to increase capacity in a number of ways in order to meet the needs of their customers.

the cable operator might reduce the number of competing end-customers served per fibre hub

and economic (costs of additional investments) considerations. 56 Rethinking the Digital Agenda for Europe (DAE) The latter option can be implemented in various ways.

First, as long as multiple customers share the same existing coaxial cable, unit costs will tend to be lower than Fibre-to-the-Home (FTTH) solutions where copper to every customer must be replaced with fibre.

The following figure gives an overview of the usual allocation of these frequencies to the different service segments provided over a cable infrastructure. 70 Section 2. 3 shows that individual bandwidth demand

even though a migration from today's traffic patterns towards more bandwidth hungry video based services and applications can be expected.

Figure 22 makes clear that the frequency spectrum allocated to upstream services (from 5 to 65 MHZ) is usually much smaller than the spectrum allocated to downstream services (from 80 to 862 MHZ.

The available downstream frequency spectrum is allocated to the following services: FM radio services, analogue TV channels, digital TV channels and Vod services, Euro DOCSIS (and Euro Packet Cable) services.

A major revision to the frequency allocation plan would entail significant disruption, but it has been under discussion for some time,

if there were sufficient consumer demand. A number of technical, economic and practical considerations come into play.

Indeed, in the digital world, operators typically support 30 to 35 analogue services, hundreds of standard definition TV services,

and tens of high definition services. Not usable Signal. Pilot Tonesfm Analogue TV Digital TV+Vod Eurodocsis and Europacketcable Eurodocsis and Europacketcable UPSTREAM DOWNSTREAM 5 65 80.6 108 862 87 MHZ

rather than a gain in facilities-based competition, is a separate question. The Feijoo/Barroso and EIB studies seem to be in reasonably good agreement for Spain,

Investment Bank (EIB), 76 based in part on earlier nonpublic work by Pantelis Koutroumpis, represents one of the few studies of the costs of achieving DAE goals that explicitly considers technologies other than FTTX.

ICT and the e-economy, EIB Papers, Volume 16, No 2. 63. Figure 25: Cost of meeting DAE objectives with and without cable in various scenarios Source:

or libraries) to electronic communication services rather than universal service in the home; however, we do not believe that Europeans would

rather than a gain in facilities-based competition, is a separate question. 83.4 55.9 142.4 103.9 0 20 40 60 80 100 120 140 160 Base

Passed%2010 Savings/HH Base case Savings/HH Advanced case 68 Rethinking the Digital Agenda for Europe (DAE) 7 FACILITIES-BASED INFRASTRUCTURE COMPETITION Key

and for infrastructure competition, it is striking that the Digital Agenda for Europe contains only a single reference to cable television and that an altogether backward-looking statement.

Cable provides facilities-based infrastructure competition. The value of infrastructure competition is recognised explicitly in the European Regulatory Framework.

Cable tends to enjoy low unit costs in providing broadband services at whatever speed. This puts pressure on incumbents to innovate,

and to operate efficiently. Infrastructure competition is a valuable complement to SMP-based regulation. For instance

it can help to correct for any errors in regulatory price-setting. There are many indications that cable (DOCSIS 3. 0) coverage stimulates fixed network operators to deploy fibre-based ultra-fast broadband more quickly.

A recent analysis of potential NGA deployment in Spain distinguishes between areas of 2+competition, where the fixed network,

cable and mobile all compete, versus 1+competition, where only fixed and mobile compete. Facilities-based inter-modal competition,

even if limited to discrete geographic areas, may have the tendency to constrain prices to reasonable levels across much larger geographic areas.

Policy and regulation in Europe and in Member States alike have put a strong emphasis on the maintenance of procompetitive remedies for fibre-based solutions (FTTN/VDSL

The results of fibre-based NGA deployment internationally in terms of competition have, however, been mixed decidedly to date.

(NBN) in Australia comes at the expense of inhibiting inter-modal competition in order to ensure that the NBN can be profitable. 7. 1 The Regulatory Framework

and facilities-based competition The European Regulatory Framework has advocated always an approach to regulation that is,

in particular those designed to ensure effective competition, national regulatory authorities do likewise. Article 8 (5) goes on to say:

safeguarding competition to the benefit of consumers and promoting, where appropriate, infrastructure-based competition; The Regulatory Framework as enacted in 2002-2003 is grounded,

moreover at its core in the belief, or at least the hope, that increasing competition would in time obviate the need for regulation that primarily responds to the presence or absence of Significant Market Power (SMP).

Yet last mile market power will not disappear unless there is infrastructure-based competition. The DAE speaks of the need for providing the right incentives to stimulate private investment,

complemented by carefully targeted public investments, without remonopolising our networks; however, it seems to disregard any concerns that a European network environment where only a single medium provides last mile access is a European network environment where detailed SMP-based regulation is needed forever.

Given this preference of the Regulatory Framework for technological neutrality, and for infrastructure competition, it is striking that the Digital Agenda for Europe contains only a single reference to cable television

and that an altogether backward-looking statement. 80 The absence of cable from the initial DAE documents is not a particular cause for concern,

because cable does not require public support to meet DAE objectives within its existing footprint.

The cable industry can finance these upgrades itself without public funding. The observation, rather, is that the degree to

can be very cost-effective in delivering higher download capacity. 82 7. 2 Societal welfare benefits from facilities-based competition The values of competition are recognised well in the economic literature,

Competition tends to promote lower prices for consumers, greater consumer choice, and incentives for service providers to operate efficiently

Cable provides facilities-based infrastructure competition in contrast to the competition provided by means of regulatory remedies based on Significant Market Power (SMP) under the Framework.

The value of infrastructure competition is recognised already explicitly in Article 8 of the Framework Directive,

which establishes the high-level regulatory principles that National Regulatory authorities (NRAS) are to follow. The national regulatory authorities shall apply objective, transparent,

non-discriminatory and proportionate regulatory principles safeguarding competition to the benefit of consumers and promoting, where appropriate,

infrastructure-based competition 83 Facilities-based competition from cable is not sufficient to enable lifting of regulation from telecommunications incumbents,

Notably, since facilities-based competition is market-based, and does not depend on regulated prices, it can help to correct any possible errors that might be made in regulatory price setting. 81 Neelie Kroes Vice-president of the European commission responsible for the Digital Agenda Giving Europe a Mobile Broadband Boost, 2012 Mobile

reference=SPEECH/12/124.82 Enhancing the broadband investment environment, 12 july 2012, at: http://europa. eu/rapid/pressreleasesaction. do?

Cable tends to enjoy low unit costs in providing broadband services at whatever speed. This puts pressure on incumbents to innovate,

and to operate efficiently. 7. 3 Facilities-based competition as a stimulus for fibre-based NGA deployment It has long been assumed that the presence of cable serves to stimulate fixed telephony network operators to deploy fibre-based ultra-fast broadband.

so as to ensure that we can offer our customers the best service quality. In doing so, we have fastened on the right technology mix of (V) DSL and glass fibre,

We have to some extent lost a lot of customers to cable companies. I am not just talking about Cablecom,

NGA Progress report, WIK, 1 march 2012.72 Rethinking the Digital Agenda for Europe (DAE) 7. 4 Prospects for achieving sufficient facilities-based competition Deployment of a mix of technologies has the benefit

of enabling inter-modal facilitiesbased competition in broadband markets. A recent analysis of potential NGA deployment in Spain (see Figure 29) 88 distinguishes between areas of 2+competition, where the fixed network,

cable and mobile all compete, versus 1+competition, where only fixed and mobile compete. Facilities-based intermodal competition,

even if limited to discrete geographic areas, may have the tendency to constrain prices to reasonable levels across much larger geographic areas.

Figure 29: Facilities-based competition and NGA deployment Source: Feijoo and Gomez-Barroso (2010a. 89 88 Feijoo, C.,Gómez-Barroso, J.-L.,Ramos, S. and R. Coomonte (2011a;

and Feijoo, C. and J.-L. Gómez-Barroso (2010b. 89 Feijoo and Barroso, op cit. Note that the figure shows a maximum speed of 30 Mbps

Issues in Economic policy no. 6, The Brookings Institute, July. Czernich, N.,Falck, O.,Kretschmer, T. and L. Woessmann (2009:

Broadband Infrastructure and Economic growth; CESIFO Working paper no. 2861, Munich, December. Elixmann, D.,Ilic, D.,Neumann, K.-H. and T. Plückebaum (2008:

The Economics of Next Generation Access, Report published by ECTA, Brussels, 16 september. European commission (2010: A Digital Agenda for Europe, Brussels, COM (2010) 245;

http://ec. europa. eu/information society/digital-agenda/documents/digital-agenda-communication-en. pdf. Feijóo, C. and J.-L. Gómez-Barroso (2010a:

The Mobile Communications Role in Next Generation Networks: The Case of Spain, 22nd European Regional ITS Conference, Budapest, 18-21 september 2011.

ICT and the e-economy, EIB Papers, Volume 16, No. 2. Howell, B. and A. Grimes (2010:

paper presented at the 33rd Research Conference on Communication, Information, and Internet Policy (TPRC), Arlington, Virginia, September 23-25,2005, revised January 17, 2006.

The UK's Digital Road to Recovery, LSE Enterprise ltd. & The Information technology and Innovation Foundation, April.

Study on the Implementation of the existing Broadband Guidelines, Final Report DG Competition, December 7; available at:

http://ec. europa. eu/competition/consultations/2011 broadband guidelines/index en. html. Nooren, P.,Marcus, J. S. and I. Philbeck (2012:

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