Committente: European Committee of the Regions.
Periodo: 2016
URL: Linking the Digital Agenda to rural and sparsely populated areas to boost their growth potential
Descrizione:
With a view of achieving the 2020 European Union (EU) broadband targets of coverage and penetration, some EUR 22 billion of EU public funds are potentially available over the 2014–2020 programming period for either upgrading existing broadband infrastructures or deploying new ones. However, to reach these targets, in the most optimistic scenario there is an estimated funding gap of at least EUR 13 billion (EC, 2015a). EU funds are crucial not only for their direct contribution to the financing of broadband infrastructures, but also for the leverage effect they are expected to play in attracting investments from other sources, including private ones. Characteristics such as rurality, remoteness and low population density contribute to make a territory unattractive for private investment in Information and Communication Technologies (ICT) infrastructure. Compared to urban agglomerates, these areas face common challenges to broadband deployment, such as structurally lower and fragmented demand as well as higher unit (i.e. per end-user) deployment and maintenance costs of the infrastructure. Connectivity demand in particular is a crucial driver of investment for private actors. As a consequence, market players have no economic convenience in areas where population density cannot guarantee a service request that justifies deployment costs. In areas affected by market failure and/or market bias, the public authorities’ roles are multiple. Indeed, evidence shows that local and regional authorities (LRAs) across Europe act as financing entities, risk takers, or initiators/facilitators of broadband deployment/upgrading initiatives. Part 1 of this study reviews the state of the art of broadband deployment in areas considered unprofitable by private operators. Unprofitable areas are assumed to include the ‘predominantly rural’, ‘remote’ and ‘sparsely populated’ (RRS) territories of the EU as defined at NUTS3 level within the rural–urban typology of Eurostat. Data at the end of 2014 provide evidence that a digital divide exists in the EU between urban and rural areas, in particular if fast broadband connection is considered. By focussing on the next targets of the Digital Agenda for Europe (DAE) for fast and ultra-fast broadband, the data also highlight that none of the EU28 countries has so far reached 100% coverage of Next Generation Access (NGA). In addition, several countries have a rural NGA coverage below the EU average of 25% (i.e. Spain, Austria, France, Hungary, Sweden, Croatia, Ireland, Finland, Czech Republic, Slovakia, Bulgaria, Greece and Italy). Overall, data analysis further highlights that the actual uptake of broadband connection (also referred to as broadband access) is much lower than the broadband coverage. This implies that end-users are potentially able to subscribe to the service (i.e. the broadband service is available) but they do not. 1 Since demand plays a crucial role in driving investments, it is evident that besides broadband coverage, the selection of the most suitable investment and financing models also needs to take into account access levels. Part 2 of the report focuses first on the discussion of the most common barriers to ICT infrastructure investments in RRS areas. Second, it identifies and classifies the tools and instruments adopted by LRAs for financing the deployment of the infrastructures and/or for attracting external investments. Barriers specific to RRS areas include, for example, a limited market size. Furthermore, compared to urban areas, barriers relate to lower revenue for network operators and service providers, and higher financial risk and/or a longer pay-back period for the investors. Regarding tools and instruments, these are categorised into four main types ranging from contractual arrangements and multi-stakeholders engagements to strategic frameworks and EU funding instruments. The emphasis of the analysis is on contractual arrangements and multi-stakeholders engagements, on their applicability in RRS areas, and on their strengths and weaknesses from the perspective of LRAs. To this end, for example, the public Design, Build and Operate (DBO) approach is found to be highly suitable for RRS areas as it easily allows the inclusion of social benefits considerations in the investment decision. Federation of LRAs is considered another suitable approach for RRS areas as the aggregation of public authorities creates a single point of contact with respect to the market, hence increasing the market size and the potential profitability of private network operators. More generally, approaches characterised by the achievement of a critical mass of actors for demand creation (e.g. community-based initiatives) or fund raising (e.g. equity crowdfunding) are found to be suitable for implementation in RRS areas. Part 2 concludes with a literature review of the evidence of the territorial impacts of broadband deployment in RRS areas, from the business and the citizens’ perspectives. Although evidence is scarce, the multiple and beneficial impact of broadband deployment on socio-economic aspects is unquestionable. While business benefits from a generalised growth potential brought about by the availability of broadband, from the social perspective impact has been noted on several spheres of an individual’s life. For example, effects are reported in literature on the level of participation in social life, on the enhancement of personal skills, on the increase of opportunities for cost savings related to the consumption of goods and services, and on better access to basic services such as health care. Part 3 presents five cases related to the different types of tools outlined in Part 2. The cases are developed on the basis of desk-review of publicly available documents. They are selected according to a number of criteria, including 2 availability of information, level of connectivity and ICT preparedness of the concerned area(s), active role in the infrastructures deployment process played by local and/or regional authorities, use of EU funds, geographical balance across the EU, and impact and sustainability of the initiative. The outlining of cases is complemented by the inclusion throughout the report of several other examples of broadband investment in RRS areas. Empirical evidence and the considerations on the wider territorial impact of broadband investments support the proposition, in Part 4 of the study, of ‘new ways’ of financing of ICT infrastructures in underserved or unserved areas. ‘Novelty’ refers to existing approaches which appear to be suitable for financing broadband deployment/upgrade in RRS areas but which are not yet taken up by LRAs. This is the case, for example, of equity crowdfunding, which is recommended as an effective but still not widespread instrument for financing broadband deployment in areas characterised by a good ICT preparedness level. ‘Novelty’ also refers to the outlining of proposals to improve the effectiveness and efficiency of financing/investment models and/or the use of EU funds by LRAs. To this end, for example, a support scheme for securing financing for ICT infrastructure deployment in RRS areas from the European Fund for Strategic Investments (EFSI) is suggested. Since higher risk is one of the barriers to ICT infrastructures investment in RRS areas and since the EFSI is specifically meant to finance projects with a higher risk profile and in strategic areas of the real economy, the proposed scheme simply aims at matching these two perfectly compatible conditions. Other included suggestions relate to the creation of publicly-sponsored venture capital, to the involvement of nonconventional broadband investors (i.e. utilities’ operators) able to exploit economies of scope, and to the maximisation of EU funding contribution within a public DBO approach. The successful implementation of the Digital Single Market (DSM) and the achievement of the DAE targets for 2020 require the effective and efficient use by the public sector of the funds available for broadband infrastructures deployment and/or upgrade. This, in turn, requires: investment tools and instruments which are appropriate for overcoming both the challenges faced by less connected areas and the barriers which prevent external investment in these areas; and capacities to implement these tools and instruments. An effort to achieve the above two conditions is essential and so is public funding in order to build the critical mass of capital required to attract external investors. The role of LRAs is multiple in this respect, and fully justified by social considerations.
Committee of the Regions Report, 4 April 2015.