Rural households could swallow up two-thirds of the total cost of wiring up the continent to superfast broadband, says Point Topic

Despite all households in the European Union now having access to basic internet connectivity, significant challenges remain before the same can be said of high-speed services, not least of which is the high cost of wiring up rural areas, according to UK research firm Point Topic.

Piggybacking on the European Commission’s latest release of its Digital Agenda Scoreboard, which recently revealed that just over half of Europeans currently have access to speeds above 30Mbps, Point Topic estimates that only 12 per cent of rural households are currently covered by Next-Generation Access technologies such as DOCSIS 3.0 cable, VDSL and fibre-to-the-premises.

However, while the EC currently predicts that wiring up the whole continent to superfast broadband will cost in the region of €180-240bn, Point Topic believes it could be done for as (relatively) little as €82bn – with two-thirds of that figure being needed for rural areas.

Of Europe’s big four economies, France – as the most rural – has the biggest investment need at €17.5bn. The UK on the other hand, although similar in population, needs only €7.5bn, according to the research firm.

The €52 billion estimate also assumes that superfast investment will be capped at an average of €2,000 per household. “Most of that amount will have to be funded by the taxpayer in one way or another,” said Point Topic’s Tim Johnson “and we think that’s about as much as they will stand for. But we think that a large proportion of rural Europe will get wired up on that basis.”

But as a number of European incumbents separated their fixed and mobile operations—that they might better compete with the fast-rising pure mobile players—the new generation went forth, vibrant with the confidence of youth that the world would bend to its design. Why look to convergence, after all, when you can drive substitution?

If there was one company that epitomised the swashbuckling self-certainty of the mobile sector it was Vodafone; the greatest of the European empire builders

Today convergence is more about the combination of fixed broadband and IPTV; a workable marriage of access and content. Voice is part of the package but it neither makes nor breaks the deal.

Mobile, meanwhile, sits often in isolation.

Vodafone’s move for Kabel Deutschland this week highlights service diversification as the new geography for expansionist mobile players. Germany is Vodafone’s biggest European market but mobile alone apparently offers insufficient potential. Fixed broadband and TV bundles represent greater opportunities for monetisation and, crucially, the chance to drive longer customer life cycles at a time when mobile operators are are being forced, either through regulation or competition, to hang up their contractual handcuffs.

The new CEO of Brazil’s Oi, Zeinal Bava—who has had success with bundled offerings in Portugal—said recently that IPTV offerings allow operators to play in a relatively low-churn environment. If service providers cannot drive customer life-cycles of seven or eight years, he suggested, they will not succeed. What percentage of mobile subscribers sit tight for the better part of a decade?

Of course all manner of wholesale and VNO models can be used to deliver bundled offerings but these will never offer the same level of integration that can be driven by ownership and control.

Calls for consolidation in the European mobile market grow louder by the week and four-operator markets look increasingly challenged. Now, those mobile operators that have already built scale seem to be suggesting that there is no option but to expand yet further through diversification.

The markets that are now held to be the industry’s leaders—the US, Japan and Korea—are each dominated by one or two operators that play across fixed, mobile, broadband and pay-TV.

The agencies responsible for European telecoms markets have a very delicate balance to strike. They need to decide whether regional leadership is more or less important than individual market dynamics. If they are wary of pure mobile consolidation how are they going to feel about wider activity?

If Europe must be made more competitive on the world stage, and there seems to be widespread belief that this is necessary—reflected not least in Neelie Kroes’ pledge to create a single European telecoms market inside a year—it surely must come at the expense of competition in individual markets.

Neelie Kroes, European Commissioner for the Digital Agenda

European Commission vice president Neelie Kroes has outlined proposals to cut the costs and bureaucracy involved in broadband deployment, suggesting that the sector could make savings of up to €60bn. Kroes said that she wants to “burn the red tape” that is blocking access for all EU citizens to cast broadband.

In February this year the Commission cut the budget for the Connecting Europe Facility—which aims to fund the rollout of super-fast broadband across the continent—from the €9.2bn that Kroes sought to just €1bn.

The proposals announced on Tuesday include plans to cut the amount of time taken to respond to planning permission for new infrastructure sites; one of the most significant barriers to network deployment. In a statement Kroes’ office said that it wants to see a maximum response time of six months for all permit applications and a single point of contact made available for operators making those applications.

Kroes also wants to improve cooperation between different infrastructure providers.

“At the moment, there is no market-place for physical infrastructure and the potential to use infrastructure belonging to other utilities. Regulations in certain Member States even discourage utility companies from cooperating with telecom operators,” the statement said.

SMEs are an undervalued market

More than 99 per cent of European businesses are SMEs, yet the vast majority plan to change telecoms service provider at the end of their contract period, according to research published recently. The message is that the SME sector represents an enormous opportunity for CSPs to grow their revenues – but it is an opportunity they are not taking.

B/OSS specialist Comarch commissioned analyst firm Telesperience to examine what European SMEs think about telecoms services, with 298 European SMEs responding to the study.

The key finding was a surprisingly low level of loyalty among SMEs, with 80 per cent of the respondents planning to change service provider at the end of their contract period for a variety of reasons.

The main factors that annoy most are poor service quality; the inability of CSPs to resolve problems quickly and effectively; lack of clear pricing and well-designed tariff plans; as well as inaccurate charges.

Comarch said this is a worrying finding given that CSPs are seeking to increase spending from the SME sector. According to the research, 100 per cent of European providers see the SME sector as a growth opportunity, with 56 per cent seeing it as a significant growth opportunity.

However, 89 per cent admit they are currently not fully meeting the needs of SMEs, and 44 per cent say that SMEs have substantial unmet needs.

Part of the problem is that service providers have not segmented their customer bases enough to know which users are SMEs, and as a result, only around 44 per cent of providers have programmes that explicitly target them.

Operators should take note that low price is only rated as the fourth most important attribute out of six when selecting a service provider, with service availability, quality and tariff plans rated as more important. The ability to have itemised and archived bills and spending controls are more important. And clear pricing is the most important pricing and bundling feature with unified communications the most appealing value-added service for European SMEs.

Interestingly, the average EU business has six employees and 2.3 communications service providers, but many of the European SMEs that Telesperience spoke to said they would like to have a single supplier of telecoms services, which represents a great opportunity for CSPs to increase the amount of money SMEs are spending with them by taking revenue from rivals.

The main message from this research is that CSPs need to ensure they get basic operational processes and features right as these are often the ones that SMEs value most.

Consolidating SME spending is a significant opportunity, but successfully doing so requires CSPs to understand the dynamics of the SME market in different EU countries, as well as the needs of individual vertical sectors.

Download the full report here

Neelie Kroes, European Commissioner for the Digital Agenda

The European Commission (EC) has called on all EU member states to make 120MHz worth of spectrum around the 2GHz frequency band available for 4G services, such as LTE.

The paired terrestrial 2 GHz band (1920-1980 MHz paired with 2110-2170 MHz) has been traditionally used for 3G UMTS networks, but the EC now wants it to be liberalised for 4G services across the region.

The decision means it will be mandatory for EU member states to open the spectrum for 4G services by June 30, 2014. The EC said that it aims to provide harmonised technical conditions to avoid market fragmentation in the future use of the band.

European Commission Vice President Neelie Kroes said: “This extra spectrum for 4G in Europe means we can better meet the changing and growing demand for broadband. I want to see member states acting swiftly to change existing licenses. We all win from faster wireless connections in Europe.”

Dario Talmesio, principal analyst at Informa Telecoms and Media, welcomed the decision and labelled it a “very strong attempt by the EC to harmonise spectrum” for LTE services. However, he added that such a policy is long overdue.

“The main reason why 4G services are lacking in Europe is because of a lack of harmonisation of frequency bands. By opening up the UMTS spectrum, this will address the harmonisation issue, however, the spectrum bands are already fully utilised in most member states.”

Talmesio added that it will take time for operators to reap the rewards from liberalising this spectrum. It will still be two years before the member state governments will have to open the spectrum bands for LTE services, and then the refarming process will take time, given that a lot of resources have already been ploughed into UMTS services using the spectrum.

“The US market is way ahead of Europe when it comes to LTE services and harmonisation of spectrum, and this will remain the case. While this announcement is a step in the right direction, it is a policy that has come too late,” he said.

Talmesio added that the harmonisation will also be helpful for facilitating LTE roaming in the future, but stressed that the number one priority for operators at this stage is not in stimulating LTE  roaming, rather the adoption of the technology within their domestic markets.

But that’s exactly the point.  The European Commission’s Digital Agenda for Europe doesn’t want old school methods to talk to citizens or to broadcast its views.

Instead, it wants to involve every European in critical decisions that will help stimulate Europe’s digital economy – knowing that these decisions are tightly linked to the European Union’s entire future.

Lead by example

No slouch on Twitter herself, Digital Agenda commissioner and EC vice president Neelie Kroes(46,376 tweeps) is not alone among her peers to embrace social media.

This was fully in evidence last week during the Digital Agenda Assembly, a two-day EC-run conference where the #da12 hashtag reached out to an estimated 20 million people – that’s 4% of the European Union’s population.

Physically run in Brussels, the eight workgroup discussions – with topics ranging from broadband, cloud computing, e-commerce and entrepreneurship – were streamed live, tweeted, Facebooked and blogged.

We want you

But don’t call this e-government. This is We-Government, an emerging term for the use of digital social tools between citizens and governments to interact, co-create and solve problems.

Can such methods succeed? #da12 was not a discussion among mandarins. Stakeholders included a farmer leading a community fiber network build in rural England (see the excellent B4RN project), technology leaders like Alcatel-Lucent’s Ben Verwaayen and many others.

Nor was this political debate controlled via airbrush, satellite outage or truncheon.

Critics might say that no decisions were reached, that #da12 was just a talking shop. But that will only be true if the fundamental purpose of We-Government is ignored.

Now, it really is up to us.

The EU has voted in favour of the creation of a roaming market and reduced rates for roaming

Members of the European Parliament and representatives of the Council and the European Commission have voted in favour of new rules that will lower roaming rates in the EU and see the creation of an EU-wide roaming market.

The new rules will create more competition in the roaming market and in the meantime impose new safeguard limits on consumer prices, including a new price cap for data roaming, which will progressively bring prices down from current high levels until the benefits of competition have fully kicked in.

“Consumers are fed up with being ripped off by high roaming charges,” said Neelie Kroes, European Commission vice president for the Digital Agenda.”The new roaming deal gives us a long-term structural solution, with lower prices, more choice and a new smart approach for data and internet browsing. The benefits will be felt in time for the summer break – and by summer 2014, people can shop around for the best deal.”

Mark Newman, Chief Research Officer at Informa Telecoms and Media said that most smartphone users today turn data roaming off when they travel because of the high costs and unpredictability of roaming charges. But over the next two years, the cost of sending an email while roaming abroad will fall from, on average, €0.07 when the price caps come into effect in July, to €0.02 in 2014.

The cost of five minutes on Facebook will fall from €0.35 to €0.10 per megabyte while a five minute video on Youtube will fall in price from €3.50 to €1 per megabyte.

“In addition to the new price caps for data services, voice and SMS, the European Parliament has approved new rules that will allow new players such as mobile virtual network operators (MVNOs) to enter the roaming market,” said Newman. ”However, Informa Telecoms & Media is sceptical that this will result in a significant increase in competition. The most likely new entrants, Informa believes, could be Apple and Google.”

Orange has announced a commitment to cover Europe with LTE by 2015

International carrier Orange/France Telecom has committed itself to rolling out LTE networks across ten European countries by 2015. France Telecom’s CEO Stéphane Richard made the announcement at a meeting with the European Commission in Brussels this week.

The move is designed to help the EU reach its targets set out in it Digital Agenda, which aims to ensure that everyone in Europe has access to broadband by 2013 assisted by the release of harmonized band of radio spectrum for use with LTE. It also forms one of Orange’s “10 commitments”, which the company has set for itself in regards to networks and services.

“”[Orange will] roll out 4G/LTE networks in all Orange European Union markets by 2015.” Richard said. “We welcome the EU decision to make more spectrum available, in a timely and harmonised manner, to wireless services in the EU, and look forward to further, similar initiatives to help us cope with the massive growth in public data use.”

However, Richard also added that, “Europe could do a great deal to promote a more favourable environment for the roll-out of radio access networks”.

In the UK, Everything Everywhere, the joint venture between Orange and T-Mobile, has already announced that it wishes to have a live LTE service running by the end of the year, by refarming spare 1800MHz spectrum, a proposal that the regulator Ofcom has said that it is considering.

The other countries scheduled for LTE are France, Spain, Belgium, Luxemburg, Armenia, Moldova, Poland, Romania and Slovakia.

Orange is a host parter of the LTE World Summit taking place on the 23-24 May 2012 CCIB, Barcelona, Spain. Eduardo Duato, CTO, Orange, Spain is giving a keynote speech on Day Two of the conference. Click here to register your interest.

The innovation deficit is an easy problem to fix, according to Telefónica

Spain-based carrier Telefonica has launched a European talent incubator – Wayra –  in a move clearly designed to try and align the brand with young people and the start-up community.

José María Álvarez-Pallete, chairman and CEO of Telefónica Europe, was on hand at Wednesday’s launch event to talk about Europe’s “lost decade,” where over the past ten or so years the regional GDP has been moving backwards. He spoke of a “lost generation,” of rising unemployment and lost innovation in the face of stellar growth from the US and China, creating a ‘brain drain’ of migrating talent, while Europe struggled with an entrepreneurial deficit and an environment where people are reluctant to start new businesses.

In the vision put forward under the Wayra initiative, which is already incubating its first batch of start-ups in Latin America, Telefónica will open academies around Europe, starting in the UK in May, then moving into Dublin, Germany and the Czech Republic, catering to education and apprenticeship options for teens and upwards.

In what Álvarez-Pallete described as “the second or third largest tech incubator on Earth,” there will be opportunities for entrepreneurs to fast track their ideas to approximately 300 million customers worldwide.

As a counter point to the bleak picture he painted at the opening of Wayra Europe, Álvarez-Pallete, said that the innovation deficit was an easy problem to fix and that the incubator, or more specifically, accelerator, was actually “very easy to launch. And cheap too.”

Telefónica Digital will take a ten per cent stake in each start-up it backs, investing between €50,000 and €70,000 in the same. There would be an option to increase the stake at a later date. So far the company has had around 6,000 applications across seven countries, and aims to invest in around ten start-ups per academy.

As Dario Talmesio, principal analyst for Informa, points out, Telefónica is getting quite a good deal out of a very small investment. “In Europe I reckon they will invest no more that €6-7m to acquire shares in new business ideas; of course, then they will have all the costs of mentoring and supporting developers.

“That is a very small investment considering what they get out of it. I see the rationale of this initiative as being threefold: quite a push for their corporate social responsibility agenda, a lot of marketing in universities, and of course, access to some innovation.”

Talmesio said that the beauty of Wayra in Europe it is that it’s a cheap scale project compared to the amount of money that a telco would normally spend. It costs less than a marketing campaign promoting a new pricing plan and, if only one out of all projects that are selected works well, that will pay back the entire cost of Wayra development.

In a recent interview with telecoms.com, Paul Buchheit, partner at incubator Y Combinator explained: “You have to consider that the number one company is worth more than next 199 companies combined, while number two is worth more than next 198 combined and so on. So there are these crazy outliers and you need to be an environment where you can cultivate this. We look for that one company that can help support all the others. It’s the economics of innovation. You have to place a lot of bets. Something with high returns also has a high chance of failure. About 33 per cent of these companies just go straight to zero – they are worthless. Then there’s another third that are in the middle. You maybe get your money back or double your money and then you get the rest which give you a good return.”

However, it remains to be seen how appealing Telefónica’s play will be for young and talented innovators to stick to, when there are very alluring alternatives such as Facebook out there. “It’s a steep slope for telcos but it’s good to see that Telefonica is addressing a real issue,” Talmesio said.

The EU Commission is looking to attract investment of €100bn to be spent on rolling out fibre broadband across Europe

The European Parliament and the EU’s Council of Ministers is considering a proposal from the European Commission for an ambitious project, worth up to €100bn ($140bn), to fund the rollout of fibre broadband and associated services across the EU.

The Commission has proposed to spend €9.2bn from 2014 to 2020, to give EU citizens and business access to broadband speeds of 100Mbps. However, this initial €9.2bn will be used to attract additional investment to a total of between €50bn and €100bn, with each Euro spent expected to attract another private investment of between €6 and €15, according to the Commission.

The additional funding would come via innovative financing tools and the purchase of high-value blue chip bonds. A blue chip bond is one that is well-established, financially sound, and historically secure. Blue chip companies are known for their strong executive management teams that make intelligent growth decisions, and for their high-quality products and services.

“EU funding from the Connecting Europe Facility would leverage other private and public money by giving projects credibility and lowering their risk profiles,” the Commission explained in a statement. “The money would be largely in the form of equity, debt or guarantees. This would then attract capital market financing from investors; the Commission and international financial institutions such as the European Investment Bank would absorb part of the risk and improve projects’ credit rating.”

Projects to enhance digital service infrastructure that would be selected for grants by the Commission include trans-European very high-speed backbone connections for public administrations, cross-border delivery of eGovernment and e-Health services, enabling access to public sector information and multilingual services and pan-EU authentication of electronic identification (eID) so that citizens and businesses can access digital services in any member state.

It would also be used to fund electronic procurement projects, making it easier to complete administrative procedures to set up a business in another EU country, cooperation to take down illegal content, such as child pornography, from the internet, coordinated responses to cyber-threats, deployment of ICT solutions for intelligent energy networks and for the provision of Smart Energy Services.

The EU Commission claims that investment in fast and ultra-fast broadband network infrastructure would immediately boost employment related to construction and related equipment. It states that, in Germany alone, the construction of broadband networks is expected to create almost a million jobs over the ten years up to 2020. In France, the construction of a fibre-to-the-home (FTTH) network would generate 360,000 jobs per year, which translates into some €20bn of added value.

The exact amount of funding available each year under the proposal to support broadband and digital service infrastructure will be set out in Annual Work Programmes.

According to FTTH Council’s European director general Hartwig Tauber, the proposed investment in fibre is crucial, despite the turmoil that Europe’s economy currently finds itself in.

“The amount set aside for ICT and Telecoms is quite small as a proportion the whole budget that the European Union intends to spend on upgrading Europe’s transport, energy and digital networks,” he said.

He added that he recently attended a meeting with the European Investment Bank, and found that broadband upgrades are high on Europe’s agenda.

“One main conclusion of the European Investment Bank meeting was that broadband and ICT are crucial for the productivity and success of the European economies in the next years. So saving on this side would make the current financial crisis worse, rather than better.”

He added that innovative financing instruments, such as blue chip bonds, will be instrumental in triggering additional private investment.

“This figure should not be taken as €9.2bn. If you look at how many households can you connect with fibre with just €9.2bn, you can see that it won’t satisfy the whole of Europe. But seeing it this way is a huge misunderstanding of the European budget and how financing of such a project works.”

The Commission’s proposals are now being submitted to the European Parliament and the EU’s Council of Ministers for adoption.

The EU Commission is looking to encourage telcos to roll out fibre quicker

The heads of major European telcos and vendors have said that they need greater leeway from regulators to make the roll-out of high speed broadband networks economically viable. Ben Verwaayen, chief executive of Alcatel-Lucent, Deutsche Telekom boss Rene Obermann and head of Vivendi Jean-Bernard Levy, told the European Commission that regulators should reduce rules that block industry mergers and network sharing initiatives that would help the operators build scale and lower costs.

The telecom bosses were speaking at a conference in Brussels arranged by Nellie Kroes, the European Commissioner for the digital agenda, over concerns from governments that targets would not be met to roll out fast fibre-optic broadband , thus reducing European competiveness.

France Telecom, Vodafone and Deutsche Telekom have all complained that they will have to share networks with rivals having footed the bill to pay for them.

The companies are looking for approval to employ traffic management and charge for higher priority traffic to flow over their networks. Consumer groups oppose this, believing that maintaining ‘net neutrality’ is fundamental to the fairness of the internet.

France Telecom chief executive Stephane Richard said that ways of making larger websites contribute to networks costs should be explored as it was unfair that telecoms companies shouldered the financial cost of building network while tech giants such as Google and Apple skim profits from services running over the networks.

“Europe needs healthy companies willing and capable to invest,” the executives wrote in a draft version of proposals from the conference. “Players who add value should be stimulated by the right incentives.”

Europeans are unhappy with broadband reliablity and speeds report states

Many Europeans are unhappy with the speed of their broadband connection, a Eurobarometer study has found. The research, commissioned by the European Union, revealed that a third of all subscribers have suffered from loss of service at some point, while a quarter of them feel that the speeds they receive do not match their expectations based on the deal they signed up for.

The E-Communications Household Survey was carried out between 9 February and 8 March 2011 using a sample of 27,000 households that, according to the EU, are representative of the EU population.

The EU said that legislation that came into play on 25 May 2011 forces service providers to provide much more comprehensive information about minimum service levels before they sign up for a contract.

“Consumers are telling us loud and clear that they are worried they are not getting the internet speeds and quality of service they have been promised,” Neelie Kroes, European commission vice president for the Digital Agenda, said in a statement. “National authorities must take appropriate measures to ensure that operators respect new EU rules requiring to them to be transparent on connection speeds and service quality. If this should not be sufficient, I would not hesitate to take further action in the form of more prescriptive guidance, or even legislation if it is needed.”

Despite this dissatisfaction however, the report found that six out of ten householders said they have never considered switching to another service provider.

The survey also found that users are concerned about their privacy with 88 per cent stating that they would wish to be informed if any of their personal data collected by the company was lost, stolen or altered in any way.

Europe gets satellite services off the ground

The European Commission this week designated two providers to offer satellite-based media and communications services, allocating Inmarsat and Solaris Mobile spectrum in the 2GHz S-band.

Under the EC award announcement, Inmarsat has been awarded 30MHz of S-band radio spectrum to run its satellite programme, known as EuropaSat, across the 27 member states of the European Union.

Solaris Mobile, which is owned by Eutelsat Communications and SES Astra, received a similar amount of spectrum. Both providers are likely to have a particular focus on rural customers that are ill-served by existing fixed and wireless offerings and will deliver TV, location-based services, video and radio and internet connectivity.

But Solaris has already run into trouble. It has confirmed that the W2A satellite, which it launched on April 3, is suffering an “anomaly”, which may affect the satellite’s capability to provide services.

Earlier this month Eutelsat introduced a satellite-based consumer internet service in the UK using the Ku-band of spectrum. Catering for consumers in rural areas, Eutelsat’s Tooway service offers 2Mbps internet connectivity on the downlink and 256Kbps on the uplink for £29.99 per month.

However, the satellite operators may get competition from traditional mobile players in the rural areas as the EC goes about addressing the issues of 2G spectrum refarming.

According to research house Analysys Mason this week, the refarming of 2G spectrum will be key to enabling mobile broadband coverage outside major population centres.

Liberalising the usage of the 850/900MHz frequency bands, in which 2G services, such as GSM, currently operate, is a significant emerging trend, which will extend the reach of 3G services to rural areas not covered by operators’ existing 2100MHz 3G networks.

“Cost-effective coverage of large, thinly populated land masses is the key benefit of introducing UMTS in the 850MHz or 900MHz bands,” said Catherine Viola, senior analyst at Analysys. At lower frequencies, radio signals propagate further, meaning that fewer sites are needed for network rollout. At 900MHz, for example, networks can be built and operated with cost savings of around 50-70 per cent compared with networks deployed in 2100MHz core-band 3G spectrum, Analysys claims.

UMTS900 networks have already been launched successfully in Europe, Asia Pacific and South America, by DNA and Elisa in Finland, Síminn in Iceland, Optus in Australia, Vodafone in New Zealand, AIS in Thailand and Digitel in Venezuela.