House of Commons - Documents considered by the Committee on 27 October 2010

Documents considered by the Committee on 27 October 2010 - European Scrutiny Committee Contents

5 Broadband development in Europe

(31969)

13874/10

COM(10) 472

Commission Communication: European Broadband: investing in digitally driven growth

Legal base —

Document originated 20 September 2010

Deposited in Parliament 28 September 2010

Department Business, Innovation and Skills

Basis of consideration EM of 14 October 2010

Previous Committee Report None; but see (31638) 9981/10: HC 428-i (2010-11), chapter 28 (8 September 2010) and (31645)10245/10: HC 428-i (2010-11), chapter 29 (8 September 2010)

To be discussed in Council 2 December 2010 Telecoms Council

Committee's assessment Politically important

Committee's decision Not cleared; further information requested

Background

5.1 An earlier Commission Communication of 19 May 2010, which the Committee considered on 8 September, set out the Commission's Digital Agenda for Europe — the first of seven flagship initiatives under the "Europe 2020" strategy.[39] The "Europe 2020" strategy, which was launched by the Commission in March 2010, is a ten year strategy for smart, sustainable and inclusive growth, designed to prepare the EU for the challenges that it will face over the next 10 years. It was endorsed by the 25-26 March 2010 European Council.

5.2 In unveiling its Digital Agenda for Europe,[40] the Commission said that implementing its ambitious agenda would contribute significantly to the EU's economic growth and spread the benefits of the digital era to all sections of society. The Commission noted that half of European productivity growth over the past 15 years was already driven by information and communications technologies and this trend was likely to accelerate. At that time, Commission Vice-President for the Digital Agenda Neelie Kroes said:

"We must put the interests of Europe's citizens and businesses at the forefront of the digital revolution and so maximise the potential of Information and Communications Technologies (ICTs) to advance job creation, sustainability and social inclusion. The ambitious strategy set out today shows clearly where we need to focus our efforts in the years to come. To fully realise the potential of Europe's digital future we need the full commitment of Member States, the ICT sector and other vital economic players."

5.3 The Digital Agenda focuses on seven priority areas, and foresees some 100 follow-up actions, of which 31 would be legislative. The seven areas are:

— creating a digital Single Market;

— greater inter-operability;

— boosting internet trust and security;

— much faster internet access;

— more investment in research and development;

— enhancing digital literacy skills and inclusion; and

— applying information and communications technologies to address challenges facing society like climate change and the ageing population.

5.4 At her press conference to introduce the Communication, the Commissioner said that progress towards achieving the Communication's objectives would be measured against a number of specific targets, for example:

by 2013, broadband coverage for all EU citizens and, by 2020, fast broadband coverage at 30 Megabits per second for all EU citizens, with at least half European households subscribing to broadband access at 100 Megabits per second;[41]
by 2015, 50% of the EU population should be shopping online, with 20% of the population using cross-border online services;
by 2015, regular internet use increased from 60% to 75%, and in the case of disadvantaged people from 41% to 60%;
by 2015, halve the proportion of people who have never used the internet (from 30% to 15%);
by 2015, 50% of EU citizens should be using online public services, with more than half of them returning filled in forms via the internet;
by 2020, doubling EU Member States' total annual public spending on ICT Research and Development to €11 billion.

5.5 In his Explanatory Memorandum of 22 June 2010, the Minister for Culture, Communications and Creative Industries Department for Business, Innovation and Skills/Department for Culture, Media and Sport (Ed Vaizey) welcomed what he described as a comprehensive Communication and the forward looking strategy it outlined, professed himself to be particularly pleased about its focus on how to derive economic benefit from the use of ICT, which he maintained was something the Government had pressed the Commission on during its formation, and agreed that the priority for the new EDA should be a focus on initiatives that derive maximum leverage from ICT for economic growth and productivity. He also supported actions that sought to resolve both access to, and increased take-up of, the internet by EU citizens and businesses.

5.6 The Minister was, however, concerned that the large number of proposed actions could cause a lack of focus and dissipate effort, and thought that the Commission should have applied a more rigorous regime of prioritisation, which he believed would have ended up with a simpler, more achievable set of actions. At the Telecommunications Council, he had therefore suggested that the Commission, in conjunction with Member States, should set out a route map for major items for example, and regularly report progress to the Council, so as to ensure effective implementation of this agenda.

5.7 The Minister was not in a position at this stage to comment on all the proposals outlined in this Communication, reflecting both that work was still being taken forward on policy development but a lack of details in some of the proposals from the Commission.

5.8 Among those upon which he commented, however, were three Broadband targets, which he said were broadly in line with the Government's policy:

by 2013, basic broadband for all Europeans, which he described as clearly consistent with the UK Universal Service Commitment to provide access to a 2 MBps service for all by 2012;
by 2020, all Europeans to have access to speeds of greater than 30MBps, which he said implied some involvement of fibre in the access network and was at a "level of ambition" consistent with the Coalition Agreement and subsequent policy statements; and
also by 2020, 50% or more of European households to subscribe to internet connections above 100 MBps, which he described as the most ambitious of the targets, and where he noted that the average level of the implicit Fibre To The Home connection (FTTH)[42] in Europe according to the Communication was 1% (compared with 2% in the USA, 12% in Japan and 15% in South Korea), which he said meant that, in addition to removing investment barriers to allow coverage to grow, would require demand-side action.

5.9 The Communication suggested taking measures including possible legal measures to facilitate broadband investment, which the Minister said were precisely the ones being considered by the Government — for example, passive infrastructure sharing, co-ordination of civil engineering works and Member States fully using EU Structural and Rural Development Funds.

5.10 Turning to the Financial Implications, the Minister said that, although the Communication as such did not have any, the Commission proposed to leverage more private investment by doubling annual public spending on ICT research and development from €5.5 billion to €11billion (£4.6 billion-£9 billion) by 2020. The Minister noted that, while the Government saw R&D as a driver for growth, EU budget decisions must be seen in the context of fiscal consolidation and good financial management, with any increase being through reprioritisation away from areas with low EU value added funding to be made; that negotiations on the framework for the 2014-2020 EU budget would begin in early 2011, with agreement expected in 2012; and that the Commission cannot enter into financial commitments for this period until the negotiations have been concluded: the UK, along with other Member States, would therefore seek to ensure that discussions on policy areas in advance of those negotiations could not prejudice the outcome of the negotiations.

5.11 The Minister concluded by describing the Council Conclusions adopted at the 31 May Telecoms Council were as a set of bland endorsements at a very high level that did not sign the UK up to any particular part of the Digital Agenda, before the negotiations on each of the proposals that form the EDA had taken place,[43] and noting that the Commission would now begin to publish the various proposals according to the timetable.

Our assessment

5.12 We noted that: the Commissioner had also said at her press conference: "The digital world affects us all — there is no choice about that. But we can take the decision to use these changes to boost European growth, jobs and the well-being of our citizens. That is the decision the Commission is taking today, and we call on all those with a stake in this digital future for Europe to join us in moving forward"; and that the extent of this challenge was plainly set out in an associated Communication, on the development thus far of EU communications markets, which we also considered on 8 September, and which demonstrated just how far the EU was from a single market in this area.[44]

5.13 We also cleared the document and look forwarded to considering the upcoming Broadband and other proposals as they were put forward.[45]

The Commission Communication

5.14 This Communication is part of the Commission's "Broadband Package" for the roll-out of broadband and fast- and ultra-fast networks in the EU. The other constituent parts, which we consider elsewhere in this Report, are:

a Commission Recommendation on Regulated Access to Next Generation Access (NGA) Networks;[46]
the proposal for a Decision of the European Parliament and of the Council establishing a Radio Spectrum Policy Programme (RSPP).

5.15 This Communication sets out a framework for helping Member States meet the European Digital Agenda's broadband targets for the EU. Its objective is to further assist the actions of national and local authorities in achieving the optimal conditions for the rollout of broadband across the EU. As foreseen in the earlier Communication, the key targets are:

by 2013 Basic broadband coverage for all EU citizens;

by 2020 All Europeans should have access to broadband speeds of above 30 Mbps; and
by 2020 50% or more of European households should have broadband subscriptions above 100Mbps.

5.16 The Commission proposes the following Member State actions on order to achieve the broadband targets:

by 2011, in cooperation with the European Investment Bank, issue guidance for local and regional authorities on the use of EU funds for broadband projects;
by 2011, adopt investment guidelines for local and regional authorities to maximise use of EU funds for broadband projects; and
by end-2013, increase funding of high-speed broadband through EU instruments such as the European Regional Development Fund (ERDF) and the European Agricultural Fund for Rural Development.

5.17 The Commission also calls upon Member States to:

implement the Next Generation Access (NGA) Recommendation and anticipate key aspects of the European Radio Spectrum Policy Programme (RSPP);
set national broadband targets and adopt operational plans that are in line with the European broadband target, which the Commission intends to review the in 2011; and
take national actions to reduce broadband investment costs.

5.18 The Communication begins by setting the background against which this strategy is set. It notes that world demand for high speed broadband is fast-growing, driven by the increased downloading of video from the Internet and the use of more graphically advanced websites. Along with download speeds being important in this context, equal consideration needs to be given to the need for higher upload speeds and lower latency.[47] Due to this, the Commission believes that high speed broadband will play a key role in economic recovery and as a platform to allow innovative new services and applications flourish throughout the EU. It is this belief that has driven the Commission to set out the targets and actions contained in the Communication. Several examples cited of existing and developing services that require such high speed connections include:

"smart"electrical grids (which can cut consumer spending on energy and allow for more effective network management);
real-time "cloud based" computing services[48] (which can be used by small businesses to lower costs); and
data intensive e-health applications (allowing health-care professionals to use remote techniques and share information more readily).

The Communication notes that, in the view of the Organisation for Economic Cooperation and Development (OECD), the cost of savings in the transport, health, electricity and education sectors alone would justify the construction of a national FTTH network.

5.19 After considering issues relating to the technology and market developments associated with current broadband delivery — fixed copper or cable networks, wireless networks, e.g. Third Generation (3G) and fixed wireless access (Wifi or Wimax) — the Commission notes that the Next Generation Access Recommendation and transposition of the new Telecommunications Framework[49] should provide regulatory certainty and so promote investment and competition over such networks. The Commission calculates that upgrading current networks to meet the target of 30Mbps for all by 2020 will cost €38 billion to €58 billion (£32.7 billion to £50.0 billion), and between €181 billion and €268 billion (£156.0 billion to £230.9 billion) in order to meet the third target of 50% of households subscribing to 100Mbps by 2020.

5.20 The Commission then examines the various elements considered necessary for success of the strategy. EU broadband policy should foster investment in new networks and enhance infrastructure competition. The Commission accordingly intends to work in cooperation with Member States to produce effective national broadband plans, especially as very few Member States have strategies for super- and ultra-fast broadband. Member States' plans should incentivise and supplement private sector action by ensuring that the revised Telecommunications Framework is properly implemented in order to provide regulatory certainty in order to encourage further investment and include policies that assist private investment in broadband (e.g. rules that allow sharing of infrastructure and targeted financing measures that reduce risk and promote new open infrastructures). Member States' plan should also include clear guidance on the use of EU broadband funds and European Investment Bank instruments in eligible Member States. Updated digital competitiveness reports and a new "digital agenda scoreboard"' with detailed performance indicators will enable Member States to monitor and compare broadband plans.

5.21 The Commission then examines a variety of ways to minimise investment costs, including:

making the installation of new passive infrastructures and "in-building" wiring a requirement for planning authorisations;
coordinating civil works so that new networks can be installed at the same time as repairs or new duct installation;
simplifying regulations and procedures to enable further roll-out of wireless infrastructures;
ways in which national and local authorities could support broadband deployment through direct public investment that would take into account State Aid rules;
cooperation with the Body of European Regulators for Electronic Communications (BEREC) to ensure they include measures to increase the rollout of broadband as a priority in its 2011 work programme;
supporting the construction of broadband infrastructures and Internet take-up through both EU Rural Development and Structural Funds;
promoting Wireless Broadband, by making radio spectrum more widely available;
developing broadband finance instruments, in conjunction with the EIB.

5.22 In his Explanatory Memorandum of 14 October 2010, the Minister for Culture, Communications and Creative Industries (Ed Vaizey) fully supports the Commission's analysis of the role which broadband will play a key role in economic recovery and is supportive of the overall objectives of the Communication. He continues as follows:

"The Government's objective is to have the best superfast broadband network in Europe by 2015. To achieve this task the Government is encouraging and supporting investment in rural and difficult to reach areas at the same time as market players are investing in more densely populated areas. The Government's policy is broadly consistent with the EU's targets and is likely to meet to meet them ahead of most other Member States."

5.23 With regard to calls on Member States to set out national broadband plans, the Minister says:

"The Government has articulated a vision and will set out in a strategy document, the interventions planned to achieve the Government's vision. This should take the UK a long way towards achieving the specific EU targets. The Government plans to publish the strategy document before the end of 2010."

5.24 The Minister also supports the EU's recommendation that Member States should take actions that promote investment in broadband networks and reduce investment costs:

"The specific suggestion that Member States should take action to promote infrastructure sharing is consistent with the approach that the Government has been pursuing. Ofcom has been consulting on access to BT's 'ducts and poles' in the context of its review of wholesale local access."

5.25 The Minister then says that the Government has sought views on the capacity for infrastructure sharing with other utilities in a discussion document published in July 2010 and is consulting on the implementation of the EU Framework Directive[50]which would assist with the goal of collecting data on the location of passive infrastructure. The Minister says that the Government is also looking actively at some of the other interventions suggested in the Communication including the re-use of public sector networks and assets.

5.26 The Minister also welcomes the commitments the Commission has made in the Communication in respect of European funding, noting that, in developing its approach, the Government wishes to make use of all available sources of funding to support private sector investment in broadband networks.

5.27 The Minister says that:

¾ neither a consultation nor impact assessment is required as the Communication does not contain any legislative proposals, but

¾ the Government will undertake any necessary consultations and an impact assessment to determine the costs and benefits to business and other stakeholders if legislation is required to take forward any elements of this Communication.

5.28 With respect to the Financial Implications, the Minister notes that the proposed financing instruments to complement existing resources for financing of broadband infrastructure would require dedicated resources and that the Commission says that these dedicated resources could be provided by an EU contribution:

"It is the UK Government's position that any proposals for additional funding from the EU Budget should respect the current Financial Framework ceilings and offer good value for money, particularly in the current economic climate. The Government cannot support proposals calling for funding post-2013 as this could prejudice the 2014-2020 Financial Perspective negotiations. These decisions should not be made in isolation of wider EU issues."

5.29 The Minister concludes by noting that the Communication will be the subject of Council Conclusions at the December Telecoms Council.

Conclusion

5.30 We are reporting this Communication to the House because of the importance of its subject matter.

5.31 Though it raises no legal or political issues, we note and endorse what the Minister has to say about the financial aspects. We would therefore like him to write to us before the Telecoms Council meeting with as much information as possible about the Conclusions that he expects to be adopted, and to say in particular if he is confident that they will include the necessary caveats that he sets out above.

5.32 Until then, we shall retain the Communication under scrutiny.

39 See http://ec.europa.eu/eu2020/pdf/COMPLET%20EN%20BARROSO%20%20%20007%20-%20Europe%202020%20-%20EN%20version.pdf for details. Back

40 See http://ec.europa.eu/information_society/digital-agenda/index_en.htm for full background. Back

41 A megabyte per second (MB/s or MBps) is a unit of data transfer rate. Back

42 Fibre to the Home: a network where the final connection to the subscriber's premises is made of optical fibre. This technology is currently replacing copper-based networks. Back

43 The conclusions are available at http://www.eu2010.es/export/sites/presidencia/comun/descargas/may31_pressreleaseEN.pdf. Back

44 See headnote: (31645)10245/10: HC 428-i (2010-11), chapter 29 (8 September 2010). Back

45 See headnote: (31638) 9981/10: HC 428-i (2010-11), chapter 28 (8 September 2010). Back

46 In common parlance, the NGA Recommendation. Back

47 The time taken for data to get from one designated point to another. Back

48 Cloud based computing is the use of software, platforms or infrastructure offered by web based service providers to perform tasks on the Internet often performed in-house. A Cloud can be either publicly owned as is the case with Google web tools such as Gmail and Google Docs or it can be privately owned and operated generally by a company. There are presently three types of Cloud based services: Infrastructure-as-a-Service (e.g. Amazon Web Services and SliceHost, which provide virtual server instances based on technologies provided by the Vmware and Xen etc); Platform-as-a-service in the cloud ( a set of software and product development tools hosted on the provider's infrastructure, e.g., GoogleApps); and Software-as-a-service cloud model (which leverages the vendor hardware infrastructure and their software product to provide a complete service to and end user such as Hotmail and Gmail). Other examples of cloud based services and technologies include: Storage - Amazon S3, Ubuntu One, Microsoft SkyDrive; Mapping - Google maps, Yahoo Maps, MapQuest; Telephony Services (VOIP) - Skype, Razortel; Business Tools - SugarCRM, Salesforce, Mail, Spam Filters; and Hosting Providers - Slicehost, OpSource, Rackspace. For further information, see http://randomitblog.blogspot.com/2009/10/what-is-cloud-based-computing.html. Back

49 Member States must have transposed the new provisions of the Telecoms Framework by May 2011. Back