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Broadband operators should seize the opportunity of government-funded networks

10 января 2012

National and local governments worldwide are developing plans to roll out government-owned broadband networks. The capabilities of next-generation networks are seen as an important ingredient for economic recovery, which is much needed during this period of economic uncertainty.

However, governments are not stimulating broadband provision for purely economic reasons. Drivers include a desire to promote better competition, to have control over the networks that deliver public services, or to ensure that socio-economic benefits are realised. Governments may also be concerned that commercial operators will not provide services in rural and other areas, hence the need for public sector intervention.

For existing commercial broadband operators, such activity could be considered a challenge to their businesses. Backed by the public purse, and with a business case justified by the promise of economic sustenance, the new networks could challenge an existing operator’s core business of telecoms infrastructure provision, especially if any new network overlaps their existing footprint.

However, commercial broadband operators should treat stimulus from the public sector as an opportunity, and aim to become part of the deployment and operation of the new networks. National and local governments are likely to move ahead with broadband plans, regardless of any objections from within the industry. It is therefore important for broadband operators to find opportunities to partner with the public sector in the delivery of these new networks. In doing so, broadband operators can ensure they are able to provide services to more end users and possibly leverage public funding in areas that would otherwise be unprofitable.

To assist local and national governments, the European Commission has published a guide, prepared by Analysys Mason, setting out good practice in planning broadband investments that combine public and private investment. A free copy of the guide to broadband investment can be downloaded here: http://ec.europa.eu/regional_policy/sources/docgener/presenta/broadband2011/broadband2011_en.pdf .

The guide is targeted at public authorities, but is also valuable for broadband operators as it describes five business models that offer private sector involvement in government-led broadband projects. The five models are:
  • Bottom-up: the network will be managed by end users, but the build and operation will need to be undertaken by an experienced operator
  • Private design, build and operate: the operator receives a grant to help build the network, and most importantly, retains ownership of the network once built
  • Public outsourcing: network ownership remains with the public sector, but the operator receives payments to build and operate the network, creating less risk than the grant model
  • Joint venture: the network is jointly owned, and the creation of special purpose vehicles offers the prospect of additional funding from third parties (e.g. institutional investors)
  • Public design, build and operate: the network is built, operated and owned by the public sector, but such investment can stimulate demand from which private operators benefit.
These models demonstrate the possibility for public and private sectors to assist one another. Governments can bring financial support, while broadband operators can offer the technical expertise and commercial discipline needed to ensure projects are sustainable. Broadband operators should devise a strategy to include government-funded networks, so that these networks become an important feature of their next-generation portfolio.

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