The World is just horribly expensive…

I’ve been moaning lately about the need for some fresh thinking on how to improve the business case for investment in next generation broadband networks.  I had almost forgotten the reasons for my evangelism when some figures emanating from Brussels reminded me of the enormity of the task.

Earlier this year, I commented on the 'CEO Roundtable' convened by Neelie Kroes to consider ways of boosting NGA investment.  The follow-up meeting to that inaugural event was held in mid-July.  Looking at the outputs, one of the key themes addressed by the Working Groups of CEOs was ‘How to Achieve the 2020 European Digital Targets’.  (You may remember from an earlier piece that the EU has set the eye-watering objective that, by 2020, all European citizens should have access to broadband speeds of 30Mbps, and that 50% should have access to 100Mbps).  Based on data from the EIB, Arthur D. Little, BNP Paribas and McKinsey, the CEOs estimate that these targets will require total investment of between 140bn€ and 290bn€.  That’s a big spread – let’s just call it 200bn€ - but, given comparable metrics for the UK, it certainly sounds plausible.  According to some 2008 work done for the BSG by Analysys Mason, rolling out NGA beyond planned coverage to just 90% of the UK population, even employing the cheapest (FTTC) technology, is going to require further investment approaching £2.5bn.  That puts government subsidies of £530m (to include a universal service obligation) into context.  It also explains why the CEO Roundtable delivered a rather gloomy conclusion on European investment prospects:

“Under the current market and regulatory conditions, shareholders of telecom operators are not willing to commit the necessary funds to achieve a massive NGA roll-out. ROI expectations on NGA in Europe are not considered as favourable as in other markets such as wireless or as in other regions”.