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About Costas Troulos

Author Website: http://broadbandprime.blogspot.com
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Articles by Costas Troulos

A Different View on Broadband Sustainability

Posted by Costas Troulos on 12/03/09

I have assisted several investors build broadband business plans/models the last few years. And I have always been requested to prove the sustainability of the project as a way to help my occasional employer achieve its objectives (ie get funding, decide and schedule the investment etc.)

However, I can’t honestly align myself with the notion that sustainability must be directly linked with financial viability when it comes to broadband deployment. Does really financial viability become synonymous to success? Because, if this is true then most likely the educational system of every nation should be considered a disaster!

We definately need to understand the bigger picture when accounting for broadband benefits. The success of a broadband project has to be evaluated based on its objectives and not necessarily on its financial profitability. I understand that a private firm requires profits quickly in order to invest but governments (luckily) have quite different views and expectations from broadband infrastructure. Only if an investment is pursued to spur economic activity should be judged purely on financial terms. Otherwise, it must be evaluted based on whether it achieved its goals (e.g. increase awareness, encourage innovation, open market to outsiders etc). Never shall we forget that broadband is only a small piece in what we like to call Information Society, however, its impact to inter-sectoral economic activity and growth will be so immense as it is almost impossible today to accurately estimate and measure.

Did the first power plants and the distribution grids that brought electricity to the cities’ main squares and central streets were considered economically viable? Certainly not. But they were made, and noone probably understood why, at the time. In the end, this simple solution, whose adoption rates and benefits was almost impossible to forecast, (along with standardization, availability, quality of service etc) boosted innovation and created an economic and social ecosystem that we all consider for granted today. Did the road to “villabajo” and “villariba” build on pure financial criteria or simply for the benefits associated with social inclusion, and the right of people for equal opportunities?

I think it’s time to assess broadband in a broader context, far broader than a colorful P&L chart…

Also published here:

http://broadbandprime.blogspot.com/2009/02/different-view-on-broadband.html

Broadband, English
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Infrastructure-based Competition in NGA: The Best Way Forward?

Posted by Costas Troulos on 12/03/09

According to EC’s recommendation, member states have to encourage infrastructure-based competition as the best and fastest way for broadband development [1]. At first, the arguments behind infrastructure-based competition policies seem solid. Competition does good to the market: provides efficiency incentives to operators, reduces prices, increase penetration, etc. This seems to cheer everyone: 1) Customers are happy for receiving cheaper service, 2) incumbents are happy because alternative networks start spending money in infrastructure, and gradually stop cherry picking over their infrastructure, 3) operators see higher penetration rates as a way to increase their market potential and revenue streams. In all this ideal setting, regulators’ overall efficiency, as measured by EC, increases.

However, broadband development and infrastructure-based competition come with some significant costs. Social benefits from higher broadband penetration (stemming from infrastructure competition) are offset by a) operation inefficiencies of duplicating/redundant infrastructures and b) the cost of laying out these infrastructures.

So, here’s the billion dollars question: Do the benefits outweigh the costs? Does network competition truely advances the market (and at what extent) or do competitors simply eat out each other’s profits. Infrastructure competition can lead to price wars (when you compete at the conduit level, what else there is to compete over) which then makes the business case of the networks worse. Intuitely, this means that only those with the deeper pockets are going to survive. International experience provides the evidence: Telco’s bankruptcies and consolidations imply that indeed firms’ benefits (producer surplus) is negative.

For that, telcos seem to initially choose unserved geographical markets to deploy their networks and avoid direct competition, as Benoit points out , but this will not necessarily last for ever .

Thus, we are faced with a serious potential deficit: Socially sub-optimal over-spending in duplicating, parallel infrastructures. Would it be possible that infrastructure-based competition does not serve social welfare in the long-run? Should we look beyond short-term gains of increased broadband penetration?

Maybe, it should be worth revisiting the current policies aiming at quick broadband penetration, especially in these times where huge piles of money are being prepared to be invested in physical infrastructure. Public, publicly-owned or public-private physical infrastructure operated under open access rules is a serious alternative to the current policy guidelines and it must be re-assessed by regional/national regulators.

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[1] EC also suggests that in the regions that experience a market failure the Government must intervene and subsidize, finance and/or facilitate physical infrastructure on some sort of public ownership terms (wtih the aid of EU funds). The three most evident examples of EU funding in regional/municipal physical infrastructures are Sweden’s in the late 90’s early 00’s, Ireland’s in 2003-2006 and Greece’s in the period 2005-2008. In all three cases, municipal metro networks were built and FTTB connections to public buildings (education, health, public administration etc) were constructed.

English, European Commission, Facilities-based Competition, Fiber Investments, Telecommunications Policy
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EU Electronic Communications Regulation Revisited

Posted by Costas Troulos on 15/01/09

A few days ago I came across the work of Alexandre de Streel on EU telecommunications regulation, published in the latest issue of the Journal of Telecommunications Policy. In light of the contemporary review of EU regulatory framework, the author attempts a review of the EU policy in electronic communications and provides some powerful insight. What follows are my views and a few personal remarks on the matter, based on the affordementioned study.

First off, the EU telecommunications regulation is composed of the Significant Market Player (SMP) regime and the interconnection clause altogether. Certainly, in the 2003 Recommendation primary attention was focused on the SMP regime as interconnection issues should (and in most of the cases did have) resolve smoothly by market dynamics. SMP regime stems from competition laws principles and i) facilitates competition entry at the first stages of the liberalization, and ii) ensures progressive removal of obligations as competition develops.

Identifying which markets require regulation and what type of remedies are necessary to alleviate entry barriers is a four stage process:

First, European Commission (EC) initiates the regulation process by screening the industry for markets qualifying to regulatory intervention. The 2003 Recommendation identified 18 national markets (11 wholesale and interconnection markets and 7 retail fixed markets). Recent Recommendation (in 2007) reduced addressable markets to 7 (6 wholesale and interconnection markets and 1 retail fixed market). To reach its initial conclusion, EC is using competition law principles (three-criteria-test - TCT, and tests derived from anti-trust policy, e.g. SSNIP)

After EC’s initial screening is complete, National Regulation Authorities (NRAs) are required to use their own experiences and available data from local (national/regional) markets and concur or not on EC’s initial market resolution, accounting for other emerging markets as well. NRAs are also using the same set of tools as EC; Evidently, however, NRAs decision should be more informed since they can consult their National Competition Authorities. However, most of the NRAs did not apply the TCT on the identified markets by EC assuming that EC has already applied the test.

Then, NRAs conduct a market analysis (on the previously identified markets) and conclude whether there exists non effective competition. If so, these markets are selected to excercise regulatory measures on SMP operators, given that non-effective competition is considered to originate from the presense of SMP (allthough this is certainly not always true).

Finally, NRAs have to impose at least one (the least disruptive) remedy to the SMP operators choosing from transparency, non-discrimination, compulsory access, price control, cost accounting or accounting separation. If wholesale remedies are not expected to be sufficient, NRAs are allowed to intervene in retail markets as well.

Outside the liberalization of the telecommunications markets of the member states, EC’s biggest challenge is the harmonization of the regulatory culture within EU. For this EC holds the power to veto the definition of markets (if different from EC’s recommendation) and the market analysis conducted by NRAs. However, EC can only comment on the selection of remedies. EC can also excerise general European law in the form of infringement procedures and anti-trust cases. Finally European Regulators Group (ERG) is established to give the opportunity to NRAs to exchange ideas and best practices.

However, these mechanisms do not enable a common regulatory approach within EU. Regulatory measures differ in member states and intra-market issues remain largely unsolved (e.g. roaming prices). Intra-market issues are of growing importance for the attempted unification of the telecommunications markets within EU, especially when national decisions have network effects to other member states. Another important issue of the current regulatory framework is that even if retail regulation is decreasing, wholesale regulation is expanding substantially and is becoming more complex (fixed bitstream access in 2004, wholesale line rental in 2005, naked DSL access in 2006, international voice roaming in 2007, international SMS roaming in 2008). Consequently, the industry will be very difficult to deregulate eventually. Deregulation is (or should be) within the scope of regulatory processes. Finally, regulatory certainty is a serious issue. In certain cases, NRAs are drifting around 1) protecting the customers, 2) promoting entry and 3) prohibiting the abuse of market power. NRAs also have not yet shaped a firm and clear stance over new emerging markets (e.g. Voice over IP, 3G networks, FTTx networks) as they should.

Four main reasons are identified for the insufficiency of 2003 regulatory framework:

Absense of conceptual allignment: No clear directions on regulation concepts is provided by EC therefore, allowing NRAs to choose independently from the most hads-off to the most hands-on approach (harming harmonization) or even worse, reconsider the approach taken in a later phase (harming market conditions).

Unfortunate allignment of regulation and anti-trust methodologies: Regulation scope and efficiency is reduced because anti-trust methodologies, primarily designed for mature, stable markets are applied to dynamic, changing electronic markets.

Questionable selection of remedies: Most of the remedies applied by NRAs or proposed by EC are behavioural measures used to address structural problems. This is probably what leads to ever complexing regulation.

Inefficient evaluation of NRAs: NRAs incentives were not clearly understood. Over-regulation can be considered a reaction by NRAs to increase their role and activities. Also, NRA are evaluated on static (i.e. prices, level of market concentration) and not on more dynamic criteria (i.e. innovation, investment, consumer benefits, social welfare).

To overcome this series of issues there is a set of improvements to be made in the next EU regulatory framework:

Provide insight and attempt to clarify on the regulation concepts (protect innovation possibly by allowing creative monopoly - eg. BT Openreach, protect price competition - most NRA follow this path, promote specific business model entry, promote specific operator or directly offer services - eg. government investment in the emerging market of fiber access)
Request from NRA to lay their plans, means and time frame beforehand in order to make evaluation more efficient and allow effective action taking when needed.
Change the sequence of the market analysis. Analyze the retail market and if found with problems then evaluate wholesale market and decide on remedies based on the easiness of replicability and inclusivity of the asset
Indicate different types of remedies other than the “atomic bomb” of structural separation (e.g. wholesale bill and keep, attempt settlements between operators to increase incentives compatibility)
The evaluation of NRA should not only be based on static indicators but on dynamic indicators as well.
Establish an increased role for a central european authority. A centralized entity for telecom regulation certainly comes with a series of benefits (harmonization, scale economies, removal of political pressure, reduce NRA work load) and drawbakcs (beraucracy: additional adminstrative layer, distant from the market, national market conditions are very different).
Improve coordination between NRAs, EC and national courts

EU, English, European Commission, Telecom Regulation
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Workshop on ‘Regional Broadband: the Universal Service Obligation and the Next Generation Access’

Posted by Costas Troulos on 19/11/08

This open workshop on regional broadband will bring together regional ICT stakeholders so as to address the issue of universal access to internet services. Keynote speakers presentations will raise awareness on new Commission’s initiatives, namely the Universal Service Obligation (USO) and the Next Generation Access (NGA) consultation. More information on regional broadband issues is available on the European Broadband Portal . More information about the workshop (agenda & application form) can be found at ianis.net (free registration might be required).

On of the reasons I mention this workshop is that USO for NGA networks in the broader context of Information Society was one of the key issues that I addressed in my presentation in Broadband Cities 2008. I look forward to read on the outcome of the workshop when it gets published. Here’s the rationale of the workshop quoted by the WS agenda:

It is currently estimated that some 30-40% of Europeans are denied access to the benefits of the information society. The reasons are various but include the costs, lack of appropriate education and skills, disability and age. Access to simple Internet via dial-up modem is available to anyone having a fixed line phone and this covers most of Europe. However, technology has moved on and a combination of DSL, cable and FTTH technologies now mean that broadband is available to many Europeans.

Nevertheless, although the main concern now rests with take-up rather than access to broadband, it remains the case that individuals, communities and enterprises throughout Europe lie beyond affordable reach of broadband networks. The Digital Divide Forum Report claimed that “at least 4.7 million would-be broadband users will be excluded by commercial rollout in 2013 in the EU25.” The Report went on to say that “Under these circumstances, public intervention may be considered desirable or necessary”. The European Commission has recently opened the debate as to whether the Universal Service Obligation (USO) should be extended to include ‘basic’ broadband. You can read more about this and take part in a user survey at the European Broadband Portal at www.broadband-europe.eu.

While many express concern at a growing Digital Divide (between people, communities and regions) resulting from limited extension of broadband networks, technology continues to progress and advances are now being made to roll out Next Generation Networks (NGNs) employing FTTP technology and providing very high bandwidth. Since Europe lags behind the US and Asia in this regard, it is clear that such networks will have an important impact on competitiveness, jobs and inclusion in the near future.

Most regions are concerned with competitiveness, jobs and inclusion and should ensure they are well informed on the issues relating to them - especially the USO and what is could mean of extended to include broadband, and the state of the art with respect to NGA and what role the regions should play in this unfolding scenario.

This workshop brings together well-informed commentators in these important fields and will provide opportunities to hear their views and to engage them in debate through Round Table Discussions and Question & Answer sessions.

Also here you can found the recent EU communication the second periodic review of the scope of universal service in electronic communications networks and services.

EU, USO, Workshops and Conferences
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Municipal Broadband: A Guidebook for Fiber Communities

Posted by Costas Troulos on 19/11/08

” Municipal & Utility Guidebook to Bringing Broadband Fiber Optics to Your Community ” is an insightful publication by Public Technology Institute which aims to serve as a reference point for local authorities that want to bring broadband reality into their communities. The study includes an analysis of four US municipal broadband projects, namely: Bristol (Virginia), Burlington (Vermont), Jackson (Tennessee), Reedsburg (Wisconsin). What makes this publication worth reading is the level of details by which each of the 4 case studies is analyzed.

We are much accustomed to read articles or see presentations on municipal projects that are completely stripped out of any useful implementation detail that could help a community with similar endeavours. This publication goes beyond that. The document describes in good detail the challenges faced (technology, business, regulation etc.) by the municipal authorities and how these challenges were eventually addressed.

This is a good reading for all municipal authorities with broadband aspirations.

Municipal Broadband
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Broadband Cities 2008: A Short Review

Posted by Costas Troulos on 24/10/08

The last 3 days I spent at Trikala were truly amazing. The conference held in a gorgeous industrial setting at the perfectly preserved 19th century ” Mill of Matsopoulos “. The hosts were amazing and the organization reached high standards (Special thanks to Odysseas and Vassiliki). On the downside, I think the schedule was a bit too tight (many speakers with limited time at hand) and more clear guidelines for the presentation thematology and possibly even an extra session or two, might have saved time and allowed the participants to get the most out of the event.

It was a great opportunity to see again old colleagues and friends, and face-to-face meet with Tim , the CUD and iNEC guys, and the infamous Benoit Felten and Gordon Cook .

I do not plan to go through a detailed review of each session rather outline some of the key messages which I take from this year’s conference:

It was clearly pointed by the speakers and the comments from the audience that a broader context for evaluating broadband development is required. Infrastructure must not be tackled in isolation of the development of a social culture towards information society. Most of the speakers, each from his own perspective stretched the importance of a social consensus about the necessity of the Information Society. Besides, the most successful broadband projects worldwide have been those that managed to inspire citizens and not just those that accomplished a successful broadband infrastructure roll-out.
Success is not easy. What is easy is local authorities experimenting. Experimentation that will help them assess their potentials and increase their chances to select a successful path for an all-inclusive information society strategy.
Success is difficult and will require resources, coordination and vision; but is is doable. And it is doable simply because broadband is the future (despite the fact that this future although highly anticipated it is not supported by hard economic facts).
Even among the international pioneers there’s yet no evidence that a clear plan to address the maximum broadband potentials is being drafted. Many are the projects and many the objectives around the globe. And all are leveraging not on the capacity potential of broadband rather on its high availability and increased connectivity features. Transportation management, traffic management, social care at home, public safety and other presented cases are services that currently are not designed on the basis of high broadband capacity rather on the feature of mobility, always-on and (I’ll give you that) broadband speed. However, these simple services a) will provide the proof of concept to the public b) will help increase the social awareness for the benefits of the information society and c) will win the public agreement for the future required concession (civil inconveniences, financial investments etc).

What I liked was the feeling that the entire city knew about and participated in the event. What I’d prefer better is to see many more municipal officials from other cities participating.

If you’re interested, you can download the presentations here .

Broadband, Reviews, Workshops & Conferences
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Discussions on Greek & EU Information Society Policy. The blog contains syndicated content from broadbandprime.blogspot.com ’though original content will not be avoided! more.