Government Information Quarterly xxx (2013) xxx–xxx

GOVINF-00960; No. of pages: 10; 4C:

Contents lists available at ScienceDirect

Government Information Quarterly

j ourna l homepage: www.e lsev ie r .com/ locate /gov inf

Should next generation access networks fall within the scope of universal service? AEuropean union perspective☆

Alberto Nucciarelli a,⁎, Bert M. Sadowski a, Ernst-Olav Ruhle b

a School of Innovation Sciences, Eindhoven University of Technology, Den Dolech, 2, 5612AZ Eindhoven, Netherlandsb SBR Juconomy Consulting, Nordstrasse 116, 40477 Dusseldorf, Germany

☆ The paper has greatly benefited from the extensive coviewers of this journal who are gratefully acknowledged⁎ Corresponding author.

E-mail addresses: a.nucciarelli@tue.nl (A. Nucciarelli),(B.M. Sadowski), ruhle@sbr-net.com (E.-O. Ruhle).

1 Despite a continuous discussion on the EU level on brotional definition of broadband still refers to Internet techspeed of higher than 144 Kbit/s (download speed) as repoCommittee document (COCOM10–29) of November 2010

0740-624X/$ – see front matter © 2013 Elsevier Inc. All rihttp://dx.doi.org/10.1016/j.giq.2013.02.006

Please cite this article as: Nucciarelli, A., et aunion perspective, Government Information Q

a b s t r a c t

a r t i c l e i n f o

Available online xxxx

Keywords:European UnionUniversal Service ObligationNext Generation Access networks

In 2010 the European Commission (EC) undertook a review of its current Universal Service Obligation (USO) todiscusswhether or not broadband should be included in it. In fact, convergence of telephony, internet andmedia,furthermarket liberalization and rapid technological development in the broadbandmarket challenge the tradi-tional definition of USO and increasingly question its notion of a “basic set of communication services”, whichdoes not include broadband. In this context, the paper looks at the origins, the theoretical arguments for, andthe empirical basis of theUSO in light of the ongoing debate in the EU, and links these arguments to technologicaldevelopments and changing demand conditions in European broadband markets. The authors propose that theEuropean Commission should include in its future USO regulation provisions for a wider set of services basedon Next Generation Access (NGA) networks rooted in the EC's new regulatory approach. Even if these provisionshave not been included in the new USO framework in November 2011 further discussions are needed to accountfor the new realities of broadband markets in the European Union.

© 2013 Elsevier Inc. All rights reserved.

2 This debate follows a discussion started in 2009 about the potential inclusion of mo-bile communications into the scope of universal service. It needs to be considered thatthe current definition focuses on various services that are defined as universal servicewhereas next generation access deals with a more encompassing term of the relevant in-

1. Introduction

Universal Service Obligation (USO) has been at the center of an on-going debate about the degree of public involvement in the telecommu-nication sector and the possible commitment in broadband1 invest-ment. The European Commission (EC) has recently delivered a newCommunication (COM (2011) 795 Final) on the third periodic reviewof the scope of universal service (i.e. Directives 2002/22/EC and 2009/22/EC) in which it did not recognize the “need to change the basic con-cept and principles of universal service as an instrument for preventingsocial exclusion”. In the outcome of the 2011 public consultation onthe future of universal service, the EC considers it as “inappropriate toinclude mobility or mandate broadband at a specific data rate at EUlevel”. However, the EC builds upon the 2009 Broadband Guidelinesand the so-called 2010 Broadband Package by drawing up policy state-ments to help achieve the goals of the Digital Agenda for Europe (DAE)(i.e. COM (2010) 245 final/2). Specifically, by pointing out the way for-ward for a consistent implementation of USO, the Commission wishes acoherent approach for the definition of “functional internet access” in all

mments of two anonymous re-by the authors.

b.m.sadowski@tue.nl

adband technologies, the tradi-nologies enabling a connectionrted in the EU Communications(EC, 2010a).

ghts reserved.

l., Should next generation acuarterly (2013), http://dx.do

EU members and a careful analysis of conditions warranting the exten-sion of USO to broadband. This paper aims to contribute to this ongoingpolicy debate2 by arguing in favor of the addition of broadband to USO.We analyze the theoretical foundations of universal service and thelatest EC policy documents and propose that Next Generation Access(NGA) networks3 should be within the scope of USO in the EuropeanUnion (EU).

The paper is divided in four sections. Section 1 analyzes literature onuniversal service and looks at its development in the EU (Section 1.1).Section 2 introduces themain characteristics of the Information Societyas developed in the EU area over the past twenty years. It highlights thechanging determinants of information access by characterizing ongoingprocesses of convergence leading to a disappearance of the dividinglines between telephony, internet and media, on the one hand, and

frastructure allowing a new range of services.3 In this paper we refer to broadband access as to every technology enabling functional

internet access and we refer to broadband connection as the connection of end-users to apublic communications network. By Next Generation Access (NGA) networks the EC re-ferred to “wired access networks which consist wholly or in part of optical elements andwhich are capable of delivering broadband access services with enhanced characteristics(such as higher throughput) as compared to those provided over already existing coppernetworks” (see Article 11, Recommendation 2010/572/EU of 20 September 2010) (see EC,2010b). In this paper, we extend this definition considering not only the qualitative as-pects of NGA but also the quantitative ones. Accordingly, we refer to NGA as to networksenabling internet connection speed at least faster than 2 Mbit/s.

cess networks fall within the scope of universal service? A Europeani.org/10.1016/j.giq.2013.02.006

2 A. Nucciarelli et al. / Government Information Quarterly xxx (2013) xxx–xxx

discussing the rapid technological changes in broadband infrastructuretechnologies leading to the emergence of Next Generation Access(NGA) networks, on the other hand. Section 2 also looks at how theUSO concept has developed within the EU by identifying its maineconomic perspectives and the trade-off inherent in USO obligations.Section 3 outlines three pillars for the future development of broadbandin the EU while Section 4 examines the arguments in favor of an exten-sion of the USO definition to include NGA in the Commission's forth-coming policy documents on universal service.

2. The theoretical discussion of Universal Service Obligationsin Europe

2.1. The origins of the concept of universal service

The origin of the universal service goes back to Theodor Vail's secondperiod as a chairman of AT&T (1907–1919) when he coined the termuniversal service and promoted it to President Woodrow Wilson.According to Vail, the concept of “one policy, one system, universal ser-vice”was necessary tomake basic telecommunication services (i.e. tele-phony) accessible to the widest number of consumers possible.4 By theend of the 1930s, market consolidation provided the basis for AT&T'smonopoly and the provision of “universal service” using basic telecom-munication services and relying on strict conditionswith respect to geo-graphic coverage, continuity in service provisioning and fixed charges.In different European countries, legally justified public monopolies de-veloped along similar lines, providing analogue telephony and facsimileservices at fixed rates, to guarantee equality of treatment and transpar-ency (Noam, 1992).With furthermarket liberalization in telecommuni-cation markets in the 1990s, justifications had to be developed whichallowed governments to intervene in cases where market outcomeswhere considered as insufficient.

2.2. The theoretical justifications of Universal Service Obligation (USO)

According to Cremer, Gasmi, Grimaud, and Laffont (2001), the maineconomic justifications for universal services5 are: 1) the correction ofmarket failure due to the existence of network externalities6; 2) theircontribution to the provision of a public good,7,8; 3) their effects onwealth redistribution (i.e. as a policy instrument to reduce inequalitiesamong the population); 4) the existence of regional developmentgoals leading to a transfer of resources; and, 5) themaximization ofwel-fare through the implementation of political actions easily evaluated bythe public (Cremer et al., 2001). In this context, universal service hasbeen defined as “the obligation of an operator to provide all userswith a range of basic services of good quality at affordable prices”(Cremer et al., 2001). To understand which services should be includedin this definition, four criteria have been used: i) being essential toeducation, public health or public safety; ii) being subscribed to by asubstantial majority of residential customers; iii) being deployed inpublic telecommunication networks by telecommunication carriers;and iv) being consistentwith public interest, convenience andnecessity.These criteria have been increasingly used in the liberalized marketenvironment to define a set of essential services within the concept ofuniversal service (Cremer et al., 2001).

4 For a critical discussion on the foundation and development of the notion of universalservice, see Mueller (1993, 1996).

5 See for example Cremer et al. (2001), Mueller (1999), Bohlin and Teppayayon (2009)and Alleman, Rappoport, and Banerjee (2010).

6 See Lehr, Sirbu, and Gillett (2006) for the discussion onmarket failure and basic infra-structures rationales justifying government intervention in the broadband sector.

7 We use thedefinition of public good as definedbyGómez-Barroso and Pérez-Martínez(2005).

8 See Picot and Wernick (2007) for a detailed discussion of government activities withregard to broadband as a public good.

Please cite this article as: Nucciarelli, A., et al., Should next generation acunion perspective, Government Information Quarterly (2013), http://dx.do

A number of studies have looked at the features of universal serviceand have investigated the concept from both a normative and a positiveperspective.9 From a normative point of view, justification for universalservice stems from the existence of substantial network externalities,the need to impose redistributive pricing, their contribution to the pro-vision of a public good, and the conduct of regional policies. The positiveperspective considers USO as the result of political and economicprocesses influenced by public opinion and various lobbying activitiesin favor or against incumbent operators (Cremer et al., 2001). Inthis context, governments have traditionally justified the creation of pub-lic monopoly structures on the basis of concerns over national security,the protection of natural monopoly structures and cost subadditivity.10

Interestingly, a number of these traditional justifications have beenfurther developed to justify the inclusion of broadband in USO.

Two alternative perspectives have been used in the discussion on theinclusion of broadband into USO: a public-good perspective (addressingthe public interest of broadband) and a competition-related perspective(arguing in favor of higher incentives for investment and innovation)(Picot & Wernick, 2007). According to the public good perspective, gov-ernments have to define the public interest in NGA technologies inrelation to issues such as the threat of digital exclusion of certain usergroups (e.g. Matzat & Sadowski, 2012; Van Winden, 2001) or the emer-gence of a digital divide (Schleife, 2010). From this perspective, thefocus shifts to the extent to which users can generate sufficient willing-ness to pay, their degree of digital literacy, etc.11 According to thecompetition-related perspective, governments have to identify marketfailures in emerging markets for Next Generation Access (NGA) technol-ogies which may arise due to a) the presence of scale effects and limitedextent of competition increasing the chances of a return to naturalmonopoly (de Bijl, 2011; Janssen & Mendys-Kamphorst, 2008; Jay,Neumann, & Plückebaum, 2011), b) substantial investment costs provid-ing insufficient incentives for companies to invest in NGA technologies(Bourreau, Cambini, & Hoernig, 2012; Sadowski, Nucciarelli, & de Rooij,2009) and c) lack in demand for complementary services in areas suchas e-health or e-education (Firth & Mellor, 2005). In the theoreticaldiscussion on the inclusion of broadband in USO, these alternative argu-ments become apparent.

2.3. The theoretical discussion of Universal Service Obligations in the EU

In the theoretical discussion on USO in the European Union, it hasbeen shown that the drivers of information access in the EuropeanUnion have shifted in the 1990s from a monopolistic to a competitiveenvironment in which problems of convergence have to be addressed.For example, Bauer (1999) showed that emerging competition in infra-structures and services requires a reconsideration of these obligations.In his work, he criticized the narrow approach of European institutionsin defining the borders of universal service, arguing that the definitionof universal service in the late 1990s has been limited in addressingonly a “minimum set of safeguards for basic services and constrainedthe ability of member states to fund such programs” (Bauer, 1999). Inrelating the policy framework of the EU to ongoing processes of techno-logical convergence, Michalis (2002) argued in favor of a greater focusonUSOwith regard to content and information rather than communica-tion links and high-speed internet. Accordingly, her arguments centeredon the necessity to include “aspects traditionally associated with uni-versal service in broadcasting” (Michalis, 2002). From a public policyperspective, this literature pointed at the shifts in information accesswhich required a broader set of services to be included in USO.

9 According to Cremer et al. (2001), the normative perspective deals with the under-standing of the “whether” and the “why” universal service as a public policy can be justi-fied on welfare grounds. The positive perspective explains why the universal service isimplemented.10 For a detailed analysis of natural monopoly justifications and economics see Sharkey(1982).11 This section has greatly benefitted from the comments of one reviewer.

cess networks fall within the scope of universal service? A Europeani.org/10.1016/j.giq.2013.02.006

12 Although traditional access technologies (fixed telephony) and public payphoneshave reached a high level of diffusion, penetration levels of broadband technologies andin particular fiber technologies have been uneven across the EU.13 As pointed out by the OECD (2006), the switch to mobile might also be fostered by“price rebalancing” strategies implemented by incumbents to balance the fall in revenuesin long-distance calls. The consequences of such actions could even “threaten the quest foruniversal service on the fixed network”.

Table 1The evolution of information access and the new frontiers of universal access. Source: our elaboration.

Information access until liberalization Information access after liberalization

Telecommunications sector Information & Communication Technologies (ICT)

Competition Legal monopoly in fixed and monopoly (or duopoly) in mobiletelephony.

Competition Open access vs. vertical integration models within an internetecosystem with layered architectureHorizontal competition (among players in the same relevantmarket)Vertical competition (inter-platform or intra-platform)

Access technology Copper network; Mobile: GSM and (E)TACS (residual in somecountries)

Access Technology Copper, cable and fiber networks; Wi-Fi; Satellite; Mobile(competing each other)

Essential services Fixed telephony, emergency services, public pay phones,facsimile, services for disabled people

Essential services Telephony (fixed and mobile), Emergency services; Services fordisabled people; e-services (?) (e.g. e-health, e-learning, e-government)

Service providers Incumbent Service providers Incumbent, Single Internet Service Providers (ISPs), platforms ofISPs

Traditional universal access New frontiers of universal access

Variables Obligations Fixed telephony, Emergency services, Publicpay phones, Facsimile, Services for disabledpeople

Variables Obligations Access at a fixed location and provision of telephone services;Directory enquiry services and directories; Public pay telephoneaccess; Measures for disabled users; Functional internet access

Coverage 100% population (irrespective of location) Coverage Aimed to 100% populationTechnology Copper network Technology Competing technologiesProvision by Monopolistic operator Provision by Incumbent and new network investorsFinancing Public funding Financing Public and sector funding; alternative funding mechanisms

3A. Nucciarelli et al. / Government Information Quarterly xxx (2013) xxx–xxx

More recently, the discussion has been focused on the extent towhich broadband should be included in USO. For example, Blackmanand Forge (2008) questioned the inclusion of broadband networks inthe definition of universal service, arguing that competitivemarkets ba-sically erode the need for universal service, but there still is a need to ad-dress vulnerable groups with USO. In this respect, the discussion hasshown that is important to balance competition-related aspects andpublic-policy aspects in addressing the need to include broadbandinto USO. From a competition-related perspective, market failure argu-ments have increasingly been put forward in particular with respect tore-monopolization and lack of competition to justify public interventionin broadband markets (de Bijl, 2011; Jay et al., 2011) to lesser extentwith respect to the existence of network externalities or lack of demandof complementary services as these arguments have beenmore difficultto verify.

From a public policy perspective, the discussion has focused onarguments with respect to the needs of vulnerable groups in society(e.g. in areas such as education or health), the threat of social exclusionof certain user groups (e.g. in rural or deprived city areas) or the kind ofservices to be included in USO (e.g. advanced e-health or e-learningservices). Interestingly, as Bohlin and Teppayayon (2010) show bystudying the outcomes of the 2005 and 2008 periodical reviews of thescope of universal service and the results of the 2005 and 2010 publicconsultation conducted by the European Commission, the positiveview seems to explain better why broadband is not yet included inUSO. They concluded that politicians have different choices in optingfor inclusion of broadband in USO legislation depending on their per-ceptions of the extent of ex-ante regulation for USO and their definitionof the services which should be provided based on USO. They arguedfurther that the inclusion of broadband also depends on the impactthat funding mechanisms would have on the relationship betweenthe universal service regime and degree of competition (Bohlin &Teppayayon, 2010). However, there are new realities in informationaccess in the 1990s in Europe which require a rethinking in the impor-tance of broadband for USO.

3. The emergence of the information society in the European Union

Since 1998, the liberalization of telecommunicationmarkets and tech-nological developments has fostered the convergence of telecom, mediaand informatics leading to the creation of Information & Communication

Please cite this article as: Nucciarelli, A., et al., Should next generation acunion perspective, Government Information Quarterly (2013), http://dx.do

Technology (ICT). Developments have particularly affected the competi-tive structure of the industry, the emergence of new access technologiesand essential services, and competitive entry of service providers.Moreover, changes such as the abandoning of legal monopolies infixed telephony, developments in broadband and cellular technologiesand their widespread diffusion across the European Member States12

have challenged the traditional definition of universal service (Table 1).

3.1. The changing determinants of information access

Over the past twenty years, market liberalization and technologicalchange in telecommunications have led to increasing competitionamong different providers of infrastructure, such as cable access, as wellas the diffusion of new services, especially those based on internet tech-nology. This indicates a shift from a monopolistic to competitive modelof USO regulation. In contrast to the strictly vertically integration of mo-nopoly, competition stems from the layered architecture of the internetecosystem and allows forms of horizontal as well as vertical competition(inter- and intra-platforms) (Fransman, 2010).

Within a liberalized environment, an increasing number of accesstechnologies allow consumers to switch among these technologiesusing fixed and mobile networks which are partly interchangeably.13

As these technologies evolve, so do essential services related to theiruse, and this evolution should be reflected in the definition of universalservice. In fact, voice services can no longer be considered the mainfeature of universal service; affordable internet access (fixed or mobile)is increasingly considered of equal importance and broadband access, abasic requirement (see Table 2).

In fact, EU data on household access to internet and broadband con-nections indicate that at the end of 2012, more than 50% of householdshad broadband access (including DSL, cable-modem, mobile and satel-lite networks) in 13 of the 27 EU countries. Accordingly, broadbandavailability and access among the EU is now consistent with the criteriafor a revision of the scope of universal service.

cess networks fall within the scope of universal service? A Europeani.org/10.1016/j.giq.2013.02.006

Table 2Information access in the European Union 27 (year 2010, ⁎ data for 2008, ⁎⁎ data for 2009).Source: ITU, 2010; OECD, 2011.

Country Fixed wireline per100 inhabitants

Proportion of people usinga mobile phone⁎

Public pay phones per1000 inhabitants

Internet accessper household

Fixed broadband accessper 100 household⁎⁎

Cable Internet perhousehold

Fiber-to-the-homeper household

AUT 38.9 90.4 2.1 69.8 63.7 16.0 0.2BEL 43.5 88.2 0.7 67.4 70.0 29.9 0.0BGR 29.2 78.2 1.6 29.6 n.a. 4.2 0.3CYP 47.6 90.6 2.0 52.8 n.a. 3.8 0.0CZE 20.4 92.5 2.0 54.2 53.6 10.5 3.2DNK 37.7 93.3 n.a. 82.5 80.1 22.1 5.5EST 36.8 92.6 0.5 63.0 64.5 15.0 13.3FIN 26.9 97.3 n.a. 77.8 75.8 9.2 n.a.FRA 56.9 83.5 2.3 63.0 66.8 n.a. 1.1DEU 59.3 86.5 1.1 79.1 75.2 5.9 0.3GRC 47.0 82.0 4.7 38.1 41.2 n.a. 0.1HUN 30.7 93.5 1.8 55.1 52.2 21.5 3.0IRL 46.1 94.6 0.4 66.7 57.5 11.6 0.4ITA 36.2 90.2 n.a. 53.5 48.9 n.a. n.a.LVA 28.6 89.5 0.2 58.0 n.a. 3.4 2.3LTU 22.7 87.9 0.4 60.0 n.a. 4.0 15.3LUX 54.2 95.1 0.8 87.2 70.3 13.2 n.a.NLD 44.1 92.3 n.a. 89.7 79.5 31.6 2.5POL 25.2 77.5 1.2 58.6 56.8 11.6 0.6PRT 39.7 84.5 3.1 47.9 50.3 20.6 0.8ROM 25.0 75.1 1.5 37.9 n.a. 6.7 1.4SVK 22.6 93.7 1.3 62.2 49.4 3.3 7.3ESP 45.3 88.8 n.a. 54.0 57.4 12.4 0.1SWE 55.7 95.2 n.a. 86.0 82.6 13.0 15.4GBR⁎⁎ 52.2 93.2 n.a. 76.7 69.5 14.9 0.0SVN 51.2 89.3 1.5 63.9 n.a. 15.0 9.8MLT 59.9 85.9 1.8 64.4 n.a. 38.4 n.a.EU 27 40.1 88.9 1.6 62.9 61.4 14.1 3.6

4 A. Nucciarelli et al. / Government Information Quarterly xxx (2013) xxx–xxx

However, by looking across European markets, large differencescan be observedwith respect to the extent of competition in themarketfor internet access coming, in particular, from cable operators.Within Europe, a high degree of competition can be observed in theNetherlands, Belgium and Malta where cable operators are providingabout 30% of internet access, in contrast to most other European coun-tries where this percentage is much smaller. Furthermore, large differ-ences characterize countries within the European Union with respectto the percentage of households having fixed broadband access athome. In Europe, Sweden, the Netherlands and Denmark are leadingwith above 75% of broadband penetration at home, and a number ofcountries for which this number is lower than 50% (like Greece orSlovakia). This means that there are problemswith the uptake of broad-band services across the European Union requiring active programs tostimulate the demand side by providing cheaper access and improvingdigital literacy.

3.2. The universal service concept in a competitive environment

In the 1990s, the notion of universal services relied upon the avail-ability of basic voice telephony services, fax and low speed data accessservices; and the access to the network supporting it.14 The goal of uni-versal services in this “monopoly era”was that these services were uni-formly available to all customers. The methodology for calculating thenet costs of universal service provision and mechanisms for fundingits deficit was part of the U.S. and made explicit by National RegulatoryAuthorities (NRAs). The NRAs in the varying European Member Stateswere given a certain degree of discretion with regard to the financialprovision of universal service. The NRAs could

i. not to finance the U.S. because obligations to provide such a servicedid not imply net cost, or (i) the net cost established was not tobe considered an unfair burden for the operator(s) concerned or

14 See http://ec.europa.eu/archives/ISPO/infosoc/telecompolicy/en/tcstatus.htm#II.G(retrieved 26 May 2011).

Please cite this article as: Nucciarelli, A., et al., Should next generation acunion perspective, Government Information Quarterly (2013), http://dx.do

(ii) the net cost did not justify the administrative costs of a specificfinancing scheme;

ii. to consider the U.S. obligation as a burden to be financed directly orindirectly by the state;

iii. to consider the U.S. obligation as a burden to be financed through aspecifically targeted financing scheme in line with community law.

A number of important policy documentswere drawn up at the timeincluding, the ONP Voice Telephony Directive15 (1995). This Directivedescribed the scope of universal service as the provision of an affordablevoice telephony service via a line supporting the use of fax and lowspeed data transmission. It also introduced new aspects for the financ-ing of the service. In this context, financing required a methodologyfor calculating universal service costs which took also the net deficitsinto account by addressing16:

(i) the cost, less revenues and associated benefits of providing uni-versal service obligations to a customer or group of customers;

(ii) quantifying the intangible benefits of being a universal serviceprovider; and

(iii) the net cost of public payphones, emergency services and theprovision of special equipment or services (e.g. to disabledusers).

From a competition-related perspective, the implementation of uni-versal service has recently come under increasing criticism (Alleman,Rappoport, & Weller, 2000; Alleman et al., 2010; Cremer et al., 2001).It has been argued that USO can generate price distortions in marketsand lead to non-efficient market solutions. In this way, the effects ofUSO to redistribute welfare to certain consumer groups distort marketsand put an unnecessary highweight on consumer groups. In addition, ithas been argued that cross-subsidies can then lead to efficiency lossesboth in a monopoly and a competitive environment unless specific

15 See http://ec.europa.eu/archives/ISPO/infosoc/legreg/telecom.html#UniversalService.16 See http://ec.europa.eu/archives/ISPO/infosoc/legreg/com96608.html for more de-tailed information.

cess networks fall within the scope of universal service? A Europeani.org/10.1016/j.giq.2013.02.006

18 For the purpose of this paper, “infrastructure developers” is a term comprising differ-ent kinds of enterprises deploying passive infrastructure and/or operating it without pro-viding retail services such as energy utilities, developers of new properties comprising

5A. Nucciarelli et al. / Government Information Quarterly xxx (2013) xxx–xxx

measures such as competitive, neutral financing mechanisms orauctions are introduced, as suggested by Cremer et al. (2001) andAlleman et al. (2000).

From a public-goods perspective, arguments have been put forwardin favor of including broadband development in USO. In this context anumber of studies have shown that broadband has a positive effecton the growth of the Gross Domestic Product (GDP) (Czernich, Falch,Kretschmer, & Woessmann, 2011) as well as on exerting direct and in-direct effects on public welfare (Katz & Suter, 2009). These studieshave once again brought public stakeholders back on board to discussfuture visions for broadband networks.17 Even if there is a threat thatpublic intervention in broadband markets may inhibit competitionand might have adverse effects on wealth redistribution (Allemanet al., 2000; Mueller, 1999).

In 2002, the Universal Service Directive (EC, 2002) modified thedefinition of the scope of universal service. Article 8 of the Directivedictated the provision of a single narrowband connection to the publictelephone network at a fixed location at an affordable price as a key re-quirement. The definition was technology neutral and the connectionwas required to “be capable of supporting speech and data communica-tion at rates sufficient for access to online services such as those provid-ed via the public internet.” A specific reference to the speed of 56 Kbit/swas also given, although different technical and commercial conditionsin Member States may have resulted in some variation. The Directivealso addressed other issues such as public pay telephones, special mea-sures for disabled users, affordability of services, control of expenditure,quality of service, and costing and financing issues. Broadband, as it isknown today, was not mentioned.

In 2010, the Universal Service Directive was amended and integratedinto the “Citizen's Rights Directive” (EC, 2009a). The scope of universalservice now includes (seeArticle 4) the provision of local, national and in-ternational telephone calls, facsimile communication and data services.The section concerning data services, Article 5, echoes Article 8 of the2002 Directive but does not impose a specific speed for connections ormention the addition of broadband to the definition of universal service.Broadband issues with regard to universal service were addressed in acommunication in 2008 by the EU commission (EC, 2008a) but no clearindication was made concerning a future approach to universal service.In 2008 and 2010, the EU commission initiated public consultationsconcerning the strategy to be adopted towards Universal Service but itdidn't provide any clear definition of the future obligations of the U.S.

Table 3 summarizes the development of policies concerning USO upto the 2010 Review (EC, 2009a).

Even if there has been a growing support in favor of including broad-band into the USO obligations between the 2005 and the 2010 reviewprocess (Bohlin & Teppayayon, 2010), the European Commission decidedin November 2011 that broadband should not be included into USO. Inparticular, concerns raised by providers and groups of providers aboutthe extent to which USO obligations would distort competition in broad-band markets have been a major factor contributing to this decision.

In fact in the ‘secondperiodic review of the scope of universal servicein electronic communications networks and services’ (EC, 2008c), theEC identified a substantial gap in DSL coverage within Member Statesnoting that one of the “major drivers for broadband development iscompetition between parallel infrastructures (telecom and cable net-works) combined with effective ex ante access regulation”. In addition,it stated that “althoughbroadband adoption [had] not yet reached levelsof coverage and take-up that would qualify it for consideration underthe universal service framework, it [was] approaching these thresholdsrather quickly,while the number of narrowband connections [was] pro-gressively decreasing” (see Annex V of the Directive 2002/22/EC whichrefers to the general conditions of market failures which would justifypublic intervention). Moreover, in the third periodic review of the

17 See also Crandall and Jackson (2001).

Please cite this article as: Nucciarelli, A., et al., Should next generation acunion perspective, Government Information Quarterly (2013), http://dx.do

scope of universal service (EC, 2011), the EC has acknowledged that athouseholds level “the threshold of broadband usage by a (simple) ma-jority of consumers in the EU has been reached”, but it cannot be consid-ered a ‘substantialmajority of the population’. In addition, the EC arguedthat substantial disparities in take-up among EU Member States wouldaffect disproportionally both telecom providers and consumers.

3.3. Changing models for public investment in the broadband sector

Market liberalization and the convergence of telecom, media andinformatics into the Information & Communications Technology (ICT)industry (Fransman, 2010) have resulted in a dwindling public role(Gómez-Barroso & Feijoo, 2010). Table 4 shows how investments intraditional fixed voice telephony in the EU have continued to declinein recent years. This trend has been counterbalanced by the growth inthe market for broadband services. However, even in these markets,new entrants have managed to take a major share leading to a fall inavailable revenues for incumbent operators.

A variety of market parties such as cable operators or infrastructuredevelopers,18 and non-market parties such as local governments andmunicipalities, have invested substantially in fiber-based networks. Infact, telecom incumbents, competitive access operators, infrastructuredevelopers and service providers have all stepped into this market,often in close collaborationwith utilities or local governments, adoptingdifferent forms of public–private partnerships (PPPs). Municipalitieshave often taken the lead in these initiatives. Indeed as Ruhle, Brusic,Kittl, & Ehrler (2011) highlighted in their comparative study of supplyside interventions in NGA, the public role can take varying forms: “moti-vator”, “enabler”, and “operator”. However the authors also underline thefact that the achievement of economic and social targets cannot be sepa-rated from improvements in regulatory issues associated with the pro-motion of measures to incentivize investments.

Nowadays, local and national governments increasingly perceivebroadband networks as ameans of reducing the digital divide and stimu-lating the economic development of regions (Fornefeld, Delaunay, &Elixmann, 2008; Huigen & Cave, 2008; Katz & Suter, 2009; Lehr et al.,2006). However, public involvement varies significantly between the EUMember States (Berkman Center for Internet & Society, 2010; Bouras,Gkamas, Papagiannopoulos, Theophilopoulos, & Tsiatsos, 2009; Infante,Sagarra, Macian, & Oliver, 2009; Nucciarelli, Sadowski, & Achard, 2010).In some cases, PPP models are used to deploy city-wide networks toavoidmarket failures e.g. Amsterdam; in other cases, public utilitymodelshave been employed to reduce the digital divide e.g. Florence. Thereforethe type of PPP or business model adopted can entail competition at dif-ferent layers e.g. passive or active layers, which could, potentially affectthe open access of infrastructures and consequently, intensity of competi-tion, prices and quality of services.

The degree of infrastructure sharing and access can stimulate compe-tition differently, especially when infrastructures overlap,19 and giventhat the essential facility doctrine has been intensively applied to tele-communications,20 public involvement in the deployment of broadbandnetworks may result in a “future essential facility” dilemma. This dilem-ma could also arise within the policy framework in the EU (Renda,2010), as a result of the differing degree of infrastructure openness tocompetition. In addition, two recent documents issued by the EuropeanCommission, the NGA Recommendation and Guidelines on the applica-tion of the EU State Aid rules, would appear to consider broadband net-works as public goods (Renda, 2010). This interpretation might have astrong impact on the investment decisions of European incumbents.

residential and office buildings, operators of highways, railways which have a communi-cation network component originally for internal purposes.19 See EC (2010a, 2010b).20 See also Knieps (2011).

cess networks fall within the scope of universal service? A Europeani.org/10.1016/j.giq.2013.02.006

22 The European Commission (EC) considers the deployment of broadband networks asa key issue for economic development and the reduction of the digital divide in theEuropean Union (EU) (EC, 2008b, 2008c). In its i2010 Lisbon agenda, the EC also postulat-ed that the European-wide adoption of broadband networks could lead towide social andeconomic benefits. The focus of the Lisbon Strategy shifted slightly as a result of the i2010Mid-Term Review (EC, 2008b), promoting the leading role of Europe in the transition to

Table 3The development of policies concerning USO.

Before 1998(Directive 95/62/EC)

EU framework 1998(Directive 98/10/EC)

2002 Review(Directive 2002/22/EC)

2010 Review(Directive 2009/136)

Definition “Minimum set of services of specifiedquality which is available to all usersindependent of their geographicallocation and, in the light of specificnational conditions, at an affordableprice”

Scope of universalservicea

Although the U.S. is not definedneither addressed directly,several services are to beprovided and provision has to beensured by NRA. They include:(1), (2), (3), (4), (5)

(2), (3), (4), (6), (7) (2), (3), (4), (8) (2), (3), (4), (9)

Consideration ofbroadband

No No Connection provided shall be capable ofallowing end-users to make and receive(…) facsimile communications, at datarates that are sufficient to permit func-tional internet access (…)

Connection shall be able to providevoice, facsimile and datacommunications at data rates that aresufficient to permit functional internetaccess.

Cost calculation Not addressed except forpossible link to interconnectioncharges

Net cost approach (Annex III of Directive97/33). The calculation shall be basedupon costs attributable to: i) elements ofthe identified services, which can onlybe provided at a loss (…). ii) Specificend-users, who can only be served at aloss (…)

Net cost approach: to calculate the netcost of the universal service obligation,taking into account any market benefit,which accrues to an undertakingdesignated to provide universal service,in accordance with Annex IV, Part Ab.

Net cost approach: to calculate the netcost of the universal service obligation,taking into account any market benefit,which accrues to an undertakingdesignated to provide universal service,in accordance with Annex IV, Part Ac.

Financing ofdeficit

Directly to operators or througha fund (see http://ec.europa.eu/archives/ISPO/infosoc/legreg/9673.html)

Member States may set up universalservice funding schemes for the sharedfinancing of those services, inconformity with Community law and, inparticular, with Directive 97/33/EC oninterconnection.

If net cost constitutes an unfair burden:- Option A: introduce mechanism

to compensate undertaking for thedetermined net costs from publicfunds; and/or,

- Option B: to share the net cost ofuniversal service obligationsbetween providers

If net cost constitutes an unfair burden:- Option A: to introduce amechanism

to compensate that undertakingand/or,Option B: to share the net cost ofuniversal service obligationsbetween providers of electroniccommunications networks andservices.

a (1) = Voice telephonyvia a line supporting theuse of fax and of low speeddata transmission; (2) = Public pay phones; (3) = Directory Services; (4) = Measures for disabled users;(5) = Operator assistance and emergency services; (6) = Connection to thefixed public telephone network at afixed location and access tofixedpublic telephone services; (7) = Capable ofallowing users to make and receive national and international calls, supporting speech, facsimile and/or data communications; (8) = Provision of access at fixed location, (9) = Provision ofaccess at fixed location and provision of telephone service.

b Annex 4 part A e.g. covers the following.: “In undertaking a calculation exercise, the net cost of universal service obligations is to be calculated as the difference between the net cost for adesignated undertaking of operating with the universal service obligations and operating without the universal service obligations. This applies whether the network in a particular MemberState is fully developed or is still undergoing development and expansion. Due attention is to be given to correctly assessing the costs that any designated undertaking would have chosen toavoid had there been no universal service obligation. The net cost calculation should assess the benefits, including intangible benefits, to the universal service operator.”

c See previous footnote.

6 A. Nucciarelli et al. / Government Information Quarterly xxx (2013) xxx–xxx

In a nutshell, incorporating broadband into the USOmeans redefiningthe role and financial commitment of public authorities in digital Europe.Public subsidies, network access charges or even the creation of a U.S.fundmight distort competition. However, the Universal Service Directive(see Articles 12 and 13, andAnnex IV) has left space for less intrusive pol-icy strategies, by asking the determination – under transparent condi-tions – of net costs of each single undertaking requiring compensation.When calculating net costs, NRAswill need to take into account the directand indirect benefits of broadband not only in the ICT sector, but also in aseries of others, such as education, health, and transportation. In addition,the limits imposed onpublic institutions by liberalization need to be eval-uated in light of the role that local and national governments may play. Ifdirect investments, even in form of subsidies, are excluded or heavily re-stricted by the EU Treaty, there might be room, in fact, for some forms ofshared investments or for alternative fundingmechanisms for increasingbroadband availability (e.g. public funding programs and investments,funding through non-profit organizations, public–private partnerships)(Falch & Henten, 2009).21

21 The 2009 BroadbandGuidelines (EC, 2009c) together with the NGA Recommendation(EC, 2010b) and the 2010 Broadband Communication (EC, 2010c) support this argumentby providing a framework for action tomember states infinancing broadband network al-so with both public–private resources.

Please cite this article as: Nucciarelli, A., et al., Should next generation acunion perspective, Government Information Quarterly (2013), http://dx.do

4. The two-fold drive of the European Commission towards broad-band in the EU area

The key issue for a future policy of the European Commission is tobalance the competition-related and public-goods related aspects indefining the specific aspects of broadband to be included in USO.There are a number of competition-related concerns with respect tothe extent of public involvement in broadband markets in order toavoid the risk related to the emergence of new bottlenecks and asubstantial re-monopolization of end user markets.22 As Bauer (1999)showed, public investment and innovation incentives in NGA networksdiffer significantly from the past because of the new ICT ecosystem (see

NGA in its efforts to overcome the digital divide. The necessity of encouraging investmentsthrough a stable and predictable regulatory environment is one of the key points ad-dressed by Viviane Reding (2008) when arguing how technological development hasthe potential to increase competition to the benefit of consumers. Reding (2009) also re-inforced her position in favor of an active intervention within the broadband sector bypublic investors (e.g. regional and local authorities) affirming that the “deployment of[NGA] infrastructures […] could act to create jobs or [as] a short-term fiscal stimulus”.

cess networks fall within the scope of universal service? A Europeani.org/10.1016/j.giq.2013.02.006

23 Until the European Commission introduced the Broadband Guidelines in September2009, the Commission had to decide on 47 possible cases of State Aid in several regionsin Europe. The Commission initially provided support to regions with under-provisioning of broadband, but later provided support to areas where broadband net-works were already available.

Table 4Growth of telecommunication infrastructure in the European Union 27 (2005–2009).

Country Growth ratefixed network

Growth ratebroadbandsubscriptions

Growth rate mobiletelephonysubscription

Growth rate mobilebroadbandsubscription

AUT −3.42 11.98 7.18 49.96BEL −0.84 11.74 6.83 132.79BGR −2.99 55.59 14.08 251.07⁎

CYP −0.33 53.32 7.96 129.12⁎⁎

CZE −9.97 17.89 4.90 163.13⁎⁎⁎

DNK −11.41 11.42 5.83 103.64EST 2.75 13.85 17.13 201.77FIN −9.37 6.91 9.94 200.69FRA 1.30 20.08 5.49 124.01⁎⁎⁎

DEU −2.90 23.36 7.28 81.29GRC −4.51 86.01 6.69 103.77HUN −2.64 30.33 6.06 160.74IRL 0.33 31.91 3.35 30.98⁎⁎

ITA −3.53 15.88 5.33 32.81LVA −3.12 62.06 6.09 189.78LTU −1.72 28.28 3.32 51.33LUX 1.90 22.81 9.00 58.72⁎⁎

MLT 4.92 19.78 6.84 39.56NLD −0.93 9.54 7.55 93.19⁎⁎

POL −5.13 51.06 11.33 234.93PRT 0.13 12.47 8.61 60.55ROM 4.98 65.07 17.44 157.09SVK 0.47 43.74 4.90 255.99SVN 6.09 24.93 4.53 118.19ESP 1.10 17.83 4.59 124.26SWE −2.22 3.92 6.34 109.47GBR −1.46 16.50 5.26 50.85EU-27 −1.58 28.45 36.00 122.58

Source: ITU (2011).⁎ Data for 2006–2009.⁎⁎ Data for 2007–2009.⁎⁎⁎ Data for 2005–2008.

7A. Nucciarelli et al. / Government Information Quarterly xxx (2013) xxx–xxx

also Fransman, 2010), as well as new forms of inter-modal competitionand collaboration, and the need to build most of the infrastructures tobe regulated. From a public goods perspective, there are concerns withrespect to expected increasing demand for bandwidth which creates,in turn, markets for new broadband services. In addition, existingsocial and work processes are already far beyond voice telephony sothat access to video-based services such as e-health and elderly homeassistance may be soon considered socially desirable services.

The tension between the different competition-related and public-goods related perspectives in Europe can be observed in the initiativesof different Directorates in the European Commission. This twofolddrive towards the Information Society in the European Union becomesvisible in the discussion on State Aid Guidelines with respect to NGAand secondly, in the initiatives surrounding the Digital Agenda of theEurope (DAE).

4.1. The inclusion of a NGA definition in State Aid Guidelines Next GenerationAccess (NGA) technologies

In order to define the new quality of broadband access technologiesand role of public intervention in broadband markets, the EuropeanCommission's (EC) initiated in 2008 a discussion on Next GenerationAccess (NGA) technologies. Consultations started in autumn 2008 andtwo different migration paths were taken into consideration: one relat-ed to fiber rollout, limited in terms of geographic coverage, and theother based on “fibre [that] will often be deployed in parallel with thecopper circuits in the network of the Significant Market Power (SMP)Operator” (Article 3) (EC, 2008d). The consultation process concludedin November 2008 but the only action implemented as a result of thisconsultation was the addition of a paragraph to the 2009/140/EC Direc-tive (EC, 2009b) to “encourage investments by the operator, including

Please cite this article as: Nucciarelli, A., et al., Should next generation acunion perspective, Government Information Quarterly (2013), http://dx.do

investments in next generation networks” by taking “into account theinvestmentmade by the operator, and allow [it] a reasonable rate of re-turn on adequate capital employed, taking into account any risksspecific to a particular new investment network project” (Article 9).No specific migration paths towards NGA networks were mentioned.

In 2010 the Commission implemented a Recommendation on regu-lated access to NGA networks (2010/572/EU of 20 September 2010)which consolidated the pro-competitive approach of the current frame-work but attempted to regulate access prices. In doing so, it intensifiedthe debate on the upcoming role of regulation in fostering the adoptionof broadband networks. Based on a competition-related perspective, ithas been argued that such “ex-ante regulatory intervention – or thethreat of it – might spoil incentives to invest in NGA” also in light ofthe lack of information (pending on both the regulator and regulatedcompany) regarding the foreseeable demand trend (Siciliani, 2010).

In taking into account the substantial investment costs related toNGA networks, further discussion focused on the opportunities of Na-tional Regulatory Authorities (NRA) to incorporate a project-specificrisk-premium within the costs of access to new infrastructures (seePoints 6 and 7 of Annex 1 for technical specifications). In addition, ithas been proposed that NRAs should take into account that a multi-fiber approach might imply improved competition and thus less needfor regulation. Furthermore, recommendations were included favoringlong term contracts and obligations for the wholesale buyer to be asso-ciatedwith lower prices to enablewholesale customers to share the riskof investment in new networks (Ruhle & Lundborg, 2010).

It is clear from the above that the EChas been aware of the increasingdiversity of stakeholders and their business models in broadbandinvestments including public investors. The EC's Recommendationprovided detailed guidelines on how NRAs can implement existingEuropean Directives for Telecommunications regulations but does notnarrow down the scope and possibilities for individual NRA decision-making. A good example of this is discounts for long-term commitmentsor higher risk premiums for new investments which might have animpact on regulated prices, but only as long as this is reflected in theunderlying costs (i.e. it is in line with LRIC as a cost standard, which isstated in the European Directive) (Lundborg, Ruhle, & Bahr, 2010).

Thus, in other words the NGA recommendation provides a “softlaw”: it does provide further support in accelerating the deploymentof NGA networks and the impact of the Recommendation on invest-ments in NGA has been rather modest. Therefore, in its current form,the contribution of theNGA recommendation to broadband as a univer-sal service is rather limited. However, the potential of these recommen-dations is rather important as it excludes certain telecommunicationtechnologies (like copper) which – in a number of Member States –

are still being implemented using traditional USO rationales.In accounting for a number of municipal broadband initiatives, the

EC's strategy has been to establish whether or not the NGA concept isin conflict with State Aid regulation. The EC examined all projects onNGA which involved public investment since 2003, leading to numberof court decisions based on case-law.23 In May 2009, the EuropeanCommission sets up an extensive consultation process with all of theparties involved in NGA deployment, in order to offer better guidelinesfor the involvement of municipalities and national governments in NGAnetworks.

In the ConsultationDocument on BroadbandGuidelines (EU, 2009c),the European Commission defined migration paths currently availablein the broadbandmarket in greater detail. The Commission also definedthe speed requirements for NGA networks (i.e. 40 Mbps/15 Mbps

cess networks fall within the scope of universal service? A Europeani.org/10.1016/j.giq.2013.02.006

8 A. Nucciarelli et al. / Government Information Quarterly xxx (2013) xxx–xxx

downstream/upstream for ADSL; more than 50 Mbps symmetricalfor cable networks; more than 100 Mbps symmetrical for fiber). Afterthe public consultation round closed in summer 2009, the EuropeanCommission, wishing to avoid specifying different migration paths,described common elements in these market developments. In theFinal Document on the Community Guidelines (EC, 2009c), the EC de-scribed NGA networks – in contrast to basic broadband networks – as:a) wired access networks, b) consisting wholly or in part of opticalelements and c) capable of delivering broadband access services withenhanced characteristics such as higher throughput. This definitionwent further than previous attempts by the EC to define NGA, in fourways: 1) it explicitly referred to the coexistence and co-developmentof a number of competing broadband technologies in the local loop;2) it characterized fiber elements within these networks and the highercapacity services provided via these networks as the common denomi-nator; 3) it made a clear distinction between broadband technologiesand copper technologies and 4) it showed that there are major differ-ences between basic broadband and NGA technologies. The EC'snew definition not only described the different technological optionsavailable in broadband markets but also pointed out the limitations ofexisting incumbent market players and the emergence of new playersable to implement NGA technologies in broadband markets.

With the BroadbandGuidelines, the EuropeanCommission providednot only a “roadmap” based on a state-of-the-art summary of case lawin the area of municipal network initiatives, but it also took on boardcriticism from the discussion on the Consultation Document. It detailedfurther “safeguards” in the event of insufficient investment of existingmarket parties in “black areas” thus giving municipalities the opportu-nity to offer financial support (articles 77 and 78). It also specified thetechnical aspects of NGA networks in a “technology neutral” manneron the infrastructure and service side (articles 53 and 54). It includedsome of the discussion on public policy objectives (e.g. on makingsure that there is no emerging “new digital, NGA divide”) and discussedthe different Commission decisions on State Aid broadband in thecontext of applying the SGEI principle (articles 20 to 29). In the currentrevision of the EC guidelines on public funding of broadband networkswhich started in June 2012 a key issue has been how the principle ofSGEI can be used by governments in areas where “private investorsare not in the position to provide in the near future adequate broadbandcoverage to all citizens or users” (EC, 2013). In addition, it has been pro-posed that governments can even facilitate broadband development inareas falling outside the scope of SGEI by looking for ways to reducethe cost of deploying fiber (e.g. using duct sharing).

4.2. The Digital Agenda for Europe and the importance of broadband

InMarch 2010 the European Commission launched the Europe 2020Strategy (i.e. COM (2010) 2020) aiming to define the role Informationand Communication Technologies (ICT) can play in exiting the crisisby its positive impact on employment, low carbon economy, productiv-ity and social cohesion. The Digital Agenda for Europe (DAE) is one ofthe flagships initiatives of the Europe 2020 Strategy. It mostly dealswith enabling the potential of the internet and spurring “innovation,economic growth and improvements in daily life for both citizens andbusinesses”. Specifically, the “overall aim of the Digital Agenda is to de-liver sustainable economic and social benefits from a digital singlemar-ket based on fast and ultra-fast internet and interoperable applications”.

As widely stated in the Digital Agenda for Europe (DAE), the EUintends to promote the digital inclusion of all its citizens and recog-nizes that broadband development is a valuable means of achievingthis goal. In fact, broadband networks are considered a key factor inthe transition towards an information society because they reducethe digital divide.

Recently, access to fast and ultrafast internet access has become akey pillar of the DAE addressing problems in the adoption of broadbandin particular in rural and remote areas (Action 42), lack of funding due

Please cite this article as: Nucciarelli, A., et al., Should next generation acunion perspective, Government Information Quarterly (2013), http://dx.do

to high risks, longer pay-back periods and insufficient experience(Action 43), the problems surrounding outdated legacy networks(Action 45), poor coordination (Action 47) and the insufficient use ofstructural funds of the EU by Member States (Action 48).

With the emergence and implementation of NGA technologies, newservices should be developed that address a variety of social and politicalproblems in areas such as digital literacy, skills and inclusion (Pillar VI)and generate more ICT social benefits in areas such as e-government(Pillar VII). Accordingly, the expansion of the universal service definitionand the inclusion of broadband in the scope of USOmay become a neces-sity, if the ambitious aims of the DAE in these areas are to be achieved.

5. Summary and discussion

The aim of this paper is to contribute to the ongoing debateconcerning the inclusion of broadband access within the scope of uni-versal service. Even if broadband is currently not included in the currentdefinition of USO, our arguments in favor of a new definition are relatedto the radical shift taking place in the Europe Union. This shift is relatedto a transition from a traditional model driven by incumbent operatorsacting asmonopolies using copper-based access technologies to provideessential services and fixed telephony to a new competitive modelin which there is horizontal and vertical competition among differingservice providers using competing access technology. The competitivemodel is rooted in newmethods of information access which challengethe traditional concepts of universal service.

The EC has responded with a two-fold drive towards examining ingreater detail the public-goods and competition-related aspects of thisshift. With its Digital Agenda for Europe, the public goods related per-spective has been put forward in arguing in favor of expanding the defi-nition of “functional internet access” from the availability of a connectionthat is capable of sustaining a dial-upmodem to the availability of broad-band access. Even if broadband uptake in the European Union is growing,there are significant differences across the EU.We show that public goodsarguments related, in particular, to issues of social exclusion and digitalliteracy would strengthen the current USO in Europe. As the concept ofUSOhas evolved over time, it is nownecessary to include changing essen-tial services, digital divide issues and different investment strategies ofpublic and non-public parties. However, this evolution must now takeinto account: i) the existence of “specific services available to and usedby a majority of consumers [and their] lack of availability or non-use bya minority of consumers [which] result[s] in social exclusion”; ii) the“availability and use of specific services [which] convey[s] a general ben-efit to all consumers such that public intervention iswarranted in circum-stances where the specific services are not provided to the public undernormal commercial circumstances” (EC, 2011).

With respect to competition-related aspects, the European Commis-sion has put some more emphasis on the investment incentives ham-pering the development of broadband and, in particular, the evolutionof NGA networks. In 2009, the inclusion of the principle of services ofgeneral economic interest (‘SGEI’) into the Broadband Guidelines ledthe European Commission (EC) to define that its clear-cut strategy inthe field of State Aid rules applied to the deployment of broadband net-works. Within the meaning of Article 106 (2) TFEU, the SGEI principlecan now be applied by public authorities to address the unavailabilityof public services in certain areas. Since then, many decisions havebeen adopted by the European Commission, which enable an assess-ment of the compatibility of local and national broadband initiativeswith the European regulation in the field of State aid.

In 2010, to avoid the risk of creating newbottlenecks and a substantialre-monopolization of end-usermarkets, the Commission consolidated itspro-competitive approach. In fact, in the Next Generation Access (NGA)Recommendation– adopted togetherwith theCommunication onbroad-band infrastructure investment (EC, 2010c) – major steps were taken toreach the targets stated in the Digital Agenda. The Communication onEuropean Broadband advocates the involvement of national and local

cess networks fall within the scope of universal service? A Europeani.org/10.1016/j.giq.2013.02.006

9A. Nucciarelli et al. / Government Information Quarterly xxx (2013) xxx–xxx

government in the process of NGA deployment. This is based on thefollowing premises: i) internet access speed is a key factor in achievingan efficient use of internet; ii) operators including incumbent operatorsare usually reluctant to invest in the upgrading to Fiber-To-The-Home(FttH), and the absence of sufficiently attractive services for which cus-tomers might be willing to pay a premium price; iii) regulatory strategymay change within the investment timeframe; iv) financial and opera-tional risks need to be mitigated; and finally, v) the substantially highcosts of civil work (approximately 80% of total costs of high-speed broad-band deployment).

The challenge for the European Commission is to strike the “right”balance between a competition-related and public-goods perspective inUSO regulations. The different initiatives by the EC provide a toolbox forpolicy makers in which they are able to address market failures in thecase of underinvestment in NGA networks in rural regions (e.g. basedon co-investment and public investment strategies), in situations inwhich prices of access are too high (e.g. in subsidizing access) or stimu-late complementary services (e.g. based on the coordination of demandaggregation). In addition, NGA networks can be used to provide solutionsto specific policy and social problems. For example, NGA networks canprovide location specific advantages in certain areas (e.g. by providinghigh speed access to small- and medium-sized companies in industrialparks) or to improve livability in regions with high migration rates(e.g. by attracting elderly people with smart home applications).There currently is a discussion as to whether or not experiments withnew services in areas such as e-health should be included in USO.

However, several questions still remain unanswered in the currentdebate on USO. If the justification for expanding USO to include broad-band relies on the speed of internet access and the services it enables,it still remains to be answered how fast the evolution of demand(and thewillingness to pay) will push singleMember States to use pub-lic financing to set higher standards in terms of quality and speed. Thiswould expand the set of essential services from triple-play (i.e. telepho-ny, internet and TV) to new e-services accessible to the majority of thepopulation by NGA. Furthermore, if USO covers rural and less populatedareas, there would be a case for mixing complementary technologies,for example, satellite and mobile technologies in conjunction withfiber networks.

A shared universal service policy is needed at a European level tofacilitate the achievement of the objectives of the Digital Agenda forEurope. However, Member States will be asked to find the most appro-priate mix of public commitment and private investment by defining asustainable tool of public funding and avoiding market distortions. Inthis sense, the upcoming revision of State Aid guidelinesmight facilitatea wider use of public–private partnerships.

The achievement of the ambitious objectives of the EU DigitalAgenda and the dynamic nature of the e-communications sector callfor a constant monitoring, evaluation and updating of the 2009 Broad-band Guidelines by the European Commission. The Digital Agenda hasawarded a leading role to fast and ultra-fast internet and the develop-ment of interoperable applications in the delivery of sustainableeconomic and social benefits, as well as to the achievement of a digitalsinglemarket. However, major technological andmarket developments(e.g. the uptake of wireless and mobile networks, the implementationof “open access” business models by public–private partnerships ledby municipalities, etc.) may hamper the adopting of the contents ofthe Broadband Guidelines.

References

Alleman, J., Rappoport, P., & Banerjee, A. (2010). Universal service: A new definition?Telecommunications Policy, 34, 86–91.

Alleman, J., Rappoport, P., & Weller, D. (2000). Universal service: The poverty of policy.http://www.colorado.edu/engineering/alleman/print_files/universal_service_law_review_revised-paper.pdf

Bauer, J. M. (1999). Universal Service in the European Union. Government InformationQuarterly, 16(4), 329–343.

Please cite this article as: Nucciarelli, A., et al., Should next generation acunion perspective, Government Information Quarterly (2013), http://dx.do

Berkman Center for Internet & Society (2010). Next generation connectivity: A review ofbroadband Internet transitions and policy from around the world. Final report. HarvardUniversity Press.

Blackman, C., & Forge, S. (2008). The future of universal service in Europe. Info, 10(5/6),152–165.

Bohlin, E., & Teppayayon, O. (2009). Broadband universal service: A future pathfor Europe? International Journal of Management and Network Economics, 1(3),275–298.

Bohlin, E., & Teppayayon, O. (2010). Broadband universal service in Europe: A review ofpolicy consultations (2005–2010). Communications & Strategies, 4, 21–37.

Bouras, G., Gkamas, A., Papagiannopoulos, J., Theophilopoulos, G., & Tsiatsos, T. (2009). Broad-band municipal optical networks in Greece: A suitable business model. Telematics andInformatics, 26, 391–409.

Bourreau, M., Cambini, C., & Hoernig, S. (2012). Ex ante regulation and co-investment inthe transition to next generation access. Telecommunications Policy, 36(5),399–406.

Crandall, R. W., & Jackson, C. L. (2001). The $500 billion opportunity: The potential economicbenefit of widespread diffusion of broadband internet access. Criterion Economics,L.L.C. (retrieved on June 2 on http://www.itu.int/wsis/stocktaking/docs/activities/1288617880/CriterionEconomics_USA.pdf)

Cremer, H., Gasmi, F., Grimaud, A., & Laffont, J. J. (2001). Universal service: An economicperspective. Annals of Public and Cooperative Economics, 72, 5–43.

Czernich, N., Falch, O., Kretschmer, T., & Woessmann, L. (2011). Broadband infrastructureand economic growth. The Economic Journal, 121(552), 505–532.

de Bijl, P. (2011). Broadband policy in the light of the Dutch experience with telecommu-nications liberalization. Journal of Information Policy, 1, 77–101.

EC (2013). Communication from the Commission. EU Guidelines for the application ofState aid rules in relation to the rapid deployment of broadband networks (2013/C25/01). From http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2013:025:0001:0026:EN:PDF

European Commission (2011). Universal service in e-communications: Report on the out-come of the public consultation and the third periodic review of the scope in accor-dance with Article 15 of Directive 2002/22/EC, COM(2011) 795 Final. RetrievedMay 12, 2011, from http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0795:FIN:EN:PDF

European Commission (2002). Directive 2002/22/EC of the European Parliament and theCouncil of 7 March 2002 on universal service and users' rights relating to electronic com-munications networks and services (Universal Service Directive) Official Journal L 108,24/04/2002. , 0051–0077.

European Commission (2008a). Communication from the Commission to the EuropeanParliament, the Council, the European Economic and Social Committee and the Com-mittee of the Regions on the second periodic review of the scope of universal servicein electronic communications networks and services in accordance with Article 15 ofDirective 2002/22/EC. COM(2008) 572 final, Retrieved on April 8, 2011 on. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0572:FIN:EN:PDF

European Commission (2008b). Preparing Europe's digital future: i2010 mid-term reviewCOM (2008) 199 final.

European Commission (2008c). Broadband: Commission consults on regulatory strategy topromote high-speed Next Generation Access networks in Europe IP/08/1370.

European Commission (2008d). Commission recommendation on regulated access to NextGeneration Access networks (NGA). Draft, C (2008). Retrieved on April 12th, 2010 on.http://ec.europa.eu/information_society/policy/ecomm/doc/library/public_consult/nga/dr_recomm_nga.pdf

European Commission (2009a). Directive 2009/136/EC of the European Parliament and ofthe Council of 25 November 2009 amending Directive 2002/22/EC on universal ser-vice and users' rights relating to electronic communications networks and services,Directive 2002/58/EC concerning the processing of personal data and the protectionof privacy in the electronic communications sector and Regulation (EC) no2006/2004 on cooperation between national authorities responsible for the enforce-ment of consumer protection laws. Official Journal of the European Union (L337/11,18.12.2009. Retrieved July 9, 2011 from http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:337:0011:0036:En:PDF)

European Commission (2009b). Directive 2009/140/EC of the European Parliament andCouncil of 25 November 2009 amending Directives 2002/21/EC on a common regu-latory framework for electronic communications networks and services,2002/19/EC on access to, and interconnection of, electronic communications net-works and associated facilities, and 2002/20/EC on the authorization of electroniccommunications networks and services. Official Journal of the European Union(L337/37, 18.12.2009. Retrieved July 14, 2011 from http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:337:0037:0069:EN:PDF)

European Commission (2009c). Community Guidelines for the application of State aidrules in relation to rapid deployment of broadband networks. Official Journal of theEuropean Union (C235/7, 30.09.2009. Retrieved May 6, 2011 from http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:235:0007:0025:EN:PDF)

European Commission (2010a). Communications Committee. Working documenton broadband access in the EU27: Situation at 1 July 2010. (COCOM10–29).Available on http://ec.europa.eu/information_society/newsroom/cf/document.cfm?action=display&doc_id=719

European Commission (2010b). Commission Recommendation of 20 September 2010 onregulated access to Next Generation Access Networks (NGA). 2010/572/EU. OfficialJournal of the European Union (L251/35, 25.09.2010. Retrieved May 9, 2011 fromhttp://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:251:0035:0048:EN:PDF)

European Commission (2010c). European broadband: Investing in digitally-driven growth.COM (2010) 472. Retrieved May 9, 2012 from. http://ec.europa.eu/information_society/activities/broadband/docs/bb_communication.pdf

cess networks fall within the scope of universal service? A Europeani.org/10.1016/j.giq.2013.02.006

10 A. Nucciarelli et al. / Government Information Quarterly xxx (2013) xxx–xxx

European Commission (2011). Universal service in e-communications: Report on theoutcome of the public consultation and the third periodic review of the scope in ac-cordance with Article 15 of Directive 2002/22/EC. Retrieved May 12, 2011 fromhttp://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0795:FIN:EN:PDF

Falch, M., & Henten, A. (2009). Achieving universal access to broadband. InformaticaEconomica, 13(2), 66–174.

Firth, L., & Mellor, D. (2005). Broadband: Benefits and problems. Telecommunications Policy,29(2–3), 223–236.

Fornefeld, M., Delaunay, G., & Elixmann, D. (2008). The impact of broadband on growth andproductivity. A study on behalf of the European Commission (DG Information Society andMedia). MICUS.

Fransman, M. (2010). The New ICT Ecosystem. Implications for Policy and Regulation. Cam-bridge: Cambridge University Press.

Gómez-Barroso, J. L., & Feijoo, C. (2010). A conceptual framework for public–private inter-play in the telecommunications sector. Telecommunications Policy, 34, 487–495.

Gómez-Barroso, J. L., & Pérez-Martínez, J. (2005). Public intervention in the access toadvanced telecommunication services: Assessing its theoretical economic basis.Government Information Quarterly, 22, 489–504.

Huigen, J., & Cave,M. (2008). Regulation and the promotion of investment in next generationnetworks— A European dilemma. Telecommunications Policy, 32(11), 713–721.

Infante, J., Sagarra, R., Macian, C., & Oliver, M. (2009). Public–private partnership inFTTX passive infrastructure deployment: the 22@BCN case. International Journal ofManagement and Network Economics, 1(3), 327–342.

ITU (2010). World telecommunications indicators. Geneva: ITU.ITU (2011). World telecommunications indicators. Geneva: ITU.Janssen, M. C. M., & Mendys-Kamphorst, E. (2008). Triple play: How do we secure future

benefits? Telecommunications Policy, 32(11), 735–743.Jay, S., Neumann, K. -H., & Plückebaum, T. (2011). Critical market shares for investors and

access seekers and competitive models in fibre networksPaper presented at 22ndEuropean Regional ITS Conference, Budapest, 18–21 September 2011.

Katz, R., & Suter, S. (2009). Estimating the economic impact of the broadband stimulusplan. Columbia Institute for Tele-Information. Working paper Retrieved March 24th,2010 on http://www.gcbpp.org/files/BBSTIM/KatzBBStimulusPaper.pdf

Knieps, G. (2011). The three criteria test, the essential facility docrine and the theoryof monopolistic bottlenecks. Intereconomics — Review of European Economic Policy,46(1), 17–21.

Lehr, W., Sirbu, M., & Gillett, S. (2006). Wireless is changing the policy calculus for munic-ipal broadband. Government Information Quarterly, 23, 435–453.

Lundborg, M., Ruhle, E. -O., & Bahr, C. (2010). Discounts and price discrimination in the tele-communications regulation of NGA networksITS Regional Conference — Copenhagen,September 2010.

Matzat, U., & Sadowski, B. (2012). Does the “do-it-yourself approach” reduce digital inequal-ity? Evidence of self-learning of digital skills. The Information Society, 28(1), 1–12.

Michalis, M. (2002). The debate over Universal Service in the European Union: Plus çachance, plus c'est la meme chose. Convergence, 8, 80–98.

Mueller, M. (1993). Universal service in telephone history. A reconstruction.Telecommunications Policy, 17(5), 352–369.

Mueller, M. (1996). Universal service, competition, interconnection, and monopoly in themaking of the American telephony system. Cambridge: The MIT Press.

Mueller, M. (1999). Universal service policies as wealth redistribution. GovernmentInformation Quarterly, 16(4), 353–358.

Noam, E. (1992). Telecommunications in Europe, Oxford University Press.Nucciarelli, A., Sadowski, B., & Achard, P. O. (2010). Emerging models of public–private

interplay for European broadband access: Evidence from the Netherlands and Italy.Telecommunications Policy, 34(9), 513–527.

OECD (2006). Liberalisation and universal access to basic services.OECD tradepolicy studies.Paris: OECD Publishing.

OECD (2011). ICT database and Eurostat. Community Survey on ICT usage in householdsand by individuals, www.oecd.org

Please cite this article as: Nucciarelli, A., et al., Should next generation acunion perspective, Government Information Quarterly (2013), http://dx.do

Picot, A., & Wernick, Ch. (2007). The role of government in broadband access.Telecommunications Policy, 31, 660–674.

Reding, V. (2008). Europe's way to the high speed internet: Why effective networkcompetition is the freeway to the future. Speech/08/355, ECTA Annual Confer-ence, Brussels, June 25, 2008 (Retrieved on April 8th on http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/08/355&format=DOC&aged=0&language=EN&guiLanguage=en)

Reding, V. (2009). Towards a European strategy of high speed broadband for all: How toreward the risk of investment into fibre in a competitive environment. ECTA Confer-ence, June 25, 2009, Brussels, Belgium (Last retrieved April 20th on http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/09/312&format=HTML&aged=0&language=EN&guiLanguage=en)

Renda, A. (2010). Competition-regulation interface in telecommunications: What's left ofthe essential facility doctrine. Telecommunications Policy, 34, 23–35.

Ruhle, E. -O., Brusic, I., Kittl, J., & Ehrler,M. (2011). Next Generation Access (NGA) supply sideinterventions — An international comparison. Telecommunications Policy, 35(9-10),794–803.

Ruhle, E. -O., & Lundborg, M. (2010). EU policy for next generation access— An innovativeor incremental step forward? Telecommunications Policy, 34, 36–44.

Sadowski, B., Nucciarelli, A., &deRooij,M. (2009). Providing incentives for private investmentin municipal broadband networks: Evidence from the Netherlands. TelecommunicationsPolicy, 33(10–11), 582–595.

Schleife, K. (2010). What really matters: Regional versus individual determinants of thedigital divide in Germany. Research Policy, 39(1), 173–185.

Sharkey (1982). The theory of natural monopoly. Cambridge: Cambridge University Press.Siciliani, P. (2010). Access regulation on NGA—A financial, market-led solution to bridge the

gap between US and European diverging regulatory approaches. TelecommunicationsPolicy, 34(5/6), 287–298.

VanWinden,W. (2001). The end of social exclusion? On information technology policy asa key to social inclusion in large European cities. Regional Studies, 35(9), 861–877.

Alberto Nucciarelli, Ph.D., is a senior postdoctoral researcher at the School of InnovationSciences at the Eindhoven University of Technology (Netherlands). His research topicsinclude telecommunications policy, ICT economics, sustainable business models for mu-nicipal broadband networks, the deployment of national broadband plans and the devel-opment of a commonEuropean policy framework for telecommunications. He haswrittenand published papers in international refereed journals and he regularly presents papersat international conferences. His publication records benefits of the collaboration withan extensive research network across universities and research centers and it relies ondeep literature reviews, data collection, and data gathering at project partners' sites. Heacts as reviewer for some international journals on a regular basis.

Bert Sadowski, Ph.D., works as an Associate Professor of Economics of Innovation andTechnological Change at the School of Innovation Sciences at the University of Technologyin Eindhoven (Netherlands). In the past fifteen years, his research has focused on a varietyof economic and management fields, in particular, in strategic management, technologymanagement and international management.

Ernst-Olav Ruhle is Managing Director of JUCONOMY Consulting AG (Germany).Dr. Ruhle is a member of the board of directors of the International TelecommunicationsSociety (ITS) and has worked for the Scientific Institute for Communication Services(Wissenschaftliches Institut für Kommunikationsdienste —WIK). During his professionalcareer he conducted preliminary work in preparation for the opening up of the Germantelecommunications market (Strategy and Regulation Division of RWE Telliance) and healso worked as Head for Regulation with special statutory authority at Telekom AustriaAG, Vienna (Austria), where he built up the regulatory sector and was responsible for allmajor regulatory procedures. He is author of several papers published in academic period-icals.

cess networks fall within the scope of universal service? A Europeani.org/10.1016/j.giq.2013.02.006