20th European Regional ITS Conference Crown Plaza Hotel, Manama Kingdom of Bahrain 26-28 October, 2009

State Aid Revisited: The New Guidelines for Municipal Broadband Infrastructure Deployment Bert M. Sadowski, Economics of Innovation and Technological Change, Eindhoven University of Technology, IPO 2.11, 5600 MB Eindhoven, The Netherlands, Tel.: 0031-(0)40-2472640, Fax.: 0031-(0)40-2474646 E-mail: [email protected] Jan M. Smits, Chair Law and Technology, Eindhoven University of Technology, IPO 2.09, PO Box 513, 5600 MB Eindhoven, The Netherlands

Abstract

In May 2009, the Commission of the European Union (CEU) initiated a discussion about terms and conditions under which (local) governments can get involved in the implementation of municipal broadband networks (CEU, 2009). With the Community Guidelines for the Application of State Aid Rules in Relation to Rapid Deployment of Broadband Networks (in short: Broadband Guidelines), the CEU has taken a step forward in more clearly delimiting the geographical and the product market for the rollout of next generation access (NGA) in municipalities in Europe. As the document identifies the relevant competitionrelated aspects of municipal fibre networks, it stops short in defining appropriate public policy objectives and open fibre access on the wholesale basis and retail basis. This is troublesome as the experience in the Netherlands has shown that competitive service level entry can be hampered if open access is not defined. In addition, there is a threat that vertically-integrated market structures will emerge in next generation access markets. Functional separation can be considered as an instrument to warranty a competitive and open market structure.

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Introduction In May 2009, the Commission of the European Union (CEU) started a new consultation round on the application of State Aid rules to the implementation of broadband infrastructure. The consultation document called Community Guidelines for the Application of State Aid Rules in Relation to Rapid Deployment of Broadband Networks (in short: Broadband Guidelines) continued the discussion on the Commission’s policy in applying the State aid rules to the deployment of traditional broadband networks and addressed some issues relevant to assess State measures fostering the roll-out of next generation access (NGA) networks. With closing of the consultation in June 2009, The Commission had received 93 contributions from European governments, public authorities, companies and organizations. Municipal networks have to be examined in balancing issues of competitionrelated and public-goods aspects of broadband deployment (Picot and Wernick 2007)(Sadowski, Nucciarelli, & de Rooij, 2009). Municipal networks have emerged in some countries in Europe with the liberalization of network access in the late 1990s based on the assumption that inter-platform competition would drive broadband development (CEU 1999). Since 2002, the European Commission (EC) has become increasingly interested in establishing whether alternative networks meet the strict criteria of Article 87(1) of the EU Treaty on State Aid and if they interfere with competition. If public sector entities intend to facilitate broadband deployment in Europe, they face the delicate task of putting forward legitimate reasons for intervention and to advance public goods reasoning (Barroso-Gomez and Perez-Martinez 2005; Picot and Wernick 2007). Within a public utility framework, justifications have been developed on the basis of describing broadband as a public good (Picot and Wernick 2007). However, infrastructure resources cannot only be provided by public utilities or the market but there are a variety of private-public partnership models which are similarly suited to stimulate infrastructure development. For example, municipalities can take over the function of providing for public service obligations. In this context, the paper examines the Broadband Guidelines with respect to the extent to which it strikes the (right) balance between public policy and competition-related aspects in regulating next generation access (NGA) networks. The analysis focuses on the analysis of the product and geographical market characteristics of NGA networks. The key question has been how best to regulate NGA to provide sufficient incentives for private investment at the service level while at the same time preventing monopoly abuse (Lewin, Williamson, & Cave, 2009). In the following, we first discuss our theoretical framework which considers municipal broadband networks in the light of the public utility concept. Second,

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we put the discussion on the Broadband Guidelines in the context on the regulatory and legislative discussion on municipal broadband networks since 2000s. Thirdly, we focus on the current regulatory and legislative discussion on municipal networks in the Netherlands as it reflects recent developments in the area of (what we call) a market-based regulation of public utilities. The final part of the paper presents some open question for further policy and academic debate.

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The Economics behind Municipal Networks

2.1

The Public Utility Argument behind Municipal Networks

Within a public utility framework, public goods have been characterized by nonexcludability (i.e. no one can be excluded from consumption) and non-rivalry (i.e. consumption by an individual does not reduce the availability of the good to others)(Picot & Wernick, 2007)1. The first public goods characteristic has often been used in close correspondence with the concept of universal service to define a basic, affordable set of telecommunication services available to consumers2. Recently, the second characteristic has been utilized to describe the “sharable” nature of infrastructure resources, i.e. the extent to which these resources can be accessed and used by multiple users at the same time3. Most infrastructure resources are based on finite but renewable capacity (e.g. bandwidth). In this case, problems can emerge from rivalrous consumption which can be overcome by management choices in favour of providing particular infrastructure resources to users (for example, by balancing ubiquity against exclusivity of access to infrastructure resources). If the generation, distribution and sharing of (non-commercial) information travelling via the Internet (which should be available to all citizens) is considered as a rationale for the provision of infrastructure, information receives the status of a pure public good generally available for both consumption and productive use by recipients. In this case, municipal fibre networks could receive the status of a public information utility (Bar & Park, 2006). However, public goods justifications about the allocation of existing infrastructure resources are incomplete as they are based on a static 1

The provision of private goods is based on the idea that a person can be excluded from consumption of a resource and that the resource is depleted when consumed. The market provision has been considered as the most efficient mechanism of allocating private goods given that the costs of exclusion are low. 2 Universal Service Directive (EC, 2002). However, for broadband services it is currently not (yet) applicable. Reding (2007) expects that an initiative by the EC to include broadband in the universal service obligation will be finalized in 2009 (Reding, 2007). 3 In case of infinite capacity, the marginal cost of adding an additional person to use the source is zero. Due to variances in capacity, infrastructure resources differ in their capacity to accommodate multiple users according to nonrival resources (infinite capacity) and partially nonrival resources (finite but renewable capacity). The consumption of infrastructure resources can take place nonrivalrously or rivalrously (see, for example (Frischman, 2004)).

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and ex post perspective. Based on a dynamic approach, the production of nonrival goods and their provision to society becomes the focus of analysis. On the basis of public goods arguments, public policy objectives have been put forward if these networks were considered as part of structural measures within the EU or as a way to facilitate the European drive towards achieving the goals of the Lisbon Agenda. In particular in the 1970s and 1980s, public utilities have been considered as the most cost-efficient way for providing telecommunication infrastructure and services. Within this framework, a vertical-integrated entity has been responsibility for jointly providing telecommunication infrastructure and services. These entities were controlled by government or local government (“government provided public utility model”). In a number of countries, this model still is implemented on a local level (e.g. Stockholm in Sweden). In contrast to these models, the market allocation of infrastructure resources has been seen as a different way that involves private parties in the process of providing telecommunication infrastructure and services (Sadowski, Nucciarelli, & de Rooij, 2009). As a result, a variety of private-public partnership models have developed as an alternative mechanism to coordinate and provide infrastructure resources to society. This market-based public utility model relies on the cooperation and coordination of different market parties as well as the definition of public policy objectives by local government or other semi-governmental institutions. In the following we examine the different arguments in the regulatory and legislative discussion in putting them in the context of these two models. In part three, we focus in particular on the development of the market-based public utility model in the Netherlands.

2.2

The Regulatory and Legislative Discussion on Municipal Networks on the European Level

In contrast to public policy arguments, the liberalization of network access in the late 1990s in Europe has mainly been driven by competition-related justifications. The argument was that inter-platform competition would drive broadband development (CEU, 1999). In the late 1990s, a number of alternative networks emerged throughout Europe based on a wide variety of technical characteristics as well as ownership structures. In 1998, the European Commission, in their Report on Alternative Networks, estimated that municipalities had participated in approximately 50 networks mostly in Belgium, Germany and Sweden (CEU, 1999). Some of these networks were acquired by market parties or ended up in failure in the late 1990s (Sadowski & Runhaar, 2000). However, since 2000, municipal networks have started to grow rapidly (see e.g. (Preston, Cawley, & Metykova, 2007; Sadowski, Nucciarelli, & de Rooij, 2009; Tookey, Whalley, & Howick, 2006).

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The European Commission has acted in different ways dealing with municipal networks: first, these networks have, in general, been stimulated if they were considered as a part of the European drive towards realizing the goals of the Lisbon agenda to make the EU "the most competitive and dynamic knowledgedriven economy by 2010". With respect to reaching the goals of the Lisbon Agenda, the European Commission has justified further investment in broadband infrastructure based on the argument that Europe is lagging behind in comparison with the United States and South Asian countries (Fransman, 2006). Second, within the New Regulatory Framework of 2003 it referred to these networks in the context of markets that have "transitional problems". With the overhaul of the EU regulatory framework starting in 1999 with the publication of the Communications Review by the European Commission, a discussion started aimed at redefining the balance between incentives to build new networks and to access existing ones. Within this framework, the Directive 2002/19/EC on Access and Interconnection was aimed at discussing the conditions under which regulatory intervention should occur to the presence of some form of market dominance. It also provided room for ex-ante regulation in markets (like for broadband access) that have “transitional problems” as a result of technological developments. These markets - (expected to be) unable to generate effective competition - were, therefore, subject to some sort of sector-specific regulation. Within the New Regulatory Framework of 2003 municipal initiatives could be exempted from ex ante regulation as these networks would operate in new "emerging markets" (Lewin & Williamson, 2005). Furthermore, an important part of the New Regulatory Framework of 2003 was the Regulation of Unbundled Access to the Local Loop4 which allowed alternative service providers use the access networks of incumbent companies. This regulation allowed new entrants to use certain parts of the networks and subsequent facilities of these companies such as the access to the local loop, access to technical interfaces, protocols and other core technologies which are required for interoperability or co-location and other forms of sharing of facilities (inclusive use of ducts, buildings and poles as well as operational support systems and similar software. Third, the European Commission (EC) has since 2002 become increasingly interested in establishing whether alternative networks meet the strict criteria of Article 87(1) of the EU Treaty on State Aid and if they interfere with competition. Exceptions have been granted if the implementation of the network was driven by public policy objectives related to the provision of basic infrastructure needs or to the expansion of networks in areas in which private investment was considered inadequate. In 2003, the European Commission provided a justification for investing in municipal networks if they were supporting growth in underserved areas (EU, 2003). In these areas, private initiatives did not exist at all ("white areas") or were insufficient to provide more than basic infrastructure and services 4

Regulation (2887/2000/EC) on Unbundled access to local loop

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("grey areas"). In 2005, with the set-up of the New Rural Development Fund, the EC was facilitating the implementation of broadband infrastructure and services in rural areas. In October 2006, the EC explicitly referred to innovation as part of long-term structural policy in the EU and added test and experimentation programs to the existing instruments for facilitating municipal broadband networks (EU, 2006). For "black areas", i.e. with preexisting telecommunication infrastructure, this justification did not hold and was considered as conflicting with European legislation on State Aid. These different views on municipal networks of the European Commission have also been reflected in the Broadband Guidelines published in May 2009. The objective of the European Commission was to initiate a discussion about terms and conditions under which (local) governments can get involved in the implementation of municipal broadband networks (CEU, 2009). With the Broadband Guidelines, the CEU has taken a step forward in more clearly delimiting the geographical and the product market for the rollout of next generation access (NGA) in municipalities in Europe. This has been the common denominator by all participants in the discussion that followed. They found that the Broadband Guidelines have been useful and stimulated the discussion on the application of State Aid regulations on municipal broadband networks. Furthermore, there seems an overwhelming agreement that next generation access networks will have an important impact on the current and future structure of broadband markets. However, there also is wide range of differences between the participants in the discussion. From the 93 contributions to the discussion on the Broadband Guidelines, 15 responses came from national governments, 20 from public authorities, 14 from registered organizations and 44 have been individual responses. In the last group, there has been a large variety of contributions ranging from incumbent telecommunication companies (like Telecom Italia and Deutsche Telekom), cable operators (like NL Kabel) and new entrants (like Skype). Furthermore, associations of municipalities (such as Stedenlink from the Netherlands and Eurocities) as well as research institutions contributed to this discussion.

2.3

The Discussion on the Broadband Guidelines in 2009

In linking to the preceding legal discussion, the Broadband Guidelines clearly spelled the (static) competition related aspects (paragraph 10-19). However, the follow-up discussion on the Broadband Guidelines showed the following: First, a lack of clarity about the definition of public policy objectives, second, an emphasis on static efficiency and third, unclear definitions about the product market for next generation access (NGA) networks. In the Broadband Guidelines, the public policy objectives have mostly related to the discussion on services of a general economic interest (SGEI) within the

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meaning of the Article 82(2) of the Treaty (paragraph 20-24). A number of participants acknowledged that establishing of a link between these public policy objectives and the SGEI principle is already a step in the right direction. For a few participants, this did not go far as it did not cover sufficiently the risk of an emerging new digital divide, particularly in deprived areas (Eurocities, 2009). Furthermore, there have been remarks to consider municipal broadband networks as a new form of public information utility (Skype, 2009) and measure their effect in terms of long term social value (ECTA, 2009). A second major criticism has been aimed at the emphasis put by the Guidelines on static efficiency aspects of municipal networks instead of dynamic aspects such as re-monopolization of upstream and downstream markets. This has been claimed will insufficiently account for phenomena such as manipulation of barriers to entry, insufficient incentives for innovation and possible abuse as a means to undermine competition (Stedenlink, 2009). Even the Broadband Guidelines mention the “contribution of these technologies to growth and innovation”, they refer to this contribution only in very general terms on the macro level (Stedenlink, 2009). More interesting is, however, the question what kind of new services can be expected on the retail level. Paragraph 49 mentions the potential of NGA networks to provide for new applications/services on the retail level, but does not argue on the possible (dis-) incentives of market parties to develop these applications/services. Based on the SGEI principle, the Broadband Guidelines provide municipalities with the “freedom to define” these services “on the specific features of these activities”. In a dynamic setting, this allows defining specific features on the basis of experimentation with new services and generation of new (local) knowledge in particular on the retail level. In this context, it becomes important to clearly define open access and interconnection as a way to allow ease of entry for new market parties, to avoid monopolization of new emerging market segments, anticompetitive innovation, etc. In case of insufficient innovative activities, this would increase the leeway for municipalities in case of insufficient innovative activities (paragraph 33) which can be considered as a market failure (missing markets). In this context paragraph 33 still does not provide comprehensive definition of market failure as it only refers to positive spillover effects on (probably) national level. However, positive spillover effects are generated not only generated in the interaction between service supplier and infrastructure provider but these are also localized and path-dependent effects. This has also effects of the definition of the different areas which are characterized as “white” “grey” and “black” areas. If the generation of new knowledge and experimentation of new services is an explicit objective, this categorization is insufficient as it does not take areas into account which are

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black, but provide potential for innovation due to specific regional circumstances (location of particular industries, service providers, deprived areas etc.). Most importantly, the issue of mandated wholesale access needs further elaboration. Current regulation on broadband wholesale access is related to the unbundling of local loop of incumbent operators. With NGA and the emergence of optical access technologies in the local loop these regulations are insufficient as they do not account for ODF access (optical distribution frame). With ODF access a number of new questions come up related to access at the wholesale level and at the customer premises (paragraph 45). With a dynamic perspective on social welfare objectives, the types of public intervention will be broadened (paragraph 54-59) and will include activities such as facilitating and coordination of innovative efforts between companies in the region, the provision of subsidies for new innovative start up firms, the definition of appropriate access prices to enable service entry, etc. Third, the principle of technological neutrality has been difficult to apply in the case of next generation access networks. In particular, the technical definition of next generation access networks has been controversial ranging from unnecessary of such definition (NLKabel, 2009) to define fibre networks as a different class of networks (Eurocities, 2009). This analysis shows that the participants in the discussion on the Broadband Guidelines have pinpointed problems surrounding the definition of public policy objectives, in particular, the definition of SGEI. Second, participants have doubts about the splitting up of markets according to “black”, “grey” and “white areas”. Third and most importantly, there has been a heated debate on the technical definition of NGA networks. As some participants considered it as unnecessary to technically define these characteristics, others found that this definition did not go far enough as it should address “future markets”. The Draft of Broadband Guidelines and discussion afterwards have outlined the framework of a marketbased public utility model in which public-private partnerships can fulfill a major role. In order to discuss further elements of this model, we discuss in the following the evolution of municipal networks in the Netherlands.

3. The Development of Municipal Networks in the Netherlands The Netherlands is one of the forerunners in broadband penetration and FttH penetration in households, together with countries like Denmark, Sweden and Norway. However, FttH penetration in the Netherlands is lower compared to the aforementioned countries (see Figure 1) although FttH networks have recently been gaining ground in the Netherlands.

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--------------------Figure 1 about here -------------------

In the Netherlands, municipalities such as Amsterdam, Rotterdam or Eindhoven started in 2001 looking for alternative ways of implementing municipal broadband networks after national broadband initiatives failed to create sufficient commitment by existing market parties. In 2005 in Nuenen and 2006 in Eindhoven, cooperative PPPs called "Ons Net" (Our Network) were set up, subsidized by the "Kenniswijk" programme which competed with established market parties on a regional level. These PPPs were unique as they represented local experimentation and testing systems, i.e. real life experimentation environments in which (end) users are also co-producers (Ballon, Pierson, & Delaere, 2007; EU, 2009). These systems allowed different actors (semi-public institutions, local governments, private companies) involved to experiment with and learn from the implementation of new infrastructure and services and, subsequently, to use these experiences for the start-up and execution of new projects. All municipal areas in the Netherlands, due to the existence of a dual broadband infrastructure, are classified as "black areas" where strict State Aid rules apply. In Appingedam, the rollout of a municipal FttH network was suspended after Essent Kabelcom filed an injunction with a Dutch court in September 20045 and a formal complaint with the EC in November 2004. In 2006, the EC ruled that the Appingedam network involves “State aid to the foundation, the operator of the fibre access network and to providers of retail broadband services"6. As a response to changes in rationales of public sector entities, the legislative environment and specific regional conditions, a number of specific public-private partnerships (PPP) models have developed in the Netherlands. Even if public utility models (e.g. Wienstrom in Austria) and sole private provider models (e.g. StockAB in Sweden) can be found in a variety of European countries, these models have not been used to implement municipal fibre networks in the Netherlands. Specific forms of PPPs emerged in which municipalities a) act as coordinators and/or orchestrate market demand (Coordination Model); or b) act 5 Case at the Dutch Court in Groningen can be found under LJ-N AQ8920, 3 September 2004 (RechtbankGroningen, 2004). 6 CEU. 2006. Commission Decision of 19 July 2006 on the measure n° C 35/2005 (ex N 59/2005) (ECJ, 2006).

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as rule maker (Franchise Model). Dutch social housing corporations have partly also been involved in these two models but have also taken the lead in establishing own models (Social Housing Corporation - SHC Model) and participate in cooperative PPP models. The implementation of these different models did not start until 2004-2005, and was initially on a small scale cooperative, SHC and coordination models as leading examples. For parties involved in the different forms of PPPs, a key issue has been how to guarantee public policy goals, such as ubiquity, affordability of services and choice of different service providers. To achieve ubiquity of fibre deployments in the Netherlands, the number of homes connected via fibre connections7 had to be sufficiently large in the particular area. To guarantee affordability of services, access rates should have been competitive or lower than, commercial providers’ rates. 8 To enable consumers to choose between different service providers, openness of the network was required allowing services such as carrier (pre-) selection. As municipalities have been responsible in coordination models to assure that public policy goals were fulfilled, social housing corporations have taken up this role in SHC models and in cooperative PPPs.9 With respect to the public goods aspects of municipal fibre networks, there currently is not a clear answer to the question how fibre access is related to public service obligations like universal service. In the Netherlands, municipalities and social housing corporations have taken the lead in defining ubiquity, but issues like affordability of services and choice of service provision have not clearly been defined yet. There are a variety of options under which regulatory agencies and municipalities can guarantee public service obligations ranging from direct interventions to regulate consumer and access prices to defining a municipal fibre network as a service of general economic interest. However, it is unclear how ODF access is defined of wholesale customer and SDF access for subscribers. If open access at these levels is not clearly defined, there is the threat that competitive service providers will not enter and service level competition will net emerge. This also creates barriers to the entry of new innovative service providers which are the basis for the development of the full potential of municipal fibre networks.

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Summary and conclusions

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In order to examine ubiquity in fibre deployments, an important difference is between “homes passed” and “homes connected”. With “homes connected”, ubiquity can be achieved as a fibre connection is placed inside the house (with an optical line termination unit) or just outside the building. In contrast to the “home passed” option, it allows to connect all potential (residential) users of an area more cost-efficiently. Recently 8 A difference has to be made between access and provision of basic (Triple Play) services. 9 Appropriate regulation of fibre deployments is still under discussion by the national regulatory agency OPTA.

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In contrast to the government driven public utility model, the market allocation of infrastructure resources has been seen as a different way that involves private parties in the process of providing telecommunication infrastructure and services (market-based public utility model). Based on the latter model, a variety of private-public partnership models have developed as an alternative mechanism to coordinate and provide infrastructure resources to society. It relies on the cooperation and coordination of different market parties as well as the definition of public policy objectives by local government or other semi-governmental institutions. In the follow-up discussion on the Broadband Guidelines, it has been shown that public policy objectives are not sufficiently defined. As these public policy objectives have been related to the definition of SGEI, less attention has been paid to the emergence of a new digital divide based on NGA networks, for example, in deprived urban areas. This also demonstrated that the definition of different markets according to “black”, “grey” and “white areas” does not adequately account for socio-economic issues (like social coherence and economic development) but the extent of competition in these areas. The discussion also showed that technical definition of NGA networks will be an issue of great concern for the European Commission. This definition has to broad enough to account for “future markets” and emerging new services, but also sufficiently narrow to allow a competitive analysis. A major issue put forward by a number of participants has been the definition of open (fibre) access and interconnection. This will become increasingly vital as it should allow service level entry. There are some parallels with regulation on the unbundled local loop, but fibre access requires further specifications to enable (even small) service level entry. The experience in the Netherlands has shown that there is a case for involving local governments and semi-public institutions (like social housing corporations) in a market-based fashion to implement municipal fibre networks even in black areas (with pre-existing broadband infrastructure). A variety of municipal networks have developed in the Netherlands since 2004, initially on a small scale with the cooperative “Ons Net” Nuenen as a first municipal network established in 2006. However, the example of the municipal network “Ons Net” Nuenen currently shows competitive service level entry can be hampered if open access is not defined. Furthermore, as there is a threat that vertically-integrated market structures will emerge in next generation fibre markets in the Netherlands due to the recent merger between KPN (the incumbent) and the Reggefibre (the new entrant firm with most fibre installations), functional separation can be considered as an instrument to warranty a competitive and open market structure in this market.

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References: Ballon, P., Pierson, J., & Delaere, S. (Eds.). (2007). Fostering Innovation in Networked Communications: Test and Experimentation Platforms for Broadband Systems. Hershey (PA), London IDEA. Bar, F., & Park, N. (2006). Municipal Wi-Fi Networks: The Goals, Practices, and Policy Implications of the U.S. Case. Communications and Strategies, 61(1st quarter 2006), 107-125. CEU. (1999). Alternative Networks in EU Member States. Brussels: CEU. CEU. (2009). Community Guidelines for the Application of State Aid Rules in Relation to Rapid Deployment of Broadband Networks. Brussels: CEU. EC. (2002). Directive 2002/22/EC of the European Parliament and of the Council on universal service and users' rights relating to electronic communications networks and services (Universal Service Directive). Brussels: EC. ECJ. (2006). Broadband development Appingedam C 35/2005. Luxembourg: ECJ. ECTA. (2009). Comments on the European Commission's Draft 'Community Guidelines for the Application of State Aid Rules in Relation to Rapid Deployment of Broadband Networks'. Paris: ECTA. EU. (2003). Guidelines on the Use of Structural Funds for Electronic Communications. Brussels: SEC(2003) 895. EU. (2006). Innovation in the National Strategic Reference Frameworks Paris: EU. EU. (2009). Living Labs for User-Driven Open Innovation. Brussels: European Commission. Eurocities. (2009). EUROCITIES Comments on European Commission's Draft Broadband State Aid Guidelines. Brussels: Eurocities. Fransman, M. (2006). Global Broadband Battles. Stanford: Stanford University Press. Frischman, B. (2004). An Economic Theory of Infrastructure and Commons Management. Minnesota Law Review, 917-1029. FTTHCouncilEurope. (2009). Mid-Year 2008 Ranking. Brussels: FTTH Council Europe. Lewin, D., & Williamson, B. (2005). Regulating Emerging Markets. Economic Policy Note 5(April 2005). Lewin, D., Williamson, B., & Cave, M. (2009). Regulating Next-Generation Fixed Access to Telecommunications Services. Info, 11(4), 3-18. NLKabel. (2009). Comments from NLkabel on the Draft Broadband Guidelines of the European Commission. Den Haag: NLKabel. OECD. (2009). Broadband Statistics. Paris: OECD. Picot, A., & Wernick, C. (2007). The Role of Government in Broadband Access. Telecommunications Policy, 31, 660-674. Preston, P., Cawley, A., & Metykova, M. (2007). Broadband and Rural Areas in the EU: From Technology to Applications and Use. Telecommunications Policy, 31(6-7), 389-400. RechtbankGroningen. (2004). Essent Kabelcom B.V. v. Gemeente Appingedam (Vol. LJ-N AQ8920). Reding, V. (2007). How Europe Can Bridge the Broadband Gap (Speech 14 May 2007). Brussels: EC. Sadowski, B., Nucciarelli, A., & de Rooij, M. (2009). Providing Incentives for Private Investment in Municipal Broadband Networks: Evidence from the Netherlands. Telecommunications Policy, forthcoming. Sadowski, B., & Runhaar, H. (2000). Diversifying utilities – opportunity or fallacy? An empirical analysis of diversification strategies of European utility companies. Eindhoven: ECIS. Skype. (2009). Response of Skype Communications sarl to the "Consultation on the Commission's Broadband Guidelines on the Application of EU State Aid Rules to Public Funding of Broadband Networks'. Luxembourg: Skype. Stedenlink. (2009). Stedenlink/State Aid & Broadband Consultation (HT. 2079). Den Haag: Stedenlink.

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Tookey, A., Whalley, J., & Howick, S. (2006). Broadband Diffusion in Remote and Rural Scotland. Telecommunications Policy, 30, 481-495.

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Penetration Level (per 100 inhabitants)

Figure 1.

Economies with the Highest Penetration of FttH and their Level of Broadband Penetration, 2008.

40.0

36.7

35.0 30.0 25.0

31.2 25.1

35.5 32.7

32.3

25.0

23.0

21.2

19.6

20.0 15.0 10.0 5.0

FTTH

18.2

Broadband 12.2

10.2 6.0 3.2

2.6

1.4

0.5

3.7 1.0 0.4

0.9

0.0

Source: (FTTHCouncilEurope, 2009; OECD, 2009)

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