EU superfast broadband should cost less
May 21, 2013
Providing superfast broadband services to the whole of the European Union could be much less expensive than previously estimated. This is the key conclusion of a new report from broadband specialists Point Topic. Earlier estimates suggested the cost could be as high as €270 billion. Point Topic puts the figure at about €80 billion, with nearly two thirds of that total needed to service the lowest density areas.
One of the main objectives of the European Commission’s “Digital Agenda” programme is to ensure that all European homes can connect to superfast broadband, defined as delivering at least 30 megabits per second (30Mbps) of data downstream. But the investment needed to achieve that target is controversial and the EC’s plans to contribute to it were slashed at the EU Budget Summit in February.
“Eighty billion euros is still a lot of money,” says Tim Johnson, lead author of the report, “but we think our figure is more accurate than earlier ones. It’s more realistic and should be more acceptable.”
Several factors combine to make the Point Topic estimate lower than previous ones. The approach takes full account of existing superfast networks, which already covered about 50 per cent of European homes at the end of 2011. It recognises that superfast broadband does not have to be provided by optical fibre-to-the-home (FTTH) technology but can also be delivered by cable TV networks (using the Docsis 3 standard) or over telephone lines using VDSL (the very-high-speed version of DSL).
VDSL is much cheaper to provide than FTTH where a good telephone network is already in place. Thus Point Topic’s chose to use VDSL as the benchmark for modelling the cost of superfast rollout in more densely populated areas. Some other estimates assume much wider use of FTTH.
The report also uses a new approach to separating out areas of high and low cost for superfast rollout. The methodology identifies the population density in every square kilometre across Europe and divides them into three sectors – urban, semi-rural and rural (see table below). One key conclusion is that only 14 per cent of European homes are in the deeply rural areas, with less than 100 people per square kilometre. Earlier estimates generally assumed that Europe has about 19 per cent rural homes.
The size of the rural sector is important because it is where superfast broadband is most expensive to provide. The rural areas are likely to take the lion’s share of the budget for superfast investment – €52 billion from the €82 billion total by Point Topic’s estimate. Another €22 billion will be needed to complete coverage of the semi-rural sector and a mere €8 billon more to achieve the target in urban areas according to the report.
The €52 billion estimate also assumes that superfast investment will be capped at an average of €2,000 per home. “Most of that amount will have to be funded by the taxpayer in one way or another,” says Johnson, “and we think that’s about as much as they will stand for. But we think that a large proportion of rural Europe will get wired up on that basis.”