NGN infrastructure high on governments’ agenda for economic competitiveness, growth. As the appetite for faster data processing speeds and larger bandwidth increases, the role of the public sector in accelerating initial deployment of fiber-based Next Generation Network (NGN) infrastructures in countries around the world will be imperative to maintain a competitive economic edge, a KPMG International report has found.
The KPMG Infrastructure Spotlight Report, "The Roll-out of Next Generation Networks – Investing for 21st Century Connectivity", examines how nine countries are applying various approaches to facilitate the deployment of broadband infrastructure so critical to the continued development of knowledge-based economies. The countries – those with the highest levels of conventional broadband access per capita - are Australia, France, Japan, New Zealand, Singapore, South Korea, Sweden, the UK and the US.
Among the key issues addressed is what type of intervention governments should take – regulatory, market or financial – to speed implementation without disrupting the role of the private sector and hurting competition. Of the nine countries spotlighted in the survey, it appears that financial intervention is the approach used most often.
Population density and GDP per capita are two other important considerations which determine whether or not the public sector should intervene. These are factors that determine how cost-effectively broadband networks can be deployed. Together with segmenting the marketing into infrastructure and service layers, they can help stimulate investment and competition, and can provide the framework that enables an appropriate form of intervention from government.
With a national broadband strategy approved by MCSI in 2009, ANCOM eyeing the development of the competitive framework and local telecom operators fighting for the title of "the fastest broadband provider", the Romanian broadband telecommunications market is highly competitive. Both fixed and mobile operators are heavily investing in a multitude of competing broadband technologies (DSL, FTTH, HSDPA, etc.) despite a relatively low uptake of these services and lowest market prices within the CEE region.
"Being seriously affected by the fierce competition, mainly price driven, as well as decreasing customer spend both in the residential and business sectors the entire Romanian broadband communications ecosystem can learn from the experiences of the governments in the countries with the most developed telecom markets." said Aurelia Costache (photo), Performance and Technology Partner in KPMG Romania.
The report shows that South Korea, Japan and Singapore have developed highly effective blended models of intervention and market segmentation that support a vibrant competitive market with an advanced infrastructure. In 2001, South Korea was the first country to make conventional broadband available to its citizens followed by Japan and Sweden. Today, South Korea and Japan lead in terms of both broadband speed and fiber-to-the-home/building. France and Sweden follow close behind.
"What’s most critical to this process is the timing of investments and the extent to which governments should be involved in financing," said Nick Chism, Global Head of Infrastructure, and a partner in the UK firm. "A number of governments around the world are pressing ahead with significant investments in NGN. Doing nothing is simply not a viable option for most countries because the risk of being left behind in the race for economic competiveness is too great."
Despite heavy demand from consumers, the business case for telecoms operators to invest in new fiber networks is not always compelling. High capital costs and long deployment schedules can deter operators. It is in these cases when market structures are failing to deliver the necessary infrastructure that governments tend to step in with financial assistance.
"Government intervention to ensure wide availability of NGN services is warranted because of the wider benefits to society as a whole," said Mihai Rada, Senior Manager in KPMG Romania, "even if the direct business case from a private investor’s perspective is unlikely to provide the financial returns."
The report demonstrates that applying various forms of intervention measured against the factors of GDP, population density and the competitive environment can deliver solutions that can stimulate the market, improve end user benefits and help improve returns on investment. In Japan and South Korea, higher broadband speeds are being offered at lower prices. In countries such as Australia or Sweden where population density or competition are lower, the cost of higher bandwidth is higher.
"The pattern we are observing is that governments are supporting NGN roll-outs," said Aurelia Costache. "As advisors to governments and operators, KPMG member firms have worked on many such infrastructure programs, helping clients on best practices throughout the lifecycle of their projects. This spotlight report summarizes some of our international insights and sheds light on some of the approaches that have been followed across the world."
