Discussion Papers

No. 430 Co-investment models for the rollout of FTTB/H infrastructures

Authors: Sebastian Tenbrock, Sonia Strube Martins, Christian Wernick, Fabian Queder, Iris Henseler-Unger

(full version only available in German)


In the context of FTTB/H rollout, cooperations are able to play an important role. They may distribute the rollout costs and risks among several actors, enhance the degree of network capacity utilisation and thus accelerate the overall extent of FTTB/H rollout. Co-investment models represent a segment of cooperation forms that focus on the cooper-ative rollout of new infrastructure. These models have not been realised in Germany yet, however, experience from other European countries suggests that co-investment models may contribute significantly to increase FTTB/H coverage in Germany as well.

The joint venture model, the investor model and the swapping model can be distin-guished as three basic co-investment arrangements. All three involve different govern-ance structures and incentive schemes. Incentives of telecommunications companies to participate in co-investment models can differ to some extent: incumbent operators may have different motives compared to alternative network operators. Arrangements and motivations depend on specific market structures, framework conditions and company related aspects.

Aside from positive effects on efficiency and overall welfare, co-investment arrange-ments may also negatively affect competition by collusive behavior. This especially ac-counts for co-investment deals, where SMP companies are involved. Against the back-drop of legal examination requirements, possible negative effects need to be examined by competition and regulation authorities, which may impose remedies if they are deemed necessary. One core objective should be free and non-discriminatory open access for third parties in order to enable them to recreate the products of the co-investors and thus to actively compete with them.

After the rollout, very asymmetric market shares between co-investing partners may materialise, which may lead to difficulties in amortising necessary investments for some parties. In a worst case scenario, a market exit may be imminent. That risk can be ad-dressed with financial compensations schemes among the co-investing partners. For example, the wholesale split approach can reduce the competitive risk of asymmetric market shares after the rollout (albeit to the detriment of maximum possible revenue per party).

Experiences in France, Spain and Portugal, where co-investment models have been established, show the relevance of country-specific structures and framework condi-tions. Regulated access to passive infrastructures is a key factor in all three countries. In Spain and Portugal, co-investment models have been initiated and pushed by market participants. The co-investment agreements in France, on the other hand, have devel-oped less from the market but have been implemented as a targeted state measure. They are coordinated by the regulator and represent a form of symmetrical regulation.

Discussion Paper is available for download.

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