Digital Agenda for Europe
A Europe 2020 Initiative

Carrier model options

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In regions where neither the public nor the private sector can or want to implement solutions, so-called bottom-up approaches can be realized alternatively. Also public-private partnerships (PPP) can take over roles in one or more of the value chain stages.
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Municipalities, municipal companies, joint ventures, PPPs and private companies can be involved in one, two or all three stages of the value chain.

Public Carrier

Potential public carriers to carry out construction and maintenance of broadband infrastructure are mainly municipalities and counties as well as local companies and joint ventures. The passive network infrastructure is primarily owned by the public sector (e.g. a municipality).

Public carriers usually build the passive network infrastructure through the involvement of sub-contractors. The involvement of the public sector in a broadband deployment project should be coordinated early with the competent authorities, particularly with regard to community economic and state aid law.

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Private Carrier

Private carriers can act as the owner and/or operator of broadband networks as well as service providers. They can be existing telecommunication companies, cable operators, private sector energy companies who want to expand their business and / or their product portfolio or start-ups. In purely privately-owned broadband deployment projects a private investor (one or more companies) takes over the full economic risk. Depending on the organizational and legal form of the company projects differ in size and type, financing strategy and the risk acceptance by investors.

If the investment of network construction and operation is entirely made of private funds, there is no Open Access obligation - unless the company has significant market power on a regulated market and is thus subject to ex-ante regulation. Nevertheless, the carrier can choose to open his passive and / or active network infrastructure to third parties (Open Access) and thereby  generate revenues.

Through co-operation between different players such as energy utilities and telecommunication providers synergies can be exploited and costs can be saved (e.g. in the construction of new or the use of existing network infrastructure, but also by joint design of services or the maintenance of the active network components).

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Bottom-Up Approach

Due to the lack of private sector interest to roll-out infrastructure in many rural areas, citizens depend on their own commitment in order to achieve a rapid broadband upgrade. The bottom-up model arises from initiatives of citizens and local or regional players (companies, organizations) that want to promote and implement the deployment of broadband networks as end-users.

While private-sector broadband projects often assess the feasibility only on the basis of commercial aspects, citizens’ initiatives in broadband expansion projects can take into account their own socio-economic objectives and goals, such as

  • a long-term investment horizon without short-term return expectations,
  • demand- and future-oriented choice of technology,
  • security aspects.

Potential organizational forms for projects arising from bottom-up models are associations or co-operations. The idea behind bottom-up approaches is that users make long term commitments (financial or other) which ensure the success of the project. The model has its strength primarily in the fact that it is organized locally and that there is a direct relationship between ownership and the provision of services to individual users, and thus a long-term customer loyalty is guaranteed.

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Public-Private-Partnership (PPP)

In a public-private partnership (PPP) public and private carriers share the risk of a project on the basis of a shared commitment. In this sense, public-private partnership is a generic term for the co-operation between the private and the public sector. The aim is also to provide resources and / or expertise of the private sector and thus add a private contribution to the public sector’s infrastructure and services offer.

Public-private partnerships are usually characterised by one or more of the following:

  • fulfilling of a public task (pure task performance as a procurement alternative of public authorities and services without investment nature)
  • participation of at least one private and one public partner
  • long-term co-operation
  • contractual formalization of the partnership
  • increased efficiency (especially in the form of cost reductions) through:
  • sharing of risks between the partners
  • life-cycle orientation in the provision of services
  • process orientation in the provision of services
  • specific allocations of the resources of partners depending on the PPP model
  • complementary and operational objectives of the partners
  • sharing of responsibilities and tasks between the partners according to their potential for success

The term PPP is generally used to describe a variety of co-operative arrangements from loose, informal and strategic partnerships to service contracts for design, construction, financing and operation ( so-called DBFO contracts, Design-Build -Finance-Operate) and formal joint ventures. Basically, there are three basic models:

  1. Outsourcing models (low degree of co-operation and used primarily to meet partial tasks)
  2. Contract models (medium degree of co-operation and mainly for the management of overall projects)
  3. Strategic cooperation models (high degree of co-operation between partners and including socio- contractual co-operation for the fulfilment of (sub -) tasks, primarily for management of overall projects.

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Read the guidelines on “How to use public-private partnerships for building broadband networks in rural areas?”.

Last updated on 21/09/2015 - 17:21