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As the Body of European Regulators of Economic Communications underlined in its recent report, the adoption of very high broadband by consumers is still low even though broadband coverage is now significant in many regions in Europe.

Yet, fast adoption is a key policy objective: for example, the Digital Agenda had set a target of 50% European households subscribing to an access with more than 100 Mbs bandwidth. Fast adoption will lead to faster macro-economic benefit and, in addition, will improve the business case for infrastructure investments.

How can policy support the fast adoption of fibre services? In Orange’s view, some concrete measures can help.

First, higher the level of fibre investment, more it is important that fibre investors are able to run their fibre services with maximum price flexibility on the retail market, so as to segment prices, conciliate high penetration with sufficient value, and recover their related investment costs. In this respect, the Economic Replicability Test - that is imposed to fibre investors and that falls under European asymmetric regulatory rules - should be implemented in compatibility with fibre investment incentives. This point is fully developed in an article by Jaunaux and Lebourges[1], to be published in the Telecommunications Policy Review.

On the demand side, a major obstacle to adoption resides in the level of switching costs experienced by end-users, i.e. costs when they switch from traditional broadband access to fibre access. As illustrated in the econometric analysis by Grzybowski and Liang[2], fibre access brings a good experience for consumers: the more people use it, the more they value it; there is hence a latent demand and a latent value for very high speed services. Yet this latent market remains untapped because customers refrain to test fibre access because of expected switching costs. In light of these considerations, public policies could help support fibre adoption thanks to public subsidies that could partly cover customers switching costs. As explained in an article by Jeanjean[3], the most efficient policy for supporting fibre roll-out and take-up consists in subsidizing demand.  In very rural areas, infrastructure also needs to be subsidized, but the level of infrastructure subsidy will be reduced if demand take-up is publicly supported. Market failure is mainly due to insufficient anticipation of fibre services value and customer satisfaction. This is why an appropriate public intervention is to use subsidies to compensate switching costs from traditional broadband to fibre. Contrary to common belief, there is no need for public policy to wait for available infrastructure before pushing demand-enhancing measures. On the contrary, by accelerating subscription take-off, demand-oriented policies fuel business cases for fibre roll-out thanks to private investments, thereby fostering fibre coverage, and reducing the need of public subsidies for white fibre areas.

[1] « Economic replicability tests for next-generation access networks « by L. Jaunaux and M. Lebourges to be published in Telecommunications Policy http://authors.elsevier.com/sd/article/S0308596115000221

[2] «Estimating demand for fixed-mobile bundles and switching costs between tariffs « by L. Grzybowski and J. Liang http://idei.fr/doc/conf/sic/conf%202015/liang.pdf

[3] « Subsidising the next generation infrastructures. Consumer-side or Supply-side« by F. Jeanjean. http://www.emeraldinsight.com/doi/abs/10.1108/14636691011086071?journalCode=info