PPP as a Tool for Stimulating Investments in ICT Infrastructures

PPP as a Tool for Stimulating Investments in ICT Infrastructures

Morten Falch (Aalborg University, Denmark) and Anders Henten (Aalborg University, Denmark)
DOI: 10.4018/978-1-4666-5888-2.ch060
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Background

Public private partnership has become increasingly popular as a model for organizing government and business relations (Helby, 2010). The PPP model has been applied both in Europe and in other regions as a means of organizing major construction and infrastructure projects (Helby, 2011). Since the 1980s, many different types of public sector activities in Europe, which formerly were produced in-house, have been outsourced to private companies through public procurement or relational contracting. Within the EU over 1,400 PPP deals representing a value of € 260 billion have been initiated over the past two decades (Kappeler and Nemoz, 2010). The new airport in Athens established in 1996 is so far one of the biggest European projects of this kind (Roumbutsos, 2008; Cruz & Marques, 2011).

Also within the ICT sector, PPP as a concept has attracted more attention within the past few years - the reason being the need for new fiber based high-speed communication infrastructures. Coverage of such infrastructures has indeed been expanded during the past few years. However, policy makers are concerned with the speed of this development – especially in less favored regions. The issue is whether the free market will be able to satisfy the communication needs of the future or whether government intervention is needed in order to stimulate investments.

The PPP model has also been applied for the provision of public Wi-Fi in cities. Many municipalities have supported the development of city-wide coverage of public Wi-Fi access in order to promote ICT usage within their area (Barroso & Feijoo, 2010; Tapia et al., 2006).

In telecommunications, cooperation between public and private sectors is not a new thing. Both sectors have been actively engaged in the telecom sector right from the beginning of the history of telecommunications at the end of the 19th century. However, the concept of PPP has a more recent origin. PPP was first used as a way to reduce the size of the public sector by outsourcing and by inviting private companies to participate in the creation of public services (e.g. Sadka, 2006; Falch & Henten, 2008). A prominent example is the privatization of public transport facilities in the UK in the 1980s. The idea was to increase efficiency through privatization while keeping a certain level of government control at the same time.

This kind of PPP projects can be compared with the telecom sector reform initiated by the EU Green Paper in 1987 (http://ec.europa.eu/green-papers/pdf/) leading to the privatization of most of the former state owned telecom monopolies. The whole idea of liberalizing the telecommunications area was to leave it to the market forces to develop the telecommunications sector. However, governments wanted to keep a certain level of control with telecom markets through sector specific regulations such as price control and universal service obligations.

Key Terms in this Chapter

White, Grey, and Black Areas: The EU Commission distinguishes between white, grey, and black areas, when allowing state aid to broadband projects. White areas are sparsely populated rural zones without broadband access. In these areas state aid is allowed. Grey areas are areas where broadband is already provided and permission for state aid demands a more detailed assessment. Black areas are those where at least two competing infrastructures exist. In such areas state aid is generally not allowed.

Public-Private Partnership (PPP): A government service or private business venture, which is funded and operated through a partnership of government and one or more private sector companies.

Public-Private Interplay (PPI): A government service or private business venture, which is operated through a partnership of government and one or more private sector companies. Public-private Interplay is a broader concept that public-private partnership as it also includes collaborations scheme without any form of contractual obligations.

Outsourcing: Contracting out of a business process to a third-party. In the public sector, outsourcing will most often imply that public sector activities are taken over by the private sector. In this way outsourcing and privatization are related terms. Sometimes outsourcing involves transferring employees and assets to the third party.

Build-Operate-Transfer (BOT): A model for public-private partnership, where the private partner is responsible for building and operation of project facilities. The facilities are transferred to the public partner, when the contract is completed.

Design Build and Operate (DBO): A model used for public-private partnerships. In a private DBO model, the private partner is responsible for the design as well as the building and operation of facilities. DBO ensures technology neutrality, as the private partner is able to choose a preferred technology without any public intervention. In a public DBO model, it is the public partner who is responsible for design, building, and operation.

Public-Private Community Partnership (PPCP): A special variation of PPP is public-private community partnership (PPCP) in which the local community is one of the partners involved. PPCP counters some of the concerns raised in relation to PPP projects, as it ensures a local foundation and focus on local development rather than profitability as the only parameter of success. PPCP is widely used in water and sanitation projects but is also applied in projects aiming to reduce the digital divide.

Build-Own-Operate-Transfer (BOOT): A variation of the build-operate-transfer (BOT) model. The difference is that the private partner owns the facilities until they are transferred to the public partner.

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