Broadband

Yesterday the Guardian had a pull-out “Optical Fibre” supplement whilst Ofcom’s Chief Executive was talking to a conference in London about “super-fast broadband”.

The back page of the Guardian supplement was occupied by an advert from Virgin media, who have faced some controversy following advertising their services as “fibre optic” when the final stretch of cable from the cabinet to the home is actually coaxial (as it always has been). The supplement also covered the Welsh “Fibrespeed” project where a public sector backbone will be built at a cost of £30m and interconnect business parks with a fibre optic backbone. Other articles covered various technical aspects of fibre and one highlighted security issues and the ease of tapping fibre.

Ed Richard’s speech titled “Serving Consumers: Competition, Innovation And Investment Through The Next Phase” was fairly wide ranging over OFCOM’s areas of responsibility. In the fixed line area he said the big issue is addressing the roll-out of super-fast next generation fixed fibre networks in the UK. “Super-fast” broadband was a phrase used in the speech, no doubt to the bemusement of some ISPs’ customers, which appeared to encompass fibre to the home, high speed cable broadband or fibre to the cabinet to provide VDSL to homes. OFCOM likes to be technology neutral and let the market decide which is the best way to deliver the service.

In essence OFCOM want to promote investment while at the same time holding on to goals of competitive access that may inhibit investment, Ed Richards said that “Our position is clear. Ofcom favours a regulatory environment for the next generation of networks and access that both allows and encourages operators to make risky investments, to innovate for the benefit of consumers and, if the risks pay off, for the benefit of their shareholders too.”

The EU are in a similar position, explained by Commissioner Viviane Reding in a recent speech to an ECTA conference she outlined some key points:

• “The technological and economic developments paving the way for high-speed broadband networks have the potential to increase competition to the benefit of consumers. But they can also lead to new bottlenecks and re-monopolisation of end user markets.”
• “A key element in my vision for Next Generation Access regulation is to ensure that all parties, entrants or incumbents have sufficient incentives to move in these markets.”
• “Regulatory restraint as a carte blanche for incumbents to re-monopolise markets where the buds of competition are flourishing is not a policy option if we want competitive markets.”

This position strongly suggests that the sort of monopoly enjoyed by Verizon’s FIOS FTTH product in the USA isn’t going to be an option in the EU. Reding did at least dangle a carrot in the form of a price premium for new investments - “I believe that the best way for encouraging long-term investment is to establish a priori a number of principles that national regulators should take into account when regulating access prices with regard to next generation access networks. In my personal view, these should include a risk premium of around 15%.”

Another interesting observation is that dominant telcos are currently trailing in 3rd place in installing fibre across Europe with Alternative operators leading the way, followed by municipal authorities. Given that the dominant telcos will be guaranteed the highest level of regulation, and also have the problem of losing one type of revenue (copper line access) to gain another, this perhaps shouldn’t be a surprise.

Tags: EU, Guardian, OFCOM, Verizon, Virgin Media