EU attempts to bring some regulatory certainty to broadband market
The UK largely through the work of Openreach has been improving in terms of broadband speeds offered, though some would say the pace of change is not fast enough. Additionally there is some very vocal complaints that the favouring of FTTC technology is short sighted. We believe that while some questioning of the Openreach projects is justified, at least they are out there doing something on a scale that will affect millions. The issue over competition and the various BDUK local authority projects has been at the forefront of the news for a few weeks, and the biggest hurdle for these projects has been getting EU State Aid approval.
On Thursday 12th July, EU Vice President Neelie Kroes' stood up and issued statements whose core tenet is to try and provide some regulatory certainty and ensure that EU 2020 targets such as half of the EU actually using 100 Mbps connections by 2020 becomes a reality.
So far a lot of the UK press coverage has been similar to what CityAM has published, suggesting that the EU has sided with the big telcos on fibre broadband. Now while we can see why this might be the perception, it is clear that the EU wants a level playing field, so incumbents will not be able to do what Verizon has done in the US, and create a closed fibre network.
"We have thoroughly examined the contributions made, and I can now announce the decisions I intend to propose to ensure that Europe finds its place as the connected, competitive continent, in particular through investment in high-speed, next generation access (NGA) broadband networks.
Regulatory policy should clearly be an enabler not an obstacle. Regulation that is stable over time and consistent throughout Europe can underpin sustainable competition and efficient investment.
- Competition needs a level playing field
- Too much intervention constrains flexibility
- We should be aware of both direct and indirect effects of regulation
- We should be wary of picking winners. "Technology neutrality"
- In general, regulated wholesale access prices should get the "buy or build" signals right
- Regulatory stability and consistency over time is a value in itself
- The question whether a rise or fall of copper prices would spur NGA investment is complex
But more importantly, after examining all the evidence, and given the significant competitive relationship between copper and NGA networks, we are not convinced that a phased decrease in copper prices would spur NGA investment. Indeed, we now see fibre investment progressing relatively well in some Member States where copper prices are around or above the EU average."
The problem for the EU is that the broadband markets across Europe are very diverse, and from attending Digital Agenda conference the impression one gets is that a great deal of the concern in other EU countries is introducing competition in the cities. The UK with most cities (48% of UK households) having a choice of two local loops already does better than many parts of the EU and the world. There is of course countries like Sweden where local authorities have often embarked on their own fibre projects, which in many cases have subsequently being sold on to commercial operators - the closest example in the UK would be Digital Region in South Yorkshire.
The value of the incremental approach to broadband improvement which Openreach and BT have embraced, and to some extent is the same with Virgin Media, appears to have been recognised as a cost-effective approach to meeting the goals. So why the change from what has been perceived as a full fibre or nothing type approach previously, perhaps it has been the realisation of the scale of the task involved, both in terms of physical work and the investment needed. The EU's €8bn investment is not much when split over 27 countries, and while we complain about UK broadband, the issue of final thirds and halves is repeated across the EU. The EU now has to encourage investment from both incumbents and the altnets, to create enough investment to meet its targets across the EU, rather than in just one or two countries.
So maybe BT has played the right card, with its majority FTTC deployment, some FTTP to gain experience and understand costs, so that where money is available Fibre on Demand can be made available. For example, the many semi-rural buildings that have been converted into 4 or 5 offices should be able to buy a single Fibre on Demand link and get connectivity as good as almost any EU city business.
Not everything has fallen in BT's lap, it still needs to ensure a level playing field, and the national regulator has a big part to play in understanding the pricing pressures in different parts of the UK, and ensuring BT does not abuse its position.
Altnets still have a massively important place in the UK market, and the entrepreneur/can do spirit will continue to keep the big operators on their toes, so long as the UK Government, Ofcom and EU do not legislate them out of existence.
One size fits all in any manufacturing/product arena is usually a path to failure, and so long as in the UK we remember this and encourage some diversity, the new companies that emerge like evolving lifeforms will flourish, some may burn bright for a short time, but some will be so disruptive they become dominant over a period of decades.