House of Commons - Broadband - Business, Innovation and Skills Committee

Broadband - Business, Innovation and Skills Committee Contents

8 Regulatory changes

Changes in Ofcom's regulatory role

118. Ofcom's principal duty in regard to broadband is to maintain a competitive broadband market. Digital Britain set out the Government's proposal to enhance its role in respect of that investment:

The Government proposes to amend the Communications Act 2003 to make the promotion of investment in communications infrastructure one of Ofcom's principal duties alongside the promotion of competition, to meet its overarching duties of securing the interests of citizens and consumers in the provision of communications services.[143]

119. The Department explained the importance of giving equal prominence to competition and investment as part of the drive to deliver an NGA infrastructure, which would enhance Ofcom's original remit which was to "provide competitive access to a legacy asset in the form of the copper network."[144]

120. Mr Ed Richards, Chief Executive of Ofcom, explained that the Regulator already had a duty to give regard to infrastructure investment, but that:

The proposal to give us a clearer duty to promote investment in infrastructure will change the emphasis. It will elevate it somewhat and, therefore, change the emphasis for us when we make decisions.[145]

The Government, while stressing the importance of this regulatory change, did not believe that it represented a "dramatic" shift in Ofcom's duty, rather that it would prove "the right basis for a sustainable balance between investment and competition."[146] For its part Ofcom explained that, it would first assess the duty and then decide on how it would make decisions which would be in line with those duties. Mr Richards, gave a pragmatic appraisal of the new duty and how it would work in practice:

I think what would happen is we would make a judgment on that in relation to any [change in the Communications Act], and I suspect at some point in the process someone, a third party of some kind, will probably challenge us and say either we had excessively interpreted Parliament's intention or we had insufficiently interpreted it, and that would probably be contested in a merits-based appeal.[147]

121. Our witnesses from industry were uncertain about the necessity of such a change in Ofcom's role. TalkTalk was not convinced that the Government had made a strong case for a change in the regulator's duty. In particular, it noted that the Government "has not been able to provide any tangible example of where Ofcom have taken a poor decision in the past."[148] The UKCTA thought that there was a risk that the new duty to encourage investment should not be "at the expense of the conditions which have led to the development of the competitive market which currently exists in the UK."[149]

122. Under its existing statutory duties, Ofcom is required to give regard to investment in its decision making. Therefore extending that duty to include the promotion of investment in communications infrastructure does not appear to be a major departure from its current duties. That said, Ofcom will need to be alert to the risks of balancing this duty with its existing duty of promoting competition in the NGA market. Furthermore, the Government will need to provide Ofcom with explicit direction to ensure that its new statutory duties do not cause it to get bogged down by legal interpretations and challenges.

Duct sharing

123. One area in which investment could be encouraged is through the opening up of existing infrastructure to competition. The Caio Review highlighted the potential benefits of providing companies access to the cable ducts (the tubes which carry cabling underground) of existing communications providers, which it saw as an important step in the lowering the cost of the roll-out of NGA.[150] BT manages the largest duct infrastructure and therefore debate about duct access has focused on access to its network.

124. In evidence to us, Vtesse agreed that enabling competitor access to the BT infrastructure would significantly reduce the costs of expanding the NGA network:

The only method that ensures economic viability of settlements [of around 500 dwellings] is the use of BT ducts into which Vtesse's own fibre could be installed.[151]

125. In 2009 Ofcom commissioned a survey into the available space within the BT network.[152] It concluded that there was spare capacity but that it was not uniform across the network. In evidence, Mr Richards from Ofcom set out both the potential and the limitations of the BT network:

Some of these so-called ducts are a piece of cable with concrete on top of them so, in other words, it is not a duct at all. In other cases they are in pretty good shape.[153]

He added that Ofcom's Report into duct sharing had inspired "a good dialogue" with companies and, as a result, had recently commissioned a second duct survey to consider the duct capacity from the exchange and from the cabinet to the home, "that is in the field at the moment and we expect to receive that back in January".[154]

126. At the time of writing this Report, BT has indicated that it would be willing to open up its duct network to other broadband providers. Speaking in the Financial Times, Mr Ian Livingstone, Chief Executive of BT, said that BT was willing to provide open access to its ducts and that "access to all ducts, not just ours, might help BT and others extend coverage and so we would like to see a future government support such a move".[155] This is a welcome development.

127. We welcome Ofcom's intention to produce a second report on duct access. The report should shed further light on the feasibility of duct sharing as a lever for increasing competition and investment in the market. That said, any report should not concentrate solely on the BT network. Other infrastructures, including access to municipal ducting (for example CCTV ducting) and access to canal and railway networks should also be considered. We also welcome the announcement by BT that it is in favour of opening up its network to competitors. This is a positive development. The Government should make removing the barriers to duct access a high priority as it would do much to encourage investment in Next Generation Access.

Local and Community Networks

128. The development of local and regional network initiatives is another means of delivering broadband and NGA to communities to which the market has yet to deliver. Recently, there are some innovative examples of this. On the regional level, Digital Region has rolled out a NGA network across large parts of South Yorkshire.[156] In other areas small communications providers have deployed fibre often through unconventional infrastructure. H2O, a local NGA provider, have delivered NGA to homes in Bournemouth and Dundee via a sewer deployment in what is known as the "fibre-to-the-toilet" solution. This is now being deployed in Sheffield.[157]

129. A second example of a regional deployment is Swindon's WiFi network which has overcome the short range limitations of WiFi by deploying antennas on lamp posts. This would provide a "Wi-Fi mesh" delivering blanket internet coverage for 186,000 citizens. The project will be funded by a mixture of public and private money, and it is hoped that the scheme will break into profit with residents subscribing to faster, paid-for access, above the free service.[158]

130. While these networks have the potential to deliver NGA to uneconomic areas, Dr Timothy Whitley, Group Strategy Director BT Group, BT highlighted a concern that independent local provision may not comply to the required set of standards necessary to connect fully with the infrastructure provided by large internet service providers.[159] Standardisation of network design is vital if a competitive NGA market is to be created. This point was raised by the Caio Review which pointed to the situation in Sweden as an example of what can happen in the absence of a standard network design:

[the] high rate of fibre connections in Sweden can be attributed to the existence of municipal fibre schemes [...] 150 such companies or schemes are currently in existence, but also highlighted concerns of the Swedish regulator, PTS, that there was no consistent business model in these schemes and less than half offered wholesale access to third party providers, thus reducing the scope for effective competition.[160]

131. The Broadband Stakeholder Group has recognised this risk and launched the Commercial, Operations and Technical Standards Project (COTS) to address the problem. The aim of COTS is to set a number of technical standards which would apply to large and small network providers.[161] The Government has also recognised this problem and stated that work on standardisation and inter-operability between local networks had already commenced. The Government will provide further support in this area through a £150,000 grant to the Independent Networks Co-operative Association.[162]

132. We believe that local and regional networks have the potential to deliver NGA to areas which internet service providers have yet to consider economic. We welcome the work of the Commercial, Operations and Technical Standards Project to promote standardisation between large service providers and local networks. For that reason we recommend that any Government subsidy should be made conditional on meeting those technical standards.

143 Department for Business, Innovation and Skills, Digital Britain, June 2009, p 66 Back

144 Ev 44 Back

145 Q108 [Mr Richards] Back

146 Ev 44 Back

147 Q110 [Mr Richards] Back

148 Ev 152 Back

149 Ev 157 Back

150 Francesco Caio, The Next Phase of Broadband UK: Action now for long term competitiveness, September 2008, p 54 Back

151 Ev 160 Back

152 Analysys mason, Final Report for Ofcom Telecoms infrastructure access- sample survey of duct access, March 2009, p 1-10 Back

153 Q 114 [Mr Richards] Back

154 Q 114 [Mr Richards] Back