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
155
"BT to share its tunnel network with rivals" Financial
Times, Monday 8 February Back
156
Ev 98 Back
157
"H2O Networks starts work on Sheffield's sewer broadband",
www.broadbandgenie.co.uk, 8 July 2009 Back
158
"Swindon to give all its residents free wireless access to
the internet", The Guardian, 17 November 2009 Back
159
Q58 [Dr Whitley] Back
160
Francesco Caio, The Next Phase of Broadband UK: Action now
for long term competitiveness, September 2008, p89 Back
161
Broadband Stakeholder Group, "'COTS' Issues Coming to the
Fore", www.broadbanduk.org, 20 November 2009 Back
162
The Department for Business, Innovation and Skills, Digital
Britain, June 2009, p 67 Back
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