In publishing the review, the Government has set a clear course to accelerate improvements to the UK’s digital infrastructure; setting out measures to promote competition, tackle red tape and bust any barriers to investment in full fibre networks and 5G mobile technology. While many recommendations have been presented, it’s clear this is only the beginning of change. Following the outcome of the review, the government will publish a Statement of Strategic Priorities (SSP), which Ofcom must have regard to when carrying out its regulatory functions. The suggestion is that much of this will fall to Ofcom to refine, implement and enforce. In this note we look at the main recommendations coming out of the FTIR and consider how they are likely to be met by the industry.
Fixed networks, deployment barriers and passive infrastructure
In the past 18 months, full fibre has dominated the agenda when it comes to fixed broadband. It emerged as a term shortly after the conclusion of the Digital Communications review and is taken to mean any connection comprised solely of fibre and one that doesn’t utilise any existing copper. The review finds that a lack of capital is not the barrier to mass full fibre deployment, but rather identifies five things that need to be got right. These include the removal of administrative overheads and deployment barriers, the need for predictability in the regulatory environment, and more reliance of existing passive infrastructure.
While the review recognises that while a revised DPA obligation is already in place, access to other utility’s infrastructure could be beneficial and has so far not worked. A separate review will be conducted in 2019 to see what improvements could be made. In terms of the existing remedy there is a suggestion that the current restrictions around usage will be removed, essentially pacing the way for mobile operators to use the product for backhaul purposes. This essentially has been the case in other European countries where fibre deployment has been much higher than the UK, and as such policymakers are looking to replicate the same success story in the UK.
Mobile, spectrum, 5G and consolidation
There is a strong indication that the government is willing to consider more flexible, shared spectrum models for the deployment of 5G, particularly in rural areas. Outlining three possible future network models, the most likely that will play out is the idea that current MNOs will continue to be licence on a national long term basis, but there will be a role for new entrants to provide coverage and service in certain areas and for specific use cases. This will be a fairly significant departure from the current approach, but one that could accelerate the pace of 5G deployment.
Rather strangely shoehorned into the document in a section about possible models for 5G rollout is a suggestion that four networks might be too many to support the level of investment in 5G required, and that as such as Ofcom should monitor and consider the industry structure if the necessary investment wasn’t being made because of competitive dynamics. While it’s been suggested that Three and O2 (who recently have a merger blocked) will be buoyed by this news, it’s unlikely to materially change the course of things in the short or medium term. Both have been quick to assert their 5G credentials and there looks set to be a healthy level of investment in network improvements. Ofcom too is unlikely to be convinced for the need for change unless something drastic materialises.
Not the end of the EU’s regulatory framework for the UK
Anyone worried that Brexit might mean an end to the UK following the EU’s regulatory framework will have been reassured that the government is minded to implement the substantive new directive for electronic communications – the European Electronic Communications Code (EECC) which is currently under negotiation. This will enable the extension of market review periods to five years and provide mechanisms to aid fibre network rollout in certain [rural] areas. Ofcom and the industry favour a longer and more stable market review period than we have currently, with infrastructure builders knowing that investments will be treated consistently for the duration of the market review.
Next steps and over to Ofcom
It’s clear that a lot of this is going to fall to Ofcom to implement. Much it it through the regular market review process, during which the detail will be worked out, and stakeholders positions will become more evident. Most of this is probably without too much concern, however there is the suggestion that Ofcom should have ‘more of a regard to promoting investment’ – something which has not necessarily sat well with the regulator in the past. Interpretation will be key here. Having a regard for investment is something the regulator has demonstrated with the ‘fair bet’ principle when it comes to regulating the wholesale price of fibre for example.
As we’ve seen before with previous government policy in this area, things are subject to change, delay and refinement. There’s no reason why this time around is likely to be any different.
