EC provides clarity on NGA regulation

The European Commission recently published its long-awaited Recommendation on how next-generation networks should be regulated.
Soon after, Ofcom in the UK set out its finalized position – precisely the sort of outcome anyone could have hoped for. While not without controversy, the EC’s final text is a clear reflection of how NRAs have been tackling the issue of next-generation network regulation so far.
It should be seen as the missing part of the jigsaw considering that, as most governments are strapped for cash, the private sector is going to have to step up to the mark and roll out fiber across the continent.
The long-held notion is that people take a "wait-and-see" stance in the face of uncertainty. For the past two years many NRAs have said they were doing just that, until the EC finalized its position. Promisingly, we have already seen movement since its publication.
In forming a final Recommendation on how NRAs should treat fiber access networks, the EC was always going to upset someone. Its second draft was described as a regulatory holiday for incumbents but at the same time too prescriptive in its level of detail.
There was also concern that initially too much emphasis had been placed on unbundled access to fiber. In response to this, the EC has recognized that more advanced forms of bitstream access (such as Ofcom’s virtual unbundled local access product – VULA) should be sufficient in the short term until the business case for fiber access becomes clearer and technology evolves to make it cost effective.
Delaying publication until all of these competing views could be reconciled was never going to work, and would only delay regulatory decision-making and ultimately the investments in superfast broadband that governments are so eager to see.
It is far better to have rules that allow a sufficient degree of flexibility for the NRA to respond to their national circumstances. In this regard, the Recommendation mostly delivers.
Ofcom’s final regulatory statement for next-generation access networks in the UK is both pragmatic and predictable. It has been designed to take into account the network infrastructure being deployed by BT across the UK, and should allow sufficient scope for alternative operators looking to invest to gain access to BT’s network.
Following the creation of Openreach and the subsequent healthy competition in the UK broadband market, BT will be free to set prices for the VULA product, but these are likely to be constrained by Virgin Media’s presence in the market. Where BT hasn’t deployed a network, alternative operators will be able to rent BT’s ducts and poles, enabling them to deploy their own FTTH or FTTC networks.
Promisingly, Ofcom has also recognized the importance of having an access product that takes into account the alternative operators’ needs and so is facilitating further cross-industry discussion on the VULA product set.
The regulator is also set to review whether there is scope for extending infrastructure access to other networks under powers it will gain next year following a review of the EU regulatory framework. This could give access seekers an even greater opportunity to deploy their own networks, particularly where BT’s duct network is patchy or unsuitable.
While national regulators are expected to take “utmost account”, the EC must improve its game
At the moment the speed of regulation is often too slow and NRAs live with the fear of legal challenge.
While such challenges are healthy, the importance of quick regulatory decisions can’t be underestimated. With a number of EC-led initiatives we have moved into a world where regulators are expected to make timely decisions but find it increasingly difficult to do so.
The EC needs to improve the speed at which it makes such decisions, particularly those that involve large-scale investments.
Unsurprisingly, no operator is ever going to be fully comfortable with proposals that contain an element of risk. But a regulator’s job is complicated by the need to strike an appropriate balance between competition and investment.
Those NRAs with real issues with the Recommendation’s provisions can rely on the fact that, while they must “take utmost account of it”, there may be room to deviate if they can justify their reasoning. You can be sure that some incumbents will search for such opportunities and lobby hard.