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Modern communications services are an essential utility, crucial to economic growth, social inclusion, public services and entertainment. Significant investment in communications infrastructure is required to deliver a ubiquitous service which meets current and future consumer demands.
In the UK, Ofcom’s 2016 Connected Nations Report notes that:
- 1.4 million premises cannot get download speeds faster than 10Mbps.
- Approximately 10% of premises in the UK do not have access to superfast broadband with download speeds above 24Mbps.
- Only 2% of premises have access to ultrafast broadband over fibre-to-the-premises with download speeds above 250Mbps.
- Approximately 10% of premises in the UK do not have indoor mobile reception and 20% of premises cannot use mobile data services indoors.
- It is not possible to receive mobile reception in approximately 30% of the UK landmass, and mobile data services are not available in just under 50% of the UK (4G services are available in about 40% of the UK landmass).
UK regulatory developments
In 2015, Ofcom launched its Digital communications review and has now taken action in a number of areas identified in its strategic review.
The Digital Economy Act 2017
On 27 April 2017, the Digital Economy Act 2017 received royal assent. It introduces a broad range of reforms in areas including electronic communications networks and services, measures to counter online bullying and restricted access to online pornography, protection of IP in broadcast material, data sharing, regulation of the BBC and direct marketing.
The provisions in relation to access to communications services were heavily debated by the House of Lords, which sought greater commitments from the communications sector in terms of the minimum broadband and mobile services available. These proposals were largely rejected by the Commons, and the Act principally enhances the powers of Ofcom to regulate in this area. Key themes for regulation introduced in the Act are as follows:
- Broadband services: The Act anticipates a revised Universal Service Order (which currently only applies to BT and KCOM), which mandates the availability of broadband services with a minimum download speed of 10Mbps. The provisions require Ofcom to review this universal service commitment as and when a broadband service with a download speed of 30Mbps is provided to 75% of UK premises. This is the quality of service which the Lords had sought as a minimum standard by 2020, together with guaranteed availability of fibre-to-the-premises and mobile coverage to the entire UK landmass.
- Network deployments: The Act includes reforms intended to make it easier for network operators to roll out new network infrastructure under a revised Electronic Communications Code. The new Code includes revisions to the basis of valuing access by operators to private land as well as enhanced rights of access to upgrade and share infrastructure.
BT – Openreach
The structure and performance of BT Openreach was a key part of Ofcom’s strategic review. As the network business within BT which provides vital wholesale services to almost all other UK communications providers, Ofcom is determined to ensure that Openreach’s investment in new networks is sufficient to meet future demands and that its services are provided to a high standard.
In July 2016, Ofcom finally reached agreement with BT to move Openreach into a separate wholesale subsidiary. While this falls short of the full break-up called for by many in the industry, the structure is intended to provide Openreach with greater independence from the main BT business so as to enable it to focus on network investment. However, as a BT-owned business, Openreach will still act in the interests of its parent and Ofcom's role in monitoring its activities remain key.
In what can perhaps be seen as a statement of intent, Ofcom fined BT a record £42m in March for its failure to compensate communications providers adequately for BT’s delay in providing wholesale Ethernet services.
Access to BT infrastructure
Ofcom is currently consulting on proposals to improve access to Openreach’s infrastructure of ducts and telegraph poles, with a view to encouraging investment by other providers in new fibre networks. The main proposals include:
- Access on fair terms: Providers wishing to deploy their own fibre networks should be able to access BT’s ducts and poles on the same basis as BT. The costs of providing access should be spread across all users.
- Mixed-use networks: Access will not be restricted to fibre networks for residential use and is available to support large business customers, provided residential or small business customers are also supported.
- Guaranteed access to poles for fibre to homes: BT will be required to ensure sufficient capacity on its poles to allow providers to install fibre for connecting homes.
Ofcom’s consultation on these proposals closes on 15 June 2017.
Mobile networks are at the heart of future communications and, while roll-out of 4G services is still a work in progress, Ofcom is already taking action to make spectrum available for future 5G services. Ofcom’s plans include the auction of 190MHz of spectrum in the 2.3GHz and 3.4GHz bands this year, with the latter seen as one of the bands most suited to 5G services.
The UK mobile operators have very different spectrum holdings (BT holds about 45% of currently useable spectrum) and Ofcom is facing calls to address this by imposing overall spectrum caps to apply under future auctions.
It remains to be seen whether Ofcom can be persuaded that levelling the playing field in terms of spectrum is necessary to ensure adequate competition amongst mobile network operators. Ofcom’s consultation on this auction closed earlier this year and we await Ofcom’s assessment.
European regulatory policy
In parallel with Ofcom’s strategic review, the EU Commission has been reviewing the EU Telecoms regulations as part of its Digital Single Market review. In September 2016, the Commission proposed a revised European Electronic Communications Code (ECC) to future-proof and simplify EU telecoms regulation, and to stimulate investment in new and innovative infrastructure throughout the EU.
The EU Parliament issued draft amendments to the proposals on 17 March. The key proposals and Parliament’s suggested amendments include:
- General authorisation: The ECC maintains the general authorisation regime for electronic communications services. Parliament has proposed a dispensation for service providers which provide services in less than three EU countries and have an aggregate EU turnover of less than €100m. The dispensation would also apply to the payment of NRA administration fees and collectively these proposals would be a welcome relaxation of administrative obligations applicable to new entrant emerging communications providers.
- Access regulation: As well as adopting a more focused approach to the access regulation applicable to providers with significant market power, the ECC also proposes an extension of the market review period from three to five years to help operators with longer term network investment planning. However, Parliament is of the view that the three-year period should be maintained for markets subject to rapid changes in technology and demand patterns on the basis that a five-year cycle would be too long in such dynamic markets.
- Spectrum: The ECC proposes a more harmonised framework for managing radio spectrum so as to reduce divergences between regulatory practices across EU member states. The Commission also seeks to achieve effective and efficient use of spectrum through the introduction of long licence durations (Parliament’s amendment increases the minimum term to 30 years).
- Small area wireless networks: Parliament has proposed an express right for providers to access physical infrastructure used by public bodies to host small area wireless networks. This will no doubt be welcomed by providers planning 5G network deployments.
- Universal service obligation: Modernising the universal service regime by removing services such as public payphones, directory enquiry services and directories, and instead focusing on the modern services required by EU citizens, including broadband internet and affordable fixed voice communications.
- Proportionate approach to different types of communications services: In line with market developments, the Code will clarify the scope of regulated “electronic communications services” so as to make it clear that all interpersonal communications services, such as over the top (OTT) services, are included as are internet of things services. The Code proposes a proportional approach to regulation, adopting a lighter touch in relation to interpersonal services which do not involve the use of numbers.
The draft ECC remains subject to further consultation with the target for implementation by the end of 2017. The impact of Brexit on the UK’s adoption of any of these reforms is unclear, and depends, in part, on timing. If the package is enacted as planned, before the UK leaves the EU, it is likely to fall under the scope of the “Great Repeal Bill” and pass into UK law.
The UK government may, however, want to adopt a different position on some of these reforms further down the line – although it clearly shares the objective of encouraging investment in high speed networks.