Ofcom leaves next-generation broadband to market forces

The Office of Communications (Ofcom) has today issued its action plan for super-fast broadband, which echoed previous government reports by suggesting the bulk of investment in next-generation networks should be provided by the private sector.

The eagerly-awaited report set out the telecoms watchdog’s proposals to remove barriers to investment, ensure super-fast broadband competition and consumer choice and make the necessary infrastructure transition from copper to new fibre networks.

Key proposals for consultation included the development of clear standards for wholesale broadband products to promote innovative services and pricing, from which it said it would learn from the ongoing local loop unbundling (LLU) process that allows telecoms providers to access existing copper infrastructure.

Ofcom said the standards proposal should also afford service providers the flexibility to price services that reflect investment risk and generate a return on investment where there is effective competition. And this flexibility would be established through work with interested parties, including the government and European Commission.

But those in the industry looking for more tangible investment commitment may be disappointed on the case set out by Ofcom on the potential role for the public sector in delivering new investment. This would only be focused on targeting those locations where the market is least likely to deliver new networks for example, it said.

Another recent report from the Broadband Stakeholder Group (BSG) earlier this month claimed the upgrade to fibre could cost as much as £28.8 billion, depending on coverage. While separate research found the UK lagged behind the likes of Japan and Sweden in terms of broadband quality.

Perhaps unsurprisingly then, Ofcom welcomed the recommendations of the recent government sponsored Caio Review, which poured cold water on the prospect of public next-generation networks funding.

BT had previously said it is investing as much as £1.5 billion in its upgrade to a new, 21st century network (21CN) fibre infrastructure 2010. NTL Telewest was quick to point out it had already invested £13 billion on its own fibre-based network.

Stefano Nicoletti, Ovum principal analyst, told IT PRO the proposal of standards that would enable providers to segment and price their service according to service quality was a key part of Ofcom’s proposals. “In a market where providers can segment their services more clearly, they are more likely to invest,” he said.

Anthony Walker, BSG chief executive, broadly welcomed the report for its proactive tone and broad scope “outside the narrow bounds of pricing and regulation and into the wider policy environment in which market changes are likely to take place,” he said.

Ofcom said it intends to publish a statement update on its super-fast broadband consultations in spring 2009.

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