The focus of industry discussion has moved to investment in recent months with Government’s focus on 5G and ultrafast broadband. Indeed, this has been at the heart of both the proposals for revision of the telecommunications regulatory framework published by the European Commission last September and it has also been seen in the digital communications review in the UK. Most recently it appeared in the 5G strategy published by the Government on 8th March in parallel with the budget.
Talking about investment is a good thing but it must be remembered that investment only happens if appropriate incentives are in place. There is still difficulty for some to square off the investment objective in the European Commission proposals with the competition objective that sits alongside it. Network investors are looking at the real returns coming from network businesses and questioning the level of investment they can make against current market and regulatory conditions. Put another way, does the risk environment and particularly the regulatory risk environment favour these investments?
The general economic climate is clearly part of this risk equation. However, the key thing for discussion is whether the sector specific framework heightens risk, which many feel it does. The UK has some of the lowest telecommunications prices driven by competition, which raises the question of what is the willingness to pay for new services and is that sufficient to create a realistic business case for operator investment in fibre and 5G? These points need serious thought as it’s hard to see how operators will invest if a commercial return is not viable.
There is an increasing focus on coverage. For example, the proposals to cover road, railways and other places that currently fall outside of network builds because they were not commercially viable / fell outside of the coverage obligations imposed. Some of these things may never be commercially viable and operators will not invest in them without some form of intervention (state aid) and the ability to risk share (shared infrastructure).
These matters need to addressed constructively when forming the shape of the future regulatory framework and they must be balanced against competition requirements. There is more work to be done here as current regulatory proposals do not address fully enough where the balance lies.
And what about Brexit? The UK applies the EU regulatory framework and much of it is good. The UK also has an interest in ensuring that it influences the development of proposals for the revised framework being discussed now. However, Brexit may also present an opportunity to ensure that the UK meets its own objectives for infrastructure in a more creative way with a solution that meets the UK’s needs.
Guest blog by Tony Lavender, CEO of Plum Consulting, for techUK's "Good to Great Connectivity for the UK" Week.