Legal Eye: Where are Europe's next-gen nets?

Regulators delay deployment

Europe is lagging behind Asia and the US in rolling out next-generation networks. Lawyer Purvi Parekh looks at what regulators need to do to speed this up.

The deployment of next generation networks (NGN) - using fibre optic cables to permit high speed access services over an IP transmission layer - has been highly anticipated and much debated.

Ensuring a seamless transition from traditional copper networks to the NGN platform signifies a challenging and potentially significant time for the telecommunications industry.

While Europe's uptake and deployment of NGN is increasing, it has a slower process when compared to its Asian and US counterparts. According to recent analysis, at current investment rates it could take more than 15 years to deploy next generation access networks in Europe. Large investments in fibre optic technology made in the US and Asia during recent years have left Europe behind.

So why is Europe lagging?

Regulators have not been keeping pace with technological developments. Ofcom and the EC are set to make decisions that could affect the scope and speed of NGN deployment in Europe and could determine the types of competitive retail services that users can economically provide over the incumbent's NGN - but the decisions are very much still pending.

Ofcom and the EC have acknowledged that the transition of providers from copper networks to NGN will need to be tightly regulated, and that investment and competition in NGN must be encouraged. Both bodies have been addressing the regulatory principles involved with these issues, launching public consultations at the end of last month.

Their regulatory approach for the transition to fibre optic networks will be key in encouraging major members of the telecommunications industry to invest in NGN.

The EC's and Ofcom's objectives are broadly similar: both have emphasised the need for regulatory measures that encourage investment in NGN by recognising the risks involved and the importance of maintaining a competitive environment in the transition to NGN.

The financial cost for established access providers to make the transition to NGN is immense. Many established telecoms companies are in a situation where their equipment and services on the traditional network could suddenly become obsolete. In order to develop new revenue streams and retain fickle customers looking for higher-speed broadband and services, they must implement the high-risk process of upgrading to NGN.

These risks have been major factors in established operators not upgrading to NGN to date. Newer, alternative network providers who have already placed a strong onus on incorporating fibre optics into their business offerings could find themselves with a definite advantage over the established operators if they have a larger share of new access network rollout.

Ofcom and the EC have proposed that pricing structures for NGN access and products should reflect the risks associated with investment. For instance, under the EC proposals, passive access - access to the physical infrastructure of the NGN - should be priced based on costs plus a 'project specific risk premium'.

As for Ofcom, its pricing principles have not proposed any risk premium at this stage but in a recent report it expressed a preference for regulated pricing, using the "more traditional approaches based on costs" with "suitable considerations for the risks incurred" when pricing passive access service.

Whatever the potential benefits and challenges, it's clear that we may have to wait some time before NGN become a reality.

Regulators need to encourage and ensure there is healthy competition in the NGN space to prevent any potential monopolies. However, with the EC saying recently that network providers are going to have to maintain the older copper network for longer than anticipated, full conversion could be some way off.

For NGN in Europe to catch up with the successes of its Asian and US counterparts, European and national regulators need to grasp the debate with both hands, imposing clear, concise NGN-focused regulation.

Purvi Parekh is a partner and head of telecoms practice in law firm DLA Piper's technology, media and commercial group.