Ofcom hints at 21CN regulation

Regulator may have to take action to ensure competitive access to BT's next-generation network

Ofcom may regulate BT's next-generation network in much the same way it forced the telecoms giant to open up its current broadband infrastructure to rival operators.

Strong hints that this could be the case can be found throughout a paper published by the communications regulator on Thursday, entitled Regulatory Challenges Posed By Next Generation Access Networks. The paper is not formal policy or even an official consultation document — it is billed as a "public discussion document" — but Ofcom nonetheless reveals its position several times.

Next-generation networks (NGNs) are the next stage in broadband. They will carry voice and data over internet protocol (IP) at high speeds, and are essentially a framework for all sorts of future technologies, such as television over IP.

One possibility noted by the authors is that wireless access technologies — such as WiMax — could theoretically provide a "competitive alternative" to wired NGN access, thus resulting in more competition and less of a need for the regulator to step in to keep the market fair and balanced. However, the authors decide to assume this will not happen, and suggest there will be "an enduring economic bottleneck at least in some parts of the UK".

That bottleneck would mean regulation was needed, much as happened when Ofcom forced BT to open up access to rival operators at its exchanges, a process known as unbundling. Ofcom concedes that this approach would need to be balanced against the risk and cost of rolling out a next-generation network, but firmly maintains that "promotion of competition through equality of access is the most appropriate approach to assets that are enduring economic bottlenecks".

However, there may be differences between the type of regulation imposed on BT's existing network and on the NGNs. Ofcom points out that, although it will probably need to "mandate access to promote downstream competition", the key question is which level within the network to target. The correct level would depend on the type of technology being used, but the regulator suggests that new regulation might free up access to ducts (through which the next generation cable is laid), introduce unbundling options for the new network, or even introduce access to a new wholesale bitstream product.

The latter option would allow rival operators to offer the same retail services as BT itself, and could prevent the telco from monopolising the market for next-generation broadband services.

The document also suggests that Ofcom is keeping an eye on those resellers who rely on wholesale products, as their suppliers (for example BT) move on to NGNs. While the regulator admits that it is not its role to protect investments made against market risks, it does say that it is "appropriate for Ofcom to consider the interests of existing competitive operators in ensuring the continued availability of and terms for current wholesale inputs to their products, during the lifetime of the assets in which they have invested".

Interestingly, the regulator also notes that the UK is "not witnessing the same level of investment in next-generation access networks as displayed in some countries like the US, Japan, Korea and the Netherlands". It suggests that this may be down to the success of high-bandwidth DSL in this country, as well as the presence of a mature pay-TV market, which means less interest in IP-based TV-on-demand.

A spokesperson for BT told ZDNet UK on Friday that the incumbent "welcomes the fact that Ofcom is seeking to clarify the future regulatory framework".

"The proposals tabled are complex so they will take time to assess but we will be working closely with Ofcom to provide a response," the spokesperson continued. It was not made clear when this response might be expected. 

BT's 21st Century Network (21CN) is not the only NGN being rolled out in the UK — Cable & Wireless and Thus might argue that their current networks qualify as NGNs — but it will certainly be the largest example in the country by the time it is rolled out. The project has been hit by delays, but is expected to be completed by 2011, even though BT has admitted that it has been forced to squeeze the timescale.

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