Wednesday, 4 August 2010

A Suit of Chocolate Armour?

Apologies for the hiatus since my last blog, but until recently a state of purdah has held back any important initiatives in the telecoms sector and we have had to wait for the Coalition Government to get into the saddle and take up the reins again in order for it to produce something worthy of comment.
The last significant thing the previous Government tried to do, by way of implementation of the Digital Britain report, was to create an entirely new beast, "Directions to Ofcom" to implement the so-called Wireless Radio Spectrum Modernisation Programme. The shorthand for this is that the Government wanted to use never-before wielded statutory powers to clear the legal/technical log-jam around harmonisation of the 900 and 1800 MHz wireless spectrum bands for UMTS (i.e. 3G) and GSM systems and to have Ofcom run a combined auction of 800 MHz and 2.6 GHz spectrum, which had proved particularly controversial. As part of this, the Government sought to equalise spectrum holdings, in particular using spectrum caps.
When Ofcom originally planned to implement GSM system refarming, as well as auctioning new 2.6 GHz spectrum, it was confronted with legal challenges from e.g. O2. So the blunt instrument of statutory Directions to Ofcom was deployed by the Government, ostensibly to avoid the need for further consultations and no doubt protect Ofcom from renewed legal challenges: a legal 'suit of armour' if you will.
However, the statutory instrument containing the Directions failed to come into force before the May election and it has fallen to the new Minister for Communications, Ed Vaizey, to consider whether to revive it, produce a new version of the Directions or abandon this stratagem altogether.
Following talks with the wireless industry, the Government has in fact now issued a new form of draft Directions (for approval by Parliament) which is much simplified and shortened compared with its immediate predecessor. Essentially they set out (belatedly) to implement the GSM amending Directive, provide for variations to the existing 900 MHz, 1.8 GHz and 2.1 GHz licences and reintroduce the central concept of a combined auction of the 800 MHz and 2.6 GHz bands.
Crucially, as regards the auction, the new Directions throw this rather hot potato back into the lap of Ofcom, in that they require Ofcom first of all to carry out a forward-looking assessment regarding the likely future competitiveness of mobile markets after the conclusion of the Auction, taking into account the possible effects of the Auction. They then require that Ofcom should put in place 'appropriate and proportionate measures' to promote competition in those markets after the conclusion of the Auction, which measures could be included in the rules governing the Auction.
Consequently it is clear that if the main purpose of the original Directions was indeed to protect Ofcom from legal action regarding the Auction conditions, nothing in the new Directions will provide any such protection this time around.
There is no real hard deadline for the Auction provided in the Directions, even though the Government have indicated elsewhere that this should take place before the end of 2011: Ofcom is simply required to make the Auction regulations as soon as reasonably practicable after concluding its competition assessment, but this of course does not dictate the timing of the Auction itself.
Other parts of the Directions, notably the variations to existing 3G licences to impose service coverage requirements, extend their duration and impose annual charges after 2021, are expressly subject to the licensees consenting, which of course is no different to the position that would have applied even without the Direction.
So all in all, I am really left questioning the utility of the Directions and whether very much, if any, of significance remains of their predecessor's main legal purpose, namely of providing to Ofcom a suit of armour against legal challenges. A suit of chocolate armour might be more apt, as certainly this whole area remains something of a confection.

Monday, 15 February 2010

Slow-release spectrum

Seeing in Policy Tracker that Optus in Australia has just bumped up its holdings of 3G spectrum by acquiring some at 2.1 GHz, put me in mind of the quagmire that the field of play has become for UK spectrum.
Unfortunately I think the developing consensus is that, for procedural and technical reasons, as well as the looming UK general election, the long-promised 2.6 GHz auction, even if not combined with 800 Mhz, will not take place before 2011. That might raise an argument for the decoupled 800/900 MHz to be auctioned earlier, but this would need to be assessed against the Independent Spectrum Broker's reasoning for his original recommendations to Government.
If there's enough time left before May (tight), there may well have to be a new consultation and a new draft BIS direction (if the Government stick to that way of doing things) about these proposals once BIS and Ofcom have a clear view on 'which spectrum and when', leaving aside of course the possibility for legal challenges, which still remain a threat.
Meanwhile would-be bidders for 2.6 who want the auction to take place as quickly as possible are publicly pressing for the release of at least the central portion of 50 MHZ spectrum in the 2.6 band.
All very frustrating for those waiting for a seat at the spectrum high table!
You can always blame the lawyers..........

Tuesday, 26 January 2010

Next Generation Fund

The BIS consultation on Proposals for a Next Generation Fund, issued on 7 January 2010, poses in all 23 questions on how best to deploy the funds generated through the proposed new Landline Duty and contributed to the special pot known as the Next Generation Fund ('NGF').
The stated principal objective of the NGF is to support the roll-out of next generation access (NGA) infrastructure to at least 90% UK of households by 2017. In particular, on the basis of the working assumption that the market itself is likely to provide NGA to up to 70% of the population, the NGF would be targeted at securing the remaining 20% of the overall aim of 90% national NGA coverage by 2017.
The Consultation Document canvasses a range of different options for delivery of NGA using the NGF. The commercial considerations and financial implications, as well as the potential impact on market competition, are discussed in some detail and reflected in the questions posed by the Government.
Of particular note is what the document says about technology neutrality. Here, rightly or wrongly, there is an evident bias towards using the NGF to support fixed-line infrastructure. Whereas the Digital Britain report, in floating for the first time the concept of the NGF, suggested that all operators would be eligible to benefit from the NGF, the Government is now clearly stating that a straightforward technology-neutral approach may not be appropriate in determining how the funds should be disbursed – "We need to consider whether that approach still applies in the context of NGA. Whilst other technologies might in due course match the expected performance, we believe that fixed line solutions, based on fibre are likely initially to be the most appropriate".
Some wireless operators, whether mobile or planning WiMax roll-out, may disagree with this analysis and its impact on the use of the NGF. The Government may be taking a rather static view of the service possibilities afforded by wireless networks, given the dramatic pace of their evolution. Be that as it may, it is issues like this that are likely to feature in discussions the Government are having with the European Commission in regard to obtaining State Aid approval for the NGF. In this connection, the European Commission is also likely to take an interest in the Landline Duty and how this is structured, and the competitive implications overall of both the imposition of the Duty and the potential beneficiaries of funding from the NGF.
In terms of Wholesale Access and competition, Ofcom have previously been seen to be embracing the concept of Active Access (based on wholesale products that use network owners' physical infrastructure and electronic equipment) as opposed to Passive Access (based on renting network owners' physical infrastructure and combining this with wholesale customer's own electronics). The Consultation is, however, careful enough to query again whether active line access is the right approach to achieve fixed access competition and whether or not such active access remedies should be applied in areas that receive subsidy from the NGF, but of course these are very much today's questions. As the NGF is to last until at least 2017, no doubt correspondents will bear this in mind in responding to the consultation questions.
The BIS consultation on the NGF closes on 1 April.

Monday, 18 January 2010

The New Landline Duty

Last month (December 2009), the Government, in a joint consultation by HM Treasury, HMRC and BIS, published its proposals for a new tax or duty to be imposed on local loops, as heralded in last year's Digital Britain report. The Consultation closes for comments on 12 February 2010.
The duty, to be known as the 'Landline Duty', will amount to 50p per month on each local loop made available for use (whether or not actually used) and regardless of whether it consists of a copper pair, a co-axial cable or a fibre connection. The duty is expected to raise about £175 million a year.
A local loop is defined in the draft legislation as being a physical circuit connecting a network termination point to the main distribution frame or equivalent facility in the public telephone network. In traditional parlance, this equates to an exchange line; it will not matter whether that line is being used for voice telephony, security alarm transmission, telemetering or whatever, as the duty will be payable with respect to each line.
When more than one local loop is provided in order for an end user to receive two distinct services, the duty will be payable on both lines. The only exemption so far contemplated will be for lines used to provide a social telephony service, e.g. to low income groups.
The duty will be imposed on network owners and may be recovered from end-users. Although there is an apparent ambiguity on this point in the draft legislation, which will need to be corrected, it does not seem to be intended that line owners should actually be obliged to recoup the duty from individual users and so will be at liberty not to do so; however, if they do so specifically, the additional payment of the duty will itself be subject to VAT.
The Consultation reveals that the Government did consider applying the duty to wireless networks as well, but did not pursue the idea partly because of the impracticability of applying it to pay-as-you-go mobile users. This becomes relevant to the classes of network builders able to benefit from the fund to which the duty payments are to be contributed in order to subsidise the cost of roll-out of next generation access.
The mechanism for this fund is explored in a separate BIS consultation on Proposals for a Next Generation Fund issued on 7 January 2010, discussed in my next blog.

Thursday, 14 January 2010

Colin's Telecoms regulatory look-out list for 2010

Happy New Year!
These are some of the key events and initiatives I suggest to look out for in 2010:

(Subject to some potential policy reversals in the event of a change of power at the forthcoming UK Parliamentary election!):
  • Introduction of the new Landline Duty legislation to support the Next Generation Fund (NGF): see my next Post
  • Government's conclusions to be reached on make-up of NGF; introduction of NGF: see my next Post
  • The proposed Government Direction to Ofcom to implement the Wireless Radio Spectrum Modernisation Programme (WRSMP): the Government has just suffered the embarrassment of having to issue a supplementary document to its October 2009 consultation, clarifying the proposals and views sought. Now it appears from press reports that BT, who may themselves be interested in acquiring new 2.6GHz mobile broadband spectrum at auction, are threatening judicial review of the proposals, particularly the proposal to extend indefinitely the duration of the incumbent mobile operators licences. Issue of the official Direction will doubtless be delayed as a result.
  • Further word from Government (BIS) and/or Ofcom regarding the proposed combined 2.6GHz and 800 MHz auction (part of the WRSMP), though because of the above delays it is looking increasingly likely that this auction will not take place in 2010 as originally hoped.


  • Launch of the new EU Body of European Regulators for Electronic Communications (BEREC), the successor to the European Regulators Group, to "serve as a body for reflection, debate and advice for the European Parliament, the Council and the Commission in the electronic communications field": Regulation (EC) no.1211/2009 of the European Parliament and of the Council, November 25, 2009
  • Issue of the European Commission's Recommendation on Next Generation Access, following its review and a second consultation round in 2009: last year's draft version was not received with universal acclaim, so it will be interesting to see what changes are made by the Commission in the final form.
  • In 2010 the Commission is also expected to publish its proposals on the scope and funding of universal service obligations.