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.

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.

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:

UK
(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.
  

EU

• 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.