Consumers like open networks; operators want to use their control of the network as the basis for developing new business models. It was ever thus! Europe's legislator and its regulators currently rely on competition to police the gulf, and it has generally worked. New entrants have entered the market and consumers are enjoying a choice of service provider. Meanwhile, an explosion of innovation in the devices used by consumers (such as netbooks, the iPhone, or Android -powered handsets) has been matched by massive investment from an array of players in datacentres to enable the so-called Internet "cloud". It has never been a more exciting time to be on the Internet. The Commission is currently consulting on a Recommendation on the regulation of Next Generation Access networks (NGAs, the deployment of fibre either to street cabinets or to the home). This paper aims to translate the legislator's willingness to recognise that investments in NGAs are more risky than traditional investments (e.g. of fibre in an operator's backbone network). The lay-person could be foregiven for wondering why investing in infrastrucutre is seen as risky, given the ongoing signs of exponential bandwidth demand from consumers, but that is not a part of the debate. The Commission is seeking views on the sort of "risk premium" those that build NGAs (frequently the traditional, incumbent) operators should be able to include in their wholesale prices to other ISPs. Two of the parameters the Commission is considering recommending national regulators to take into account are "demand for additional bandwidth, [&] consumers' willingness to pay". Our contribution to the consultation makes the simple observation that bandwidth demand and consumer willingness to pay are themselves dependent on how open are the Internet access services available to them. The telecoms package equips regulators with powers to ensure consumers can access the services and applications of their choice. Weak application of these rules would permit operators to run less open neworks, reducing consumer willingness to pay. But if this was then used as evidence in favour of higher "risk premiums", higher wholesale rates would feed in to increased consumer prices and cause still lower demand. A vicious circle. We have therefore proposed that the Commission require risk premiums be calculated under the assumption that the regulators' new powers to keep networks open are applied vigorously. Lower risk premiums will increase demand, facilitate market entry and hopefully result in competition continuing to police the openness of network access. A virtuous circle, where assuming regulation is applied will (hopefully) result in it not being needed in practise. Posted by Simon Hampton, Director of European Public Policy
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