Chi Onwurah was elected at the 2010 general election as MP for Newcastle upon Tyne Central. The former head of Telecoms Technology at Ofcom, the UK telecoms regulator, she became the Shadow Minister for Business, Innovation and Skills (Innovation, Science and Digital Infrastructure) in 2010, and is a board member of the Parliamentary Office of Science and Technology.
Ms Onwurah spoke to Aphaia’s Boštjan Makarovič about the future of telecoms regulation and Next Generation Access networks.
You recently came forward with some fresh ideas as to BT’s potential monopoly in fibre.
I said that BT was operationally separated, but if that nevertheless led to BT having a monopoly in fibre, than the regulator would have to look at the competition environment in fibre, and one of the things that they would have to look at would be structural separation. So I was certainly not calling for structural separation, as it would take a lot more analysis than a shadow minister can conduct and would have many disadvantages. But I was pointing out that the operational separation – which was relatively successful in first generation networks in creating a market in copper –would not work as well in fibre, because the same technical point of the separation of the network is not available, and that Ofcom would have to look particularly at the fibre market in due course, when that becomes the key market for communications services.
Did you think it was ever realistic to expect to have multiple infrastructures competing against each other? A couple of years ago the environment was very optimistic about new infrastructures and the possibilities available, but now, in gloomier economic times, everybody’s just asking whether we can expect to have at least one fibre network.
The objective of infrastructure competition is to ensure competition that differentiates on the basis of product innovation and not just on the basis of price. So that means you have to have enough control of the infrastructure to be able to differentiate your products and services. In copper networks you could get that at the local loop, and in the UK we saw the impact of infrastructure competition with local loop unbundling leading to reduced prices with greater speeds. If you look at fibre networks, that option is not available. Local loop unbundling does not work for fibre networks.
This assumption is probably linked to G-PON, because in point-to-point infrastructures, unbundling could be sustained.
Even in point-to-point, because of the size of the fibres and the need for the fibres to be collocated, it gets very technical, and it depends whether you take out the copper as well. But – your point is generally a valid one – if there is point-to-point fibre, there is more likelihood that you could have infrastructure competition, and there may be a point in the network where it makes economic sense to have more than one provider. In the UK, BT certainly is not looking at rolling out point-to-point fibre.
Quite often we hear, especially from the incumbents, that there is a dilemma between competition and investment. Do you think this is an artificial dilemma, or do you think that investment can be spurred by having less competition?
In the main I think it is an artificial dilemma, because certainly the research that I viewed when I was at Ofcom showed that a competitive market attracted more investment then a market with a single provider. But if you have one provider who was looking at making an investment decision, then a prospect of competition may keep them from making that decision. But I don’t think that is a reason to prevent competition in NGA networks, because ultimately the dynamic benefits from competition will be greater than the loss to one operator of not being a single market provider.
Which brings us to the European debate on copper prices. ECTA says they should go down and ETNO says they should go up. But then, according to Stefan Stanislawski, one of the authors of local loop unbundling in Europe, it is not about prices going down, it is about not having a “claw-back mechanism” for the incumbents not having invested money from copper in fibre as modern equivalent assets.
Ofcom spent about four years looking at the price of copper in two or three different reviews so it is a hugely complex area. The regulators and policymakers need to have a clear idea of where they want to end up. If they want to end up in a situation with competing infrastructures or competing providers, then they need to set the regulatory path accordingly. If that means managing the return on copper with appropriate signals for investment, then that is a legitimate policy goal.
Do you think the EU regulatory framework is to some extent to blame for the lack of investment as well?
When you say there is a lack of investment, why do you judge it as a lack of investment?
Compared to the Digital Agenda for Europe, because the Agenda suggests that by 2020 essentially every European should have NGA access.
It is legitimate that the EU has set down a marker as to take-up, access and speed, but if it wants to achieve that, then it needs to really look at what the market failures are, what barriers exist, and determine whether public intervention, whether in terms of co-investment or in terms of regulatory environment, is necessary to achieve that. If the market won’t deliver on that and you see that as a market failure, then you need to look at what the incentives are to make that delivery. I think that the digital infrastructure is essential for our economic growth, but I am not sure these targets are necessary to optimize economic growth between now and 2020.
Did we get it wrong? Should we have seen fixed telecoms networks as a utility from the outset and just worked on service competition? Remember, it all started in the 1980s with the idea of parallel networks and then moved towards service competition.
I think we have learnt a lot over time. I think service competition, pure service competition failed because it did not provide the differentiation of the products and services and the dynamic benefits of competition and innovation. Furthermore, in the current three-sided market with not only consumers and network providers, but also application providers involved, the latter do not get the choices that they need. On the other hand, if consumers find that in NGA networks they do not have the same real choices they do in current generation networks, they will be upset. We therefore need the dynamic benefits of infrastructure competition, but that does not necessarily mean parallel networks. We can for example look at different types of Ethernet access, active line access, or potentially wavelength unbundling.
You worked in regulation before: do you feel you can do more for the market now, in the policy-making role?
Ultimately yes, because what drives digital inclusion and many of the issues – digital take-up, digital literacy – a lot of that is in the policy making. But certainly regulators have more power than any individual member of parliament, because they can set all the investment incentives and they can also set the key messages about competition. My message to European regulators is that they need to be more robust in setting the key message for competition in NGA.
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