Well it's a timely discussion, despite the rain here in the UK, with the "Digital Britain" report due to be published today.
As I see it, there are two things to bear in mind here - the problem and the proposed solution.
First, the problem. FTTx networks are being installed in many places around the world by incumbent telcos, cable operators and newer challengers alike without any special regulatory inducement. The trouble is that it seems that the economics of FTTx make it unlikely to be profitable to cover the whole population. This cuts across political objectives such as regional policy and plays to a fear that sections of the population will be excluded from some as-yet-undefined, but essential, social and economic activities.
So the politicians and regulators must either appeal to a patriotic consensus, as seems to have happened in some Asian countries, such as South Korea, or they must provide incentives to the market to produce what they want.
As Andrew Sharpe suggests in his blog, "not interfering" looks unlikely to work, given the economic issues described above. For incumbent telcos, though, the holiday bargain they seek is freedom from downstream competition. In other words, in exchange for making an unprofitable, or marginally profitable, investment in their (upstream) network business, they get to avoid downstream competition for retail customers, enabling them, or so they hope, to extract monopoly profits for at least long enough to repay their investment.
But regulatory holidays, like real ones, are seldom as free from the normal constraints of life as we hope and may cost more than we plan. For those who would not otherwise get high-speed broadband, it might seem like a reasonable deal - monopoly service, probably at a regulated price, is better than no service. But to the rest of us, there is a clear risk that what is, at least here in the UK, a highly competitive and fast-moving industry might turn into a sluggish monopoly.
Of course one might try to draw a distinction between profitable and unprofitable areas and set the rules accordingly. But it seems inevitable that this would lead not only to lots of arguments about what and where is profitable, but also to the perverse result that monopoly high-speed broadband would be imposed in just those areas where there is least competition for the current generation of broadband.
There are, of course, alternative solutions, such as allowing the incumbent to pass on more of the costs where they are higher, setting up a universal service fund and allowing operators to bid for subsidies, or even taking on the whole project, as is happening in Australia with the National Broadband Network.
Note: this post was published earlier in substantially the same form as a comment on a LinkedIn article. It is re-posted here for the benefit of anyone who is not a member of LinkedIn, and of its Telecom and Media Regulation and Public Affairs group.
