16 Rev2b NGA Opinion Supplementary doc - IRG

ERG (07) 16rev2b NGA Opinion Supplementary Doc 11 / 69
encourage efficient and timely investment in NGA networks. Efficient and timely investment
involves investment decisions on the most appropriate technology at the right time and in
specific locations by operators. However, this results in a range of complex options for investment
that the market is best placed to assess. Regulation should therefore seek to leave
investment decisions to the market, and to minimise any distortions to efficient investment
that could result from regulatory intervention. At the same time, regulators should seek to
provide a predictable regulatory environment and address barriers to efficient investment,
including market power.
ad 3.4 Treatment of Investment Risk
Consultation Comments
Several responses dealt with what they saw the risks of NGA to be:
• An incumbent argued that the uncertainties surrounding costs, revenues, time and
revenues meant that there was little point in trying to define FttH regulation now (FT)
• Another emphasised that given large costs and long payback periods, regulatory certainty
and impact of regulation on investment were key issues (Telefónica)
One of the stakeholder associations commented that it believed that market definitions
should be flexible enough to allow for operators to have a degree of freedom to experiment
and identify new revenue streams (BSG).
In contrast, a different stakeholder association believes that cost savings provide an incentive
for incumbents to invest in NGA (BREKO).
There was a general consensus on the need for a degree of regulatory certainty to facilitate
investment in NGA from a number of respondents (BSG, ETP).
An incumbent stressed that the concept of the ladder of investment needed to be defined in
order to reduce uncertainty, whilst another reiterated the view that regulatory uncertainty,
makes a risky investment even riskier (PT, OTE).
Several incumbents expressed specific ideas as to how returns should reflect risk:
• One incumbent references OFCOM’s NGA consultation and suggests that ERG
should do an in-depth investigation on cost models as Cost plus with an activityspecific
cost of capital and Returns adjusted for a symmetric “fair bet” (TDC).
• Another suggests that a real options approach could be adopted (TI).
Several altnets also suggested how the risk in their NGA investments might be rewarded:
• One of them suggests a “Broadband Premium” allowing altnets to receive termination
rates reflecting the actual cost of their NGA roll-out costs and reflecting difference in
cost and risk between altnets and incumbents (EuroISPA).
• Another suggested that altnets might be allowed to use voice termination rates to
fund NGA, but also suggested a broadband premium mechanism (Fastweb).