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Net Neutrality > Blog
Reforming net neutrality regulations as a way of ensuring investment in 5G to lines up with the growing needs of the content and applications providers.
The following blog has been written by Hamish MacLeod, Chief Executive of Mobile UK.
Would you rather your pension fund was invested in a telco or big tech?
The message from the capital markets is clear. Over the last 5 years stocks in the big tech companies have risen around 200%, whereas the stocks of the UK’s leading telcos have fallen between 48% and 60%. Much of this growth has been on the back of investments made by the telcos.
This disparity does not benefit UK consumers, nor does it benefit the content providers. Investor sentiment running against the telcos makes it much harder for them to invest in the quality networks which the content and applications providers need for their growth and to uncover new opportunities.
Mobile UK has identified that reform of the net neutrality regulations is one of the key measures that should be enacted to improve the investment outlook for the telcos and the on-line market more generally.
The UK’s regulations, transposed from EU law, are some of the most restrictive across the world economy, with, for example detailed rules on traffic management and the zero-rating of internet sites, which restrict the telcos’ ability to innovate and manage networks efficiently. It also leads to an imbalance of negotiating power between the telcos and content providers. The net neutrality regulations should be removed and replaced with a code of practice that protects internet freedoms but gives more flexibility to telcos to innovate and invest. This approach has worked perfectly well in the past and in other regions of the world.
The prize for UK plc, after all, in both economic and social terms is substantial.
In the mobile domain, for example, the forecast benefit to the UK economy of fully fledged 5G networks is put at £158bn[1]. This would be a massive boost, particularly at a time when UK productivity growth is negligible. It would also boost access to more flexible, sustainable, and affordable services for the most vulnerable and disadvantaged.
The Digital Connectivity Forum (DCF), though, has estimated there is a £10bn+ gap between the current rate of investment and the investment needed to maximise the 5G opportunity. The Government, in its Wireless Infrastructure Strategy has set an ambition for the UK to have standalone 5G available to all populated areas by 2030.
But to achieve this, the UK badly needs an ecosystem which is much more self-supporting, whereby the telcos are incentivised to grow their networks much more in line with the growth in the content and services they deliver. This would be good for consumers, good for telcos and good for content providers.
Over the last 10 years, the traffic carried over the UK’s mobile networks has grown 20 times, while service revenues, in nominal terms, are a third lower over the same period. This is clearly not sustainable or likely to deliver the level of investment required in the near future.
As the economics consultants Compass Lexecon recently put it ‘the trouble for content providers and for consumers more generally, is that telcos don’t share in the benefits that greater investment would generate for content providers, so they don’t invest enough in enabling that additional growth’.
Reforming the net neutrality regulations and thus rebalancing the bargaining power of telco and content provider would go some way to addressing this problem. Telcos would also have greater freedom to create innovative packages and services, including for those on the lowest incomes.
As the Government delivers on its Wireless Infrastructure Strategy, this is one of the key reforms it must put in place. Among other things, it would send a strong signal to the capital markets that Government is serious about improving the investment outlook for the telco sector – a self-fulfilling intervention that will help stimulate the network investment which the UK requires.
