UK Broadband Stakeholders Group Warns of Brexit Risk for Digital Comms

The Broadband Stakeholders Group, which acts as a think-tank for the government, has published a new report that summarises the risks and challenges of Brexit for Internet and digital communications across the United Kingdom (broadband, mobile, USO, state aid policy etc.).

A lot has already been said about the pros and cons of the United Kingdom’s decision to leave the EU but, like it or not, that decision has been made. As such the BSG’s report broadly acts as a useful summary of the many different telecoms, broadband and Internet related areas that will be affected by the change.

Richard Hooper, Chair of the BSG, said:

“This report serves to highlight the complexities of Brexit for the digital communications sector. The sector is the bedrock of the wider economy, particularly digital industries which makes up around 16% of the UK’s economy.

Government must work with industry to provide as much regulatory certainty in the short to medium term whilst exploring the opportunities that Brexit can offer in the long term.”

The report notes that the Brexit decision comes at a “particularly acute” time because the sector is in the “initial phase of a new investment cycle to bring the next generation of ultrafast and 5G technologies,” which could easily be put at risk if the Government fails to build a suitable path through the minefield of changes. Luckily it has a few recommendations to help.

The recommendations cover various areas from the impact on State Aid policy and funding for rural broadband networks, to data sharing agreements, the Universal Service Obligation (USO) for Internet connectivity, mobile roaming prices, cross-border data sharing, spectrum management (radio) and various issues related to Internet policy / regulation (privacy, law etc.).

In particular the BSG calls on the Government to preserve the continued implementation of regulations covering cross-border services – areas such as mobile roaming charges (the EU is abolishing such costs) and the Country of Origin principle for the delivery of audio-visual media services.

Likewise they also call for the UK to maintain something similar to the EU’s State Aid rules in order to protect competition in the broadband market and for the Government to continue its somewhat self-regulated protection of the open internet (Net Neutrality), as well as to keep pace with any future USO for the EU etc.

In addition, the BSG states that retaining a “seamless level of research and funding cooperation with the EU in the ICT sector is essential” and they encourage the Government to consider whether it will continue to support programmes which have benefited from EU funding. Generally there aren’t really any big surprises here, it’s a fairly logical summary.

BSG Brexit Recommendations for the Government

Avoiding a cliff-edge Brexit

• It is important for the sector that the process of exiting the EU is as smooth as possible. This means exiting the EU and agreeing the terms of its future trading and collaborative relationship as early as possible. A cliff-edge scenario, whereby the terms of the transition deal or a trade agreement between the UK and the EU are not secured, would further the concerns of the industry over the regulatory, economic and trade environment under which businesses operate.

Alignment with the EU regulatory framework for the medium term

• The UK’s national regulatory regime is derived from the EU Telecoms Framework which is currently under review. We support the Government’s commitment to taking part in and influencing the ongoing negotiations. In the short and medium term, industry expects that the UK telecoms regulations will remain aligned with overall EU regulatory framework to provide legal and commercial certainty during the transition period. The UK should seek to align the UK rules with the EU regulatory framework in the medium term. Government may see benefits in diverging from the EU on aspects of the framework in the longer term and industry stands ready to engage on any such proposals through Government consultation.

• Difficulties in implementing EU rules post-Brexit could however arise in the context of the regulation of crossborder services where cooperation with other regulatory bodies will be necessary. We expect that co-ordination will need to be maintained in the long term between UK and EU regulatory regimes for cross-border services (e.g. delivery of audio-visual media services, and broadcasting content).

• Divergence from the EU Framework could be possible or desirable in some areas (frequency of market review, avoiding regulatory asymmetry across converged services and bundles, deregulating where possible, tailoring access remedies, etc.) but divergence would need careful consultation with industry and other stakeholders to avoid unintended consequences in the long-term.

Confirming the role of Ofcom as the independent UK Regulator, and as a key contributor to EU policies which will continue to affect UK companies operating in Europe

• It is key that Ofcom and Government continue to have clearly divided responsibilities, and to be legally and functionally independent to support competition and investment in telecoms and deliver good outcomes for UK citizens and consumers. To achieve this, checks and balances need to be retained in the process of regulating the telecoms market, including identifying a third party body, potentially the Competition Market Authority, to play a backstop role in maintaining Ofcom’s independence from Government while ensuring its decisions are properly scrutinised. It is also crucial that future policy and regulatory decisions are proportionate and adopted on the basis of robust evidence.

• Given the scale of Ofcom’s valuable contributions and current level of involvement within BEREC (Body of European Regulators in Electronic Communications), the UK should seek to retain an active role for Ofcom within this EU institution. EU policies and legislation will continue to affect and in some cases apply directly to UK companies. Ofcom therefore needs to retain its strong collaborative relationship with other EU regulators.

Retaining key EU regulatory principles post-Brexit

• EU State Aid rules for broadband exist to protect competition and private investment for the broadband sector, we believe it necessary that these are retained post-Brexit. Opportunities to tailor the regime to the specificities and needs of the UK market may arise, but this should remain a long-term consideration for regulator Ofcom and the Government. The assessment of the compliance of public funding initiatives against competition rules will not be carried out by the European Commission, and this may reduce the length of the approval process. It is however key that this process is carried out by an independent authority in the UK.

• The extension of EU universal service rules to broadband is being debated. It is unclear if the UK will transpose the Directive (as part of the revised framework – the EECC) particularly if the Government position diverges from that of the EU (e.g. on the relevant funding mechanism). It is important that Government delivers its policy decision prior to completion of the EU review process.

• EU Open Internet rules were adopted and implemented in the UK alongside the BSG Open Internet Code. Self-regulation has in this instance played an important role in the development of the UK’s successful and growing digital marketplace. This is one area that sets the UK apart from many other EU Member States, and should be maintained alongside the EU Regulations.

With careful engagement with industry, securing the continued implementation of EU regulations on cross-border services

• The upcoming abolition of additional roaming charges in the EU will benefit UK consumers. It is due to be implemented from 15 June 2017. For UK consumers to continue to benefit from ‘roam like at home’ in the EU and EEA after Brexit, UK operators must continue to have access to wholesale roaming rates at or below the EU regulated caps. Without access to these wholesale rates, domestic mobile operators will face significantly higher costs, which will lead to higher roaming charges for UK consumers.

• The Country of Origin principle under the Audio-Visual Media Services Directive has been crucial for content and audio-visual businesses. Government should seek to conclude an agreement with the EU to retain the status quo.

• Cross border data flows are key to the telecoms industry. Government should seek to secure “adequacy” of the UK data protection regime during Brexit negotiations, as failure to do so may lead to the “localisation” of data flows on EU citizens outside the UK.

• Due to the ability of wireless transmissions to cause interference across borders and the need for economies of scale, spectrum management and regulation has always had an international dimension. With its role as a crucial ingredient in an increasing array of applications of future economic and societal importance, the EU is becoming increasingly active in the area. The UK will need to retain its international influence in Europe via the CEPT and the EU RSPG group, and at a global level in the ITU by increasing resources dedicated to these fora.

Engaging with industry throughout the process of concluding trading arrangements with the EU and the rest of the world

• The digital communication industry needs further clarity on the Government’s strategy regarding the process of exiting the EU, and in particular its objectives for the conclusion of transitional arrangements with the EU and the World Trade Organisation (WTO), as well as a potential bespoke Free Trade Agreement (FTA) with the EU. Securing a bespoke free trade agreement with the EU could help mitigating risks the industry could face post-Brexit in the cross-border delivery of services and flow of data. Engagement with the industry in the phase of planning would be crucial.

• The UK may need to conclude Mutual Recognition Agreements with the EU to facilitate the accreditation process of electronic products and remove obstacles for market entry of telecoms equipment. The WTO Information Technology Agreement provides for zero-tariffs on many IT goods. Whilst the EU is a signatory to the Agreement, the UK would need become part of it following the process of exiting the EU.

• In partnership with the industry, Government should engage and strengthen ties with international bodies such as the WTO, ICANN, ITU, OECD, G7/20 and associated business groups such as Business Europe, B7/20, BIAC, IGF, ICC, WEF. Given the importance of technical standards to the UK companies competing in the European and global markets, Government’s involvement within standardisation bodies (e.g. ETSI, ENISA and CEN/CENELEC) should be increased to minimise the risk of EU standards being used as non-tariff barriers to UK companies.

Retaining the UK’s capacity to attract European and international resources and talent in order to continue developing the UK as a leading digital nation

• Industry would welcome continued commitment from Government to initiatives to attract resources from across Europe, including low-skilled workers who have been particularly relied upon for the deployment of fibre broadband networks. The industry relies on researchers and innovators from across the EU in specific sectors such as cyber security. To maintain our hard-earned leadership position post Brexit, the digital communications industry needs to attract talent from abroad and guaranteeing the status of EU nationals in the UK should be seen as a priority objective for Government.

• Post-Brexit, the UK telecoms sector may lose access to key funding schemes supporting the development of emerging technologies (e.g. 5G, IoT) and the deployment of broadband networks. Retaining a seamless level of research and funding cooperation with the EU in the ICT sector is essential. Government also needs to consider whether it will continue to support programmes which have benefited from EU funding.