The price of telecoms – getting it right, why it matters

This short paper by Brian Williamson discusses the importance of a proper understanding of telcoms pricing, for regulators and national statistics authorities

Thinking beyond the WACC – the investment hurdle rate and the seesaw effect

The price cap for legacy telecoms networks impacts new investment in two important ways.

First, new networks must compete for customers with legacy networks, and so lowering the price of legacy services will reduce the price that can be charged for new ones - which in turn makes it harder to justify new investment in the first place.

Second, the treatment of legacy infrastructure will influence investor expectations on how new investment will be treated in the future - given that new investments will come to be seen as legacy over time - again potentially deterring fresh investment.

If investment in Very High Capacity Networks (VHCNs) is seen as desirable, it is therefore counter-productive to underestimate the weighted average cost of capital (WACC) for legacy networks and thereby set their pricing too low.

These issues are compounded by an approach whereby a comparatively small harmonised EU wide equity risk premium is combined with country-specific risk free rates, since this not only results in extremely low regulated returns in certain markets, but also means a divergence - rather than convergence - of investor returns across Europe.  

Brian Williamson and Stephen Howard have prepared a paper (on behalf of ETNO) considering these issues.

UK DTT Transmission Maps

Based on Ofcom data, we've prepared maps of the UK DTT tranmsitters. Below are maps for PSB1, the main BBC multiplex (group of channels broadcast together), and for COM4, the commercial mux operated by SDN, a subsidiary of ITV.

Commercial muxes have about 90% population coverage, the PSB (Public Service Broadcasting) muxes have 98.5% coverage, but need many more transmitters as a result. These are generally lower power, used to fill in areas that are 'in the shadows' as far as the main transmitters (shown in red and yellow) go. For instance, these areas may be in valleys, and so shielded. You can see many low-power (green) PSB1 transmitters in Wales, for example, to ensure the Welsh get value for money from their BBC licence fee. By contrast, the flat fenlands of East Anglia can get by on very few transmitters.

Click on an icon to see information on which muxes transmit from that location and the power and height of the approved transmission. These parameters are set by Ofcom.

Scroll in on any transmitter and switch to satellite view to see the actual mast. (The Crystal Palace mast is at the bottom of the page, by way of example).

The icons indicate the power of transmission in kW:

Red: 100kW+

Yellow: 1-99kW 

Green: < 1kW

Mux:  PSB1 (BBC)

Mux: COM4 (SDN)

The Crystal Palace mast

UK Fixed Broadband 2025

Robert Kenny has written a paper looking at how the UK's fixed broadband market is likely to unfold over the next five years. Growing complexity and fragementation will have important implications for both competition and regulation.

Ultra-Fast Broadband – A solution in search of a problem

This presentation was given by Robert Kenny to a conference hosted by the Information Economy Project at George Mason University in Washington DC