From Beacon Fires to Fibre Broadband: Specialist partner Steve Unger asks what we can learn from historic attempts to regulate the tech sector

Specialist partner Steve Unger asks what we can learn from historic attempts to regulate the tech sector.

Tell us about your previous experience

My last full-time role was as an executive Board member of Ofcom. I served as Chief Technology Officer, Strategy Group Director, and as Acting Chief Executive. Specific achievements included a major reset to the regulatory framework for telecoms, which used network competition to drive investment in fibre broadband. Creating this strategy required us to deal with one of the fundamental challenges faced by any regulator – creating a rulebook which promotes competition but does not held back innovation. In doing so, we attempted to learn from previous successes and failures – and the dramatic growth we’ve seen in the availability of fibre broadband over the last few years suggests that the strategy has been effective. I continued to study the history of telecommunications after I left Ofcom, as I believe that much of this history remains relevant today: the result is my new book ‘From Beacon Fires to Fibre Broadband: A history of innovation, enterprise and regulation’.

Tell us about your new book

Modern broadband networks carry vast amounts of data around the world, but this has only become possible over the last two hundred years. For thousands of years before that our ancestors could only send the simplest of messages by lighting beacon fires. The book looks at the repeated waves of disruptive innovation which have taken us from beacon fires to fibre broadband. It looks at how entrepreneurs have exploited each new innovation, and at how governments have responded by regulating them. It compares how this process played out in four countries which adopted different approaches to harnessing innovation: France, Germany, the United Kingdom and the United States.

What lessons do you take for the future of telecoms regulation?

The most important lesson from history is that it is innovation, not regulation, that is the primary guarantee of prosperity. Regulation can play an important supporting role, helping to ensure that markets remain contestable, but overly prescriptive regulation risks make it harder for individual companies to innovate. This tension is best illustrated by the decades old debate about the relative merits of ‘facilities-based’ competition and ‘access-based’ competition. Facilities-based competition – in which each operator builds its own network – is unlikely to result in fully effective competition, due to the economies of scale associated with telecommunications networks. Access-based competition – in which many companies provide services over the same underling network – results in more intense competition but reduced levels of innovation. A good compromise is to limit any mandated network sharing to ‘dumb’ assets such as ducts and poles - and it is precisely this approach which has proven to be effective as a means of driving competitive investment in fibre broadband.   

To what extent do those lessons read across to the regulation of digital platforms?

The debate about regulation of digital platforms is made particularly difficult by the range of issues that are in play – from geopolitics to the future use of artificial intelligence. For that reason, I think it is helpful to anchor the discussion by looking at specific areas where we can learn from the historic experience of telecoms regulation – and one such area is the use of mandated interoperability. Specifically, the Digital Markets Act (DMA) allows the EU to apply ‘vertical interoperability’ obligations to digital platforms, and these can be compared with the ‘network access’ obligations which traditionally applied to telecommunications networks. However, the scope of the DMA powers is much broader - obligations of this kind have historically only applied to assets that were hard to replicate, and companies that had no incentive to grant access on commercial terms. The lack of any such constraint on the powers contained in the DMA suggests that it is too intrusive - and thereby supports a broader concern, expressed most recently in the Draghi report on EU competitiveness, that we in Europe rely too much on regulation.