Nobody likes new taxes, so naturally the initial reaction to the 50p per month levy on line-rental to help pay for the future of the UK's broadband infrastructure is not a particularly positive one.But is that a fair conclusion in this case?

In today's broadband landscape the vast majority of broadband ISP's are doing little more than reselling BT Wholesale's ADSL package; there is very little investment or opportunity for product differentiation. Lots of brand choice but all the cakes are the same inside.

Those that are investing by unbundling telephone exchanges with their own ADSL equipment are typically doing it in the same select few exchanges where they can expect strong competition not only from other unbundlers but also from Virgin's cable broadband since the exchanges they pick are same deeply urban areas. An ISP investing in their own DSLAMs is likely to expect to achieve only a small percentage of a highly contested market.

In both cases, the market has largely opted to compete on price alone. As a result customer prices have continually fallen and the margins necessary to re-invest in the future have been increasingly eroded. The market opted for a path that can only sustain small incremental changes to services, so the kind of major infrastructure investment programme being seen in countries like The Netherlands is simply out of the question in the UK.

The only way that it will be possible to generate the funds to invest in true next generation broadband will be if the cycle of ever decreasing revenues can be broken; and if the market's not going to do, who will?

So, while nobody likes new taxes, this one was probably inevitable. Lets hope the market learns a lesson from this.

But will it make a difference?

On the face of it the levy isn't going to raise much to invest in the future of broadband - certainly not matching the investments of countries like South Korea or Australia - but that's not to say it won't make a difference.

Between 2010 and 2016 the levy is expected to raise around £900m - CBN's own modelling suggests that such a sum, when invested alongside community and commercial funds is likely to be sufficient to make true next generation services available to almost any community in the UK.

Note the word "invested"; there is no reason why the public shouldn't see a return on their 50pin the medium to long term, with the funds invested in sustainable projects.There is no reason for the levy funds to be given away as a subsidy to what ought to be sustainable businesses.

BUT such an approach is new to the UK telecoms markets. Its going to require existing network builders to join forces with communities to create the future, using the levy money to fill the investment gap. Work CBN has done work with, amongst others, the East of England Development Agency which shows that such models are becoming established in European broadband programmes, and have been used successfully in the UK in the development of wind farms.So why not UK broadband?

So perhaps all it really needs for widespread next generation broadband to take hold in the UK is for network builders to think outside their box, and take a peek inside a few new ones.

The levy removes some of the reasons for not investing in true NGA, learning from the imagination of other sectors and countries removes the rest.

DOCSIS is the international standard for providing data over cable, allowing Internet services to be provisioned alongside television channels. Cable operators have begun to make announcements as they migrate to DOCSIS 3.0 which put them ahead of the ADSL2+ phone-line operators. Some, like the UK's VirginMedia are making bold claims - "The UK's fastest broadband is over fibre", referring to their hybrid fibre and coax (HFC) network.  But will the fastest broadband be over cable for very long?

There are few people today that would dispute that future connectivity will be based on fibre; the questions are of timing and how the transition can be managed. Today there are two main intellectual camps – those that tend towards a top-down national roll-out and those that see a bottom-up locally led market transition. These thought processes imply three scenarios which may play out as next generation projects emerge in the UK:

• Da Wo (“Big Me”). This describes the development of a traditional vertically integrated operator willing to build NGA networks alone. This is essentially what occurred in Japan.
• Islands of Connectivity. A scenario where projects develop largely in isolation with few links with other projects. This is the traditional municipal network approach.
• The Patchwork Quilt. Local projects develop but exist within a framework which ensures a consistent interface to the market.

Da Wo is most likely to create a market which is very much as today; one where there is significant choice but limited variety much as the patisserie offers a great variety so long as you want cake. The scope for product differentiation and innovation is limited and largely in the hands of the network owner. However the biggest hurdle to overcome problem with this approach is the need to secure massive levels of investment – figures of £25-30bn are commonly talked about – which few if any in the industry believe delivers a business case.

The emergence of islands of connectivity may overcome the lack of variety and opportunities to innovate but many projects may struggle to achieve the scale needed to create a rich product set and vibrant market of service providers; even the very largest cities in the UK may struggle to attract some of the key media organisations, the elite of which make no secret of their requirement for a million customers before engaging with an organisation.

A patchwork quilt of local projects sewn together by a national framework permits local innovation, allowing projects to reflect local needs and colour, offering the benefits of the Da Wo approach without the potential problems.

It is possible that all three scenarios will play some role in the future of the UK’s transition to NGA networks. The cable companies, for example, may elect to remain vertically integrated and follow the Da Wo path; some municipalities may feel they are better able to deliver their strategy alone, developing islands of connectivity; while others may see benefits in working together to create a patchwork quilt.

The regulatory framework will need to develop to encompass all three scenarios as each will have a different impact on the consumer and the industry. In many respects the Da Wo scenario is the easiest to regulate as it largely describes business as usual with only fine adjustments needed to fully reflect the technical transition to fibre. The two new approaches will require more regulatory thought as they to varying degrees describe a transition from a tightly held monopolistic market to a more “perfect market” which perhaps demands less of an ex ante regulatory regime.

Is a framework necessary?

The first question must be “is it necessary to have a national framework?”. To understand this it must first be necessary to consider what the service provider market would look like without such a framework.

There are occasions where home-run cabling isn't a realistic option - for example where overhead cables are mandated or if the most viable option is through sewers and culverts. Such environments mean the only viable cabling system is a hierarchical one, and in the world of fibre-based NGA this means PON. The traditional view is:

• Ethernet = Open
• PON = closed

But is this always true?