Government policy can often be the major determinant on the development of Local Open Access Networks, as Governments have the necessary legislative and regulatory instruments available to either encourage or restrict the development of these networks.  The major instruments available to Governments are the use of telecommunications and spectrum policy and statutory instruments.
 

6.2.1 Telecommunications Policy

National telecommunications policy can be one of the most significant drivers in the deployment of broadband services and the development of Local Open Access Networks.  All countries have telecommunications legislation, which is designed to govern the provision of telecommunications services and the manner in which the providers of these services are to be regulated.  There are significant variations among countries depending on the structure of the industry, the approach taken to regulation, and the respective social and economic objectives.  In addition to the actual legislation, the manner in which regulatory policy is practiced can have a major impact on the delivery of services.  As noted by Proenza (2004),

“The situation is different in developing countries. Regulators are generally weak, lacking independence and at times part of a system in which the legacy operator captures the regulatory and political processes.”[ii]

As evidenced by the experience in advanced economies, the role of incumbent carriers in shaping the regulatory and legislative agenda can also be quite significant, as evidenced by the debate over Local Open Access Networks.  In the case of North America and Europe, which have had the most experience with Local Open Access Networks, incumbent carriers have generally been opposed to the development of these networks.  This is also likely to be the reaction of incumbent operators in developing countries, as LOANs become more widespread.
 
Government telecommunications policy is not shaped in isolation and stakeholders can often have a significant influence on its development.  The communications industry has long recognised the importance of ensuring that their positions on issues are well understood and expend considerable resources in communicating its views to governments and their regulatory agencies.  This is perhaps best exemplified by the U.S. experience where according to a study undertaken by the Centre for Public Integrity Analysis, telecommunications companies spent an estimated $83.4 million on state lobbying activities over a two year period in 2003 and 2004, while the cable industry spent $5.2 million.[iii]
 
As evidenced by the debate on municipal owned local access networks in the U.S., a considerable amount of this lobbying activity has been directed at influencing Government policy and public opinion against local Governments establishing these networks even when they are open access.  The influence brought to bear by the industry in shaping state legislation that restricts or prohibits local Ggovernments from establishing them is well documented. An overview of the current situation in the U.S. was provided in a 2005 presentation given by Jon Leibowitz, Commissioner, Federal Trade Commission, which is the Federal Government agency responsible for enforcing competition law in the United States.  He stated the following:
 
“In fact, although it is almost universally acknowledged that broadband access is essential to economic growth and education, phone and cable companies are lobbying furiously to prohibit municipalities from providing free or discounted broadband to their residents.

I’d like to focus today on municipal broadband and discuss why it is right for consumers, why the arguments advanced by its opponents fail and, why, upon closer examination, these arguments are internally inconsistent.

But local governments have long been laboratories of experimentation. If they want to give their residents affordable Internet access, they should be allowed to try without being foreclosed by federal or state laws – or by cable and telephone interests. Hopefully, in the end, reason will triumph and states will reject efforts to choke off these truly vital broadband initiatives. As a matter of public policy, it is just plain wrong to stifle competition in this manner.” [iv]
 

The debate on municipal broadband has triggered a rise in the number of public advocacy groups at both the national level and in local communities, particularly in those that are considering the deployment of local access networks.  With few exceptions, most municipal network deployments have met stiff opposition from the incumbent operators that have employed lobbying, legal action, price reductions, and other tactics.   The experience of projects like UTOPIA, Wireless Philadelphia, and Lafayette Utilities System, all demonstrated the importance of widespread public support and the role of local advocacy groups in ensuring these projects proceeded.  A local citizen’s action group like Lafayette Pro Fiber undoubtedly had an impact on influencing public opinion and the results of a City referendum where 62% of voters agreed to the issuance of a $125 million revenue bond to pay for the deployment of a fibre network.  The actions of City Governments backed by support from local citizens were decisive in ensuring proposed state legislation was amended to allow these projects to proceed.
 

The reaction by incumbent carriers and cable operators in other countries to LOANs has been fairly muted and has not received as much attention as in the United States, however, this is likely to change as more of these networks are deployed.  The actions by telecommunications and cable operators in the Netherlands over the proposed LOAN deployment in Appingedam and the opposition by the incumbent carrier in South Africa to the projects in Knysna, Johannesburg and Tshwane are likely indicative of a more proactive approach that will be taken by the industry to oppose these deployments.

 
6.2.2 Spectrum Policy

 
Spectrum policy relates to the management of the electromagnetic spectrum for those wavebands that are capable of carrying radio signals.  All countries have agencies that have been specifically established to manage the radio frequency spectrum, which involves allocation of specific radio-wave frequencies for provision of communications services.  Within a country, the management of the spectrum is the responsibility of that Government, which is free to establish whatever policies it feels are appropriate, subject to certain international conventions.  As a result, countries can decide to exempt certain frequencies from licensing, such as the 2.4 GHz and 5 GHz, whereas others may decide that restrictions should apply.
 
6.2.3 State Aid and Legislative Instruments

 
State aid is a well-developed concept in the European Community, but it is one that is generally not practised by other countries.  State aid is an important issue in the European Community, as it does impact the ability of individual countries to finance initiatives that are not compatible with the provisions of the European Community Treaty.  Article 87(1) of that Treaty [v] declares that State aid, in whatever form, which could distort competition and affect trade by favouring certain undertakings or the production of certain goods, is incompatible with the common market - unless the Treaty allows otherwise.
 
As countries in the EC develop programmes and projects to expand broadband deployment, many of these initiatives are coming under increasing scrutiny by the Competition Directorate-General of the European Commission to ensure that they are consistent with Article 87(1).  Although the EC through eEurope 2005 has a policy of promoting the development of broadband, initiatives must still be consistent with EC Competition policy.
 
EC member countries are all developing their own broadband strategies, which can differ quite markedly.  In the case of the Netherlands, the Government has promoted the rollout of FTTH systems as a means of ensuring that the country maintains a competitive edge.  Consistent with this policy, the City of Appingedam announced its intention to deploy a FTTH Local Open Access Network to serve all residences and businesses in the community.  In response the EC has launched an investigation on the basis that such public funding may represent a State aid, as the community is already served by a number of existing network service providers.  The outcome of this investigation could have a significant impact on similar deployments throughout the EC.
 
Although Governments in countries like the U.S. may have concerns over the use of public funds to develop LOANs, most do not have any specific national legislation that would specifically prohibit the development of these networks in communities served by existing carriers with existing networks.  However, as evidenced by the U.S. experience, other policy and legislative instruments can be used to either severely restrict or prohibit the development of LOANs.

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