Broadband Stakeholder Group warns against ‘Brexit cliff edge’ for digital sector

Profile picture for user ddpreez By Derek du Preez April 12, 2017
The government’s leading advisory group on broadband has outlined the risks associated for the digital sector as the UK enters its Brexit negotiations.

Another day, another round of warnings on the implications of Brexit on the digital sector. This time from the Broadband Stakeholder Group (BSG), which has put together a detailed report on the impact that the UK’s exit from the European Union could have on both the telecommunications sector and the digital content sector.

This is particularly pertinent, the report states, as the UK is in the initial phase of a new investment cycle to bring the next generation of ultrafast broadband and 5G technologies to consumers and businesses.

At present, the UK’s digital communications sector is derived from the EU Telecoms Framework, which the BSG hopes the government will remain closely aligned to (at least for the medium term), in order to provide certainty for industry.

The report also warns against a ‘cliff edge’ scenario for the sector, where Britain exits the EU before securing a favourable trade deal with the bloc, and also calls for retaining key EU regulatory principles post-Brexit.

Richard Hooper, Chair of the Broadband Stakeholder Group 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.

A lot of history

The BSG’s report aims to advise government on how to mitigate the risks associated with Brexit and to maintain the UK’s place as a leading digital nation. And the scale of the challenge is large, given that the UK has integrated over 40 years of regulation, benefited from access to the EU Single Market and developed trading relationships with the rest of the world via the EU.

The BSG states that UK will continue to be measured globally with regard to its connectivity levels and adoption by users of new tech, and it needs to retain its capacity to attract investors, digital innovators and high growth companies.

One of the key concerns is that the end of free movement of people between the EU and the UK - which is likely - will impact on the capacity for the industry to attract talent and resources to operate efficiently and compete internationally.

Also, the Prime Minister has made it clear that she believes that a no deal for Britain is better than a bad deal - however, the report urges the government to agree the future trading relationship with the EU as early as possible. It states:

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.

Aligning with EU regulations and principles

As noted above, the UK’s national regulatory regime is derived from the EU Telecoms Framework, which is currently under review. The BSG has strongly urged that the UK should seek to align the UK rules with the EU regulatory framework in the medium term - to provide legal and commercial certainty.

Whilst it notes that divergence from the EU framework could be possible or desirable in some areas (frequency of market review, deregulating where possible etc.), it adds that “divergence would need careful consultation with industry and other stakeholders to avoid unintended consequences in the long-term”.

It adds that difficulties could arise in implementing EU rules post-Brexit, as the regulation of cross-border services will require cooperation with other regulatory bodies, which is far from certain.

The BSG has also urged that the government retain key EU regulatory principles after the UK exits the European Union. For example, EU State Aid rules for broadband exist to protect competition and private investment for the broadband sector - and the report argues that it is necessary fro these to be retained in the future.

Equally, the EU Open Internet rules are highlighted as critical. The report states:

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.

The report also highlights the need to continue the implementation of EU regulations on cross-border services. Additional roaming charges in the EU are due to be abolished later this year, and for consumers to be able to ‘roam like at home’ in the EU and EEA after Brexit, UK operators must 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 BSG also notes the importance of the government securing “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.

diginomica/government has highlighted before the importance of securing a data flow agreement with the EU, but it is important to note that it is largely down to the European Commission if it considers the UK to be ‘data adequate’ and that the flow of data isn’t then restricted.

Access to talent and resources

One of the other key considerations highlighted by the BSG, as has been a key concern for the tech sector across the UK, is the continued access to talent and resources from the EU. It is becoming increasingly clear that a key priority for the Prime Minister is ‘gaining control’ of the UK’s borders, which brings into question the free flow of people from EU member states.

Technology companies and the digital sector at large rely heavily on international talent to support their business. The report warns:

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.

And with regards to funding, it notes:

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.

My take

As the prospect of negotiations with the EU looms, it’s becoming increasingly clear the uphill challenge the UK government faces in securing a good deal. There’s just so much complexity and so much to take into consideration, that achieving all of this within the two year timeframe seems questionable. A sensible report from the BSG - one that is free of politics and just focuses on the facts - and should be looked at closely by the government’s Brexit team.