Ofcom is considering ways to roll out fast fibre in the UK
The price of super fast broadband should reflect the amount of money spent on investing in next generation networks, UK regulator Ofcom has said.
It comes as part of its latest consultation on how fibre networks can flourish in the UK.
In August BT committed to invest £1.5bn in fibre cable networks over the next four years.
The regulator said that public sector funding should target areas that private investment would not reach.
Next generation broadband will offer speeds of up to 100Mbps (megabits per second) and allow, for instance, a family to download songs in seconds while simultaneously watching high-definition films.
It could also allow for new ways of delivering medical care, services for disabled people as well as providing solutions for those cut off from current broadband.
James Garlick, a broadband analyst with research firm Screen Digest, thinks that consumers may initially pay more for super-fast broadband.
"Prices may go up but as soon as the competition that currently exists for DSL extends to fibre services, prices will drop," he said.
Ofcom has hinted that government support may be forthcoming to bring fast net services to rural areas which will not be so financially attractive for private firms to invest in.
It follows calls from the Ofcom Consumer Panel to make sure those that have missed out on first generation broadband do not miss out on next-gen.
"It is going to be hard to promote equal access to fibre without government help," said Fernando Elizalde, a principal analyst with research firm Gartner.
The fact that Ofcom is looking at all the options, rather than just fibre, is a good sign, he thinks.
"Fibre is very expensive for remote areas and it is likely that other technologies, such as Wimax, will fill in the gaps," he said.
BT has been waiting to hear how the new market will be regulated and it welcomed Ofcom's initial thoughts.
"It is vital that the rules applying to fibre access are not only clear but also allow for a reasonable return to be made over the lifetime of the investment," said a spokesman.
After consultation with industry, Ofcom said it would publish a statement on super-fast broadband in spring 2009.
Ofcom also made it clear that it supported the recommendations of the recent Caio review which said that the telecoms industry, not the government, should pay for next generation networks.
Francesco Caio, the former boss of Cable & Wireless who was appointed earlier this year to look at the broadband market, said that the government could help reduced the hefty bill of installing fibre optic networks by co-ordinating road digging.
He also recommended that other infrastructure, such as sewers, should be opened up to fibre operators.