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FT World Telecoms: Broadband & Fibre

So Telco 2.0 went to the Financial Times’s World Telecoms event. Despite its very traditional format (Telco 2.0 event formats are much better!), this event does provide a platform for C-level execs to promote the wonderful things they are doing and (sometimes) open up about their business challenges.

Here are our thoughts about a number of key topics.

Fibre and Open Access

We’ve always been very keen on open access to ducts and dark fibre, structural separation, and the like. One thing that came across very strongly was that open access is now both necessary and inevitable, also a theme in the US National Broadband Plan. BT CEO Ian Livingston made the interesting point that successful NGA deployments seemed to involve either massive investment by government (as in Sweden or now Australia), toleration of an incumbent monopoly (as in Japan), or unusually favourable circumstances such as extremely high urban density, or to put it another way, extremely low trench mileage per subscriber passed (as in Hong Kong or Singapore).

It’s also clear that nobody is going to accept the creation of a new incumbent monopoly. The only way to deal with the contradiction, then, is to accept that there will be only one fibre network, but require that multiple operators will use it. This has cascading effects through the industry. BT is now rolling out FTTC very fast - Livingston claims that they’re doing the equivalent of a smallish NBN every month, and BT is going to hire 3,000 additional apprentices to create more installation teams - and therefore the big question is going to be how the terms of business work out between Openreach and the others.

OFCOM chief Ed Richards, also present, still insists that there is no case for price regulation of VULA (Virtual Unbundled Loop Access, the equivalent in the fibre/ethernet world to LLU in the PSTN world) although the only provider of it is by definition BT. The argument for this - we asked him - is that BT’s Generic Ethernet Access product on fibre competes with wholesale LLU on copper. The logic of this escapes us, not least as this implies that BT is a competitor with itself. More practically, how well will this work once a majority of the UK’s lines have transitioned to fibre, let alone 90%? Is BT really going to leave parallel copper lines in place after a subscriber signs up, in case they want to have a worse service again some time in the indefinite future?

On the other hand, it looks like we’re heading for a hybrid future, with significant additional fibre being deployed after the street cabinet by municipal and other actors. British street cabinets are going to be busy - Virgin Media’s Andrew Barron also said that they might be going to install WLAN infrastructure into their cabinets. Although he didn’t make a definite commitment, he seems to have already decided which frequency band to use (5.8GHz unlicensed), which suggests that some thought has gone into this.

Mind you, VMED might be advised to fix some of those famous open cabinets before putting something saleable like a WLAN box into them…

Regulation: The Interaction of Open Access and Net Neutrality

Regulatory views were remarkably consistent. Essentially, OFCOM director Richards, Comms Minister Ed Vaizey, and the deputy head of Singapore’s Infocomm Development Authority, Leong Keng Thai were singing from the same hymn sheet. The key theme was that there was relatively little need to worry about net neutrality or pricing so long as there was a sufficiently competitive ISP market. Vaizey’s remarks have been vigorously hyped by the British media, but in practice the speech boiled down to the following points:

  1. We prefer competition to regulation
  2. Substantial competition exists in the UK market
  3. We don’t have any problem with normal traffic management
  4. We are committed to an open Internet
  5. That includes a right to access content and services of your choice
  6. Nothing has gone wrong so far
  7. Therefore, we aren’t planning to pass a net neutrality measure
  8. Operators should tell their customers what they’re doing

Given that there is no net neutrality legislation in the UK, this is a much less sensational statement than it’s been given credit for. Vaizey took care to remain in step with Richards’ words the day before and also with Neelie Kroes and Viviane Reding’s over the past few months. This is also roughly what we concluded in our recent review of the issue. Also, the general calming down of fears over “exafloods”, the “data tsunami”, etc. was in evidence.

The interesting point here is that if competition is an acceptable guarantee of fair treatment, then open access to infrastructure is a requirement for an open Internet. The primary reason why the UK has several major ISPs and many more small ones, which compete at a national sale, is that we have structural separation. In the US, for example, where the whole debate has been at its most bitter, consolidation and the Comcast ruling has led to a shift away from the highly competitive market of the dialup era, back towards one dominated by a small number of RBOCs and major cable operators with a high degree of territorial monopoly.

Singapore’s regulatory framework for their National Broadband Network is the extreme case of this viewpoint - net neutrality isn’t mentioned, but open access is available at every level from ducts up to layer 3 IP networking, and cross-ownership between layers is actually forbidden.

Looking Back at a Classic Telco 2.0 Chart

Comparison of OECD broadband markets

Long-time readers will remember that we carried out a cluster analysis of OECD nations (and a few others) plotting price versus average customer bandwidth as part of our Online Video Market Study. We discovered, in short, that you tended to get a group of poor countries with poor infrastructure where service was both poor and expensive, a group of countries where service was mediocre but cheap, and a group of countries where it was both cheap and good. This last group didn’t seem to have much in common except dense cities and a tradition of public sector leadership in building infrastructure (how else do you group France and South Korea?).

We argued that open access and hybrid deployments would be a way of getting out of this trap, as was suggested by the emergence of countries with unexpectedly good service due to easy access to poles. We think we’re being borne out.

See our submission to the OFCOM net neutrality consultation here and our Online Video Market Strategy Report here.

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