Digital Town hypothesis: the future of access networks

We're working in the background preparing our next Telco 2.0 brainstorm event. We avoid the word "conference" as the format is so different: interactive technology, brief pre-screened stimulus presentations, real-time expert analysis, and after-event reviews. One of the ways in which we depart from the conference format is we frame up issues for debate -- and also have a point of view ourselves.

One way we are trying to improve on the conference format is by giving all speakers and attendees a brief session "hypothesis" that provides STL's view on the topic of discussion.

First on the lauchpad is our Digital Town work stream, which looks at how to improve the economic and social well being of municipalities via high speed broadband access. In a nutshell, we don't think investors are happy with "business as usual" for redundant, competing access networks -- unless they can capture monopoly rents and also keep the regulator at bay. The uncertainty of regulatory intervention ultimately works against the carriers, as it drives away risk capital. Are there better ways of dealing with the problem? We think so, and successful "pipe" providers will examine and embrace change in network funding models.

We'll be debating these issues with a line-up of speakers representing communities, altnets, users, incumbents, new entrants, innovators, and technology disruptors. Do join us!

The state of the access market today

  • Retail prices for broadband in competitive markets have lowered substantially, stimulating growth.
  • Commercial FTTH seen in a few markets (Verizon Fios, Japan, Denmark), but generally limited compared to cable and DSL.
  • Variable results from muni network projects: lots of different service models, plenty of early lessons.
  • Investment in access technologies slowly recovering from the telecom slump; wireless (notably WiMax) looking healthier than optical.
  • Copper and coax networks benefit from new technologies (VDSL, DOCSIS 3.0).
  • Partial or total structural separation existing or proposed in many markets (UK, France, Ireland, Denmark, Japan).
  • Wider social and economic benefits of improved connectivity and broadband seen as strong.

The status quo leaves few participants happy

  • Competing wired access providers results in lower take-up rates, and risk bankruptcy cycle whereby losing network comes back without debt.
  • Funding from services revenue (TV, telephony) risks regulatory intervention and/or capture (most notably in US market)
  • Copper assets are being "sweated" and prices may be too low to fund access investment
  • Reach of true high-speed access in limited, and asymmetric networks don't reflect increasing volumes of user-sourced traffic (home video, online backups, P2P file sharing).
  • Public sector connectivity purchases are highly fragmented, raising costs and limiting general public benefit
  • Emerging industries dependent on universal high-speed access are stifled
  • Social divide problems with access to social care, e-government and information/education facilities
  • Investors are scared of asset confiscation through anti-trust if "winner takes all" happens

What's the issue?

How can we better fund more abundant access networks using the best of demand-driven market means and private risk capital - without the downsides of monopoly or eternal regulation?

STL's proposed answer

  • More models for paying for connectivity than just "all you can eat broadband" -- ad-funded, device-embedded, service-funded, free (social tax-funded), etc.
  • Different ownership and operational models (e.g. OPLANs, co-ops, muni, private shared like cell towers)
  • Innovation in the fiscal vehicles used for networks, appealing to long-term infrastructure investors (e.g. pension funds) seeking annuity-type returns
  • Diversification of network funding sources to include more of the beneficiaries: real-estate owners, public sector, local commerce, consumer electronics, etc.
  • Better co-ordination of public sector efforts: rights of way, attachments, commissioning, service provision, etc.

We'll be debating these issues in-depth at the Telco 2.0 Brainstorm in the Digital Town workstream.