Fibre Down Under: It's All Part of the Master Plan...
Australia, New Zealand, and Singapore's ambitious plans for publicly owned FTTH show that if you want Real Broadband (speeds heading for at least 100Mbit/s, a high degree of symmetry, and OPEX low enough to support a healthy ISP market), only Pakistan-style anarchy or state-run technocracy will cut it. That's also the conclusion we reached in our Online Video market study; and data from Akamai bears it out.It's the 40th anniversary of the Internet, in a deep sense; 40 years to the day the first RFC (Request For Comments) document was issued, essentially founding the 'Net's very specific culture and institutions. RFC1 was written in a shared toilet in a college dorm at dead of night, by a student who was mostly concerned with avoiding tripping over anyone's toes; but the approach it began would be replicated in the entirety of Internet engineering and culture. And the word was this:
The early R.F.C.'s ranged from grand visions to mundane details, although the latter quickly became the most common. Less important than the content of those first documents was that they were available free of charge and anyone could write one. Instead of authority-based decision-making, we relied on a process we called "rough consensus and running code."
Rough consensus and running code. Right. We would like to think that's how we've been suggesting that fibre-to-the-X should develop - rather than either the IMS-infused visions of the telcos, or the technocratic vision of giant publicly-owned networks, we were putting our money on messy progress - common standards, open interconnection, and a happy mix of incremental muni-fibre, telco-muni cooperation (like KPN, Reggefiber, and Glasvezelnet Amsterdam), layer zero openness, and perhaps more.
So, this is very interesting news.
Australia's central government has decided that none of the tenders for its planned National Broadband Network are any good, after Telstra effectively refused to take part, and that instead the government will build a publicly-owned fibre-to-the-home network, providing dark fibre to anyone who wants it. Five years after deployment, the company will be reviewed with an eye to deciding whether it should be privatised, part-privatised, or left in peace.
New Zealand, meanwhile, is putting NZ$1.5bn of government funds into a national dark fibre build that will be owned by "local fibre companies", dark-fibre deployers owned jointly by local government, commercial partners, and perhaps by telcos, but with the restriction that no operator using the network can own a majority of any LFC.
In Singapore, meanwhile. where the government wants to build 1Gbit/s service to every address, contracts have been issued for both the "NetCo" (which will actually lay the dark fibre and also provide regulated wholesale access to the duct network) and the "OpCo", a telcolike entity that will provide wholesale service over it to competing telcos and ISPs.
It's hard to avoid the conclusion that what works, in this case, is actually a big technocratic plan. You might think that Australia will always be a special case - only five per cent of Telstra local exchanges were unbundled, after all, so for most of them the only option is either Telstra or the state - but in fact it's not so.
For example, as part of the Online Video market study we looked at the quality and price of broadband in OECD economies. We found they fell into well-characterised groups; one group had low speeds and high prices, another had low speeds and low prices, a further group had slightly better speeds and slightly higher prices, and a fourth group had high speeds and low prices. The first group was essentially the poor; the second and third both consisted of markets where there was extensive unbundling or bitstream-based competition, and really they should be taken together for these purposes; and the fourth was an odd and heterogenous one, which only had in common that they had a strong tradition of public-sector planning and infrastructure investment.
Perhaps the most interesting detail was what we didn't find; there was no fifth group worth mentioning where FTTH was available, but only at a steep price. Below the sort of pricing you expect for leased lines, the market wasn't providing real broadband to those who could afford it. This could be explained by two different scenarios; either a large chunk of the return on investment in fibre access networks is an externality, perceived by society rather than operators, or else a large chunk of it doesn't exist.
However, we know from real-world examples that there is, indeed, a fibre dividend; the classic example, indeed almost the only example of an entirely privately-funded fibre overbuild, is Iliad/Free.fr, which claims to save €26 a month in OPEX and wholesale charges per line it replaces with fibre, as well as significantly increasing ARPU through selling value-added services (like multichannel TV). As a result, they are able to cover the cost of fibre deployment everywhere they have at least 30% market share. We haven't heard of an FTTH build anywhere that actually deployed and then failed.
Further, realising the positive externalities of fibre to their fullest extent involves many other actors; the Australian NBN plan provides that the network company will provide service to the health and education sectors, and perhaps they may be asked to chip in. The trans-sector concept is crucial - for example, the energy sector has both needs for connectivity for things like demand response, and also extensive duct, pole, and right-of-way networks. The question may be whether this degree of coordination is achievable without some layer of government being involved.
Since then, we've also seen the success of low-road fibre; the current Akamai State of the Internet report says that Romanian users are the fourth-most likely to have more than 5Mbit/s service, which is almost entirely down to semi-official cable deployment. It looks like Stewart Brand was right; you've got to choose between High Road, Low Road, and No Road.
It is almost painfully evident that the only model that has yet to deliver much fibre is the one with a regulated private incumbent and competing DSL operators; anarchy and technocracy both deliver, market-led regulationism doesn't. And it is a real issue whether the many fancy options that have been discussed are anything more than outbursts of frustration at this fact. Not only that, but the New Zealand and Singaporean deployments are all intended to be point-to-point, active Ethernet jobs, which provides for a maximum of symmetrical connectivity and openness for competition, and the Australian one is rumoured to be so as well. Perhaps PON is just another inelegant effort to hack a fundamentally flawed model into some sort of functionality.
There is much discussion of the "killer app" for FTTH - is it just more TV? Really good computer gaming? Telemedicine? Self-hosted servers? Although we don't believe in killer apps in general, we think it could be something quite different; the survival of multiple competing Internet service providers. It would be a great pity to lose the diversity and liberty that the end of telco monopolies gave us; how long before we got it back? As the UK experience shows, access to the incumbent's wires can be a poisoned chalice. Certainly, the example of Iliad would tend to bear out that one of the most important applications for fibre is to save the ISP business model.
So the report that the FCC may demand that telcos share any fibre built with government money should fill us with inspiration, not fear. As Brough Turner points out, openness in fibre access networks is an excellent business proposition and one shareholders ought to demand. Here's Benoit Felten of Yankee Group making just that point.