|Fiendishly complex and highly unglamorous|
|Written by David Harrington|
|Wednesday, 02 November 2011 09:17|
(GI editorial note: In this carefully considered guest essay David Harrington , leader of CMA's Regulatory College, looks at regulation of the UK's telecoms sector and what is at stake now that we are all stakehdolders.
“Fiendishly complex and highly unglamorous”?
According to the FT back in January 2009,
“the fiendishly complex and highly unglamorous matter of telecoms networks is fast rising up the agenda of Labour and Conservative politicians.”
In the same article, Lord Carter is quoted as:
“If we take the right set of decisions and set the right strategic frameworks now, the communications sector could emerge from today’s global downturn strengthened in its own right and as an engine for growth to shorten the downturn.”
Earlier still, we had the BSG’s Pipe Dreams, which in April 2007 pointed out that:
“For next generation broadband to move from pipe dream to reality in the UK, steps need to be taken now. The issues are complex and there are few clear or obvious solutions at this stage. However, there is a limited window of opportunity between now and April 2009 to get this right. A concerted and innovative approach to regulation and policy making will be required to achieve the right balance of investment incentives and competition that will enable a market-led transition to next generation networks.”
So – where are we, nearly five years after Pipe Dreams, and nearly three after the FT article?
The change in government last year promised, for a while, to eliminate the gap between the rhetoric of the politicians and the reality where the rest of us live. The oft-parroted rubric that universal access to broadband would lift our GDP and make significant improvements to our health and welfare was enlivened with action. BDUK was set up, albeit with only £530M, and the notion that “build it and they will come” was generally accepted as not such a bad idea after all. The concept of the “Final Third” was lifted from Carter’s policy paper “Digital Britain” of June 2009 and was better defined. The mills of the marketers ground out the term “superfast broadband” which, suiting the agenda of the politicians (spend no more public money) and the incumbent (spend what there is on us), was universally accepted. 2Mbps for (nearly) everybody was pronounced as the national goal and, with more grinding of mills, we are to enjoy, by 2015, the “best superfast broadband network in Europe” – a descriptive phrase that begs acceptance as much as it beggars belief. A few pilot schemes were set up under BDUK and some of the public money was doled out. NGA became associated with xDSL and “about” 24Mbps asymmetric. FTTC is now the order of the day, leavened here and there with just a soupçon of FTTC/FTTP. Ofcom has begun to issue its broadband coverage, under the Digital Economy Act and based, somewhat dubiously, on data provided by the suppliers.
All good stuff. So what’s the problem?
The problem is, as befits a “fiendishly complex and highly unglamorous” topic, multifaceted. Two intertwined imperatives appear to dictate the pace and direction of activity: shareholder interest and lack of public funding. The first controls what the incumbent is prepared to do, and thus constrains what the incumbent might otherwise do in pursuit of the over-riding national interest, while the second suffers from state aid restrictions and the relatively lowly place occupied by broadband in the National Infrastructure Plan – another illustration of rhetoric (universal broadband is vital to our economy) vs reality (there are far more important things to spend our money on).
In the real world, these twin imperatives influence both policy and practice. The term “superfast” is applied to anything over 2Mbps and is a hostage to future developments in fibre. The incumbent’s policy is nailed to FTTC, where competing providers must access the fibre via the incumbent’s electronics. Unbundling is difficult, if not impossible and there are no plans to deploy a future-proof point-to-point fibre access network. Ofcom and the government have failed to stand up to the incumbent’s endless demands for a more lenient regulatory environment and have meekly accepted an inordinate delay in the introduction of equal access to passive infrastructure. Dark fibre – reportedly anathema to the incumbent – is not mandated.
Since the publication of the Undertakings in 2005, there has been a gradual erosion of the principle of equivalence. Equivalence does not apply to PIA or SLU and the incumbent has been granted significant exemptions including:-
The Wavestream decisions were initially made on the basis of the “impracticability” of imposing EOI on the vertically integrated BT and have further undermined the ability of CPs to provide high bandwidth services in competition to BT. Most recently, however, the exemptions have been based on an assumption of market competitiveness pending the next Business Communications market Review (BCMR). The incumbent has recently submitted a further exemption request for Ethernet and OSA services at 2.5 Gbps and 10 Gbps.
BDUK has published a formal statement on how its efforts and money will be spent. However, it effectively encourages service providers to rent their access to end users from Openreach. This means BT will continue to have the final say over who can sell what to whom, despite Openreach’s “functional separation” from the rest of BT.
In the light of such favourable treatment, it’s hardly surprising that BT is “confident” that it will achieve 90% coverage of the UK with some sort of broadband access. It says that the “final third” is no longer appropriate terminology and that the last 10% is the real challenge. Its FTTC offering is due to reach up to 80Mbps in 2012 and its FTTC/H, in some 6 exchanges, will climb up to 300Mbps. Confusingly, it is to extend access to higher-speed 20Mbps copper to an additional 2.5 million premises by spring 2013 and has recently accelerated its “Final Third” programme by one year, to 2014. Naturally, such headline figures will apply only in very limited circumstances (distance from the exchange, condition of the copper, etc) – but it makes good PR and impresses skim-readers.
But no-one is highlighting the low take-up rates for BT’s superfast offer. The top-down process lacks local community engagement and many opportunities for economic growth and societal development are being over-looked. The opportunity to unhook the public sector from the shackles of poor-value, high-priced and often duplicated Public Service Networks has not been grasped. In contrast, many other European countries are allowing Local Government to help lead the country out of recession by facilitating the provision of ‘dark fibre’ – that energy-giving resource that is an anathema to incumbent telco’s – in league with private sector enterprise and enthusiastic communities.
So it’s gradually becoming clear that a combination of preferential treatment from government, via BDUK, and a Teflon marketing machine will confirm BT’s position as the monopoly provider in the rural areas while, at the same time, satisfying the government’s political objective of providing at least 2Mbps to nearly everybody. Minimal risk to the DCMS officials obeying their master’s voice, no disturbance to Ofcom, beavering away at its internal “diversity” policy, but still no infrastructure competition in a third of the country.
Is that a price worth paying?
If Openreach was not an integral part of the BT Group, the answer to that question would be “probably – yes”. However, there’s an uncomfortable feeling that the flames are crackling around the Forum while fiddles scratch away in the background. Again a quote from a senior BT source: “There’s far too much talking and not enough action”. From everybody’s viewpoint, including that of BT, such a sentiment is undoubtedly true. But not everybody shares the same underlying rationale.
On the far side of the world there is action a-plenty. Telecom New Zealand has finally succumbed to pressure and has split itself in two. At the end of October it was announced that the incumbent telco will demerge so that Chorus, the firm’s fixed-line infrastructure arm, would be able to participate as an independent entity in the upcoming award of government contracts for the building of a national broadband network. It's believed that this is the first time that an incumbent has undertaken complete separation. The new structure should mean that New Zealand avoids the 'incumbent problem' Australia suffered when full-scale war broke out between Telstra and the government around the role of the still vertically-integrated incumbent in the development of that country's NBN.
Meanwhile in Korea the incumbent KT, with the benefit of nearly 100% FttX coverage has announced the end of ‘last generation’ telephony by acknowledging the decline into irrelevance of the PSTN.
Here in the UK the “incumbent problem” has always been with us to some degree. It was far worse before Ofcom’s Telecoms Strategic Review imposed functional separation and created Openreach. But of late, fed by government policy, tacit or otherwise, and by uncharacteristically weak regulation, the problem is fast re-emerging. BT is seizing its chance and has launched a massive land-grab that will take its universal copper infrastructure into a universal copper/fibre broadband era. Comparison with the California gold-rush isn’t too wide of the mark.
It is reasonable to suppose that while private money is flowing in and BT is pushing ahead at flank speed, the government is content that its political target of 2Mbps for most of us will be met – indeed, even exceeded. That meaningless phrase “the best superfast broadband network in Europe” might even gain some credibility. And the price is the re-creation of monopoly. However, to apply the New Zealand remedy at this stage would upset the applecart: we should have done it years ago, spurred on by Digital Britain and by Pipe Dreams. But the policy-makers were blind to the threat and now is not the time to trigger a nuclear option. But we must all hope that before the nascent infrastructure competition is asphyxiated at birth we adopt a political and regulatory approach that will give us unfettered and open access to service providers riding on point-to-point fibre networks operated by any number of suppliers.
Are we at one with Mark Twain and his: “We live in hope and die in despair”?
Or can we cling to Paul McCartney’s: “We live in hope of deliverance”?
The Communication Management Association is part of the BCS - the chartered body for ICT Professionals. The CMA represents members of British-based businesses who in aggregate spend over £13bn a year on networked products and services.
The issues raised in this editorial will be debated during NextGen 11 (November 15th and 16th, Bristol) - the UK's premier platform for Next Generation Access activity.
|Last Updated on Wednesday, 02 November 2011 09:44|