Thursday, January 17, 2008

Viviane Reding: how do we get to FTTH?

Viviane Reding delivered this interesting speech at a KPN Forum in Brussels, this week. Thanks to one of the leading Communications Breakdown MUVRs for providing the text.

I am very sympathetic to most views and proposals coming out of the EC, even if the new EU regulator (EECMA) could be a stretch (it remains to be seen how bureaucracy and harmonisation will be balanced).

Here are some quotes that I find particularly interesting, but do read the whole thing (it's not very long):
  • "(...) by summer in the mid-term review of the i2010 strategy, I will publish a new indicator of broadband take-up in Europe that compares national performance, not only on broadband penetration but also geographic coverage, speed, competition and price." This is important, since penetration only doesn't tell the whole story. Compare the OECD Broadband Portal.
  • "Further service development is likely to result in the need for significantly higher broadband speeds of up to 100 megabit per second or more." There is some room for debate - I have shown some scepticism myself, but 100 Mb/s must be the milestone to focus on. Among the many drivers will also be Web 3.0, which may have significant implications for both bandwidth and storage.
  • "I found a widely held view that the European regulatory framework and its emphasis on access obligations to open up competition is not at all the impediment to investment and innovation that some market players claim, (...)." Bravo.
  • "How we treat next generation access is therefore the single most important policy question in the telecoms sector today."
  • "(...) one of the potential attractions of functionally separating access networks is to make this incentive structure clearer and more operational." Mind you: functional, not structural. KPN is a good example of a telco staving off the 'threat' of structural separation by making functional separation really work (transparancy, good portfolio of services, happy wholesale customers).
  • "My worry is that such bundling will, de facto, stifle choice and innovation."
  • "Let me be very direct: except where the structure of the market has non-discrimination built into it such as in a well designed system of functional or structural separation the incentive of the telecom company is to design new infrastructures in a way that controls or chokes off competition."

Furthermore, she looks at the "three different models of network upgrade":

  1. FTTC + VDSL. "In terms of open competition however there are serious concerns that VDSL could be attractive to incumbent telecom operators, because they require competitive market entrants to substantially scale up their investment in switching capacity." But "(...) unbundling requirements at street cabinet would have to continue to allow competitive access operators to stay in business."
  2. FTTB + PON. "But the flexibility in the medium term may be more limited, not least because the end user equipment and the equipment in the network have to be compatible. Unbundling these passive fibre networks is therefore more difficult and the incumbent increases control." (...) "It is unclear that passive optical networks can be unbundled in the way that we see today on copper networks. This requires close attention and probably experimentation with novel architectures, using wave division technology to offer virtual unbundling as a more flexible alternative to bitstream access."
  3. FTTH. "The difficulty here is cost: existing ducts are often too small to allow multiple fibres to pass through and therefore major construction spending is required. This is by far the most expensive option." (...) "Point-to-point fibre deployment, meanwhile is rarely being deployed by private market investors. Certainly, this is due to its high cost, but it is also probably due to its openness. Where we do see it being used is in open access schemes initiated by municipalities, in cities such as Stockholm and Amsterdam. These schemes are local partnerships that take a pure 'infrastructure utility' approach by building ducts and end to end dark fibre and then leasing access to service providers. Clearly by so doing these cities have created for their business and citizens a future proof network infrastructure and for the investors in the networks a very long term stable return on their investment given that ducts and dark fibre have a potential operating life of several decades. Under these conditions of guaranteed open access circumstances, perhaps, infrastructural competition is less important than an open and high performance platform. However, the municipal solution seems unlikely to be relevant for all of Europe and could lead to a very fragmented landscape." This highlights the fact that the EC is not a friend of munifiber and is very critical about them. "Whichever infrastructure route we take forward, my conclusion is clear: regulation will have a role to play to keep networks open and to guarantee progress, efficiency and choice."

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