Last week saw the publication of Francesco Caio’s Final Report into Next Generation Access which was commissioned by the Government in February [link to the full document on the BERR website here].
Whilst provision of residential networks is not currently part of Geo’s core business, the implications of the move to a more developed broadband infrastructure in the UK are critical to Geo’s business customers and overall levels of demand over the next few years. Here is our reaction to some of the Report’s recommendations.
The Positives
The Report contains a sensible list of initiatives for Government and Ofcom to take to encourage private investment in next generation access. In particular, we would support:
1. Initiatives to lower the cost of build-out;
2. The adoption of open access network models at the infrastructure level;
3. Establishing common standards for local open access networks (especially those being funded by public money); and
4. Reforming the business rates system.
The Report adopts the data about build-out costs from the recent Broadband Stakeholder Group’s report [web link needed here] without further enquiry or debate. The cost and other assumptions in this related report need a lot more work by the industry and Ofcom, who are due to complete their own survey.
Open access network models at the infrastructure level are, in our view, essential to the long-term future of a competitive broadband economy. This is exactly the model which Geo developed for its core business when it launched in 2004 and is the model we have developed with the Welsh Assembly Government for their £30m investment in a new fibre network in North Wales (FibreSpeed) that we are in the process of building for them (launches Jan 2009).
Geo supports regulation to mandate that the owners of existing or new optical fibre networks are compelled to offer access to that fibre to other service providers so they can in turn offer services to their customers. A competitive wholesale market (at the infrastructure level) is key to the development of the broadband market. History has shown that if those network assets are limited to the primary benefit of the company that owns them, their full value is not realised.
Reforming the business rates system (as it is applied to optical fibre cables) also represents a real opportunity to encourage investment in the deployment and use of new fibre. Fibre and copper cables are currently treated differently creating barriers to investment for fibre to the home - Government should either remove the tax or make it simpler and equivalent between copper and fibre.
Caution Needed
The Report has continued to suggest that alternative ducting methods are an important part of the overall solution. Whilst they may have a role to play, caution is needed here. As the operator of the capital’s sewer-based optical fibre network and a 3000km national network built next to the main gas pipeline network, Geo has direct experience of running these types of networks.
They are ideal for the requirements of large businesses. They are highly secure, hardly ever get damaged and are physically diverse from other networks. Also, these particular routes (built in partnership with the owners of the other infrastructure) are well suited to relatively fast, low cost deployment.
However, their equivalents in the suburbs and rural areas (if they exist at all) are, to our knowledge, unproven as being suitable for large scale optical fibre deployment to people’s homes (or the cabinets on their street-corners). For example, the sewers in a typical small town are much smaller and more difficult to work in than the large Victorian sewers in central London.
Also, we are sceptical as to whether the (numerous) owners of these other assets would be willing or able to accommodate the build and operation of a large new optical fibre network at the same time as continuing to deliver their services.
The Priorities Now?
On the other hand, the UK already has two purpose-built national residential telecom networks owned by BT (Openreach) and Virgin Media. The fastest and, in all probability, the lowest cost way of getting the next generation of broadband services to most people’s homes will be through the ongoing evolution of and investment in these assets.
If, as the Report suggests, these newly upgraded networks should be “open access” so that their owners have to offer optical fibre to other service providers (and where they are dominant, at regulated prices) then there is a lot of work for Ofcom to do. [More]
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