As you probably all know by now, I was attending a conference in London last week organised by the Broadband Stakeholder's Group on the future of Next Generation Access Networks in the UK. The general position of the BSG, OFCOM, Openreach and several other speakers and attendees was: there's no reason to rush. This position was best summed up by the BSG's own Antony Walker who said:
It matters more to do it right, than to do it right now.
In a strange confluence of quotes, Yankee Group's CEO Emily Green wrote a blog post on the same day (but not having attended the event) in the aftermath of a trip in the Iberic peninsula. Asked about the timeframe at a dinner at the APDC in Lisbon, here's here response, as she relates in Europe tries to get its fiber:
Making the sweeping over-simplifications that both CEOs and Americans are (in)famous for, my answer at an APDC dinner event in Lisbon this week was this: “Every day’s delay is an added cost. Make it fast and fair. But make it fast.”
A good summary of this conundrum was made by my good friend Dirk who sent me this email following the press releases of the BSG:
The necessity question seems to be cleared. The new Scylla is "the profit in waiting just a tiny bit longer", the new Charybdis: "how massive will the losses be because of waiting too long".
Charybdis is the tough one. If we had a definitive answer to that question, the waters could be charted with relative accuracy, and indeed the whole point of the Plum study commissioned by the BSG was to determine a framework for analysing potential NGAN benefits. The report, however, made sure not to calculate these benefits, an exercice which I think could be interesting but would necessarily remain theoretical and thus open to debate and discussion.
I thought I would dwell on Scylla here. What is the benefit in waiting?
What was amply evident at the BSG conference was that the main hurdle, the one thing that ensures that no one wants to launch NGAN deployment in the UK at this stage is the lack of a guaranteed commercial business case.
Waiting 18-24 months, presumably, would then enhance that business case one way or another. Let's see how it might.
What we may reasonable expect in 24 months when it comes to FTTH is:
- a better experience of deployment in continental Europe: presumably France and the Netherlands (at least) will be significantly more advanced. This may mean a better assessment of costs and hurdles.
- a better experience of regulatory remedies: A longer time period to examine regulatory choices and their consequences when it comes to NGANs; although 24 months seem awfully short to me for the latter evaluations to be anything close to definitive.
- a better view of services enabled by FTTx and their potential benefits: As I remarked during my presentation at the BSG, the evolution of the service environment and the integration into the wider economy take a lot more time to emerge than just a couple of years after the first customers are connected. I doubt very much that this aspect will be less debatable in 2 years.
- a more accurate assessment of technological choices: the impact of technological choices on service evolution, flexibility, provisioning and perhaps regulatory regimes (the whole EU vs PON thing) Again, I doubt very much that 24 months would make a difference here.
- a lowering in equipment prices due to economies of scale: this is likely if the rest of Europe really gets its act together and deploys aggressively, but will it be all that huge?
Overall, and unless I'm missing something major, I don't think these will make a whole lot of difference. UK PLC may have a better handle on how much it'll cost, but that's not going to reduce the cost, and revenues will be as uncertain in two years as they are now. Ultimately what it comes down to is that infrastructure investment are long-term, and 24 months doesn't help much in assessing 240-month trends.
In other words, the business plan won't look any better in two years.
What will most likely happen in the UK within 24 months however is:
- strong consolidation of Virgin Media's customer base selling "fiber optic" services
- emergence of alternative municipal or regional NGANs (either PPP financed or fully private)
- increased penetration and partial substitution from mobile broadband
This, in turn, will push Openreach to deploy defensively, business model or no business model. By then, depending on how early or late they make their move, the best areas might already be served (at least by cable) and the network will be fragmented for good. I'm pretty sure that's not a good scenario for Openreach.
Whether it's a good scenario for the UK is harder to assess. I think some of the consequences of network fragmentation can be positive, assuming of course that the regulator puts its nose in there and ensures that details like interoperability are taken into account!
