At last week’s Westminster eForum conference on the future of Broadband in the UK, Stuart McIntosh, Ofcom’s Partner for Competition, explained how regulation for superfast broadband would be different from what we had seen before.
In the Telecoms Strategic Review, Ofcom was determined to press for infrastructure competition “at the deepest level possible”. It did this by encouraging Local Loop Unbundling, not least through massive reductions in the wholesale price. The higher levels of investment required necessarily led to a series of takeovers and mergers, and the result in the much-consolidated industry we see today. Ofcom argues that this has led to a much more competitive market, and that competition has led to greater investment.
For superfast broadband, however, they are taking a different view. Firstly, although there is no suggestion of regulatory “forbearance” for BT, Ofcom have said that wholesale prices can reflect risk. And because it sees the economics of fibre roll-out as being more challenging, Ofcom is putting more emphasis on “active” wholesale products , rather than “passive” ones – ie is expecting rather more service provider competition than infrastructure competition.
This leads to a series of interesting questions. How much margin will there be between the passive and active products (as this determines which is the better investment) ? What happens to the deployment of first generation LLU – are these now stranded assets ? If infrastructure competition was so successful first time round, but is not encouraged by favourable pricing this time, does this mean that we will get a less competitive market in superfast broadband ?
Speaking later, Andrew Heaney of TalkTalk insisted that unbundling was still the way to develop competition. It will be interesting to see to what extent he can persuade Ofcom of this.
But, anyway, to what extent will regulation will make a difference to BT’s FTTx investment. Isn’t it far more likely that BT would start blowing fibre very quickly indeed if it saw a big takeup of Virgin Media’s superfast broadband or saw the mobile operators bringing forward their LTE investments. However, neither of those yet seems to be happening in any market-changing way.
Tuesday, 1 December 2009
Friday, 18 September 2009
EU green light to state aid for rural broadband
The European Commission has adopted Guidelines that will help Member States to accelerate and extend broadband deployment, allowing public support to foster investment in this strategic sector without creating undue distortions of competition.
Competition Commissioner Neelie Kroes said: “ The Guidelines will facilitate the widespread roll out of high speed and very high speed broadband networks, enhancing European competitiveness and helping to build a knowledge-based society in Europe."
The guidelines distinguish between “white areas” (rural and underserved area) where support for broadband network deployment is in line with existing Community policies and “black areas” where at least two broadband networks are present and where State Aid in not required. Typically, there are also “grey areas” where there is a need for a more detailed assessment.
Last month the EC gave the green light for plans by the Welsh Development Agency (WDA) to construct an open, carrier-neutral, fibre-optic network to wire up 14 Welsh business parks in North Wales.
NetStrategics can help planners work through the detailed conditions in the Guidelines – contact us on huw.williams@netstrategics.co.uk
Competition Commissioner Neelie Kroes said: “ The Guidelines will facilitate the widespread roll out of high speed and very high speed broadband networks, enhancing European competitiveness and helping to build a knowledge-based society in Europe."
The guidelines distinguish between “white areas” (rural and underserved area) where support for broadband network deployment is in line with existing Community policies and “black areas” where at least two broadband networks are present and where State Aid in not required. Typically, there are also “grey areas” where there is a need for a more detailed assessment.
Last month the EC gave the green light for plans by the Welsh Development Agency (WDA) to construct an open, carrier-neutral, fibre-optic network to wire up 14 Welsh business parks in North Wales.
NetStrategics can help planners work through the detailed conditions in the Guidelines – contact us on huw.williams@netstrategics.co.uk
Wednesday, 9 September 2009
£2m available for Digital Britain projects
Funded by the Department for Business Innovation and Skills, the Technology Strategy Board (TSB) is planning to fund at least 80 projects on Digital Britain, with a total budget of £2 million. The TSB will fund 75% of feasibility studies proposed by SMEs, small or micro businesses, costing up to £33,000 of innovation in business models, applications, services and technologies.
But if you want to get your hands on this money, you’ll have to move fast – the closing date for proposals is noon on October 1st – and not a minute later.
Creditably, you only need a one page proposal, but you will need to make sure that is well written, concise and compelling, and that the market opportunity is clearly set out. Most importantly, you need to show how the proposal aligns with the scope of the programme:
· Economics of the network
· Economics of content and services
· Access, protection and enablement
One of the four priority areas which the TSB is particularly interested in is “Cost-effective deployment and operation of digital infrastructure”. This is looking for feasibility studies which offer ways of overcoming the cost barriers to next-generation infrastructure development, eg:
· Community initiatives to increase broadband access in a way that reduces costs of deployment
· Ways to reduce the amount of energy used to run telecoms networks
· Ways to reduce running costs of networks
The other priority areas are:
i. Enabling technologies for the internet: core functional technologies that help with areas such as meta-data management of content, revenue distribution and payment processing, quality of service control, personalisation and privacy, or management of data within the home
ii. Access to public service information: eg how to increase accessibility to and public engagement with online public services
iii. Applications and services - ”other”: eg new models for distributing and managing digital content, such as those based on metadata; trusted services models; personalised services and interfaces.
NetStrategics attended the BIS briefing session yesterday, and can help you pull together your proposals. Contact me at huw.williams@netstrategics.co.uk
But if you want to get your hands on this money, you’ll have to move fast – the closing date for proposals is noon on October 1st – and not a minute later.
Creditably, you only need a one page proposal, but you will need to make sure that is well written, concise and compelling, and that the market opportunity is clearly set out. Most importantly, you need to show how the proposal aligns with the scope of the programme:
· Economics of the network
· Economics of content and services
· Access, protection and enablement
One of the four priority areas which the TSB is particularly interested in is “Cost-effective deployment and operation of digital infrastructure”. This is looking for feasibility studies which offer ways of overcoming the cost barriers to next-generation infrastructure development, eg:
· Community initiatives to increase broadband access in a way that reduces costs of deployment
· Ways to reduce the amount of energy used to run telecoms networks
· Ways to reduce running costs of networks
The other priority areas are:
i. Enabling technologies for the internet: core functional technologies that help with areas such as meta-data management of content, revenue distribution and payment processing, quality of service control, personalisation and privacy, or management of data within the home
ii. Access to public service information: eg how to increase accessibility to and public engagement with online public services
iii. Applications and services - ”other”: eg new models for distributing and managing digital content, such as those based on metadata; trusted services models; personalised services and interfaces.
NetStrategics attended the BIS briefing session yesterday, and can help you pull together your proposals. Contact me at huw.williams@netstrategics.co.uk
Telecoms Regulation: Telecoms Regulation: Do Stephen Carter's numbers add up ?
Telecoms Regulation: Telecoms Regulation: Do Stephen Carter's numbers add up ?
My reply to LIndsey was:
"Hi Lindsey,
Thanks for your query – it’s nice to know people read some of the stuff we write !
Interesting that you point out that 27.2m is probably a high figure. Actually I received today Ofcom’s latest market data (see attached). That gives a figure of 23.5m fixed residential lines and 9.5m business lines.
As you rightly suggest I made the simplification of number of premises = number of lines. It could in fact be higher or lower – premises without lines, and multi-line premises. With ADSL, I think we are seeing fewer of the latter. If you do make the simplifying assumption, then the actual figure doesn’t matter much as it is a factor in both the revenue side (N*£6) and in the cost side, and so drops out.
Of course this has all become a little academic, as there is no prospect of the £6 levy being in place before the election, and there is little sign that the Conservatives (who I guess must be odds-on favourites at present) would give this priority.
So I don’t see any nationwide roll-out any time soon. BT will go as far as it can, and CBN groups will try to pick up the slack. My interest is how one can make business cases for those trials work – I think the involvement of local councils who may be able to justify including other benefits may be the way to crack it.
Happy to talk more
Huw"
My reply to LIndsey was:
"Hi Lindsey,
Thanks for your query – it’s nice to know people read some of the stuff we write !
Interesting that you point out that 27.2m is probably a high figure. Actually I received today Ofcom’s latest market data (see attached). That gives a figure of 23.5m fixed residential lines and 9.5m business lines.
As you rightly suggest I made the simplification of number of premises = number of lines. It could in fact be higher or lower – premises without lines, and multi-line premises. With ADSL, I think we are seeing fewer of the latter. If you do make the simplifying assumption, then the actual figure doesn’t matter much as it is a factor in both the revenue side (N*£6) and in the cost side, and so drops out.
Of course this has all become a little academic, as there is no prospect of the £6 levy being in place before the election, and there is little sign that the Conservatives (who I guess must be odds-on favourites at present) would give this priority.
So I don’t see any nationwide roll-out any time soon. BT will go as far as it can, and CBN groups will try to pick up the slack. My interest is how one can make business cases for those trials work – I think the involvement of local councils who may be able to justify including other benefits may be the way to crack it.
Happy to talk more
Huw"
Telecoms Regulation: Do Stephen Carter's numbers add up ?
Telecoms Regulation: Do Stephen Carter's numbers add up ?
Lindsey Annison sent me the following comments:
"Disclaimer: I am making no claims to being a mathematician or accountant, and like to keep things simple. ;o)
In your blog post about Carter's figures, you use Analysys Mason's figures of 27.2m. That is landlines IMHO not premises. I spent hours on the phone to ONS etc and was repeatedly told 20m homes and up to 5m max business premises. (This figure is very ahrd to determine as there are so many farms, SOHOs, home businesses etc apparently who could feature in both figures)
The AM figures imply at least 2.7m second/third lines but it would be VERY interesting to get the true number of multiple phone lines into single premises from BT et al.
If you repeat the figures using 20m, then it comes to £2bn to do the final third with FTTH and 36% take up. If each of those homes were paying, for sake of argument, £30/month eg £360 pa, the revenue generated in year 1 alone would be £2.6bn (by my maths). On a standard telco/infrastructure model, payback would be over 10 -15 years so I cannot begin to see how this can't be justified easily.
To continue, no-one in their right mind is going to go into a region/community and deploy fibre without passing every home/premises where at all possible. Lessons learnt from NTL!! So, whilst in year 1 take up may only be 36%, in rural communities such as ours, by year 2, you would have picked up the majority of users, except the digitally reluctant, and could possibly double the 36% without too much grief. That second wave of subscribers would only therefore need kerb/gatepost to home connections, with related costs approaching zero, particularly if the householder does that bit themselves as in the Nordics.
So, do you fancy expanding on the maths for FTTH and disproving that £28bn and showing just how feasible the final third is?
Regards
Lindsey"
Lindsey Annison sent me the following comments:
"Disclaimer: I am making no claims to being a mathematician or accountant, and like to keep things simple. ;o)
In your blog post about Carter's figures, you use Analysys Mason's figures of 27.2m. That is landlines IMHO not premises. I spent hours on the phone to ONS etc and was repeatedly told 20m homes and up to 5m max business premises. (This figure is very ahrd to determine as there are so many farms, SOHOs, home businesses etc apparently who could feature in both figures)
The AM figures imply at least 2.7m second/third lines but it would be VERY interesting to get the true number of multiple phone lines into single premises from BT et al.
If you repeat the figures using 20m, then it comes to £2bn to do the final third with FTTH and 36% take up. If each of those homes were paying, for sake of argument, £30/month eg £360 pa, the revenue generated in year 1 alone would be £2.6bn (by my maths). On a standard telco/infrastructure model, payback would be over 10 -15 years so I cannot begin to see how this can't be justified easily.
To continue, no-one in their right mind is going to go into a region/community and deploy fibre without passing every home/premises where at all possible. Lessons learnt from NTL!! So, whilst in year 1 take up may only be 36%, in rural communities such as ours, by year 2, you would have picked up the majority of users, except the digitally reluctant, and could possibly double the 36% without too much grief. That second wave of subscribers would only therefore need kerb/gatepost to home connections, with related costs approaching zero, particularly if the householder does that bit themselves as in the Nordics.
So, do you fancy expanding on the maths for FTTH and disproving that £28bn and showing just how feasible the final third is?
Regards
Lindsey"
Monday, 20 July 2009
Do Stephen Carter's numbers add up ?
The Digital Britain report proposes an annual fixed line levy of £6 to fund the "final third" of fast broadband rollout. So we thought we'd look at how far that would go.
What will the last third cost to build ?
· Assume 27.2m fixed line homes.
· A report for the Broadband Stakeholder Group by Analysys Mason (fig 5.1) suggested that FTTC costs for last 16% of homes are £1175/home connected, with 36% take-up assumed= 27.2*16%*1175*36%= £1.8bn
· For next 17% homes (taking us to 33%, the last third), cost per home connected is £573, take-up assumed 36% again;
· = 27.2*17%*£573*36%= £1.0bn
· So total “last third” cost = £2.8bn
How much money is raised ?
The Universal Service Fund comes to £6 * 27.2m = £163m a year.
Does that add up ?
We have a choice of approaches.
a) We could assume that BT would contribute to the last third at the same level as the first two-thirds, with the Fund paying the rest. Taking the 2/3 cost (£400 ) as a break-even per home connected, that would make BT’s contribution to the last third = 33%*26m*£400 * 35% = £1.3bn., leaving £1.5bn to be covered by the levy. Payback = 9.2 years. Plausible, just about.
b) Alternatively you could say that BT would earn revenue on the last third that it would not otherwise have done. If we allow the levy for 10 years we get £1.6bn, leaving £1.2bn to find from 3.2m homes = £370/home connected over 10 years = £3/month. Again just about possible.
So overall one could say that £6 was a fairly well judged level for the levy. The problem might come if other groups take some of the levy for one-off ventures which don’t then get integrated. Or if the take-up assumption is too high.
Personally, I’d say this still looks a risky proposition.
What will the last third cost to build ?
· Assume 27.2m fixed line homes.
· A report for the Broadband Stakeholder Group by Analysys Mason (fig 5.1) suggested that FTTC costs for last 16% of homes are £1175/home connected, with 36% take-up assumed= 27.2*16%*1175*36%= £1.8bn
· For next 17% homes (taking us to 33%, the last third), cost per home connected is £573, take-up assumed 36% again;
· = 27.2*17%*£573*36%= £1.0bn
· So total “last third” cost = £2.8bn
How much money is raised ?
The Universal Service Fund comes to £6 * 27.2m = £163m a year.
Does that add up ?
We have a choice of approaches.
a) We could assume that BT would contribute to the last third at the same level as the first two-thirds, with the Fund paying the rest. Taking the 2/3 cost (£400 ) as a break-even per home connected, that would make BT’s contribution to the last third = 33%*26m*£400 * 35% = £1.3bn., leaving £1.5bn to be covered by the levy. Payback = 9.2 years. Plausible, just about.
b) Alternatively you could say that BT would earn revenue on the last third that it would not otherwise have done. If we allow the levy for 10 years we get £1.6bn, leaving £1.2bn to find from 3.2m homes = £370/home connected over 10 years = £3/month. Again just about possible.
So overall one could say that £6 was a fairly well judged level for the levy. The problem might come if other groups take some of the levy for one-off ventures which don’t then get integrated. Or if the take-up assumption is too high.
Personally, I’d say this still looks a risky proposition.
Tuesday, 16 June 2009
Pole Tax, anyone?
The Digital Britain final report emerged yesterday to muted fanfares. We summarise our initial take on the key points here as they relate to telecoms.
The overall tenor of the report might be described as modestly interventionist, with "industrial activism" and "modernisation" as recurring catch-phrases. However, there are few signs of grand projects and those we were expecting - universal broadband now (or soonish), next generation broadband later, re-jigging the funding of broadcasting - are all quite modest in scale and funded from bits and pieces here and there. Of course there is a sprinkling of Czars, including Martha Lane Fox of former Lastminute.com fame as Champion of Digital Inclusion, though the report stops short of crowning them as such. There are no Dragons or other professionally grumpy reality TV stars that we could find.
In relation to telecoms, we see the following main objectives spelled out in the report:
Key proposals:
Winners:
Key proposals:
Winners:
Key proposals:
Key proposals:
In conclusion
On the face of it the report might be accused of a lack of ambition, particularly in setting the universal service criterion as low as 2 Mbps and with a relatively leisurely progress towards high-speed broadband. Perhaps understandably in current economic circumstances, it avoids extravagant spending commitments, or almost any spending commitments, to the extent that we wonder whether even its modest ambitions are realistic given the amounts proposed, for example the 50p/week/line tax in relation to the billions said to be required for next generation broadband. However, we'll return to that topic in a forthcoming post!
The overall tenor of the report might be described as modestly interventionist, with "industrial activism" and "modernisation" as recurring catch-phrases. However, there are few signs of grand projects and those we were expecting - universal broadband now (or soonish), next generation broadband later, re-jigging the funding of broadcasting - are all quite modest in scale and funded from bits and pieces here and there. Of course there is a sprinkling of Czars, including Martha Lane Fox of former Lastminute.com fame as Champion of Digital Inclusion, though the report stops short of crowning them as such. There are no Dragons or other professionally grumpy reality TV stars that we could find.
In relation to telecoms, we see the following main objectives spelled out in the report:
- Preventing exclusion - skills, affordability, motivation;
- Promoting access to current generation broadband (the broadband Universal Service Commitment);
- Ensuring that next generation broadband reaches otherwise uneconomic areas (Next Generation Final Third project).
Key proposals:
- Home Access scheme - content and skills development for children, young people and their families - currently in pilot in Suffolk and Oldham - £300m budget - plus industry initiatives from Microsoft, UK online (DfES), second-hand computer schemes etc.
- Digital Inclusion Programme - under the auspices of the Digital Inclusion Champion, backed by an Expert Task Force and in cahoots with the (already proposed) Digital Inclusion Consortium. It is not yet clear what they will do, other than "move toward" a National Plan for Digital Inclusion and, maybe, merge with various other bodies into a Digital Inclusion Agency at some later date.
Winners:
- The quangocracy, would-be Champions
- The "corporate responsibility" industry
- Digitally naive young people (if any)
- The poor (maybe)
- The digitally reluctant.
Key proposals:
- Revise universal service obligation (USO) legislation and license authorisations to extend them from narrowband to broadband
- Establish a "delivery body" (Network Design and Procurement Group) with powers and technical expertise to procure not-spot solutions on a technology-neutral basis - CEO to be appointed by the end of October 2009
- Twist the arms of the BBC Trust and BBC Executive to cough-up the money left over from under-spending on supporting elderly people and others as the switchover of TV broadcasting to digital proceeds
- Pass the hat around interested corporations, local authorities, regional development agencies and the like to get additional funding and contributions in kind
Winners:
- Not-spotters
- BT - will probably get most of what's going
- Mobile operators - might get some at the margins
- Virgin Media - might get some at the margins
- Local self-help initiatives (e.g. rural/village wi-fi/Wi-Max ventures) and similar
- The elderly and confused
- The TV-switchover-support industry
- The BBC - but they have known since at least the first PSB Review that the money would probably be ring-fenced
Key proposals:
- Impose a 50p/month tax (the Next Generation Fund) on every copper line (including coax) to fund extension of high-speed broadband (FTTx, or equivalent) to the "final third" of the country that would otherwise be uneconomic to serve. Operators will be responsible for collecting it and remiting it to Ofcom
- Allow operators to bid on a technology-neutral, reverse auction basis for tenders, which will be managed by the Network Design and Procurement Group (see above)
- Amend the Communications Act 2003 to make the promotion of investment in communications infrastructure one of Ofcom’s principal duties alongside the promotion of competition
- Crofters, farmers, second homers, rural retreaters, owners of moats and anyone else in the final third
- BT - will probably get most of what's going
- Mobile operators - might get some subsidy at the margins and may benefit from some increased defections from fixed lines
- Local self-help initiatives (e.g. rural/village wi-fi/Wi-Max ventures) and similar
- Probably not Virgin Media, as relatively few of the final third areas seem likely to be sufficiently adjacent to their existing footprint
- Anyone with a copper line (including, it would appear, a hybrid fibre/coax or fibre/twisted pair FTTC one)
Key proposals:
- Existing 3G licences will be made indefinite
- The Administrative Incentive Payments (AIP) structure (annual fees paid by spectum owners) will be adjusted to achieve greater fairness, though how is still to be determined
- The 800Mhz "digital dividend" from shutting down analogue TV, together with the 3G expansion band will be auctioned off in 10Mhz blocks
- Appointment of the Independent Spectrum Broker to manage the above (ISB - already in place - his report was published on 13th May 2009). It is proposed to implement his proposals.
In conclusion
On the face of it the report might be accused of a lack of ambition, particularly in setting the universal service criterion as low as 2 Mbps and with a relatively leisurely progress towards high-speed broadband. Perhaps understandably in current economic circumstances, it avoids extravagant spending commitments, or almost any spending commitments, to the extent that we wonder whether even its modest ambitions are realistic given the amounts proposed, for example the 50p/week/line tax in relation to the billions said to be required for next generation broadband. However, we'll return to that topic in a forthcoming post!
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