In Part I, the shape of cloud computing was considered and how the metaphor was perhaps not able to encapsulate the scale of change it may bring. Part II began to explore the impact the cloud may have on broadband services; that the evolution view of next generation broadband is largely wrong and will prevent society from realizing the full potential laid out in Part I. In this chapter, I start to look at how the original internet cloud – the underlying network – will need to change as cloud computing becomes mainstream, and how the telecommunications market will need to reconsider their whole approach.
The first challenge comes from the direction of change. While we are at a point in telecoms history where the technology is fundamentally changing, the real change is coming from society and their use of the Internet. I’ve been criticised before, and no doubt what I about to say will annoy some of my telecoms colleagues further, but the industry to date hasn’t been good at relating to people – at understanding what they want and creating base services moulded around them. To far too many telecos, customers are “revenue generating units” (RGU’s); a necessary source of income but something of an irritation to the smooth running of their expensive network. In Part II we considered this in the ways telecos use traffic shaping to minimise the impact of customers, and in the way the market has opted to differentiate its services by little more than brand.
This time however, the change in telecoms is coinciding with fundamental changes in society and its attitude to technology – it would be a brave (stupid?) company that ignored this as they prepare to invest in the most fundamental and expensive change in their industries long history.
In the UK, like many other countries, the telecoms market is fragmenting. It is no longer certain that a single incumbent operator will be the sole supplier of connections into our homes and businesses as a growing number of organisations using a range of technologies and business models begin to invest in first mile access networks. While its impossible to predict how far this fragmentation will continue, it has become an established fact which creates two key dynamics in the market.
Firstly, at a micro level network owners have to persuade people (not RGU’s) to migrate onto their new, wizzey, and very expensive networks – and that necessitates engaging with customers as never before. Nothing is a substitute for take-up – customers choosing to use your network. But as I demonstrated in Part II, next generation broadband isn’t really about speed – the only message beyond brand typically trumpeted in today’s ISP adverts but this is a message which misses the point of next generation networks.
To further unsettle the existing world order, the necessarily patchwork deployment of next generation networks means global advertising of nationally available services is no longer a viable model. The industry needs to consider how to deliver a differentiated service set which draws on the true characteristics of their next generation broadband networks, which chimes with societies transforming view of technology, and then they need to find ways to share that message at a local level using local channels rather than national media.
There are two quite contrasting international case studies which can be quite informative here:
- The first is the well known market town of Nuenen near Eindhoven in The Netherlands; this town has achieved immense take-up levels using very smart marketing techniques which are closely tied to the community. They laid out seven pillars for a successful fibre project where perhaps only three of which a traditional network operator can achieve. The key to their success was community communication, an “us feeling” where the community feels engaged, and a local set of services. Nuenen is an example of how to successfully engage with a community, and it can’t be faked.
- The second example is Slovenia, a country where the incumbent operator has met with very strong competition from a new entrant. The land confiscated by the communists was returned to the Church who no longer needed it. The money the generated from its sale was invested, at the request of parishioners, in next generation broadband but it was the local links which made it a success. No matter how much money the incumbent could invest in their technology and their traditional marketing message, they found it impossible to compete with locally delivered services which people felt related to them in some way.
The lessons from these two are easy to understand but difficult to implement – how can a major, national company truly engage with a community such that they feel engaged? I offer no answers here, although I am working with a number of organisations to develop models which may balance the economic imperative of a top-down model with the requirement to genuinely engage at a local level. With the progress being made, I hope to be able to add some important case studies here soon which show how macro and the micro business approaches can be married.
The second impact of market fragmentation is macro market co-operation. If customers are to see a wide choice of services with some certainty that they will be able to keep them when they move, network owners will need to co-operate. In many cases, they are individually too small and diverse for national service providers to deal with. Even in the case of some of the larger initiatives, major service providers are concerned that the additional value offered by next generation networks may be small when offset against the cost creating an interface to them.
Conceptually, however, this is the easy bit – something other markets have already dealt with long ago. The industry will need a single wholesale market which delivers two things – a series of aggregation points where service providers can expect to find sufficient potential customers, and a trading system which enables service providers, in the widest sense, to buy the wholesale elements they need to build flexible, differentiated services.
When I first started work on this perhaps three years ago the necessary structure looked strange until I did a search, replacing telecoms assets with widgets or cocoa beans. The problem wasn’t with the concepts but with the way we have become used to seeing the telecoms market with a dominant avuncular incumbent.
There are some details which are tricky, like identifying fungible and liquid assets which can be traded but thankfully this is something which can be solved – rather is being solved. Significant elements of the nascent next generation broadband market have come together to create what is being called JON – the joint operating network. This programme is in the process of turning the discussions within the Broadband Stakeholder Group’s COTS process together with work of standards organisations like the NICC into an open wholesale market for competitive next generation services.
The potential benefits of this move are immense – a vibrant whole sale market which celebrates differentiation and innovation, which provides customers with choice across the “reach-richness” spectrum, and is able to do this without the need for an interventionist regulator (there will of course still need to a regulator but one adopting a more auditory role).
So while the UK is still unable to be considered for the Global Fibre to the Home League Table because it doesn’t have the minimum market penetration, there are other structural things being put in place which I hope will help the UK not only accelerate its investment in fibre but perhaps more importantly also optimise the benefits of those investments for the industry, the wider economy and for people.