Its all about black and white
September 17, 2011 in Adrian's tech blog
Anyone who has been close to any public sector involvement in broadband is likely to have come across references to Black, White and Grey areas but I get the impression that the meaning is often not well understood; this is perhaps not surprising because there are in fact two models and rarely in my experience is the specific one being used named.
A bit of background. In 2009 the EU laid down some guidelines on where it was reasonable for a state to consider intervening in the broadband market; this introduced the concept of Black, White and Grey areas for classifying market failure in both NGA and basic broadband areas. A black area is generally one with a strong, competitive market; grey with a developing market; and White where the market has essentially failed. White does not necessarily mean there is no broadband, just no functioning market.
- A Black area is one which has two competing fixed line infrastructures. So in the UK that typically means areas where both BT and Virgin offer services.
- A Grey area is one where there is only a single physical infrastructure but it supports a wholesale marketplace. In the UK this covers any unbundled telephone exchange where there is no cable service, for example. Perhaps surprisingly this covers both Ofcom market 2 and 3 areas.
- A White area is one where there is no choice of physical infrastructure and no wholesale marketplace. This in the UK means Ofcom Market 1 areas with no other infrastructure.
The definition for NGA is broadly the same:
- An area with competing NGA broadband infrastructures would be an NGA Black area. In the UK that might mean an area with both Virgin DOCSIS3 and BT Infinity services, for example. Somewhere like Bournemouth with City Fibre and Virgin would also be Black.
- An NGA Grey area is where there is only a single NGA provider with a wholesale market. This means an area with only BT Infinity would be classed as Grey – but an area with only Virgin would not as they don’t wholesale access services.
- An NGA White area is one where there is currently is no NGA market available and no credible plans to deliver an NGA service within 3 years. This could include areas where Virgin is the only NGA operator and the footprint of many community projects like Alston Cybermoor as they don’t currently wholesale their services.
There are some major caveats in this!!
Only fibre-based fixed-line technologies are currently considered NGA technologies – wireless and satellite are currently considered “complimentary” and an area served by either is not considered as NGA Grey or Black. This means an operator using a Gigabit microwave technology could legitimately face state subsidised competition from a 40 Mbps FttC provider – FiWi is not currently protected! This may (should!) change but its a risk that needs to be born in mind today!
What’s an Area?
The EU guidelines recommend that an “area” isn’t defined as an exchange district as it may benefit the incumbent. So what is an area? At the moment this is something of a grey area, to stay with the theme. The UK government is providing local authorities with some latitude to choose between postcode areas and ONS “super output areas” (LSOA).
For a community thinking of building their own broadband solution, this loose definition may be critical. A postcode may only have 20-40 premises while a LSOA typically has about 400. A small community scheme may be protected from subsidised competition if the local authority decides to use postcodes as their defining area.
BUT if the LA uses super output areas as their measure, then any network which is much less than 400 premises could face a competitor legitimately subsidised by the BDUK framework.
Since BDUK are currently modelling communities as groups of around 100 premises, this seems rather contradictory.
The three years rule means that BDUK are able to focus their funding on the final third – the bit that BT haven’t formally announced. Their ambition appears to be to increase the NGA Grey and Black coverage from 66% to 90%. In the final 10% they want to ensure its at least Basic Broadband Grey (ie at least a single wholesale infrastructure).
NB: Big things you can’t ignore!
- Anyone considering building a network, whatever their motives, needs to make sure both BDUK and the relevant local authority are completely aware, not just of the currently footprint but the credible expansion plans covering the next three years. Failing to be on their radar may mean state subsidised competition and a battle over illegal state aid few smaller operators will be able to afford.
- A vague intention to offer wholesale services or simply making an offer to the market that is ignored is not good enough to be classed as “Grey” – you need to demonstrate a functioning wholesale market! Failing to demonstrate real wholesale agreements means your area remains “White” and could be legitimately subsidised. Working with a national franchise model like Broadway Partners and including an existing mediator that can deliver a proven wholesale market will certainly help both whether you’re at the planning or delivery stage!
- And communities going it alone need to know what their local authority considers to be an “area” – if its an ONS LSOA, make sure your project covers one!
The more you think about this, the more implications you will stumble across. This a very messy, complex, and shifting space. Whoever you are, don’t do it alone!