The annual FttH Council Conference in Stockholm published it annual FttH/B league table for Europe which seems to perennially out of scope for having too little fibre connectivity to be counted. The UK is not alone, other major nations like Germany and France also struggle to make the grade. Heavy Reading also continue to predict that the UK won’t achieve what they call “fibre maturity” until after 2020. This precipitated a number of conversations, as it does every year – why is the UK broadband market so different?

So here are some of the conclusions.

UK customers like a bargain

Price is king and other factors are perhaps less important than in some other countries. This has driven our service provider market towards a “pile it high, sell it cheap” model” which relies on scale more than in almost any other market. Internet services are not alone in this – price comparison sites are prospering in finance, insurance, energy and the key and sometimes the only differentiator is price.

This characteristic doesn’t mean we are rational either. Complaints about the biggest ISPs are common but there are alternatives that offer a better customer experience or more consistent performance but they cost a bit more so we suffer albeit not in silence. Again the Internet doesn’t have a special place in our irrationality. We sign petitions to keep our rural post offices and village shops open but do all our shopping online or in a major supermarket because its cheaper.

Big is safe to its best?

An argument I regularly hear is that our public bodies are more risk averse than in many of the nations forging ahead in the FttH Council league tables. In acknowledging this, a seasoned civil servant explained to me that his view was that the UK is generally one of the most entrepreneurial markets in the world. A consequence of this, in his mind, is that public bodies can afford to be more risk averse, knowing that the market is likely to shoulder all the risk.

However, if this is true, it also means that public contracts are more likely to go to organisations that minimise risk, and in the access market that can only lead to one conclusion – creating a new market is clearly more risky than relying on an existing model.

Another perspective came from a professor of geography who has been studying civic trust across Europe. The resulting league table closely mirrored the FttH Council league table for the same year, suggesting there may be some correlation between civic trust and fibre investment. Admittedly this was a coffee conversation rather than a peer reviewed piece of research but there did seem to be a link between decentralised political systems resulting localism and investment in fibre – its on my list of things to look into one day.

Regardless of the background, it is broadly true that public contracts do go to large organisations in the UK, more so than in some of the countries.

Do we have a market?

Companies of every kind behave according to their nature, and the telecoms industry is no different. As a fresh-faced, newly elected MP, a now well-known politician explained to me that BT wasn’t a telecoms company – it was a monopoly that sold telecoms services, and that understanding this was a key to understanding their behaviour. He went on to say that their business was not about growing market share – they already had that – it was never to lose market share, and that because they already dominated the market they didn’t have to especially worry about customer and competitors being happy about it.

Agree or not, almost all countries have an incumbent operator that largely monopolies the access network. It might be argued that the larger the market, the larger the size of the incumbent, the more it has to lose so larger countries perhap rely more on the efficacy of their regulators if they are to develop competition. And it was the feedback about this that on the face of it is the most disturbing.

When I discuss regulation with alternative operators, they often aren’t especially concerned about whether Ofcom is a useful regulator – the consensus is that they are at best irrelevant to their business.

Most of the organisations I speak to don’t consider making complaints to Ofcom when they face what they feel is anti-competitive behaviour, and see the regulatory regime as something of a private dance between Ofcom and BT with little thought given to other operators.

As an example, one operator faced what they considered prima facie anti-competitive behaviour, their lawyer agreed, and certainly the case appeared to merit investigation. So they compiled a dossier and passed it to Ofcom, who simply replied that they would only investigate if the complainant provided all of the evidence. What might be the purpose of an investigation if the complainant has to provide all of the evidence?

This seems to be typical of Ofcom’s behaviour and why many alternative operators feel Ofcom is irrelevant.

So what?

Where operators are building fibre infrastructure they are typically seeing very good levels of take-up and low levels of churn – and this with limited or often no choice of service provider.

It may be true that UK customers like a bargain but they are also smart enough to differentiate between fundamentally different propositions if they’re presented in a digestible form. Gigabit in itself is of marginal interest to all but the most ardent geeks but never having to worry about where the bandwidth is going to come from and fixing the problem permanently are of wider appeal, especially in rural areas.

The perceived demand issue is not a real barrier to investment

Government’s preference for less risky solutions may be ebbing as we hear more supportive noises coming from Whitehall encouraging innovation and diversity. The alternative providers offer a specialist, fine-brushstroke solution to hard to reach areas which a broad-brushstroke framework can’t deliver.

It could be argued that if the final bits of the UK are to see superfast broadband investment it would be less risky to rely on specialist small operators than to ask organisations designed for scale to change their approach

Ofcom’s perceived irrelevance is a concern, not least for Ofcom. Whether its true or not, this perception is impacting investor confidence, and that is limiting the growth of fibre infrastructure. That said, it should not be an overwhelming concern.

The business case for investing in fibre exists – its proven abroad and its beginning to be proven here albeit after some entirely avoidable false starts

Its true that confidence would be improved if Ofcom engaged constructively in this part of the market but the market doesn’t vanish because they haven’t turned up yet, it just means the UK pioneers are likely to be a little more maverick and they’ll need to become smarter competitors – and this is beginning to happen!

Just as big operators use their strengths – scale, homogeneity, brand – smaller operators need to maximise their strengths – localism, customer care, flexibility and differentiation

And be optimistic!

Personally, despite the challenges, I’m more optimistic about the UK broadband market that I have been in some time. The signs are generally improving and I can now start to see a point when the UK will appear in the FttH Council league tables – it won’t be next year but the time is coming.

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