It’s a story I’ve told before but when the Irish Government Minister announced the liberalisation of their telecoms market in the 90’s he remarked that it was ironic that his first action in deregulating was to create a regulator. He went on to say that the mark of a successful regulator was one that understood it was a project with a clear goal, and that goal was to reach a point where the market no longer needed a specific regulator. He closed by saying that in his experience regulators don’t live up to that ambition, instead they become embedded in the market and therefore become part of the problem.

While it may not be appropriate for the UK Government to preempt Ofcom’s Strategic Market Review, it would, in my mind, be appropriate for them to remind Ofcom of that Irish wisdom, and ask them to ensure that whatever conclusion they come to, Ofcom plans for a market that no longer needs them.

Doing this would refocus the debate from a distracting and premature argument about whether BT should be broken up to one about what kind of telecoms market the UK wants and needs.

Several years ago, Brian Condon described three market scenarios:

  • Big Me
A single, major infrastructure operator upon which a services market relies
  • Patchwork Quilt
A diverse array of infrastructure operators, tightly sewn together to create a single, functioning market
  • Islands of Connectivity
A diverse array of uncooperative individualistic operators

At the moment the UK is drifting towards elements of all three – BT remains dominant, a number of the increasingly confident new operators are starting to cooperate, and there some loners who are going it alone.

Perhaps purist Darwinian free-market advocates might prefer that the Government allows these three groups continue to evolve until only the strongest survivor is left standing, but even this “do nothing” option will require a regulator to stay deeply embedded in the market, possibly for eternity, which is hardly a vote of confidence in a properly functioning free market.

If we think that telecoms naturally requires a monopoly of scale then Ofcom’s efforts should be on ensuring that BT becomes the sole marketplace over which everyone trades, and Government policy would be put in a position where it needed to support this by removing the current wave of encouragement for alternative operators. I doubt this has much political support on any front bench.

If we accept that “Big Me” is not ideal and want to maintain the concept of a functioning telecoms market then having isolated Islands of Connectivity is a bad thing. If that’s that case then Government policy and Ofcom’s regulations should be encouraging them to co-operate with the Patchwork.

And if a process of elimination leaves only the concept of a tightly knitted Patchwork of operators, big and small, then everything Government and Ofcom does should be focussed on developing that market. At the moment Ofcom is a bystander in the market – it’s not looking at what would make a market function efficiently and fairly for investors, service providers, customers or operators,

And I think it would be fair to say that while Government is supporting the development of market participants, little has done to support the development of the market itself. For example, Government support tends to limit its requirement for a functioning market to the State Aid rules to support open access, leaving it to the funded operator to work out how; there has been, for example, no formal support for the development of a marketplace which the operators Government is supporting could trade over.

So if we conclude that the shape of the UK’s market should be a dynamic and tightly knit patchwork, policy should be sharply focussed on ensuring that this new market develops to a point it can be self-sustaining, with sights set on a distant point where telecoms can be regulated alongside all other functioning markets, without the need for an embedded, specialist regulator. Even if this distant point is unachievable and theoretical, it must be better for everyone to have a market that needs ever lighter regulation.

Before we decide whether breaking up BT is a good thing or not, lets revisit that Irish wisdom – a regulator should be a project with a goal of reaching a point where the market no longer needs them.

  1. Chris Conder says:

    scuse me, where have you found government supporting altnets? their current policy seems to be patching up an old phone network. Aided and abetted by ofcom.
    Maybe the first thing any of them do is attend some physics lessons so they stop announcing that the uk is getting ‘fibre broadband’. If they are going to regulate they do need to know that you can’t get fibre down a twisted pair, or coax. They also need to know the limitations of copper, which they don’t seem to.
    They also need to know that the peasants don’t want satellites.
    With a diverse array of ‘uncooperative’ networks you will find that real competition emerges and breaks up the cosy deals, forming a truly market led product instead of the current superfarce. Companies will migrate to the new valleys, the market will decide. A cosy patchwork may not be the ideal solution? Don’t we want the best? If we do, we have to encourage the altnets in every way we can. Some will succeed, some won’t, but stopping them will stop innovation, and that’s the opposite of what this country needs. For too long we have been lulled into this false sense of security by the telcos. It was all lies. Bent statistics. They assured ofcom we all had ‘broadband access’ and yet a decade later we still don’t. Let alone superfarce. The money we pay ofcom would be better spent buying duct and laying fibre. They can’t regulate when they don’t understand the real facts, and when they believe reports commissioned by our monopoly incumbent it shows they aren’t up to the job.
    So again, of all the hundreds of groups who wanted to build altnets, how many actually got support from BDUK, and of those how many have actually made a connection live to a home or business? (by altnet I mean stand alone companies, not the eejits who did build and benefit BT)

    • Adrian Wooster says:

      I can’t wait til you start to really say what you think!! 🙂
      Personally I think the idea of a patchwork is ideal but I just don’t think it naturally happens by itself when operators are busy establishing and growing their businesses, and when established can be excused for trying to compete rather than cooperate. I think some external influence is needed that doesn’t just help establish a greater diversity but is able to fit them into a common framework that provides a common service layer. Just as LLU defined the one-to-many broadband market over BT’s copper network, we need a framework that enables many-to-many relationships over a diversity of infrastructures.

      • Chris Conder says:

        er, that’s th’internet innit? If you can get there then that is all that matters. As long as it is a fit for purpose connection, now and for the future. That is why its so wrong to do the cabinets on copper. It is not fit now, let alone in a few years. People don’t care how it works, they just want a connection that does what it says on the box. Only those near cabinets see any temporary benefit. So don’t tell me that ‘anything’ isn’t better than what they have allowed our fantastic phone network to become. Its now a pile of tat. If they can’t regulate and maintain what was one of the best phone networks on the planet, there is not much chance of them regulating a patchwork quilt. So the answer to ofcom and openreach, is,
        ‘either lead, follow, or get the hell out of the way’.
        Established altnets don’t worry about competition. There is more than enough work for all of them to do for decades. Customers are desperate. 90% of the land mass has limited connectivity. The only business that need worry is BT. They will lose customers in droves. You don’t have to spend £8million on a silly advert if you have a good product.

      • Adrian Wooster says:

        The internet is only one part of this. What about universal service obligations? Is B4RN ready for that? How will larger organisations get the leased lines and meld them into private cloud networks? Same for ISPs – how do they build services over hundreds or even thousands of disparate networks? Or do we go down the US route of vertically integrated operators where the retail costs are significantly higher than here? In which case there are a lot of organisations heading for the wall. What if that service provider was the NHS wanting a guaranteed service level for medical purposes? Or a power generating company that needs true real-time end-to-end communications or the grid starts to go off line? And are you arguing that voice becomes just an application? So all that regulation needs to change, including the handling of 999 calls. This is a massive shift.

  2. Chris Conder says:

    yes a lot of regulation will have to change, and it won’t be easy, I don’t dispute that. But with modern fibre it will be much easier to run and maintain a network. Far easier than patching up all this old copper and aluminum that has been neglected for so long. The horror stories abound, far worse than most realise. Its time to start afresh, and if its regulations holding us back, then what is the answer? Stick on old POTs because its too difficult to upgrade to modern infrastructure? Nobody likes change. Staying the same is the easiest. Let’s just sit back and watch the world go by. Or get some fibre? Moral and optic and get this show on the road. We don’t necessarily need lots of isps selling the same product. we need new providers providing modern connections. if that is what you mean then what is wrong with that? I would far rather there was the choice of one gigaclear or altnet connection everywhere rather than 100 isps selling me the same old copper crap that is throttled, contended and capped, and fails at peak times and doesn’t go the distance needed to reach all consumers.

    • Adrian Wooster says:

      Chris,

      ISPs don’t sell infrastructure, they sell services over the infrastructure, and in an uncontollably fragmenting world they have a challenging time. This has nothing to do with fibre v copper.

      Let’s say one operator uses GPON and PPPoA, another uses Ethernet with simple VLANS, another uses Q-in-Q VLANs. Multiply this 100 times, and each network is offering perhaps a few hundred customers. This can’t be the basis of a market.

      Until this problem is solved service providers simply can’t engage. Not solving it isn’t an option. I can’t see a world where a regulator and government choose to lose a market layer worth billions in favour of a discontiguous world of operators keen to be different.

      If we want something different then we need to find an answer to this as the easy answer is do nothing as it kind of world today, and altnets will be condemned to being a small fringe part forever.

    • Peter says:

      ‘Throttled, contended and capped’ When in the networks is that happening? I don’t see the connection between that and the method of delivery to the property. It’s important to get our facts right.

      Do we want a local monopoly?

      • Peter says:

        I was hoping for some explanation for those 3 words…

        Many companies will have fibre delivery from more than one telco, but I assume you mean more about the small business and residential properties.

        Would Chris be happy if we all had a FTTP connection from BT, it does not need to be from another company to give the connectivity she desires. Much of the infrastructure is in place for this. Just that the £numbers seem to be a problem.

        A monopoly in an area implies that there is no other supplier. How does the VM network fit into this discussion? Over half the UK properties have a choice that’s unlikely to change.

        Elsewhere in the UK your point about the issues with many small companies is correct. How much opportunity is there now the extent of the BDUK rollout phase is becoming apparent? The maps show lots of small population areas.

      • Adrian Wooster says:

        Generally speaking there is no business model for two fibre operators to complete for the same customers – the costs and reduced revenue simply doesn’t make sense.

        Even in the corporate market tails will typically be delivered by the access monopoly so to one degree or another any change needs to include all access customers, residential or business, big and small, retail and wholesale.

        Cable is an interesting one. It’s been far from a happy story in the UK until Virgin was able to consolidate what was in many places a failing market.

        But you are right, any market review must include the cable market.

        The whole significant market power mechanism may need to change if there is an assumption that local fibre operators are local monopolies, and that could make Virgin twitchy.

        My own view is that where operators are fully and demonstrably open or are successfully competing locally at infrastructure level there is no significant market power – and in a diverse world that could include BT.

  3. Peter says:

    Well said Adrian, makes sense. FTTC, that some do not like for some strange reason, has produced a product used across the world to give significant speed access to the internet. And it’s not just a few near to cabinets, it’s loads.

    What’s the issue with 999 calls?

    • Adrian Wooster says:

      Peter,
      The issue with 999 calls is that if we drift into a world where voice services are just an application, a caller can’t have any certainty that the call will complete and the call centres will need to consider how to geolocate callers.

      Equally if we drift towards a more diverse world, how will service levels be managed should 999 calls be considered more than just an application.

      In today’s relatively simple world this is broadly handled but whatever direction we take this is likely to evolve, and in a diverse infrastructure world it will need to evolve more.

      This isn’t a criticism, just something that will need to be thought about.

  4. Neil Fairbother says:

    Looking at this debate from an “infrastructure is good for the country” perspective, HS2 has a very dubious business case and is set to cost at least £80Bn. It will benefit very few people, if anyone.

    For less than half of that, £30Bn is the highest estimate I’ve seen, FTTH will benefit 65-70million people. Go figure.

    Further more, FTTH is future proofed. Once the fibre’s laid, it doesn’t need to be touched for upgrades – first 1Gbps symmetrical, then 10Gbps symmetrical, then 100Gbps symmetrical, simply by changing the stuff at each end.

    So – the questions are “How is this to be paid for? Who will pay? Who will deliver on a true USO?”

    History tells us. Telephony started with the entrepreneurial private sector, but to meet the USO for talk-band communications, the country did it – the GPO – a tax-funded Government department. Once complete, it was then privatised. We’ve come full circle – talk-band is no longer the driving force, broadband is. The “free market” has no interest in serving a USO – it’s not profitable. I doubt if “rural” has ever been profitable for GPO/BT.

    The inconvenient laws of physics tells us that the only tech known to mankind that can deliver consistent access speeds irrespective of distance is laser light through glass fibre. So we need to bin the asymmetric copper/fibre hybrid network that is talk-band’s legacy and replace it with a 21st century one.

    We also know that operating costs decrease with a fully optical network and services on a fully optical network are much more flexible – so for those folk such as Ed Vaizey and the Board of BT who think 10Mbps is all they need – they can have that. But for others who need or simply want 1Gbps or more, well they can have that too.

    A symmetrical FTTH network really will give this country the world’s best and will enable everyone to compete internationally, wherever they live, whether in the West End or the Western Isles.

    • Peter says:

      What seems to be lacking in these discussions is if (if!) £30M became available how a full FTTP scheme would be rolled out and the connection with existing telcos and their infrastructure. eg, would it replace and be usable by BT and VM etc. in a street?

      Detailed thoughts please!

      • Adrian Wooster says:

        Its interesting that almost none of the commentary that followed from my blog has been related to the shape of regulation that the item looks at, and nearly all about “copper bad/fibre good” or vice versa.

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