Why is the UK so different? It just is but that’s an opportunity for operators

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 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.

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Everything should be made as simple as possible. . .

The debate about what’s going wrong with the broadband policy is becoming quite complex, messy and somewhat emotional.

For me, the key policy of making the UK the best “superfast” (meaning > 24 Mbps) broadband market in Europe is the right one. Delivering that in tandem with the localism bill and while supporting SMEs couldn’t be better. These are all things that get my total support – and I hear very few detractors (quite the opposite).

The rub for many people seems to be in the delivery – a matter of policy implementation and interpretation. A key example (totem?) is the framework which contains what appears to be little more than lip service to the policy – an opening few paragraphs that give the appearance of supporting the policy followed by a long list of qualifying criteria which, one by one, chip away at the goals until there is almost nothing left – even the stated objective of super-fast broadband seems to have been discarded, or at best re-framed, along the way.

There have been conspiracy theories that this is a stitch up between Government and BT but I don’t support that for one minute. To begin with, I suspect that the framework isn’t something BT would prefer to support but will pragmatically go along with as its what’s on offer.

Einstein is quoted as saying:

Everything should be made as simple as possible, but not simpler.

For me this is a case of a very complex problem that’s been reduced beyond the possible degree of simplicity – the framework assumes a level of homogeneity of technology, scale, business model, financing, risk, partnership and so forth that just isn’t possible – BUT it is much simpler to manage.

The original policy objectives appear to have got lost in a drive to find the optimal process – or at least the one that’s the least bother to oversee.

This isn’t a time for a difficult u-turn – this is a time for politicians to crack the whip and make sure the policy is implemented as stated.

There are very good people inside BDUK, and they didn’t suddenly switch off. Something has happened that group at the top – whether it was the change of management or the influence of KPMG but it is something that can be corrected – but time is not on anyone’s side. One or the other or both need refocussing, and very soon.

12p or a fifth-of-percent

The Broadband Stakeholder Group’s (BSG) Commercial, Operational and Technical Standards (COTS) working group has written to BDUK recommending that they find their way to supporting the development of framework to ensure retail service competition on next generation broadband networks.

This comes about two years after the Digital Britain team at BIS declined a proposal to do exactly that, feeling that it should be formed and funded by the industry at the recommendation of the BSG which, in turn, lead to the formation of the COTS process.

A year ago, when little progress had been made, a submission to the Technology Strategy Broad to build a market clearing system was also turned down, although that may have reflected the sometimes random nature of bidding to the TSB; one judge said the bid hadn’t understood the risks, a second said it fully understood the risks, while the third judge admitted they weren’t qualified to judge the bid.

Attempts to create a clearing system commercially also ran into treacle – enough written about that here already.

The reality is that it was always going to be necessary to create a wholesale marketplace for broadband services should the access market fragment as it has in most markets across Europe. It was obvious two years ago and its still obvious today.

If it were to cost around £1m to build a solution, it would equate to about a fifth-of-a-percent of BDUK’s £500m+ budget were the Government to have funded it.

Or, with about 8m premises in the final third, just 12p per customer were the industry to have funded it.

This really isn’t a big thing – other industries have done it – but, collectively, we seem to be unable to see our way around this.

This uncertainty is having a significant impact on the development of NGA in the UK. Where schemes are developing, they are largely doing it as vertically integrated networks - not out of choice but of necessity. This is bad for the industry and customers alike, and remains a major failing in the BDUK procurement process where an open-access model is legal requirement.

Lets top sweating the small stuff!

Why we should care about the US Internet “Kill switch” proposals

There is a proposal running through the US Senate at the moment which would give the President powers to shut-down critical internet infrastructure, the so called “kill switch”. Apart from any concerns at a distance we might have about free speech and rights, there is an equally big issue which may be more critical to our own homeland security.

In the dawn of time, the internet was a peer network where each organisation with a network they wanted to open up linked, or inter-netted, with others on an equal basis. Since then major providers have moved into a position of some power and the equality of peering has pretty much gone. Small providers often have to club together or pass through multiple hands to get to a universal audience, so a small number of US-based infrastructure items have become critical to us as well as Americans.

Casting your mind back to the Autumn of 2008, you might remember a few days when odd things happened on the internet, where you could Skype some people and not others or reach some websites but not others, while your friends and colleagues experienced the same but it affected completely different sites and services. This was caused by a spat between Sprint and Cogent in the US, where Sprint decided to shut-down its peering relationship with Cogent (see here for a reminder).

Because peering is no longer egalitarian, a significant amount of the UK internet traffic needed to pass through this peering point in order for UK internet users to reach UK services; that’s why you could skype some people and not others, and why some websites disappeared but not others, and depending which way you passed through the peering point determined which services you could access.

I’m quite sure that proposals passing through the US legislature will have more safeguards than they do in Egypt and I’m sure the US President will act more calmly than Mubarak is but surely our national security should be in our hands?

While our diplomats should be ensuring we have assurances and safeguards as the law passes through Capitol Hill, we should also use this time as a moment of reflection, to make sure we have an internet that we can always use and can’t be impacted by the decisions of others far away and beyond our control.

BT showing signs it’s worried about infrastructure competition

BT Wholesale’s Sally Davis was reported as warning the Government not to waste money on small rural broadband projects as a patchwork effect couldn’t possibly work (ISP Review article here). There is perhaps some irony in the example she gives – of the early railways not agreeing standards so they couldn’t work together, given that the railways did successfully put the canal’s out of business and a century later, with standards, multiple rail operators are still vyeing  for customers everyday.

Perhaps its mischief more than irony – after all, BT is heavily engaged in the NICC’s ALA work and with the BSG’s passive infrastructure group, both seeking industry accepted standards for interoperability.

On a more general point, wouldn’t it be very odd if a whole nation went in search of a solution and without any dissent they all came up with the exactly same answer?

And what is it about the telecoms sector that is so unique that means it can only function with a monopoly at its heart?

Properly functioning markets develop choice and variety. Some of those choices may be small, others large; some risk averse, some daring; some targeting niches, some a wider constituency – that’s what markets do and are.

And that’s why JON Exchange is being created – to provide a marketplace for a competitive market.

What the shift towards next generation broadband represents is the single largest threat to BT’s monopoly in its history. If a region opts for an alternative infrastructure its likely that, without some serious soul-searching, BT’s Openreach will lose that area for at least a generation. This has never happened before, so Sally Davis’ salvo is assuredly the first of many to come.

The Government’s job isn’t to defend one company against threats from a wider and naturally emerging market – quite the reverse. If the Government doesn’t grasp this opportunity with both hands there is a very real risk that it will be held to ransom each and every time the incumbent should invest.

A functioning patchwork market is exactly what we as consumers and electors need; its what the market needs – it just happens not to suit the one with the most to lose.

The hub of the argument

At the JON Exchange, we’re very excited by the Government’s announced strategy for superfast broadband today. The feeling that network operators would be used by Government as pawns to bargain with BT again I think is receding; confidence among network operators and builders that its safe to invest should be rising; and JON Exchange is ready to play its part.

The last Government’s first generation broadband policy led to early improvements in speed and geographical coverage but largely ignored the need for a competitive infrastructure. Competition has ever since been focussed on a fairly narrow service layer with infrastructure investments largely limited to sitting on top of BT’s cables, unpinning BT’s dominance in the market. There was a general sense that the Government used smaller, alternative initiatives as pawns to negotiate the deal they always wanted from BT.

The legacy of that policy is that we now have widespread but very basic infrastructure without a competitive market which would have ensured continued investment at the most basic level – in the physical infrastructure to our homes and businesses.

Today’s announcement by Jeremy Hunt signals a more balanced approach which should ensure a fair and competitive infrastructure market embodying diversity and innovation, and if successful will lead to market forces causing naturally occurring investment in the future.

By focussing on hubs as the gateway between infrastructure investment and service providers, the Government appears to be removing the assumption that BT’s exchanges and metro-nodes will be the default locations for new broadband investment. That’s not to say, of course, that BT will be excluded – I’m certain that they will win the opportunity to build and run significant parts of our future broadband ecosystem but the playing field feels like it has been levelled, giving alternative network operators an opportunity also.

The idea of a diverse and competitive market in any other walk of life is normally considered a good thing but the telecoms industry is largely used to a limited scope for competition, largely focussed at the service layer. Where it was permitted, competition generally flourished but the nature of competition even at these levels was often stifled by the lack of diversity in the basic infrastructure. The creation of a patchwork of infrastructures, stitched together around regional hubs and their offerings presented on an open marketplace is likely to change that forever.

Several years ago I called them Joint Open Network Hubs – JON hubs. Others call them village or community pumps. Whatever we call them, JON Exchange excited by the prospect of helping to draw together the various parts of the industry in a vibrant and exciting marketplace.

How successful would Finland’s broadband policy be here?

At the NextGen Road-show event in Edinburgh this week, Professor Michael Fourman gave a fascinating talk on the special challenges for delivering broadband in Scotland. At the heart of his work were some maps which very effectively demonstrated the impact the Finnish Government’s broadband policy might have on some of the more remote areas of Scotland as well as a GIS-based estimate of how much it might cost to deliver it.

Heavily summarised, Finland’s policy says that there should be a fibre back-haul connection within 2km of any community; and they define a community as an area containing at least 70 people per square kilometre.

I was left wondering how effective this policy might be across England and Wales, as well as Scotland.  I don’t have to hand the core network details that Prof. Fourman used to calculate the costs of delivering the policy nor the time just at the moment to build the shortest-distance spanning tree model he used, so I’ve restricted myself to simply looking at where Finland’s policy might reach that the market won’t.

Finland's broadband policy applied to England & Wales The map (click on it to see it life-size) depicts in green the areas which the policy would deliver a fibre to, and the black is the extent of market-led next generation broadband according to DCLG’s 65% NGA model. A first glance says “so what – doesn’t seem very impressive”. However this is where maps have the power to overstate a problem. Using the 2001 census, there would be 11,946,819 (don’t you love computer precision!) English and Welsh people who remained without NGA broadband when 65% of the UK was already enjoying it. Applying the Finnish policy reduces this figure to just 275,451 – or in other words, increases the reach of NGA from 65% to 94% of the population.

The Finnish broadband policy would reach 94% of the English and Welsh population

Of course this is academic without the costs that Prof. Fourman generated, but it is a powerful example of how the village pump model that Rory Stewart MP is advocating. So how many of these green areas are close to a Primary School, Library or GP whose existing broadband connections could be upgraded and converted into a Village Pump?

Ambition is the new agenda

Last Thursday I attended the Government’s Industry Day where they laid out their key policy framework and work programme for broadband and the internet. If you hung around just long enough to hear Jeremy Hunt, Ed Vaizey and Caroline Spelman speak, and with only one ear on what was being said while you rushed to submit your copy you might be forgiven for thinking this was another platform where the new government blames the old for a delay in delivering on a promise – BUT you’d be VERY wrong.

Before the election two phrases kept cropping up – “We’re in this together” and “Big Society”. For me, Thursday’s event was possibly the first time I’d seen a concrete example of what that meant in real terms. What was announced wasn’t a policy which handed large sums of money to a semi-state organisation to proscribe how better broadband would be delivered from on high. Instead we heard from Ministers explaining what their role was in defining and delivering the future, what we could reasonably expect from central Government, and what needed to come from others.

We heard how the Government will remove barriers to investment and create the structures necessary to support local communities in defining their own broadband futures, and how industry would be encouraged to support that process, enabling a smart division of skills that could solve all but the most intractable of broadband problems.

And we heard from a Minister with a vision of 50 Mbps symmetrical services reaching most people by the end of this parliament delivered by the combined efforts of Government, industry and communities. I suspect that sent a few shivers through Whitehall but knowing the people involved I’m sure they are universally excited by the challenge.

Starting immediately is a month long consultation seeking paper solutions to three paper broadband problems. These will be used to shape the Government’s support programmes, ensuring both commercial and community organisations receive the right kind of support in the right manner. At the same time, the English regions and the devolved assemblies are each being asked to construct a long-list of areas they want to benefit from next generation broadband. From this, Broadband Delivery UK (BD-UK) will announce the location of three real market testing projects in September and begin a tendering process to find the right mix of commercial and community players to make them a reality. From these projects they aim to learn about the impact of state aid, forms of broadband registration and demand stimulation, and infrastructure sharing open access models.

While this is going on, BD-UK will be negotiating with the EU towards a national state aid agreement which for the first time since dial-up modems were in short trousers will provide clear guidance to local authorities on what they can and can’t do.  State Aid legislation has been a bigger block to UK investment in broadband than almost any other, with state sponsored projects crippled by fear of challenge or paralysed by years of rulings before they can begin work. The first roadblock gone – and with it gone, a new process will be in place to unlock the public networks which already reach many of our most remote communities.

Secondly work will push ahead on infrastructure sharing including the opening up of BT’s ducts as well as other assets like the sewers and culverts. This is a knotty problem and not a panacea but an important element in making the UK an easier place to invest in. Second roadblock going.

With all this work hopefully complete – the lessons from the market testing projects learnt, infrastructure hopefully opened up, and state aid put to bed – the Government will announce the main programme of work next year to support local delivery of super-fast broadband, supported by what they termed “mid-level aggregation” to make it easier for the service providers to link to homes and businesses. This time next year we will be well prepared for the main challenge ahead.

Did I hear all the answers on Thursday?No
Does that worry me?Quite the opposite – I’m relieved!
Am I excited?Absolutely!

For the first time in a long while, ambition is back on the agenda. Whether we actually achieve at least 50Mbps symmetrically to every corner of the UK doesn’t matter nearly so much as the way it will change the shape and aspirations of an industry, and the people and businesses that it serves. The journey matters as much as the arriving, and we are on our way.

 
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