by Gabrielle Gauthey
We are on the eve of an evolution that is essential, and somewhat revolutionary, in the history of telecommunications: the transition from broadband to very high-speed broadband, made possible by the use of fibre in the access network.
This phenomenon is starting in several regions around the world. It is taking shape differently according to existing networks and local factors. In general, however, it’s more than an evolution: It’s a dramatic change in the level of planned investments and expectations on the return for the new services and in the applications. This transition will have very important consequences for industry, operators, and local governments, as well as for the development of the knowledge economy and the competitiveness of our companies.
What are the stakes, the opportunities, but also the risks of this coming evolution? What role can public action and in particular regulation take in guiding and facilitating this transition?
In Asia, Japan and Korea are the countries where very high-speed broadband is developing quickly. Japan has 10 million FTTB and FTTH subscribers as of mid-2007, growing faster than cable and even ADSL despite strict FTTH unbundling requirements. In Korea, VDSL is gradually replacing ADSL, and the government has set a goal of 5 million FTTH subscribers in 2007.
In the United States, rising broadband competition from cable operators is driving FTTH and FTTN network construction by incumbents and even local governments.
In Europe, where northern countries are for now the most dynamic, many projects are being launched by municipalities and also by private companies, including B2 of Sweden and FastWeb in Italy. A number of incumbent European operators including Deutsche Telekom, Swisscom, Belgacom, and KPN are also developing plans-mostly FTTN and VDSL.
France is also part of this trend. Over recent months, a number of operators have begun to deploy or have announced large deployments of FTTH. Most have been in Paris, but there are also some local government projects.
Before raising the question of public involvement, we need to weigh the stakes of fibre access networks for our country. We are talking about the local loop of tomorrow, which doubtless will eventually replace the copper access network. But we are no longer living in the same conditions of the 1970s, when the copper local loop was installed and financed through a state-run monopoly. So it is necessary to devise other investment models and to anticipate the potential risks they represent for broadband.
Initial assessments show that the cost of deploying a nationwide FTTH network in France would require a total investment of several tens of billions of euros, spread out over more than 10 years. It is quite unlikely that one operator alone could build such a nationwide project in a reasonable timeframe.
Passive infrastructure accounts for the bulk-70% to 80%-of network deployment costs. Particularly onerous are civil engineering costs-more than 50% in urban areas-as well as costs related to cabling buildings. But the cost of fibre is low, and the cost of active equipment will continue to decrease with mass deployments.
Based on the assessments, profitability could be reached not only in very dense zones but also in cities with a medium density-but only if there is a high degree of passive network sharing.
Sharing passive infrastructure appears to be the key to removing entry barriers and favouring an economical deployment of high-speed broadband.
Operators need continuity and predictability before committing to the large investments that we have mentioned. It’s important to give them a certain amount of assurance for an equitable return on their investment. Nevertheless, the high risk of re-monopolisation must not be underestimated and we must avoid a “wait-and-see situation,” which could lead to the deployment of nonsharable infrastructure.
Over the past four years, our country has benefited from a rapid growth of its broadband market, which has now reached 14 million broadband subscribers (of which 95% are served by DSL) as of September 2007. But compared to the United States, it is mainly a so-called “one platform” country. This acceleration is due to competition from alternative carriers, which have been able to sell increasingly attractive and varied services, basing their development on the unbundling of this essential infrastructure, the copper loop.
The stakes are high; it is quite possible that with the implementation of certain fibre architectures, there is a risk of turning back the clock in this competitive market.
It is our duty as regulators to now make the relevant decisions to facilitate the roll-outs on the best conditions by concentrating on the two remaining bottlenecks: the civil work and the last part of the line.
It is unrealistic to think that all operators have an equal start. France Telecom has a large amount of spare duct capacity, dating from when it was a state monopoly, which the operator can use to significantly reduce its FTTH deployment costs. This situation makes it possible for these ducts to be made available on a transparent, non-discriminatory, and cost-oriented basis to all operators deploying very high-speed broadband.
ARCEP is currently studying the feasibility and the relevance of this type of regulation. France would not be alone in studying this procedure. This is one of the subjects investigated by the European Regulators Group and that should be reflected in the review of both the recommendation of relevant markets and the directives.
Although they make up the largest portion, France Telecom’s ducts are not the only ones and cable ducts could be used as well. However, there is a lot of uncertainty about the availability of these ducts, and hence whether the measures would be sufficient, notably outside the most important cities in France.
This is why adequate sharing of the last part of the local loop is crucial inside the building but also on the horizontal segment.
Cabling the interior of buildings is an extremely important subject. An evolution of rules, even legislation should be considered so that precabling is required in new buildings and the cabling of existing buildings is made easier for operators. Of course, this should come along with rules granting the sharing of the fibre installed.
It is indeed doubtful there will be more than one operator granted access by co-ownership property. There is therefore risk of pre-emption of this facility by the first operator reaching the building. Who wants people to have to move to change operators? Sharing is therefore crucial.
Moreover, in many parts of the country it is doubtful both for technical and economical reasons that there will be from the start more than one operator rolling out its own fibre to each building. It is thus important that an access offer is granted higher in the network, at the optical node level by every operator on a symmetrical basis and at conditions that encourage what can be considered as co-investment. It is ARCEP’s duty to work in the future months with the operators and define more precisely what such reasonable access offers could be.
There are, of course, other important drivers aside from regulation that will affect the speed of the roll-out.
Local authorities have an important role to plays as “facilitators”: They can encourage the sharing of ducts when granting rights of way, lay ducts and rent them, avoid inefficient duplication of basic infrastructure on reduced geographical areas, facilitate negotiations with property owners, and ensure the fair opening of the new optical loop.
And last but not least, an adequate access to content, especially premium content, will be crucial. Next-generation access networks must be seen not as a threat but as a new opportunity for content providers.
We are at a crucial, exciting but decisive moment in the history of our country’s networks of the future. Over the coming months, let’s calmly open a debate in France in light of the European review to define the best conditions so that our country might keep in NGA enabled high-speed broadband the place it has reached in broadband.
Gabrielle Gauthey is a commissioner at L’Autorité de Régulation des Communications Electroniques et des Postes (ARCEP; www.arcep.fr), the French regulatory authority for telecommunications and postal activities.