Wanted: a viable model for fibre

Public sector or private?

As high-speed broadband access becomes ever-more important to economic wellbeing, the UK is facing a critical decision on how, and who, will roll out a national next-generation network to carry voice and data over optical fibre rather than copper wiring.

The big question is whether a massive government-funded rollout should be pursued to guarantee that this time everybody in the country gets internet access ­ – rather than just those close to a broadband-enabled exchange.

There is no shortage of expertise analysing the problem ­ – the challenge is deciding who will pay.

The body tasked with overseeing a transition to a UK fibre network is nominally the regulator, Ofcom. However, the government also set up the Broadband Stakeholder Group (BSG) in 2001, “to advise on the development and implementation of the UK’s broadband strategy”.

And in February, the Department for Business, Enterprise and Regulatory Reform commissioned a report from former Cable & Wireless chief Francesco Caio to review the barriers to investment in next-generation access (NGA), which was published last month.

The Caio report made a series of recommendations, the first being the development of “a framework for delivery of future broadband, setting out how the government would like to see the market or infrastructure develop, to provide all parties with a clear sense of direction”.

But the second recommendation grabbed all the headlines – ­ that the government should not publicly fund a large rollout of optical fibre across the UK, but instead carry out a set of policies that would “stop short of major intervention, but which might lower the cost of deployment for operators and facilitate investments in NGA nationally and locally”.

The Caio review was significant, said BSG chief executive Antony Walker. “It points towards multiple local fibre subnets emerging, like those we’ve seen in Scandanavia and the Netherlands, rather than a single monolithic fibre network,” he said.

But major concerns remain over where the funding for national rollout will come from ­ – a figure estimated by the BSG to be anywhere between £5.1bn and £28.8bn.

Yankee Group senior enterprise analyst Benoit Felten said there are problems with relying on the private sector. “Fibre business models don’t look very sexy – ­ they have limited revenues and high costs,” he said.

Ofcom last week started a consultation on progress towards next-generation broadband, but is treading carefully on the funding issue.

“It’s for the government to decide where public money is spent and we can provide advice on that, but we think it’s up to the private sector to invest where they see fit, at the right time and in the right location. There’s not sufficient evidence to justify widespread national investment,” said a spokeswoman.

But BSG’s Walker said the watchdog’s tone has changed. “Previously, Ofcom was usually focused on principles and conceptual issues, but its latest report concentrates more on practical implementations – ­ it’s a framework for action,” he said.

The urgency of making a decision was highlighted by the UK’s standing in a league table of fibre-to-the-home (FTTH) rollouts shown at the FTTH Council Asia Pacific Conference in July.

European nations such as Sweden and Norway registered more than five per cent of their population connected with FTTH. But the report covered only countries whose fibre penetration was above one per cent. The UK was absent from the table entirely.

Bringing fibre to the home

• Cable provider Virgin Media announced in May trials of 40Gbit/s network core links, to prepare for upgrades to customer bandwidth.
  
• In July, BT announced plans to invest £1.5bn in fibre connections for new housing developments, which initially means a download speed of 100Mbit/s.
  
• Ofcom has indicated a favourable regulatory framework would be put in place, which would not interfere with BT’s deployment plans, and a share buyback announced in May by BT has been suspended in favour of its next-generation network investment.
  
• BT has also said it will provide these new services on a wholesale basis to ISPs, and a similar commitment from Virgin Media to do the same with its network infrastructure might be required by Ofcom.