Guest blog: David Hilliard, Mentor Europe
David is the Chief Executive of Mentor. He is a trusted hard-core specialist with encyclopaedic skills on strategy execution – a down-to-earth practitioner, with over 30 years’ experience in telecoms, media, and service industries.
He has helped many clients setup new businesses – Energis, Eircell, Virgin Mobile, Three, 5 Television and Tele2. Other key clients include Airwave, BT, Cable & Wireless, Dell, eir, EE, Lilly, O2, lastminute.com, Vodafone and BSkyB.
Why the scarcity of Dark Fibre will strangle 5G…
Others have made this connection too. Recently Europe’s Backhaul Black Hole Looms Above 5G was published.
In June, BT were due to launch a Dark Fibre access product.
This was good news.
Since the news broke that BT had forced Ofcom to think again about the Dark Fibre obligation, the birth of DFA has been put off indefinitely.
In truth, we don’t know how long this delay will be – but we do know the investment cycle for each successive generation of mobile technology is getting shorter.
5G is kicking off now. Does this mean our nation’s 5G rollout will be designed and planned – without the benefit of Dark Fibre Access (DFA)?
Sharon White, Ofcom’s Chief has been in the press recently warning of the emerging litigation surrounding the 5G spectrum auction – and the serious risk that it causes further auction delays.
“In turn, this will prevent the UK being the global 5G leader”
I’m pleased Sharon sees 5G leadership as both important – but also at risk. For me, it’s not just spectrum litigation but also Dark Fibre that threatens our 5G position.
Is it just naive to say Ofcom need to do a better job?
After all, it was their plans for Dark Fibre that BT were able to pick apart; their spectrum auction rules too that are most likely to be challenged.
Or do we just have to accept that companies will follow their own interests and aggressively use every opportunity, including the courts, to tilt the table towards themselves?
Back to the Dark Fibre news.
We know there are pockets of Dark Fibre in metro areas up and down the country. But it’s not pervasive and it’s not joined up.
Put yourself in the shoes of the Mobile Operator’s CTO.
How can they cope with this patchwork of different suppliers? How utterly absurd it is to realise that BT Openreach will remain the only supplier in vast swathes of the country?
I don’t spend much time studying Ofcom consultations – but I was drawn to this one: Wholesale Local Access Market Review – Consultation on Duct and Pole Access remedies.
This is a very important document – and may even be the last-chance saloon to achieve a nationwide alternative to Openreach in time for 5G implementation.
The Ofcom consultation has now closed. So, ‘the great and the good’ at Ofcom are thinking about what to do – between now and January.
Now, a bit of history.
Ofcom has decided BT may have Significant Market Power (SMP) in both wholesale residential broadband access and business connectivity; amongst many other areas I would imagine.
If this is proven to be true, Ofcom can order this market power to be remedied in some way. Things like price controls – or more often – wholesale obligations.
Wholesale obligations are designed to make sure other firms can buy the network components BT uses and add their own elements to make a competing service.
Clearly, for this to work the network components must be equivalent to those BT use and must be priced in a way that the new firm can compete.
They have to be able to create a product that is equally as good as BT’s.
The allegation of SMP in business connectivity resulted in an obligation to offer Dark Fibre, hence DFA.
The allegation of SMP in residential broadband resulted in an obligation to offer wholesale access to Openreach’s ducts and poles – the physical infrastructure with which Openreach constructs its superfast broadband service.
A bit of a simplification – but this is the kernel of the situation.
In truth, there are many other wholesale obligations BT has had to follow – to support competition in residential broadband. But a Duct and Pole remedy is seen as particularly helpful for companies who want to take fibre all the way to the customers home.
If you are looking to invest in a fibre network to serve a specific market and geography, which way should you go?
Dark Fibre or Ducts and Poles?
Here’s the rub.
“Right now, each remedy is tied to a particular market”
So, if you are tackling residential broadband, you can buy Ducts and Poles. But if you are interested in business premises or 5G base stations, you must choose Dark Fibre Access.
A baffling contradiction.
Since Openreach Dark Fibre is off the agenda for the foreseeable future, what about Ducts and Poles?
Can we use BT’s ducts to pull in our own Fibres to serve 5G base stations?
The answer seems to be an unambiguous ‘maybe’.
For that to happen, Ofcom has to rule that Duct and Pole services can be used for ‘mixed-use’ networks.
The priority solution for 5G rollout has to be collaboration between alternative metro fibre providers – to give the MNO’s the key dense urban Dark Fibre footprint where they need it first.
But alternative fibre providers don’t cover the whole country, and MNO’s may have no choice but to use much more expensive – and less flexible Openreach Ethernet products – for urban and rural base stations.
So, could Ducts and Poles offer an alternative?
It’s workable, provided Ofcom set a viable price and approve mixed use. It’s crucial that competing fibre firms can rent duct space and install fibres for any customer.
It makes no sense to restrict the use of these networks to one service or market.
We all know economies of scope are as important as economies of scale for successful network businesses. If Ofcom really wants independent fibre providers to have viable businesses, they must be able to sell their fibre-based services to any customer in the geography they’ve built in.
There are some incontrovertible truths in the local access business.
Only two things matter – the cost per home passed – and the percentage of homes passed that take your service.
“So, it’s all in Ofcom’s hands”
Will Ducts and Poles provide a sound basis for more independent fibre investment? Will it drive companies to invest outside the most lucrative dense urban footprints?
Will they be free to sign up all customers – whether business or consumer, retail or wholesale, broadband or 5G?
And who else can buy the capacity they have created?
Ofcom must allow ‘mixed-use’ of Ducts and Poles and put forward a workable price.
This would enable the market to realise the benefits of genuine competition – and bring 5G to urban and rural areas in the first wave.
This is what’s needed and, without question, it would be truly meaningful for the UK.