Br0kenTeleph0n3

Following the broadband money

How Ofcom encourages network ‘slum landlords’

with 16 comments

Because Ofcom’s regulations do not reflect the underlying technology change from time division multiplexing (TDM) to statistically multiplexed packet switching, those who control access to network-based services can and do behave like “slum landlords”.

This observation is contained in a response to an Ofcom consultation on how its regulations need to change so as to not discourage shared works, shared facilities or revenue sharing and rather support mechanisms for this.

Consulting firm Predictable Network Solutions (PNS) told Ofcom “The market and regulatory structure that has emerged is one that requires the monopolist to charge ‘rent’, and where there is no other measure than the rent that is charged, the result is a race to the bottom where monopolists become ‘slum landlords’ and fitness for purpose is entirely lost.

“Money is charged for access to the resource, not for the resultant outcome, and this attitude persists along the value chain, so that all the accumulated risk (that outcomes will not be achieved) is dumped onto the final customer.”

PNS said its work revealed “an emerging pattern that points to structural flaws in the UK telecoms market. In our view, these flaws constitute a substantive risk that many of the potential benefits to the UK of robust, reliable, ubiquitous and cost-effective telecommunications will not be realised.”

It ascribed this to Ofcom’s traditional view that telecoms is about “deterministic and centrally controlled” circuits rather than packets. “The created retail services are, essentially ‘purpose-for-fitness’, in that ‘you get what you get'; there is no specification of what is delivered, and it is the end users’ problem to find a way of exploiting whatever it is. It is this divergence of expectation from delivery that is creating large scale (and costly) hazards,” it said.

PSN said the current market structure has led to a focus only on the rate of financial return on capital investment. This has been to the detriment of service outcomes.

“Where there is fitness for purpose in the current system (eg TDM), it is fitness for a historical purpose, with no flexibility that would encourage innovation. A further consequence of this ‘rental’ model is there is no market for concurrent services to the end user.”

PNS said customers can switch access providers, but they cannot switch service providers, for example one delivering reliable streaming video, one VoIP and one general web access.

To reduce the risk of owning a network but no “tenants” (think Digital Region), incumbents had to work at “large scale”, and rip off competitors with high prices (think of the fight between BT and Sky over TV content) for access to the network.

This also affects wholesale customers. PNS noted that mobile network operators need to backhaul LTE traffic from small cells. TDM circuits are too costly, so they need to use DSL. “However, the lack of any guarantee of the transport characteristics of such connections (ie mass market DSL) makes their use in a RAN [radio access network] problematic, as the protocols employed were developed to work over TDM.”

PNS called for “an underlying carrier that can offer services that are appropriately isolated from each other and differentiated and guaranteed performance characteristics. A competitive market can then develop in delivering concurrent services over this infrastructure (including, but not limited to, non-discriminatory internet access).”

PNS recommended a regime where service providers offer a set of services with well-defined, quantifiable and verifiable outcomes. These could be offered equally well by competing entities, and other players could built further layers of service on top of them.

Note: Other responders were Ofcom’s Advisory Committee for Wales, Arqiva, the Mobile Operators Association, Virgin Media, Vodafone, and the Wireless Infrastructure Group.

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16 Responses

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    • What you point to is BT and VM offering the country’s five MNOs uncontended services, thereby emulating circuit switching on their Ethernet networks. It means they have to overprovision to avoid hitting service level agreement ceilings, thereby losing all the productivity benefits of multiplexing.
      The MNOs are a very special case. The rest of the UK enjoys the following terms and conditions for broadband from these suppliers.

      EE Broadband Network Terms for Small Business
      You can use Our Network to make and receive calls and use the internet through Our Broadband Services. If You have fibre Broadband Services, you can access the internet at even faster speeds. We will try to provide a high-quality Network to You at alltimes. However, We cannot guarantee that We will always be able to provide the Services. You should check whether you live in a Service Availability Area on Our website. The availability and quality of the Services are affected by a number of things such as the number of people using the Network and Your location. See points 2.2 of the terms and conditions.
      2.2. Your Transmission Speed will be affected by (but not limited to) the following: the operational and technical characteristics of Your Line and Your distance from the exchange; Your Address location; any change You make or deterioration in the Equipment; whether You have fibre Broadband Services; the time of day at which You use the internet; and Our traffic management policies which can be found on Our website (see also point 4.4 and 4.5).
      4.4. We reserve the right to manage Our Network in order to protect it for the use of all of Our customers. We may therefore apply traffic management controls from time to time. Those controls may vary if:
      4.4.1. You’re in Our Service Availability Area;
      4.4.2. You’re not in Our Service Availability Area but We are providing the Broadband Services through a wholesale provider; or
      4.4.3. You have fibre Broadband Services.
      4.5. Details of Our current policy are on Our Website. Your Plan Terms and the Price Guide may also contain information about Your Allowances (such as how much data You can use or how many calls You can make) and what We might do if You exceed Your Allowance, including but not limited to, moving You to a higher Price Plan if You exceed Your Allowance. We will give you reasonable Written Notice before We change your Price Plan.
      It’s also worth looking at these clauses:
      4.9.10. You must not operate, whether directly or through a third party, anything which routes or re-routes voice, data or other Services on, from or to the Network, including but not limited to anything used to forward or divert calls or data to another network(whether fixed or mobile) with the intention of reducing Your charges for the Services (or other services from a fixed or mobile network) without Our express prior written consent;
      4.9.11. You must not sell or attempt to sell Our Network or the Services to any third party without Our express prior written consent…

      From VM Business’s Acceptable Use Policy:
      7. Fair Usage Policy
      7.1 The Internet and Broadband networks are monitored to ensure that the available network bandwidth is shared fairly between all subscribers. Where excessive and prolonged use of the service by an individual subscriber is detected, constraints on that subscriber allocated bandwidth may be applied to alleviate congestion on the network for other users of the service.
      7.2 Where a Broadband bundled service contains a telephony calling plan or usage allowance, that plan will be subject to fair use. Where excessive and prolonged use of the service by an individual subscriber is detected, this might result in immediate suspension (with or without notice) or termination of service, or this part of the service, by Us (acting at Our sole discretion), with no prior notice.
      Service guaranteed
      All our Ethernet VPN solutions include watertight Service Level Agreements that give you complete peace of mind. Including:
      • Service delivery and availability.
      • Continuous 24/7 network monitoring with fault restoration.
      • Absolute confidence in our ability to meet these levels, which we
      demonstrate by building service credits into these agreements.
      ”’
      Our Ethernet VPN Service Level Agreement includes:
      Guaranteed Ready For service dates.
      24/7 helpline with a six-hour fault restoration guarantee, which includes any detected by us.
      Annual availability guarantee backed by service credits for any failure to meet these targets.
      See what you can do on your network
      Round trip delay less than 8mS.
      Jitter less than 1mS. 
      Packet delivery: better than 99.99%.
      I did find that VMB’s standard terms and conditions to be different: the website holds Version three, but downloading the PDF gives you version two. And I couldn’t find an actual SLA.

      Br0kenTeleph0n3

      2013/06/02 at 08:40

      • The MNO’s are not a very special case. The MNOs are not buying ‘broadband’ for their core network connectivity so quoting EE’s T&Cs is meaningless.

        Is this more the sort of product you should be discussing which the rest of the UK can and does have: https://www.globalservices.bt.com/uk/en/microsite/Global_Telecom_Markets/products/ethernet_connect_gtm

        Somerset

        2013/06/02 at 16:16

      • Oh, so the MNOs share the BT and VM’s Ethernet/IP resources with the rest of us? Are you sure? EE’s T&Cs provide ample evidence of PNS’s contention is right, and therefore highly meaningful. Please stop using this blog for linkbait to BT services. BT can discuss sponsoring Br0kenTeleph0n3 if it feels it needs the hits.

        Br0kenTeleph0n3

        2013/06/02 at 16:53

      • The EE T&Cs are for broadband end customers, not for circuits that MNOs use in their core networks..

        Somerset

        2013/06/18 at 13:58

    • Surely the MNOs use circuits that can be bought by anyone, and are, to connect businesses across the UK, Including broadcasters, mission critical production plants, warehouses and suppliers, banks, telcos etc. etc. All at more than £5/month.

      Google finds the links!

      Somerset

      2013/06/02 at 19:32

  1. Sounds like rubbish to me.

    How can we have such a well developed Ethernet market? And one the biggest roll out of FTTX and DOCIS3 if the above is true? Lots of operators have announced TDM closure dates.

    Neil McRae

    2013/06/02 at 09:10

  2. Over provision ? Absolute tosh!

    Neil McRae

    2013/06/02 at 09:13

    • Sounds like a fundamental non-understanding of network design and implementation!

      Somerset

      2013/06/05 at 21:50

  3. “PNS said customers can switch access providers, but they cannot switch service providers, for example one delivering reliable streaming video, one VoIP and one general web access.”

    There must be something wrong if we cannot do what has been going on in Vasteras since before 2006.

    http://www.designnine.com/news/content/how-does-15month-broadband-sound

    David Cooper

    2013/06/02 at 21:23

    • I suspect Vasteras could do that because it borrowed the money against future rates income, something the UK appears unwilling to consider as a way to finance NGA. If you have more details, perhaps you could let us know.

      Br0kenTeleph0n3

      2013/06/02 at 21:40

      • In 2000, Västerås was the first municipality in Sweden to form its own commercial company to build and operate an open urban network, and since then the company, Mälarenergi Stadsnät AB, has deregulated the broadband market by allowing the users themselves to decide which services they want.

        Somerset

        2013/06/02 at 22:33

      • Sounds like a good idea. If UK cities weren’t wedded to “free money” from European and UK taxpayers, the Superconnected Cities project wouldn’t be needed.

        Br0kenTeleph0n3

        2013/06/03 at 08:15

  4. […] and decline as the the rest of Europe – whether or not we leave. P..S. Thank you to Ian Grant and Br0kenTeleph0n3 for drawing my attention to the PNS […]

  5. […] Because Ofcom’s regulations do not reflect the underlying technology change from time division multiplexing (TDM) to statistically multiplexed packet switching, those who control access to network-based services can and do behave like “slum…  […]

  6. Money is charged for access to the resource, not for the resultant outcome, and this attitude persists along the value chain, so that all the accumulated risk (that outcomes will not be achieved) is dumped onto the final customer.Great article

    Gary Hera

    2013/06/18 at 11:49


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