Br0kenTeleph0n3

Following the broadband money

Posts Tagged ‘Sky

How Ofcom encourages network ‘slum landlords’

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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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Perfect storm builds for UK broadband market

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Healthy demand for broadband in the UK hides a viper’s net of problems that the government must address soon or fail its citizens.

The UK’s top four fixed broadband suppliers added 1.7 million subscribers in the past year, the firms’ quarterly results reveal, bringing the total some 16 million, a market penetration of 26% of the population.

However, in a submission to the department of culture, media and sport’s green paper on the upcoming communications act, the mobile network operators’ Mobile Broadband Group claimed 80 million mobile broadband users. The group noted that rapidly rising demand for data is forcing them into usage caps and throttling.

The big fixed broadband winners were BT and Sky who added 904,000 and 701,000 subscribers respectively.

The importance of a video component of the increasingly popular “multiplay” package is shown by the average monthly revenue per user (ARPU). Virgin Media led with £47.35, followed by Sky (£44.92), both almost twice the ARPUs of BT and TalkTalk.

Access to video content appears to be whetting an appetite for faster speeds.

Virgin Media says half its new customers subscribe to a service of 30Mbps or above. No doubt this is to provide enough capacity to run multiple services at once. Nearly two out of three of Virgin Media’s subscribers take a triple-play, and one in eight add a mobile service.

Sky, which delivers satellite TV, says 2.8 million (27%) its customers take a triple-play (TV, phone and broadband), a growth of 37% on the year. BT reports it now has 600,000 subscribers to Vision, its video on demand service.

If video on demand is driving broadband demand, Virgin Media is in a good position to take market share. Figures released by Ofcom this week showed that all of Virgin Media’s products provide speeds closest to their advertised headline speeds.

Virgin Media claims it can provide a 100Mbps service via a fibre to the cabinet (FTTC) network upgrade to a quarter of the UK’s homes, and that it is on target to pass almost 13 million homes within the year, half of which will have access to 100Mbps.

Virgin Media last month completed a successful test running its network at 1.5Gbps at London’s TechHub in Old Street, but this is unlikely to be offered to residential customers in the near future.

BT is continuing its own £2.5bn FTTC roll-out. It claims to pass more than five million homes, of which 200,000 have signed up. This gives BT a 4% penetration rate for its “superfast”, up to 40Mbps Infinity service. It is also claiming to be taking the lion’s share of new DSL or copper-based business, by 141,000 of 251,000.

Meanwhile, both TalkTalk and Sky are moving customers onto their own fixed networks as fast as they can to cut costs.

Poised market

The future development of the market is interestingly poised. On the infrastructure side, dozens of counties are waiting for BDUK, the government’s broadband funding agency, to loosen the purse strings to the remaining £400m of the government’s initial £530m earmarked for broadband not spots. However, BDUK appears to have gone into its shell, frustrating counties and community network operators that want to get on with broadband procurements.

The future market may also be affected by two court decisions this week. In the first, BT was ordered to block access to Newzbin2, an index of websites that serve illegal copies of film and video content. BT welcomed the decision, saying it affirmed its long-held contention that rightsholders need to go through the courts to assert their rights.

In the second, Meltwater, a news aggregation website, lost its appeal against an earlier judgment that its activities infringe the Newspaper Licensing Agency’s terms. According to legal commentators, this decision effectively makes copyright pirates of millions of people who browse the web.

Comment

The Meltwater decision is likely to increase pressure on the government to address the widely-praised Hargreaves report. Hargreaves’ key recommendation is to set up a tiered online market for licences for digital content.

Providing a fast, simple, cheap way for content creators to earn money from their work, without making them the indentured slaves of record companies and film studios, is likely to encourage many more to try their luck. If people can access this extra content cheaply and legally, they are likely to demand more content, and drive up demand for broadband.

Unless the government gives some leadership soon on both broadband infrastructure and content , it may find its overall goal of the best broadband network in Europe slipping through its fingers.

Written by Br0kenTeleph0n3

2011/07/29 at 17:00