Following the broadband money

Posts Tagged ‘spectrum auction

End game for traditional telco model

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The end game for the traditional telco business model is already in play.

On 12 February the European Commission cut €8bn from its €9.2bn broadband fund. This was money that telcos expected would be coming to them to spend on fibre networks.

The next day, the ITU said, “The move to IP-based communications is irreversible – and the timescales for business models, regulatory frameworks, development cycles and infrastructure investment in the internet world and that of traditional telecommunications may be dangerously out of sync.”

BT's Don Clarke - programming the network

BT’s Don Clarke – programming the network

And on Valentine’s Day, at the launch of its software defined network strategy, Huawei’s director of dolution marketing, Dai Libin, said telecoms operators “had to change their genes” if they are to survive. They can no longer afford to provide ever-faster performance if they cannot also reduce costs the way the computer industry has, he said.

That same day saw the official launch of B4RN, the community-funded point to point fibre to the home network in rural Lancashire. B4RN customers get a nominal 1Gbps symmetric service for a £150 connection fee plus £30/month, which you can halve if you want to give up your BT phone line and rely on Skype for voice calls.

In contrast, BT’s up to 330Mbps fibre on demand service, due out in spring, will cost £500 to connect and £38/month, plus a distance-related fee averaging £1,000. And it will be available only in BT’s fibre to the cabinet footprint. And you’ll have to hold on to your £15.45/month phone line.

Some at BT are certainly alive to the threats. Last October BT told ISPs about its new Multiservice Edge (MSE) roll-out that will see more than 500 data centres installed around the country on the “edge” of its network. This is to cope with greater consumer demand for data services, it said.

MSEs will give BT Vision subscribers a better quality experience because it cuts down the distance signals must travel. It will also improve subscribers’ experience of Netflix, Facebook, YouTube and other “over the top” (OTT) services too.

BT is also deeply involved with ETSI’s effort to standardise how certain network functions are virtualised; Don Clarke, BT’s head of network evolution innovation, is the working group’s technical manager, largely because he’s been studying the problem for the past two years.

Virtualising the network means that networks will be programmable. According to the pitch, it will be quicker and cheaper to provide and change services because all the devices in the data centre will be virtual machines and will run on very fast industry standard servers. Provisioning and changes will be done via a dashboard rather than physically patching cables and using command line instructions to install and set them up.

This situation pretty much is at least partly true already for core networks, if only because Cisco so dominates this market that it is effectively the industry standard. But this ETSI network function virtualisation (NFV) initiative is really about increasingly that agility across the entire network, even right into the home.

Clarke says his team wants to finish its initial work within 18 months. Telecom standards can take years or even decades to establish, so this urgency suggests a penny has dropped somewhere.

This software defined networking and/or NFV heralds so many changes in the traditional business models of equipment vendors and telcos that we could be at what the gurus call an inflection point. It is like the meteor that some say wiped out the dinosaurs.

It’s not the only source of change. So many subscribers are giving up their fixed line services for mobiles, or taking up cheaper offers from unbundled local loop operators like Sky and TalkTalk, Ofcom is reportedly toying with the idea that the duopoly enjoyed by BT and Virgin Media should end at the kerb rather than at the wall plug inside your house.

This could make it easier for new fibre network operators like B4RN and Gigaclear to compete with BT and VM (and may be partly why VM was sold to Liberty Global, a US-based European cable TV operator). This is because the home owner could, as they do in Scandinavia, dig his own trench to the kerb and connect to his service provider of choice. This would save the operator a lot of time, hassle and cost, around £100 per household.

There is already a robust public interconnect standard (Active Line Access), so in theory this should not be a problem.

However, BT is the monopoly fixed local access infrastructure provider in two-thirds of geographic UK. The reserved 800MHz mobile licence currently at auction will provide only a 2Mbps indoor connection. So for fibre to the kerb to happen on large scale Ofcom would have to revise the terms of BT’s physical infrastructure access (PIA) product. PIA’s costs, terms and conditions meant that none of the eight other network operators invited to join the BDUK purchasing framework for next generation access in rural areas was able to make money in competition with BT.

We can be sure BT (and other incumbent telcos) will continue to fight for its monopoly while building its replacement network. But will it run out of customers and money before the new network is fit for purpose?


How the UK can save billions and get ubiquitous high speed broadband quickly

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Want ubiquitous high speed broadband access on the cheap and still meet the EU’s targets?

Scrap the upcoming spectrum auction, give the 800MHz and 2.6GHz spectrum at stake to Arqiva and let the present and future operators rent it.


Written by Br0kenTeleph0n3

2012/01/09 at 22:19

Ofcom ignores business needs in 2012 work plan, but hints at an independent Openreach

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Mobile and broadband are Ofcom’s key targets for next year, but there is not a word about dark fibre, the product most desired by business network users, in its draft work plan for 2012.

Ofcom said its framework requires BT to provide access to its physical infrastructure (PIA), including sub-loops, ducts and poles, so that other providers have the option of investing in NGA.

It also requires BT to offer virtual unbundled local access (VULA) to its next-generation fibre infrastructure, so that other providers can compete with BT to sell superfast broadband services to consumers.

Both of these statements from Ofcom’s work plan mask serious reservations among business users and would-be competitors to BT.

According to GEO’s chief executive Chris Smedley, the usage restrictions on PIA do not apply to BT, and together double the breakeven period for next generation investments compared to BT’s reported breakeven period.

The Communications Management Association, whose members buy some £13bn of communications goods and services a year, has for years called for Ofcom to insist that BT offer dark fibre, but Ofcom has repeatedly said there is no apparent demand for it.

Ofcom says it may look at dark fibre in its planned review of business access, due late in 2012, but did not mention it in its draft work plan, which is open for public comment.

In the absence of dark fibre, the CMA has called for structural separation of Openreach, BT’s inforastructure division, as the country’s single physical network operator.

However, Ofcom CEO Ed Richards said recently that it would require BT to supply customers with different wavelengths on its fibre rather than the fibre itself.

But in a speech on next generation network investment, Richards held out the prospect of a single converged fibre broadband network that carries voice ‘over the top’.

“This would of course be a significant change for both BT and competitive operators alike and would have to be considered very carefully,” he said.

In the meantime, Ofcom’s priorities for the year include:

  • Auctioning and clearing the 800MHz and 2.6GHz frequency bands for ‘4G’ mobile use
  • Review video on demand regulations
  • Make sure the 2012 Olympics has the spectrum it needs
  • Enable the copyright provisions of the Digital Economy Act.

Also on the wish list are to promote competition and investment in high speed broadband, business connectivity and voice markets, to ensure consumers can understand what they are buying, make it easier for consumers to switch suppliers, and to see about “regulating content”, which is code for stamping out online piracy and blocking or taking down websites with offensive or illegal material.

Written by Br0kenTeleph0n3

2011/12/09 at 15:43

Spectrum games are over, Ofcom tells UK MNOs

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The UK’s mobile operators, Vodafone and O2 in particular, may have been too clever by half in threatening to litigate their way through the proposed auction for high speed broadband frequencies.

Ofcom CEO Ed Richards told the European Competitive Telecommunications Association (Ecta) regulatory meeting yesterday, “some major companies will have to reflect upon whether they have inadvertently jeopardised the benefits of objective, independent regulation in this area by virtue of their willingness to game the system.”

Richards said he recognised the need for companies to defend their commercial interests and to use the law to do so. But it had been “very disappointing” to see how far the incumbent mobile operators were prepared to “entangle this process in litigation or threats of litigation”.

Richards said that only a few weeks ago, the department of culture, media and sport, which oversees communications policy, had realised “the stance of the operators made it harder for important decisions to be made and implemented”.

This may be unfair; culture minister Jeremy Hunt and communications minister Ed Vaizey are both said almost 18 months ago  they hoped the MNOs would not turn to the courts but cooperate with government in creating a vibrant 4G mobile market.

Richards said, “This may well be a consideration as British lawmakers consider their approach to a promised new communications bill for the UK.

“I am sure legislators would be all too willing to accept an argument which returns power in such matters to politicians, in light of the apparent inability of the current model to make timely decisions where the national interest is at stake.”

Richards was speaking ahead of Ofcom’s imminent release of the terms and conditions for the auction of 800MHz and 2.6GHz spectrum, the so-called 4G frequencies, now delayed until mid-2012. These will permit local operators to introduce high speed mobile broadband services in urban and rural communities.

The threat of litigation and the need to free up 800MHz frequencies has delayed the auction to the point where the UK is now far behind competitor economies such as Germany and France in 4G mobile roll-outs.

While the lack of cheap 4G handsets has minimised the gap up to now, this is less and less the case. It has also dampened projects to explore the use of LTE (Long Term Evolution) as an alternative to copper in local access networks.


Written by Br0kenTeleph0n3

2011/12/02 at 08:00

UK faces £1bn bill for delayed 4G spectrum auction

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Delays to the 4G spectrum auction have cost British businesses £732m a year, and the latest three to six month delay will add between £183m and £366m, a policy think-tank says.

Open Digital, an independent policy think-tank, said the UK was losing competitive ground to a host of European and other countries that have already allocated 4G spectrum.

The extra speed offered by 4G could save 37 million business hours worth £732m a year, Open Digital calculated.

The UK was four years behind the Nordic countries and three years behind the US in 4G roll-outs, the think-tank said. This has allowed their businesses to save time and money by using high speed mobile broadband to do business and develop new businesses.

“Visitors to Britain will first notice London’s lack of 4G mobile data when they arrive for the Olympics next year,” said James Firth, report co-author and CEO of Open Digital.

Several industry observers, including Three CEO David Dyson, have warned that UK’s mobile networks will run out of capacity by the Olympics. Last week O2 said it was spending £50m to boost capacity for the Olympics.

Firth welcomed the £150m extra for rural mobile roll-out promised today by the chancellor, George Osborne. Osborne said this would help the country to expand mobile coverage from 95% to 99%.

But Firth noted that the auction for 4G spectrum (800MHz and 2.6GHz) was not expected until mid-2012, and for network build to start only in 2013,and not finish until 2017.

“4G has significant advantages – better spectral efficiency so you can cram more bandwidth in the same amount of spectrum and far less noticeable performance penalty when you’re a few miles from the transmitter, so rural ‘fringe’ communities should see far faster mobile broadband.

“But the auctions for 4G spectrum are yet to be held, so it’s probably a good second-best to widen the 3.5G coverage now, while we’re waiting for 4G,” Firth said.

The on-going lack of 4G has meant UK businesses has not been able to take full advantage of new technologies such as cloud computing, he said.

Firth called on Ofcom to adopt more ambitious 4G roll-out targets and for the government to acknowledge the massive benefit to the economy from 4G mobile data.


Written by Br0kenTeleph0n3

2011/10/04 at 00:01

Use spectrum cash to boost mobile coverage, says Ofcom panel

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The government should use the money from the upcoming 4G spectrum to extend mobile coverage in the UK, Ofcom’s Communications Consumer Panel says.

The panel said the market has already delivered maximum economic coverage for 2G voice services. 3G and new 4G services were unlikely to extend existing coverage, and it doubted that consumer and small business needs would be met.

This was “creating significant problems” for small businesses, as well as the three million people living in not-spots, the people passing through them and passengers on the rail and London tube networks, it said.

The panel wants Ofcom to consider imposing coverage obligations on the auction winners for each of the UK nations and some English regions, or to retain money from the spectrum auction to fund a reverse auction run to upgrade rural coverage. “Operators that successfully bid for this should be required to provide roaming for these areas,” the panel said in a statement.

Panel chairman Bob Warner said most places that were mobile not-spots 10 years ago were still not-spots. “The spectrum auction presents perhaps the only chance we have in the next decade to improve coverage in the nations and for rural communities.”

The present auction foresees mobile coverage of 92% of the population. Cumbria and Border MP Rory Stewart persuaded parliament to vote unanimously to extend 800MHz mobile coverage to 95%.

He estimated the cost of the 1500 extra towers was only some £215m. This was tiny relative to the improvement in the quality of life and potential economic impact on people who were now excluded, and a fractin of the £3bn Ofcom hoped to raise form the auction, he told parliament.


Written by Br0kenTeleph0n3

2011/07/26 at 09:21

Networks fight Ofcom over calls between them

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The Competition Appeal Tribunal has asked the Competition Commission to judge an appeal by BT and UK mobile operators against an Ofcom plan to lower the costs of calls between networks.

Ofcom said in March it wanted the so-called mobile termination rate to drop from 4.18p (4.48 for Three) to 0.69 between 1 April 2011 and 1 April 2014.

Mobile termination rate caps (pence per minute)*

Source: Ofcom

Current rates until 01/04/11 20011/12 2012/13 20013/14 2014/15
02, Everything Everywhere
and Vodafone
4.18 2.66 1.7 1.08 0.69
3UK 4.48 2.66 1.7 1.08 0.69

The network operators claim that the regulator used the wrong formula to work out the cost. If the Competition Commission upholds the appeal, the cost of phone calls from one network to another will stay relatively high, pumping billions in operators’ coffers.

The extra cash could give the operators more latitude in bids for spectrum in the upcoming auction for frequencies in the 800MHz and 2.6GHz bands, the so-called 4G mobile bands. It could also help speed up investment in LTE (Long Term Evolution) technology for 4G networks.

Europe’s Digital Agenda chief Neelie Kroes has called on national regulators to drive down the cost of mobile “roaming” nationally and internationally to the cost of terminating landline calls.

Regulators use a variety of accounting formulas to calculate operators costs. Ofcom used a formula call pure LRIC (long run incremental cost). The operators say it should have used LRIC+, which includes “common costs”.

This would raise the operators’ claimed cost base and therefore the ultimate retail price Ofcom allows them to collect.

Written by Br0kenTeleph0n3

2011/07/04 at 12:28