next generation broadband from pipe dream to reality ?

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Next Generation BroadbandFrom pipe dream to reality ?

Antony WalkerBroadband Stakeholder Group

www.broadbanduk.org

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Overview

• Broadband - looking back, looking forward• NGA – why it matters, why it is difficult, what it might

look like• The challenge ahead - getting it right

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Broadband – looking back, looking forward

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Looking back 2000 - 2008

Broadband development in the UK

0

20

40

60

80

100

2001 2002 2003 2004 2005 2006 2007

Percen

tage

 of h

ouseho

lds

0

510

15

2025

30

3540

45

£ pe

r Mb pe

r mon

th

Broadband Coverage

Broadband Take‐up

Broadband Price £ per MB permonth (indicative)

Source: BSG, Ofcom, Point Topic

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

European Commission Broadband Performance Index

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Actual and predicted compound traffic growth

Source: Cisco

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Future demand– 2006 BSG Green Paper suggested a level of demand from the

most bandwidth intensive households for both upstream and downstream services that would exceed the capability of existingaccess infrastructures

New video rich services will generate very short and intense bursts of demand for bandwidth, making peak access rates more important

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Business – future speed requirements [Source Point Topic]

Point Topic Broadband User Survey

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Capability and coverage of current broadband services

• ADSL coverage: 99.6% of premises– Headline speed: 8 Mbps down/ 0.8 Mbps up– Median speed: 5 Mbps down/ 0.7 Mbps up

• ADSL2+ coverage: (80% premises connected to an unbundled exchange)– Headline speed: 24 Mbps down/ 0.8 Mbps up– Median speed: 9-10 Mbps down/ 0.7 Mbps up

• Cable coverage: 49% of households– Docsis 2.0 Headline speeds 20 Mbps down– Docsis 2.0 Typical fastest speed 10 Mbps

• 3G coverage: 90% population live in postcodes with 75%+ coverage– HSPA headline speed – 7.2 Mbps down– HSPA typical speed – 1.3 Mbps down

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Reach of xDSL broadband

Source Ofcom

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Where the fibre is being deployed[Souce Point Topic]

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Fibre connections as % of total broadband, Dec 2007[Source OECD]

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Next Generation Access

Why it matters, why it is difficult, what it might look like

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

NGA – Why it matters

• Significant social and economic value• Fundamental for a knowledge economy• Enabling a low carbon economy

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Value attributes of next generation broadband

Up 0.7Mbps

Down 9Mbps

Speed

Fibre (FTTH)

Symmetric 20Mbps or more

Copper (ADSL2+)

Pro

ba

bilit

y Quality not just speed

• Greater consistency• Higher upload and download• Greater reliability• Lower latency• Lower error rates• Freedom from radio frequency

interference

Improving user experience and service capability

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Private value

• Saving time doing existing things (efficiency)• Doing more existing things (expansion)• Doing new things (transformation)

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Wider economic value

• Non-appropriable private value• Externality• Piracy• Network effects• Spill-over and virtual agglomeration• Competition• Resilience and adaptability

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Wider social value

• Educated citizens• Informed democracy • Cultural undertsnading• Community and inclusion• Privacy• Social capital, resilience and trust

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Cost benefit framework

Private costs:

(i) FTTC(ii) FTTH (overlay)(iii) FTTH (replacement)

Private benefits:

(i) Saving Time

(ii) Doing More

(ii) Doing new things

Non-appropriable private

Externality

Piracy

Network effects agglomeration

Competition in telecoms sector and wider economy

Resilience, adaptability and policy options

Excess burden of taxation

Educated citizens

Informed democracy and freedom of expression

Cultural understanding

Belonging to a community and inclusion

Privacy

Social capital, resilience and trust

Pseudo externalities

Asset price changes (if already captured under private cost-benefit)

Employment effects

“Competitiveness”

Private Wider economic Wider social Pseudo (not counted)

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Indicative incremental annual costs and benefits

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Other qualitative incremental costs (-) & benefits (+)

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Can the UK afford not to be a world class low carbon knowledge economy?

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

NGA – why it is difficult

• High costs• Uncertain revenues• Complex migration

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

The deployment cost of NGA

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5

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25

30

35

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Cumulative population

Dep

loym

ent c

osts

(GB

P b

illion

s)...

FTTC/VDSL FTTH/GPON FTTH/PTP

Total cost vs. percentage population coverage for FTTC/VDSL, FTTH/GPON and FTTH/PTP [Source: Analysys Mason for BSG]

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Deployment costs by area type

Source: Analysys Mason for BSG

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

A difficult investment at the best of times

• demand side investment incentives are weak –mature DTV market in the UK

• current access based pricing models don’t reflect costs– tiered pricing – peak rates, volume, quality

• potential for non-access based revenues uncertain– vertical integration– third party affiliate payments – traffic prioritisation

• Impact of financial crisis on ability of operators to invest and consumer willingness to pay???

• But growing competitive pressure – cable and mobile broadband

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

NGA – What it might look like

• Multiple technologies – copper, fibre, wireless• Multiple networks• Patchwork quilt• A widening bandwidth divide?

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Today’s broadband market (cable, copper and mobile)

Services

ISPsCable Mobile

Openreach

Cable

Fully vertically integrated. Owns and manages an HFC access network. Providing retail services to customers including on-net services such as VOD as well as high speed internet access

Openreach

Owns and manages the access network and provides LLU and WLR products to CPs on the basis of equivalence.

Internet Service Providers

Provide retail ADSL services to customers based LLU and WLR products from Openreach. Services can include on-net services such as VOD to a STB as well as high speed internet access. Six largest operators account for 95 % of the market

Mobile Operators

Five operators providing mobile broadband data services to customers via 3G HSDPA network. Although parts of the network are shared, MOs are primarily vertically integrated, offering on-net services as well as internet access.

Services

‘Over the top’ internet services provided by a multiple companies and organisations. Limited revenue flow between the service layer and the ISP layer.

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Tomorrow’s broadband market more complex?

Cable

NECable

wholesale

CPs

Mobile

Muni-wholesale

OpenreachMuni-

passive

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Getting it right

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Challenges

• Policy – Central government – Caio report• Regulation – Ofcom, EU – current consultations• Local action – Regional and local engagement

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

So

• Broadband matters today and will matter in the future• NGA will be difficult, but we need to get it right• Will require concerted innovative thinking across the

private and public sector

BROADBAND STAKEHOLDER GROUP From pipe dream to reality

Acting now for long-term competitiveness