Dark Fibre: back to square one …

Openreach’s legal victory over Ofcom on Dark Fibre has thrown the network densification plans for Mobile Operators into disarray.

This obligation was supposed to remedy a market problem identified in Ofcom’s review of the Business Connectivity Market.

My recent talk on Network Densification and Dark Fibre argues that the only way for the independent Mobile Operators to tackle Openreach’s dominant market position – is to create a credible alternative supply of dark fibre.

The Competition Appeal Tribunal ruling only reinforces my belief that BT Openreach will definitely not make any constructive contribution in the near future.

So, why would the rest of us ‘sleepwalk’ into a situation where the industry has no practical alternative to Openreach.

It’s absurd.

But, first, what is the CAT?

The web site says … “The United Kingdom Competition Appeal Tribunal is a specialist judicial body with cross-disciplinary expertise in law, economics, business and accountancy whose function is to hear and decide cases involving competition or economic regulatory issues.”

So, the CAT upheld Openreach’s appeal against its Dark Fibre obligation. This means we won’t see the Dark Fibre products – originally scheduled for launch by October this year.

We don’t yet know if this is a delay – or a cancellation. But it’s not good news for independent Mobile Operators who now face high-cost Ethernet services to light up their new small cell strategies.

 

So where does this leave the industry – and Mobile, in particular?

Well the ALT.NETs, who invest in fibre infrastructure to compete with Openreach must be laughing all the way to the bank.

They argued the pricing formula Openreach had agreed with Ofcom would cause a ‘race to the bottom’ in terms of price – and would also be a serious deterrent to future investment plans.

Yet, this is good news for new fibre investment in the UK – which we truly need – but bad news for buyers of fibre services.

Buyers now face prices that are positioned relative to the existing general benchmark – Openreach Ethernet – rather than the assumed Dark Fibre prices recently published on BT’s website.

Of course, this takes for granted anyone else will supply Dark Fibre – without the competitive motivation of an Openreach product.

At best, this is a shift of margin back to the fixed operators and, at worst, a shift of margin back to Openreach.

We already know independent MNOs can’t afford to densify their networks at Openreach’s Ethernet prices. 

 

We now face a suffocation of 4G growth. Even worse, a possible delay in laying the foundations of 5G.

Unless, of course, you are a Mobile Operator who is part of a massive fibre business and, by chance, has tons of spectrum.  But that’s another story!

This is a big issue for the UK, in my view.

We need to keep up with the world leaders in Mobile to stay competitive as a country.

Ben Allwright from Flomatik commented on my “Connected Britain” blog last week suggesting we could use the new passive remedies Openreach is offering to solve the access and backhaul problem – access to poles, holes and ducts.

Actually, if that were possible it might be part of the solution.  But it’s not.

Today, these passive remedies are imposed because of problems in the Consumer Ultra Fast Broadband Market. You can’t use them for Mobile backhaul or other business services.

 

That’s a ridiculous situation for most straight-thinking people.

Who, in their right mind, is going to build a single purpose fibre network – focussed on consumer broadband – and not accept orders from business customers, or other network operators, in places where you’ve built?

Ofcom are now consulting on relaxing these restrictions – but you still have to be building a network, primarily for Ultra Fast Consumer broadband.  It’s far from clear what the position is – and it may be a legal minefield in the future.

 

So, what is the solution?

I’ve already proposed it.

The independent Mobile Operators need to get together and use their considerable buying power to create urban and suburban dark fibre networks across the UK Piecing together coverage based on “IRU” style purchases from ALT.NETs – or where that won’t work – sponsoring new fibre build.

Ironically, until July 25th, the main threat to this strategy was Openreach’s imminent Dark Fibre launch.  If Openreach had embraced Dark Fibre faster, Mobile Operators might have been attracted to buy from them.

Yet, now we are facing at least a 12-18 month delay. And then a period for Openreach to “switch on” to the Dark Fibre market opportunity.

In truth, we have a bigger window now in which to make these alternative investments and secure an independent 4G and 5G future.

With Openreach Dark Fibre ‘dead at birth’, there is no other option.

 

We know current Ethernet prices are too high for densification.  So, what are MNOs going to do?  Watch their customers switch to different networks – because they can’t provide them with the right capacity?

Or find a different Dark Fibre supply to reinforce customer satisfaction through densification?

What does all this mean?

We have to assume it’s a long delay – and not a cancellation of Openreach Dark Fibre.  It means we have a much larger dark fibre window with plenty of time to “crowdsource” a Dark Fibre competitor for Openreach.

So, the idea of a Mobile-led collaboration to glue together the disparate ALT.NET footprints –  filling the gaps with innovative new build – seems more pressing than ever.

 

Nothing happens by chance

To echo what I said at “Connected Britain” in June.  There are companies out there who own key parts of what it would take to crack this problem.

Whether you have dark fibre, want to buy dark fibre, have skills or technology to help exploit it – or maybe you have ducts we could thread fibre through.

Beyond doubt, we need to construct our own plan to fix this.

If we don’t fix it, we’ll knowingly fall into Openreach’s plan – and guess what they have planned for the mobile industry?

Not much.

Surprised? Don’t be.

So, let’s not “wish” Openreach was more progressive and hands-on with Dark Fibre – they’re not. Or that there were less problems in tackling the issue. Openreach will continue to walk backwards at a snail’s pace for some time to come.

Let’s just wish we were better and more courageous.

 

If you’d like to help or talk some more,

please get in touch at: david.hilliard@mentoreurope.com 

or call +44 (0) 1189001252 for a confidential talk.

 

 

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