The fibre plot thickens… but still no help for 5G?

Last week Vodafone and City Fibre announced they are prepared to invest in Fibre to the Premise (FTTP) in direct competition with Openreach – £500m is mentioned for 1M homes passed by 2021 with an option to build out 4M more homes by 2025.

This is great news.  There’s nothing like competition to focus minds, actually better than regulation in my view.

Back in the summer, Openreach responded to FTTP pressure with an industry consultation. Last month, they shared some of the results in which they called for industry collaboration, financial help and a relaxation of rules by Ofcom.

This week Mike McTighe, Openreach’s Chairman, said“We will be publishing Openreach’s response to that consultation before Christmas, and in that we will put out a very clear hypothesis on what it takes to build ten million FTTP ports in the UKWe need a regulatory environment that moves away from lower pricing to encourage investment in the network.”

Later in his speech he also said “we need to be able to switch off the copper network. The economics don’t make any sense if we keep the copper network running at the same time as we overbuild with a fibre network.”

But we also hear Openreach wants to increase the wholesale price of its broadband services for all customers by £7 per month to fund this rollout.  This comes at a time when Ofcom is pressing in the opposite direction and asking Openreach to reduce FTTC prices.

CP’s don’t believe their customers will pay more for the same speed anyway – even if it is provided on a better FTTP platform.  Why would you?

 

Fibre infrastructure is a scale business

…… and Openreach needs most of the homes ‘passed’ to upgrade to make their business case work.  It costs as much to pass one home in a street as it does for the whole street.

Openreach has also called for co-investment with CP’s. This seems to fall flat at the first hurdle as the CP would obviously want some form of exclusivity to justify their investment. This would crack open the wholesale model we have – even if Openreach’s equivalence obligations would permit this.

Vodafone was earmarked as a potential Openreach co-investor a few months back. Now they have decided to build with CityFibre instead.

Of course, Vodafone aren’t doing this for unselfish reasons. They have negotiated exclusive marketing rights during the construction phase of each city.

 

How does this help the UK to lead 5G globally?  

Well not much really, because this scheme is all about residential broadband.

The uncertainty over throughput and lack of guaranteed channels make Superfast Broadband problematic for 4G and 5G base station backhaul.

The commercial attraction is clear but the industry remains focused on dark fibre.

Naturally, Superfast Broadband is being built first in residential areas where customers live. These areas are important for mobile, but not as important as the critical dense urban areas where mobile customers – at work and play – are devouring the mobile capacity available now.

But there is a glimmer of hope from Vodafone. 

They say their network investment is all part of their converged strategy to serve their customers, whether residential, business or public sector with all the services they need – whether delivered over mobile or fixed, or both.

They also say “advanced fibre networks are critical for mobile networks, providing the very high-capacity backhaul connections required for 5G mobile services from the early 2020s onwards.”

Since then there has been some hasty back-tracking from Vodafone, however.

Before Vodafone’s announcement, it seemed the UK needed a national industrial policy for Digital Infrastructure – with Mobile at its heart – to provide clarity on where we need to go – and how we are going to get there?  Who will deliver it – and who will pay?

 

Now it seems competition might actually do this for us 

Let’s hope too that Vodafone are serious about building – and not just using ‘gunboat diplomacy’ with Openreach.

Google’s Fibre threats in the US seems to have focussed minds. As a result, local Telcos there are responding with their own products and investments.

So far, Google hasn’t actually built much of its own fibre. It’s been done for them.

Let’s face it, a new well-funded wholesale super-fast network reaching 5M homes is really bad news for Openreach. They now risk losing large numbers of broadband customers in Vodafone areas.

Confronted with a dismal business case to build a third fibre infrastructure in any given street, they may just have to invest their own money in FTTP – and double-quick.

But this is all in the future. Let’s get back to the ongoing legal wrangle with Ofcom on Dark Fibre Access.

 

More bad news from the Competition Appeals Tribunal

Last week, Ofcom heard more bad news from the Competition Appeals Tribunal (CAT), the special court that hears competition cases.  The CAT announced that Ofcom’s error in the Dark Fibre process was material – not technical– which means at least 6 months further delay, while new market definitions are baked into the process.

The new twist in the story is a mischievous offer from Openreach.

It’s been dubbed Optical Spectrum Access – Filter Connect.

In earlier blogs, we said a typical mobile network comprises around 17k base stations. With 4G densification and 5G rollout that number might rise by 3x or more – and perhaps to over 100k base stations within 3-5 years.

Some suggest the numbers will be much larger.

We understand the OSA – FC price will be similar to the 10Gb/s existing OSA product.  This gives a connection charge in the region of £15k and an annual rental of £7.5k.

For a mobile operator using this product for say, 100k base stations, this means a one-off fee of £1.5bn – and a ‘modest’ annual rent of £750M.

Industry-wide the figures would be 4x that – assuming EE actually pays for its fibre.

That’s an eye-watering £6bn connection charge – and £3bn annual rental. 

Who wouldn’t like business revenues like this?

This mammoth sum contrasts starkly with Vodafone’s investment of £500m.

But OSA-FC for mobile network densification just doesn’t pass the blush test, does it?

When you compare these prices to the proposed prices for Openreach’s dark fibre access product (DFA) – now in legal suspension – these prices are roughly 7x higher.

It’s clearly not a satisfactory answer for the Mobile industry – no matter how good it might be at transporting data.

What’s more, what is its relevance to network densification – where many circuits will be connected to new base station locations with no existing fibre – and the base station end is likely to have direct fibre connect?

OSA – FC requires an existing OSA circuit and boxes of Openreach kit at both ends

We really need a much cheaper and simpler metro fibre options. Ironically, DFA really would fit the bill.

Without DFA we are stuck between the rock of residential broadband – and the hard place of OSA-FC – where neither meets the need.

The pricing too is benchmarked against existing 10Gb/s+ services.  This may be a bargain if you eventually want 100Gb/s – but that’s not where we are going with the mobile network densification requirement.

Small cells are transitioning from 100M to 1G range – some of the most complex cells will push to 10G in a few years’ time.

Clive Selley is quoted in the FT; saying he did not think that dark fibre was a good product and has instead launched a new product called Filter Connect that offers its customers a more flexible wholesale product.

You would be hard pushed to imagine anything less flexible than OSA – FC or, for that matter, anything more flexible than dark fibre!

Finally, Mike McTighe, Openreach’s Chairman, speaking at the Broadband Futures Conference in Australia, has offered a 5G olive branch.

“The issue with 5G is the micro-cell architecture,” McTighe said. “We want to provide that. It is not currently within Openreach’s scope. I want to change the scope so that when we build down a street we not only provision for the homes and premises and businesses that we pass, but that we provision architecturally for whatever radio heads need to be built to support a micro-cell architecture.”

Openreach are not qualified to shape Mobile architectures – but any good news for 5G is welcome.

But, please Openreach, do tell us exactly what you propose to offer, when and what it costs?

 

A few things to bear in mind

We’ve been reminded of the many competing calls for Openreach’s attention.

We’ve seen independent Fibre investments being announced – something we have been calling for and welcome. We’ve seen Openreach responding to the competitive threat; this is all good. And, we’ve had some hints but no clear solution yet to provide fibre for 5G.

So, hats off to Vodafone. An audacious plan that could move their own 5G network forward confidently.

Better still, a Gold Star if Vodafone can actually do it, open it up to others – and use it for 5G.

Ofcom should not be discouraged by the CAT setback. They should move on and do the essential work to bring Openreach Dark Fibre back to the market.

We still need it urgently, otherwise it will be yet another avoidable reason as to why 5G will be seriously delayed for the rest of the market.

Openreach should also keep in mind that there are worse things than selling dark fibre.  The main one is selling no fibre at all.

They should also tell us specifically how they will support 4G and 5G with fibre.

OSA-FC is clearly not the answer.

 

 

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