Fibre deployment: what can the UK learn from Australia’s National Plan?

Openreach is in a ‘no-win’ position

On the 1st of February, Clive Selley Openreach’s CEO, announced an acceleration of its plan for fibre to the premises (FTTP) rollout. Openreach is now targeting 3m homes and businesses by 2020. This followed the Government’s decision last December to impose a Universal Service Obligation (USO) on Superfast broadband.

Openreach argued it would do this, but didn’t want to serve random orders from the last 5% of the country that would inevitably come with a USO. Instead, it preferred a planned program they say would be cheaper and faster.

Openreach is probably right, but whatever happens they are in a ‘no-win’ situation. Just like Australia’s NBN Broadband Access Service, Openreach has lost public trust. But more on that a bit later.

Openreach’s woes are driven by mish-mash of service delivery and repair crises in the last few years – and by infuriating an increasingly vocal population who are not served by Superfast. Competitors and pundits have had a ‘field day’ talking about South Korea, Hong Kong, Spain and even Portugal, where customers already get Gigabit broadband and make Openreach’s Superfast rollout seem piddling and sluggish.

Are these opinions unfair?

Perhaps. But Openreach has done a respectable job with a modest number of £Billions, in short order, to give most people fast broadband. Not much comfort if you are a “have not” – like the unfortunate people of Templeton in Devon.

But no relief at all, if you are invested on the old broadband service, via Local Loop Unbundling (LLU), and now find yourself forced to compete with a wholesale fibre product from Openreach – because you can’t or won’t invest in a nationwide fibre infrastructure like Openreach has.

On February 12th, government irritation at BT’s foot-dragging has sparked off renewed pressure to spin-off Openreach. After months of industry consultation, Openreach announced that only three million homes on the national network will get a “full fibre” connection by 2020. This contrasts badly with more impressive plans from rivals like CityFibre, TalkTalk and Vodafone.

Where many lose sympathy with Openreach is its attitude to their outright monopoly of key assets. Anyone doubt they have the lion’s share of fibre, ducts and poles in most of the country? If Openreach plans a new product, they have colossal resources at their disposal to commercialise – at will – with few regulatory constraints. The hunch has always been that product commercialisation happens “in any way BT wishes.”

Dark Fibre is essential to the rollout of 5G – and as crucial as the move from Super to Ultrafast broadband.

Openreach has aggressively resisted attempts from Ofcom to meet the demand for Dark Fibre. Whether this is by way of its proposed DFA product, or through a more open Duct and Pole Access option – which allows others to pull in their own Dark Fibre. They oppose this for perfectly rational financial reasons – from Openreach’s standpoint. But this stubbornness inflames key stakeholders and constantly promotes a climate where Openreach just can’t win.

Openreach and Ofcom jointly seem unable to crush this deadlock.

We are stuck in a legal framework where market power is judged several steps down-stream from this asset monopoly. Apart from not cracking the problem, its simply leads to busy – but wealthy – lawyers.

Are there any lessons to learn from other parts of the world?

 

Lessons from NBN Australia

Australia’s National Broadband Network perfectly illustrates a radically different course of action – direct intervention. Back in 2007 frustrated by Telstra, Australia’s incumbent fixed and mobile telco, the government proposed to build its own Fibre to the premises network. Capital “P” politics in Australia – rather than technology – is the dominant theme.

National Broadband Network was a manifesto pledge in 2007 by the opposition Labour party. They proposed spending A$15 billion to build a government-owned superfast broadband network using FTTN. Fibre-to-the-Node technology delivering 12mb/s download speeds to 98% of Australians with the remaining 2% getting “improved broadband.”

Once in government, the plan changed to a “Fibre-to-the-Premise” rollout for 93% of the population with a blend of point-to-point wireless and Satellite for the rural customers. The cost estimate went up to between A$37.4Bn and A$43Bn. The model was to create a government-owned organisation – NBN – that would build a broadband network providing the access component to a set of retail broadband service providers.

This is similar to the role Openreach plays in the UK broadband value chain.

In the run up to the 2010 Australian election, the opposition said they would “demolish NBN”.  But the minority Gillard government changed priority towards regional and rural areas and increased the peak speed target to 1Gb/s in response to Google Fibre’s announcement. Malcolm Turnbull won the election in 2013 and announced immediate changes to NBN. The CEO was replaced and a “Multi Technology Mix” was launched.  This swung the focus back to FTTN from FTTP – and introduced Hybrid-Fibre-Coax (HFC) by purchasing Optus’ HFC assets.

According to NBN’s own data, as of this month they have passed c7.25m premises, with c6.25m ready to connect and c3.5m connected. But, NBN has recently stopped HFC rollout for 9 months due to soaring complaints over reliability and quality service.

Wait, there’s more . . .

There are calls for the Government to write down a big chunk of cA$60Bn investment so NBN can lower its charges to service providers; there are also strong hints from Bill Morrow, NBN’s CEO, that it will never make a profit, and indeed may need protection from competitors like 5G!

“Forget about 5G for a moment, even the antenna technology using 4G is a viable alternative to NBN where the towers are already up” said Mr Morrow.

For context, according to Speedtest.net Australia ranks 56th in the world for broadband download speeds achieving 26.45Mb/s. This compares to Singapore – who is number 1 – achieving 166.44Mb/s – and the UK at 25th achieving 55.59Mb/s. Speedtest.net report a global average of 42.88Mb/s.

And according to BDRC Continental and Cable.co.uk Australia ranks 104th in the world for cheapness of broadband at £42.73 on average per month. This stacks up against the UK at 63rd with an average of £30.70 – and Singapore at 57th with an average price of £28.39. By the way, Iran is the cheapest in the world according to this survey at £4.04 per month!

 

So, what can we learn?

A blinding glimpse of the obvious – NBN has been a fiasco. The government intervened and it turned out to be a much bigger job than first thought. What a surprise!

Partly because the goal posts rightly moved up during that time – but also successive Governments constantly meddled with the strategy. It was a political football with failure ‘designed-in’ from birth.

This intervention has not resulted in either brilliant speeds, good service or great prices for Australian consumers.

There are no positive lessons here for the UK from the NBN debacle.

So, we are stuck with Openreach in the UK. While we’d love to see a big bold gesture on Dark Fibre or Duct and Poles as part of an Openreach charm offensive, it’s highly improbable.

We clearly need a grand coalition of fibre providers and the biggest users to “crowd-source’ an alternative to Openreach.

That will at least let us get on with the priority areas for 4G densification and 5G rollout which, in the end, will put a rocket under Openreach to enter the Dark Fibre market.

Right now, Vodafone and CityFibre are leading the charge. And I feel sure there are a few intense ‘strategy workshops’ going on in Openreach these days.

 

If you’d like to 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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