It is interesting to see that over the last 18 months investment in Fibre-to-the-Home/Fibre-to-the-Premises (FttP) rollouts has sky-rocketed all round the world.
It is also interesting to look at why and where that is happening.
It will not come as a surprise that competition is driving this trend among western economies. In every single country around the world national telecoms operators have held back development because they want to milk their existing assets for as long as possible. Since some remain as monopolies, or at least are very dominant in their markets, they have been successful in doing so.
In many of the Asian countries FttP rollouts are driven by government policies. In Scandinavia, they have been driven by a far more cooperative approach between governments and telcos.
Beware the FUD
At present, however, Australia’s high speed broadband government policy is more comparable with countries where infrastructure-based competition is the driving force – this despite the fact that such a competitive force does not exist here. In most developed countries the national telcos used an excellent set of FUD arguments (fear, uncertainty and doubt) to forestall regulatory intervention in speeding up the rollout of FttP. These arguments rested on false suggestions that there was no market demand for FttP, the costs were too high, people did not need higher speeds, and that other sectors, such as healthcare, also did not need it.
But eventually it was shown that these emperors were not wearing any clothes. After more than a decade of attempts, some brave FttP operators in countries such as the USA, the Netherlands, Britain, France and Spain have finally gained. It is in these countries (surprise, surprise) that the reluctant incumbents are suddenly starting to talk up FttP, and are announcing their own FttP rollout programs. Some have even talked about delivering gigabit networks: so much for their earlier FUD messages. On a monthly basis we are seeing new countries being added to the list, because once one national operator starts launching plans for FttP the others do not want to be seen to be lagging behind.
So suddenly the several reasons promoted by the Australian government to argue the case against FttP are no longer being supported by international evidence. Amazingly, the Australian minister for communications is still happy to re-use the FUD messages from AT&T, BT and Deutsche Telekom to claim that there is no demand for FttP. Unfortunately, the government does not report on the recent turnarounds of such developments in these countries, since that does not suit their political purposes.
40 years too late
Since the government’s Davidson Inquiry back in the late 1970s, there has been no chance of getting infrastructure competition in Australia. Successive governments have tried, but at the same time they have always given in to the incumbent – as FCC chairman Tom Wheeler so famously formulated – ‘by giving them the fair regulatory advantage’ they asked for in exchange for concessions.
So until 2010, when structural separation was introduced, regulators and governments in Australia complied with Telstra’s request for a ‘fair regulatory advantage’, with the result that competition was never able to establish itself in the infrastructure market.
We are roughly 40 years too late in reaching a commercial level of infrastructure-based competition (at that time cable TV networks started to become established around the world, and eventually they became the only real broadband competitors to the telcos). So trying to do so now – as the Vertigan report suggests – is futile, and will not work, as we have outlined in a previous analysis.
Today, FttP rollouts are happening in countries that the Australian government compares itself with. Despite what the government leads us to believe, where there is sufficient infrastructure-based competition FttP is rapidly becoming the norm for infrastructure upgrades. One would assume that this is because upgrades to FttP make business sense, since otherwise it would be hard to believe telcos would make such commercial investments. So it might be time for the Australian government also to dispense with the FUD messages.
However, even if they would change their tune – as mentioned above – those competitive market dynamics do not exist in Australia and there is little or no chance that this will change any time soon. If we want to move ahead, in line with what is happening in other parts of the world, we will need to find another solution. That was why the FttP-based NBN was born in 2009. Since the current government has reversed that decision, FttP is now largely off the agenda and instead we are getting the inferior FttN solution. Even worse, through this policy the government is essentially banning any further FttP investments in Australia.
The worrying thing here is that there are no market dynamics in Australia that will ensure that we will begin to catch up with the rest of the world, and get FttP. There are no competitive forces in place, the government is going to limit NBN Co funding so it will not be able to invest in FttP, and it has failed to come up with a policy on transitioning from FttN to FttP.
So we are well and truly stuck with old technologies for decades to come in an industry that is rapidly becoming all-fibre.
This is why Australia needs a government policy that addresses this market failure and guarantees that we will not end up socially and economically disadvantaged on both the national and international levels. This is the government’s responsibility, since it is they who have failed over the last 40 years to come up with good policies that would have created an environment where infrastructure-based competition could have been developed in a viable way.
The world is fast becoming digital, and FttP is its required infrastructure – there is no argument about that. This being the case, where is the government policy to guide us to that point?
This is an edited version of a post originally published on November 12. Paul Budde is the managing director of BuddeComm, an independent telecommunications research and consultancy company, which includes 45 national and international researchers in 15 countries.