Published:
22-Jun-09
The Digital Britain report proposes 90% next-generation access network (NGAN) coverage to homes and businesses by 2017. To achieve the target, a Final Third Project would be set up to subsidize operators from a Next Generation Fund (NGF) to roll out in areas, particularly less populated rural regions, where the market would not otherwise invest. Without funding, the report expects that market-led competition would drive NGAN deployment to cover 50 – 66% of population. The NGF is strictly limited to funding NGAN rollout, rather than, as has been widely reported, to funding the universal service commitment (USC) (except, presumably, for FTTC upgrades as part of the USC, although the text is unclear on this).
A £0.50 monthly levy introduced in 2010 on all fixed line connections, including residential copper lines, business ISDN2 and cable telephony lines would provide £150-£175m annually for the NGF. The supplement would be collected by operators and passed to Ofcom. The Network Design and Procurement Group would then hold tenders open to all operators for rolling out NGAN services to the final third of the population.
The requirement for an NGF to subsidise rollout for a third of the population is based on the dramatic increase in the average initial set up cost per connected premises to support NGAN coverage beyond around 70%. For FTTC, between 0% and 70% coverage, the report estimates this cost ranges between around £350 and £510, rising to ~£1000 for 90% and to ~£1750 for 100% coverage.For FTTH, between 0% and 70%, depending on the technology used (either GPON or P2P), the cost varies between around £1300 and £3000; jumping to ~£4200-£5000 for 90%, and to ~£10,000-£12,500 for 100% coverage.
Besides subsidised funding, the report suggests a number of other potential measures to support NGAN rollout:
- Guidelines for homebuilders to ensure next-generation cabling is included in their plans, overseen by the British Standards Institute
- Relaxation of regulation on the installation of overhead lines to lower deployment costs
- Support for localized projects. The 2009 Budget doubled the size of the fund for access, backhaul and core network investment and the Government has allocated £0.15m grant to support the Independent Networks Co-operative Association (INCA)
- Focus on access to existing network and civil infrastructure:
i) Possibility of wholesale access to Virgin Media's cable network. While at this early stage regulatory action to ensure this would be premature and not preferable to market forces, the report suggests monitoring this possibility
ii) Those organizing community-level NGAN rollouts should provide evidence of where access to existing primary infrastructure or shared 'digs' could accelerate deployment
iii) Working with utilities and public authorities with the goal that by 2012 information on all street works planned for 1-2 years ahead is made available, and that, with legislation if necessary, all
utilities share works with other interested parties. The report suggests that an inventory of ducts, poles, lit fibre, unlit fibre, used and unused wavelengths and their availability/usage to help with
planning NGAN. The list could also include utility-installed ducts and fibre cabling.
The telecoms regulator Ofcom will be tasked with assessing the state of the overall telecommunications infrastructure every two years, to include (as examples):
i) Mapping of major communications networks, including DSL and cable access, backhaul and core infrastructure, along with access network capability
ii) Key indicators of reliability, resilience and security of these networks, including potential to fail and response under emergency conditions
iii) List of services offered on each network, including wholesale arrangements and service competition;
iv) Index of international competitiveness of UK's network infrastructure
The report does not define exactly which technologies or networks are included in NGAN, although does suggest that they include both fixed and mobile solutions. Fixed NGAN technologies would presumably include FTTP, FTTC and DOCSIS 3.0 fixed deployments, while mobile would include LTE technology which is still being tested and is expected to see deployment in 2011 or later in developed European markets. LTE technology has a maximum theoretical speed of 100Mbit/s but owing to a number of factors (e.g. user location relative to mast and backhaul contention), actual throughput is expected to be substantially lower (at least a third of theoretical maximum).
Our take...The report also makes no commitment on a minimum end user speed via NGAN deployment. The actual speed end users experience is likely to see considerable variation depending on the NGAN technology used and a host of other factors (e.g. with all technologies, contention in the backhaul network segment; with FTTC, distance relative to street cabinet).
Upgrades to the access network are only half the story. Notable in its absence is the mention of backhaul networks. To expand the capacity of these networks will need considerable investment if in future users on a wide scale are connecting at higher average speeds. Unless there is the required expansion in backhaul capacity to correspond to upgrades to the access network, users will not be able to connect at the NGAN headline speeds. Competition in the backhaul wholesale market has traditionally been limited: BT, for example, has had a monopoly over providing backhaul to wholesale DSL ISPs. However, increased competition between wholesale backhaul providers and advances in transmission technology have both reduced data costs in this area of the network and encouraged providers to avoid over stocking backhaul pipes.
The target date, 2017, while cautious comparative to those committed to in policies in other countries (see further information below), is at least realistically achievable. Virgin Media has already rolled out a considerable portion of the coverage, with 80% homes in its footprint (~10.0m homes) having been upgraded to DOCSIS 3.0 technology that enables speeds of 50Mbit/s and beyond for end users. This figure is expected to grow to 12.5m homes by Q3 2009, or just shy of 50% of all UK homes. Incumbent telco BT plans to invest ~£1.5bn principally in FTTC to deliver up to 40Mbit/s to 40% of UK homes, with deployment starting in January 2010.
Given the similar grounds on which both Virgin Media and BT decide on rollout areas – e.g. high population density give better ROI prospect – the two networks are likely to cover many of the same target homes. The question remains whether the money available in NGF – £1.2bn after 8 years – will be sufficient to deploy to the ~10m homes not covered under these providers' plans. (For argument's sake this assumes a complete overlap of homes covered by Virgin Media's DOCSIS 3.0 and BT's FTTC network, and discounts those homes upgraded to FTTC under the USC). Through the NGF, this would see around £120 per NGAN home passed to bring coverage to 90% of all homes. However, assuming a FTTC network was used to cover all these homes (low-cost relative to the higher cost of Virgin Media to extend its cable network and then upgrade to DOCSIS 3.0 or for a telco to lay FTTP), then at ~£1000 per connected FTTC premises the total cost would in the region of £10bn - although this is likely to come down considerably as the cost of rolling out fixed networks decreases with falling network and in-home hardware, cabling and construction costs.
Besides the funding initiative, the other measures suggested for boosting NGAN rollout are useful. In particular, the inventory and usage of civil infrastructure and the incorporation of next-generation cabling in new homes would remove two important obstacles and help speed NGAN deployment.
For comparison, examples of other countries' public commitments to NGAN include:
- Finland: by December 2015, 99% of homes and businesses are located within 2km of a broadband network capable of 100Mbit/s to end users by 2015
- Germany: 50Mbit/s offered to 75% homes by 2014, funded by public sector bodies, of which €180m has been identified. Deutsche Telekom (DT) already covers homes in ~50 cities with its 50Mbit/s capable VDSL network, built at a total cost of €3.3bn to target 20m homes (50% all homes). NGAN rollout should be spurred on by collaborations between DT and other operators such as Vodafone and EWE-Tel to share the cost of FTTC upgrades, and by a wholesale VDSL that DT now offers
- USA: $7.2bn (£4.8bn) for broadband projects (including current-gen and next-gen plans), of which $4.7bn (£3.1bn) will go to accelerating broadband development in unserved and under-served areas. Government funding adds to investment of the three major players rolling out NGANs – Verizon (FiOS FTTP; target 2010 coverage, 18-20m premises or 50% footprint), AT&T (U-Verse FTTC; target 2011 coverage, 30m premises) and Comcast (DOCSIS 3.0 cable; 2010 target, 50m premises or 100% footprint)
- Australia: A$43bn (£21bn) to provide FTTH to 90% of homes. The remaining 10% (mainly in rural areas) will be served by wireless technologies delivering up to 12Mbps. FTTH commitment represents A$5,520 (£2,700) per home passed
- New Zealand: FTTH to 75% of the population with NZ$1.5bn (£0.6bn) with investment starting in 2010; equates to NZ$1250 (£490) per home passed
- Singapore: 1Gbit/s to all homes and business by 2015 with a National Broadband Network (NBN) built by a consortium of operators. NBN now promises 95% coverage by June 2012, ahead of the required 50% coverage by January 2013.
UK,
