A regulatory perspective on FTTx
deployments
Chinyelu Onwurah, Head of Telecoms Technology, Ofcom
19th June 2007
FTTx Summit
©Ofcom
The UK is witnessing significant private sector
investment in faster broadband access
• 2,210,000 local loops unbundled
• UK DSL allows 2Mbps to up to 97% of
Awareness of Connection Speed
homes
Up tp 1Mbit/s,
12%
• UK LLU operators are launching
services up to 24 Mbps
• Cable rolling out 10 Mbps services
Don't know, 48%
Up tp 2 Mbit/s
17%
• BT launched nationwide 8Mbps ADSL
Max service - 6Mbps to ~60% of
homes
• Current DSL and cable deployments
are meeting consumer bandwidth
demands
©Ofcom
Over 4Mbit/s, 23%
Source: Ofcom research February 2007
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UK
DSL: over 99.9%
Cable: 46%
LLU: 67%
Broadband take up and
availability
Scotland
DSL: 99.9%
Cable: 37%
LLU: 39%
NE
DSL: 100.0%
Cable: 47%
LLU: 71%
Broadband take-up
80%
60%
52%
45%
45%
Y&H
DSL: 100.0%
Cable: 42%
LLU: 69%
67%
64%
62%
47%
42%
42%
42%
45%
NW
DSL: 100.0%
Cable: 51%
LLU: 90%
EM
DSL: 100.0%
Cable: 52%
LLU: 70%
41%
40%
Wales
DSL: 100.0%
Cable: 23%
LLU: 32%
20%
WM
DSL: 100.0%
Cable: 56%
LLU: 75%
0%
UK
England
Scotland
Wales
Household
N Ireland
SME
Base: All adults 15+/all SMEs Source: Ofcom research 2006
©Ofcom
SW
UK Urban
DSL: 100.0%
Cable: 34%
LLU: 40%
UK Rural
SE
DSL: 100.0%
Cable: 42%
LLU: 67%
London
DSL: 100.0%
Cable: 61%
LLU: 100%
Broadband availability
2
UK broadband market today
50
40
30
Broadband
prices over
time
20
10
0
2001
2002
2003
512 Kb/s
1Mbit/s
2004
2Mbit/s
8Mbit/s
2005
2006
24Mbit/s
15
Over 8Mbit/s
10
Over 2Mbit/s up to 8Mbit/s
Over 1Mbit/s up to 2Mbit/s
5
Broadband lines
by headline
download speed
Over 512Kb/s up to 1Mbit/s
0
Q1
Q2
Q3
Source:
2004 Ofcom
©Ofcom
Up to 512 Kb/s
Q4
2005
Q1
Q2
Q3
Q4
2006
Q1
Q2
Q3
Q4
3
So what happens next?
Maximum
obtainable DSL
speeds
Current
Broadband
8Mbit/s or more
More than 4 but less than 8Mbit/s
More than 2 but less than 4Mbit/s
More than 1 but less than 2Mbit/s
Less than 1Mbit/s
DSL
DSL
ADSL2
Fibre
Exchange
ADSL2+
Fibre
Fibre
Fibre
VDSL
©Ofcom
4
Next generation core and access network investment is
gaining speed within Europe
KPN proposes
FTTC
Telenor
NGN core
TDC
FTTC / VDSL
BT, C&W,
Thus NGN core
Deutsche Telekom
FTTC / VDSL
Belgacom
FTTC / VDSL
Telekom Austria
NGN core
France Telecom
NGN core
Swisscom
FTTC / VDSL
France Telecom,
Illiad, FTTH trials
Telecom Italia
IP core upgrade
©Ofcom
Source: EC, operator announcements
5
The economics of access fibre deployment differ by market
UK loop lengths are shorter than
those in the US
Drivers for access NGN deployment
• End to end infrastructure competition
100%
• Limited opportunities for DSL evolution
• Non-availability of unbundled DSL
• Government led supply side strategies
Share of total lines
• Pay TV opportunities
80%
60%
Germany
Italy
40%
Spain
Sweden
UK
20%
US
0%
0
1
2
3
4
5
6
Loop length (km)
Source: Analysys, various
©Ofcom
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Regulatory principles
1.
Promote competition at deepest level where it will be effective
and sustainable
2.
Deliver equality of access beyond those levels
3.
Withdraw regulation at other levels
4.
Promote a favourable climate for efficient investment
5.
Varying regulatory solutions for different products and
geographies
6.
Create scope for market entry
7.
Light touch regulation elsewhere in communications value
chain
©Ofcom
7
Questions for this session
1.
Promote competition at deepest level where it will be effective
and sustainable
2.
Deliver equality of access beyond those levels
3.
Withdraw regulation at other levels
4.
Promote a favourable climate for efficient investment
5.
Varying regulatory solutions for different products and
geographies
6.
Create scope for market entry
7.
Light touch regulation elsewhere in communications value
chain
©Ofcom
8
1.
Promote competition at deepest level where it will be effective
and sustainable
2.
Deliver equality of access beyond those levels
3.
Withdraw regulation at other levels
4.
Promote a favourable climate for efficient investment
5.
Varying regulatory solutions for different products and
geographies
6.
Create scope for market entry
7.
Light touch regulation elsewhere in communications value
chain
©Ofcom
9
Competition at the deepest level where it will be
effective and sustainable
Local loop unbundling
Results
• 1,600 unbundled
exchanges
MDF
DSLAM
BT
Altnet
network
• Price competition
(‘free’ broadband
offers)
• Service innovation
Altnet
©Ofcom
10
Where is that point in next generation access networks?
Competition needs to…
Examples
• be technically feasible
• duct sharing
• be practically feasible
• sub-loop unbundling
• have the prospect of being
• fibre unbundling at the
effective and sustainable
• maximise scope for innovation
exchange
• bitstream access
• ….and others too
©Ofcom
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Duct sharing
• civil works around 70% of
deployment cost
But…
• BT’s duct network unmapped
and incomplete
• very significant practical
challenges
• scope for innovation in cabling
©Ofcom
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Sub-loop unbundling
• moves competition in
Sub-loop unbundling
Point of
interconnection
Cabinet
mini
MDF
infrastructure closer to
customer
DSLAM
Altnet
network
But…
• is it practical to have
competing infrastructure
at this level?
• is effective competition
BT
likely to be sustainable?
Altnet
©Ofcom
13
Fibre unbundling at the exchange
Fibre unbundling
• very like today’s local
loop unbundling
But…
OLU
ODF
Altnet
network
• possible for point-topoint fibre
• ..but difficult for shared
BT
Altnet
©Ofcom
infrastructures (e.g.
PONs)
• would not need to be at
the exchange
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Bitstream access
• lack of complexity in wholesale product definition
• technically and practically straightforward
But…
• moves level of infrastructure competition away from
customer
• risk of reduced competitive innovation in local access
©Ofcom
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1.
Promote competition at deepest level where it will be effective
and sustainable
2.
Deliver equality of access beyond those levels
3.
Withdraw regulation at other levels
4.
Promote a favourable climate for efficient investment
5.
Varying regulatory solutions for different products and
geographies
6.
Create scope for market entry
7.
Light touch regulation elsewhere in communications value
chain
©Ofcom
16
How may regulation promote a favourable climate for
efficient and timely investment in next generation
infrastructure?
Regulatory policy can distort investment
– Ex ante regulatory forbearance
– Sunset clauses on regulatory
–
remedies
Risk adjusted returns
• Whatever approach is adopted, it must
not distort market conditions such that:
– inefficient investments are
incentivised
– disproportionate regulation deters
efficient investment
©Ofcom
Regulation results in
inefficient investment
regulatory certainty, possibly through
decisions in either direction
Regulation deters
efficient investment
• Main role of regulator is provision of
Negative
Positive
Impact of
market
distortions
arising from
regulatory
policy
NPV of NGA investments
Pre-regulation NPV
Impact of regulation
Post regulation NPV
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Potential solutions
Various solutions, including…
• access obligations but no regulatory determined prices
• cost of capital specific to next generation access
• returns adjusted for a ‘fair bet’
• ‘anchor’ product regulation
©Ofcom
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Next generation access raises regulatory challenges
• Providing incentives for efficient and timely investment
• Ensuring wide scale availability of high speed data services
• Minimising uncertainty on:
– future regulatory intervention
– expected returns from NGA
• Promoting competition
• Protecting consumers
• Public policy objectives
• Legacy regulation and migration
©Ofcom
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Autumn consultation to:
• Review
– Where we are today
– The opportunities NGA presents
– The prospects for competition in NGA
• Consult on
– Public policy issues and challenges related to NGA - is there a need for NGA
–
–
–
©Ofcom
services? How should any need be met?
regulatory strategy: what, if anything, should be done to secure investment in
NGA? Once NGA is deployed, how should Ofcom promote competition to achieve
consumer and citizen benefit?
what options are there for new regulatory remedies and approaches e.g. duct
sharing?
what are the specific regulatory challenges posed by NGA?
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Questions?
chinyelu.onwurah@ofcom.org.uk
©Ofcom