Finding a funder for fibre to the home

Finding a funder for fibre to the home

Summary: The Communications Management Association's David Harrington argues there's a case for using government funds to roll out fibre to the home across the UK

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TOPICS: Networking
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As bandwidth demands continue to increase, the requirement for fibre-optic internet connections has risen up the regulatory agenda. Ofcom is now making obvious signals that it wants the issue investigated and the government is tackling the subject through the Caio Review.

At the centre of the debate is the Communications Management Association (CMA), which is representing businesses' IT interests through its regulatory forum leader, David Harrington.

A veteran of the telecoms industry, Harrington has seen vast changes in the regulatory scene, from the dismantling of BT's monopoly to the transformation of Oftel into Ofcom.

Speaking exclusively to ZDNet.co.uk, Harrington explained why providing a fibre-optic connection to every UK home and business is essential; how Ofcom is finally coming round to supporting the idea, having suffered a "lack of thought leadership"; and why European commissioner for information society and media Viviane Reding is simply "the greatest".

The need for fibre-based broadband access is one of the most hotly debated regulatory issues at the moment. Why do we need fibre to the home (FTTH)? Copper is pretty fast these days.
Copper provides at most 24Mbps — if you live in the exchange — and it's not symmetrical. Although services that require over 10Mbps are not yet here, they are coming. There is an ever-growing demand for higher and higher bandwidth. Viviane Reding said it's the most important topic in the telecoms world today. The challenge is where the investment comes from and how it's funded. How do we regulate when we can't apply yesterday's thinking?

Equipping the UK with nationwide fibre to the home would cost around £15bn. That's a lot of money, which few companies would be prepared to invest. Who would do it?
That's the issue. Openreach has the Ebbsfleet [fibre-to-the-home] contract. The most likely company is BT. No-one else has the reach. The thing is, BT won't [invest] at the moment because it has enough problems with 21CN [its £10bn backbone network upgrade]. The last thing they need is another £15bn [investment].

What about Virgin? It already has a network covering half of all homes.
Yes, but they are half way not there.

Where is the business model? It's dangerous to invest £15bn with uncertain returns.
Ed Richards [Ofcom's chief executive] said a couple of weeks ago that it could be that telecoms is one of those areas where "build it and they will come" [as a model] might work. That is a sea change in Ofcom's thinking.

It's interesting that you mention Ofcom. The regulator issued a consultation document on fibre access late last year. The CMA responded quite critically at the time.
It was a terrible document. It completely lacked thought leadership. From an economist's point of view, it was probably just, but that's all I could say of it. But Ed Richards' speech was far more upbeat: "We are going to do something about this."

[Fibre to the home] has national benefits, so it needs a national investment. Why should we entrust it to a private company and go hands-off at the government level?

David Harrington, CMA

But £15bn is a lot of money to invest.
Well, £15bn is the cost of Crossrail and, arguably, the cost of the 2012 Olympics. If you put a similar amount into fibre, think of the longer-lasting impact, compared to the other two projects.

The other two projects are backed by taxpayers' money. Should the government help pay for FTTH?
It has national benefits, so it needs a national investment. Why should we entrust it to a private company and go hands-off at the government level? There is a case for using government money.

Do you think taxpayers will find it acceptable?
No.

So, if it is too expensive and the returns are too uncertain for a private company to invest, and it's unpalatable for the taxpayer, how could it happen?
I would be a rich man if I had an answer. That's the whole point of what Francesco Caio is doing: how to find an answer to this conundrum [Caio, former chief executive of Cable & Wireless, is investigating the barriers to next-generation networks on behalf of the government]. My best guess is that we will see islands of fibre. Look at Amsterdam, where the council has entered into a joint venture with private money [to roll out fibre in the city]. If we had the same here, we could have islands of fibre in cities, then run it out into some of the communities. It seems a logical explanation of what is likely to happen. Some could be operated by different operators. It could be allowed [by regulators] as long as there is open access [for competitors to sell services using the infrastructure].

Do you have a preference for the type of architecture used? Openreach's Ebbsfleet deployment uses a PON-based approach (passive optical networking), but it could be done using point-to-point.
Because point-to-point has an electrical component at the switch, it is more amenable to [sharing the network with] other providers. There is some concern, based on present knowledge of Ebbsfleet, that other service providers might not be able to...

Topic: Networking

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