Fibre for a thriving digital economy: the time for equal access is now

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Barney Lane, Head of Regulation at Colt, argues that the UK urgently needs to invest in fibre and that more could be done to help that happen.

According to Mastercard’s Digital Evolution Index, the UK’s digital economy is among the best in the world, beyond even the US and Germany. The UK has always been the gateway to Europe for global businesses – hence the number of European headquarters or substantial offices located in and around London. These, along with many UK companies, are also becoming bandwidth heavy with insatiable appetites for even faster, low latency and better broadband connections. The pace shows no sign of slowing.

At the start of the year, the Department for Digital, Culture, Media and Sport (DCMS) announced that it had reached its target of making broadband available to 95 per cent of the country by 2018. However, the UK is playing catch up on fibre-to-the-premises (FTTP). In a study of 28 countries from across the continent, analyst house, IHS Markit, found that the UK ranked the third worst country in Europe for FTTP coverage. In fact, Ofcom’s chief executive Sharon White confirmed last year that a mere 3 per cent of homes and businesses are connected to an ultrafast full fibre line, putting Britain’s businesses at a distinct disadvantage compared to their European neighbours.

It’s clear that the UK urgently needs investment in its networks to: help its digital economy flourish; ensure it is not left behind in the race for gigabit connectivity and; help it remain the location of choice for the global business community. An essential part of this investment is fibre.

Fibre was addressed in the 2017 Autumn Budget statement (November), when the UK’s Chancellor of the Exchequer, Philip Hammond, pledged £500 million towards connectivity and artificial intelligence. Further, he created the Local Full Fibre Network (LFFN) Challenge Fund, which is earmarked to be worth £190 million, that will be offered as funding to local and public bodies for investment in full fibre networks.

Fibre deployment will require significant investment by the industry. There are ways in which both the government and the regulator could help significantly reduce this cost. A key driver is the availability of duct access from the incumbent. Laying down fibre into a duct can be 10 times cheaper than digging up the street. Currently, in the UK – unlike many other European countries – the obligation is on the incumbent to provide access to its ducts and is restricted to investors building residential fibre. This discriminates against businesses and prevents synergies being fully realised. Deregulation will allow access for businesses as well as residential users. This, along with the proposed five-year business rates holiday for new fibre optic deployments proposed by the government, is key to unlocking fibre investment in the UK. However, Ofcom has yet to take this step.

This comes as quite a surprise, especially if the UK wants to retain its leadership status. After all, it is the government’s responsibility to protect the interests of the UK’s digital economy, particularly by laying the foundations for companies to compete and invest. The UK industrial strategy acknowledges this with the creation of an independent watchdog, keeping tabs on progress in innovation, upgrading infrastructure and increasing workplace skills. But, in the midst of reduced projections for productivity, is this enough to bolster business and drive a stronger UK economy?

Still to bite the bullet

In the UK, only 3 per cent of premises can connect to fibre, lagging far behind countries such as Spain, Portugal, Korea and Lithuania where this soars up to 60 per cent, and then rises further still in Japan to 70 per cent. Parts of the telecoms industry still see full fibre investment as a bullet they can afford not to bite, choosing instead to paper over the cracks by upgrading existing century-old copper networks. And the main reason for this? The tight confines of EU regulation which, as interpreted in the UK, is applied as a strict demarcation between business and consumer markets holding regulators back from developing solutions for both, using the same policies and principles.

At the moment, this means that many of the telecoms providers serving both markets (think Vodafone, TalkTalk and BT) are allowed to access Openreach’s network for business purposes, if also rolling out a residential network. As well as dramatically reducing competition, this locks out smaller specialist providers from delivering services for the specific business needs of SMEs and particular industries. For example, firms operating across the financial markets require an unrivalled level of security and ultra-low latency to support high-frequency trading. Ultimately, such regulatory restrictions stem the flow of healthy competition to the incumbent and, without the threat of rising challengers, innovation falls to the backburner.

Time to shine

Other European governments – France, Spain, Italy and Portugal in particular – have developed policies specifically designed to foster fibre investment. In all four countries, the incumbent’s ducts have been open to competitive investment for years. In fact, the FTTH Council Europe (fibre-to-the-home) hailed ‘Spain’s pivotal role as a great achiever’ with around 17.5 million homes passed by FTTH/B and six million subscribers by September 2017, representing a penetration rate of 33.9 per cent. So far, consumer markets have been the focus across Europe but, if UK businesses are to thrive, equal attention must be given to connecting commercial premises.

Such an initiative could mean that it’s the midmarket’s time to shine. SMEs stand to gain the most from such an initiative as cheaper and fibre-ready infrastructure will mean better availability of fibre connectivity. These organisations have been struggling with copper for far too long. For each business, leveraging fibre technology means higher speeds, lower latency, greater security and cost savings in the long run. And at a strategy level, full fibre is essential for powering technologies like 5G, artificial intelligence, virtual reality and cloud computing that are often at the centre of digital transformation programmes. But at a macro level, greater investment in fibre will yield a much-needed boost to UK productivity growth and GDP, which will be especially important if our digital economy is to flourish in a post-Brexit era.

 

Barney_LaneBarney Lane joined Colt in January 2012 as Head of Regulatory and Government Affairs. He is responsible for liaising with government and public authorities globally, concerning the development of telecoms policy. Barney also safeguards Colt’s compliance with all sector-specific regulations, as well as ensuring industry opportunities and risks are understood within the organisation.

Colt and Verizon raise the bar for inter-operator SDN

At an event in London Colt and Verizon claimed the first two-way inter-operator SDN network orchestration demonstration.

Both companies were able to make near-real-time bandwidth changes in each other’s production networks, we’re told, which is an important step towards enabling real-time network automation between operators. In turn this is the sort of thing that needs to be sorted out before the virtualized network utopia we have all been promised can become reality.

“Enterprise networking is in the midst of a revolution,” said Peter Konings, EMEA head of product development at Verizon. “Organizations today want intelligent, dynamic networks that respond automatically to their changing business needs. Before today, no-one has been able to demonstrate elastic flexibility across carriers. Today’s demonstration is the first time anyone in the world has been able to flex network capacity in both directions across network boundaries. This will be a game changer for enterprise networking.”

“This showcase positively demonstrates the power of software defined networking and how increased adoption is putting operators and customers in control of their networks and services,” said Mirko Voltolini, Head of Network On Demand at Colt. “Previously, closed systems have made interoperability between service providers extremely difficult. Further, it validates Colt’s strategy of providing on-demand flexibility to truly enable customers’ digital transformation journeys. Through the use of SDN, providers are now able to better collaborate and innovate, ultimately benefitting customers.”

That’s about it really. The two companies are also working with MEF (Metro Ethernet Forum) to advance the development of industry standards, with the aim of accelerating the availability of this flexibility from many more partner networks. The virtualization promised land will probably be reached through a combination of individual initiative and collective coordination, so this sort of thing feels like a step in the right direction.

Virtualization is going to happen, but that isn’t the point

A question was raised at The Great Telco Debate event which caused a stir: will virtualization make telcos agile and competitive? Of course it will, but it needs to happen faster was the feedback.

This is perhaps the point which the industry doesn’t seem to be getting at the moment. Virtualization is critical for the telcos to operate in the digital economy, but progress has been slow. The question of whether virtualization is important is a moot point, everyone gets it, but what doesn’t seem to have sunk in is the fact it needs to happen quicker.

Colt is a great example of what is achievable when virtualization projects are accelerated. Mirko Voltolini, Colt’s Head of Network on Demand, gave some great insight on the Network on Demand product during his talk, which is essentially the delivery of connectivity through a cloud business model. Customers can scale up and scale down, while being billed by the hour. It is the flexibility and scalability which the digital economy demands.

This is only one product which the Colt team offer, but the concept of virtualization is one which has enabled this change. “We can fail fast and fail often, which is something we have not experienced before,” Voltolini said. It allows Voltolini and his colleagues to create and tweak products, learn from experiences and launch new services quicker. It is the OTT business model, which is proving so successful.

But to create this concept, Voltolini highlighted that virtualizing the network is a key aspect of any progression towards the digital economy, but then so are DevOps and business transformation projects. This is perhaps where many of the telcos are falling behind the times; virtualization is being viewed as a network initiative, whereas there are wider needs and implications if a telco is to remain relevant in the connected community. From Voltolini’s perspective, a successful virtualization project marries the needs and demands of the network, IT and the business in one.

One point which was raised from the audience was virtualization is like electricity, necessary but not sufficient alone. This was backed up by another frustrated voice, virtualization is like asking turkeys to vote for Christmas; there are too many people, both internally and externally, at the telcos who will lose out through the process of virtualization.

So why is virtualization taking so long? Let’s get the obvious point out of the way first and foremost, it is difficult and expensive. But now onto the more interesting point, the projects are too narrowly focused. Some telcos are resisting the idea that every company is now a software company, some individuals are stuck in the analogue age of business and some parties have not evolved to the digital world yet and therefore want to don’t want to lose out just yet.

Virtualization is going to happen quite simply because it has to. But when it is going to happen is a difficult question. The tide is turning more quickly than the super tankers can turn which is very worrying for the longer standing players in the telco vertical. The younger players, such as Three for example, might be holding back smiles as they are not as burdened by the legacy of the industry, but whether this enthusiasm is held by everyone else remains to be seen.