INTUG - International Telecommunications Users Group
 2nd International CICT Conference

Next generation broadband - content and user perspectives

1 December 2005, Copenhagen

Ewan Sutherland

Check against delivery


Disclaimer
The views expressed in this presentation and made ex tempore by the speaker are not necessarily those of the International Telecommunications User Group, or of its members or of their members or employees. They are solely the views of the speaker and INTUG accepts no responsibility for those remarks.


The topic for our panel is "drivers and barriers for broadband development".


It is, by now, fairly obvious that the primary driver is competition and the primary obstacle is resistance by incumbent operators, that includes the mobile network operators.
 
There was a time when people believed that incumbents would learn about competition during the process of liberalisation. In truth what they learned was that they could influence or even control the pace and outcomes by complex politico-regulatory processes. For them, competition remains a weapon of last resort.

At the same time the mobile network operators learned to be incumbent operators playing the most heavily defensive games imaginable. For them, competition is a rhetorical device rather than a reality.


The nationalism of broadband

We can see enormous variations across the European Union and the OECD in the performance of countries in broadband.

Some have lots of lines of broadband, some almost none at all. Some have very high speeds and innovative multi-play offers, while others remain at slow speeds, with simple offers at high prices.

If we assume some link to economic growth, then we will eventually see very different contributions to growth and jobs, the Lisbon goals.

I still hear the intensely stupid question, "why do users need so much bandwidth?"

Incumbent operators asked this question with ISDN at 64kpbs, especially the waste of that second B-channel, and they ask it again with 1 Gigabit per second (already available in Hong Kong as a residential offer from HKBN). The answer is because someone will develop applications at those speeds, someone who is too clever to work for a (pre-)historic operator.

I have said on many occasions that multi-national corporations seeking residential broadband for their homeworkers,  their teleworkers and the like are very frustrated by the wild variations in availability, speeds, prices, SLAs (if they are lucky enough to get them) and the technologies. If you have to assume poor latency and slow speeds as the lowest common denominator it does nothing to encourage adoption of new technologies and services. Moreover, if you have to support thirty flavours of broadband at a hot desk it makes the cost very high.

Explaining to the CEO that he can get 0.5 Megabit/second at his home in Copenhagen, but 20 Megabits per second at his holiday home on the Côte D'Azur is not easy. That his managers can get residential broadband in Morocco but not in Greece enters into the realm of the absurd.

It is hard to believe that we are supposed to be working towards a single market.

From the data, I defy anyone to show that we will ever get to a single market!


The Irish question

The OECD Telecommunications Working Party (TISP) meets on Monday in Paris. It will meet again in May, but this time in Dublin.

The chances are that by May 2006 very little further progress will have been made on broadband in Ireland. For all its claims to being a Celtic tiger economy, Ireland is a broadband sloth.

The 2002 regulatory package seems entirely inappropriate to solving the problems in Ireland.

It is clear that more dramatic action is required if Ireland is not fall yet further behind.


The German question

In the last few days we have seen some almost inevitable moves by incumbent operators. Their prospective investments in optical fibre and next generation networks have created a political opportunity that they have tried to exploit.

The incumbent operator can add up the prospective investments to some enormous total and then complain to the government or to the regulator that they can only justify such an investment to the financial markets if there is a holiday on regulated access. They allege that they can no longer carry the burden of the free-loaders and parasites that do not invest, but merely resell their infrastructure and their investments.

The bolder incumbent operators will even hint of investing in other markets where conditions are more amenable, more pliant.

I suppose we have to expect this sort of political posturing. Telecommunications has long been the politico-regulatory equivalent of the World Wrestling Entertainment.

It almost takes your breath away when we find it written into the agreement of the Grand Coalition in Germany. The CDU and the SPD have codified their unified policy to exempt new communications infrastructure from regulated access for an initial period of years.

Suddenly, the Bundesnetzagentur announced that it wants to exempt VDSL from regulation. It asserts FTTN/VDSL is a separate and distinct market, one where dominance and market problems cannot be presumed. Yet VDSL will clearly be part of the retail market for broadband; it is not a distinct market. Consumers will buy the service, not the underlying technology.

It has forced the European Commission to invoke a second phase investigation under Article 7 of the Framework Directive. In time, the Commission will have to veto the German proposal, unless it is withdrawn.

If the Bundesnetzagentur persists in remaining "on message" with Berlin then its claim to being independent will have grown awfully thin.


The South African question

I was quoted in the press as saying that Telkom South Africa priced broadband for Mercedes-owners. In fact the price is so high that it is only for the owners of larger Mercedes models.

Broadband in South Africa is so hideously expensive that African leadership lies in the opposing corners of the continent, in Morocco and in Egypt. For example, TE Data says it will have 100,000 lines by the end of this month.

The key to the problem is unlocking the construction of domestic infrastructure by any operators that wants to do so, including the opening up of spectrum. Wireless will be especially important, since it has so many GSM users who cannot obtain broadband from the PSTN or cable television networks.

The international gateway must be opened to competition to release some of the unused capacity on the undersea cable. The example of India should be clear enough and the lack of action is extremely disappointing for those who cannot afford the present level of international communications costs.

Without radical changes South Africa will fall further behind and may struggle to regain its position.


Wireless broadband

When I talk of wireless broadband, I do not mean 3GSM.

I recently had to listen to the propaganda of the GSM Association in which they tried to pass of W-CDMA as being broadband. If you can wait for 3.5G, that is for HSDPA and HSUPA and you find a cell that nobody else is using, then you might get something that feels like broadband for beginners and priced at some outrageous rate.

Brussels has become a byword for unsavoury political deals, where concessions on fishing rights are traded off against the creation of obscure EU institutions in a bizarre form of political calculus. It is in that spirit I would suggest the following, casting off any pretence at rational analysis.

The 3GSM operators are being awkward about the reassignment of 450 MHz, 2 GHz and 2.5 GHz spectrum. This sort of obstructionism is unacceptable. So, the price is to renegotiate their existing licences for 900MHz and 1800 MHz to allow them to use any technology they wish. It might be fun to oblige them to use W-CDMA, but it should be true technological neutrality.

They then cannot complain about the use of 450 MHz, 2 GHz and 2.5 GHz for technology neutral wireless broadband services. 450 MHz is especially important for rural areas.

As I say it may not appeal to the engineers or the economists, but it has potential as a political deal.

The assignment of licences can be above and below the level of the member states. We should consider a licence for Åarhus or for the Nordic grouping. Equally, we can consider a licence for Wien or for the Habsburg lands.


The Japanese question

Japan has created a mass market of some twenty-three million broadband lines, that is over seventy million consumers. That means that already more than half of the population has access to broadband. It adds about 400,000 lines per month.

The fixed lines have speeds of, at least, 10 Mbps and often 50 or 100 Mbps for prices of the order of ¥4,000 to ¥7,000 per month. Many have installed Wi-Fi at home.

In contrast to Germany, the Japanese authorities see one market that spans a range of broadband technologies up to speeds in excess of those proposed by Deutsche Telekom. Indeed they see unification of fixed and mobile markets through multi-play offers.  NTT, the Japanese, incumbent takes a similar view and has already shifted away from ADSL to FTTH (see its recent roadshow).

The offer from Yahoo! BB is some 220 DKK for 50 Megabits/sec downstream and 3 Megabits/sec upstream. I do not think there is a comparable offer in Europe and most certainly not in Denmark.

Additionally, there are about forty million individuals using 3G phones. The conversion from 2G is so rapid that that technology will disappear in a couple of years. Already Japan prepares for 4G in collaboration with Korea and China.

It is only once you have such a market that the software, services and consumer electronics people take you seriously and develop the new "things" which make broadband so exciting.

The vision in Japan is for the Ubiquitous Network Society (UNS). It is in stark contrast to Europe that a vision exists of the future.

Moreover, it is comprehensible, in contrast to NGN which remains, at best, nebulous. While we are told NGN is demand-driven there is very little evidence of that, unless it means demand from the carriers. Why the carriers are so keen on IMS is something that causes me deep concern, it looks potentially severely anti-competitive and retrograde.


A plague on both your houses

Were it of no economic importance, then watching the content owners and the incumbent networks operators achieve a "Mexican stand-off" might be amusing. One side claiming more money for carrying the content, the other refusing its content until it is paid more and the installation of yet more draconian Digital Rights Management (DRM).

It is truly amazing that the only organisation, other than the police and interior ministries, asking for traffic data retention is the alliance of content holders. They want access to the data in order to sue individuals. They retain a business model developed for the sale of sheet music in the era of the ubiquitous network society. It looks to me a horribly short-sighted view of the world.

For reasons of jobs and growth, we need competition to get the distribution of content unblocked. We need multiple channels to need to see content platforms being delivered in Europe not in Japan and Korea.

For the moment, I would still bet on stasis, two tribes of dinosaurs locking horns.

Once again, the Lisbon goals are ignored.


Lisbon is only four years away

We draw ever closer to the deadline for the Lisbon goals. In terms of most political actions, we almost out of time, certainly if any measures have to be transposed.

We were supposed to have achieved a much higher level of competitiveness for Europe than we have. We were supposed to have created lots of jobs and lots of economic growth, but we have not.

It seems inevitable that we will see a continuing politico-regulatory struggles over the 2006 Review and issues such as VDSL/Fibre/NGN. It is a process that is focused on operators and not on the economy or on business or on consumers. It is the short term view of a bunch of market players that gave us such wonderful technologies as ISDN and UMTS.

We have world class lobbying that impairs rather than improves the economy.

Anyone expecting mobile Internet access in time for 2010 clearly believes in miracles. It is simply not going to happen. The 3GSM operators have no interest in delivering it and will not deliver it. They will offer the equivalent service of a mediaeval water seller, wandering the streets of a city, a few drops sold for a high price. If we want mobile Internet, let alone, mobile broadband, then we must look elsewhere and immediately deliver spectrum to new players.

We have no single market at any level. We need desperately to make progress to that simple objective. To argue that one of the most important high technology sectors should continue to remain outside the single market is bizarre and perverse.


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