Wednesday, March 7, 2007

French Telecom Regulator excellent comments on Fiber to the Home

[Mme Gauthey is a member of the board of ARCEP - the French Telecom Regulator. I am told she knows about anything there is to know on next generation networks and is the person ensuring continued competition on FttH in France. Her comments in this article I think reflect an excellent understanding of the roles of regulators, governments, municipalities and carriers in terms of FTTh. I whole heartedly agree with everything she says, especially in relation to passive infrastructure and PON. Although PON is called "passive optical networking" it is anything but. As a layer 1 technology it is a recipe to insure customer "lock-in" with a carrier. (With home run fiber, however, it can serve a useful purpose at layer 2). Some excerpts from the Global Telecoms Business article. Thanks to Dirk van der Woude for this pointer--BSA]

Fibre to the home Operators around the world are installing or at least considering fibre to the home. Gabrielle Gauthey, a board member of French regulator ARCER considers network strategies and the different investment models needed to make fibre infrastructure viable. There is a risk of creating new monopolies in local fibre infrastructure, she warns
Fibre, a breakthrough but a danger of a new monopoly

Gabrielle Gauthey: operators can share a passive optical network, ducts and dark fibre, but that risks creating local monopolies We are on the eve of an evolution that is essential, and somewhat revolutionary in the history of telecommunications — the transition from broad-band to very high-speed broadband, made possible by the use of fibre in the access network.

This transition will have very important conse-quences for industry, operators, local governments, as well for the development of the knowledge economy and the competitiveness of our companies. What are the stakes, the opportunities, but also the risks of this coming evolution? What role can government take in guiding and facilitating this transition?

Stakes and risks of deploying fibre
Before raising the question of government involve-
ment, we need to weigh the stakes of fibre access net-
works for our country. We are talking about the local
loop of tomorrow, which doubtlessly will eventually
replace the copper access network. But we are no
longer living in the same conditions of the 1970s,
when the copper local loop was installed and financed
through a state-run monopoly.
So it is necessary to devise other investment mod-
els, and to anticipate the potential risks they repre-
sent for broadband?
Initial assessments show that the cost of deploying
a nationwide FTTH network would require a total
investment of several tens of billions of euros, spread
out over more than 10 years. It is quite unlikely that
one operator could alone build such a nationwide
project in a reasonable timeframe.
Passive infrastructure accounts for the bulk — 70%
to 80% — of network deployment costs. Civil engi-
neering costs are particularly onerous — more than
50% in urban areas — and so are costs related to
cabling buildings. But the cost of fibre is low, and the
cost of active equipment will continue to decrease
with mass deployments.
Based on the assessments, profitability could be
reached not only in very dense zones, but also in
cities with a medium density, only if there is a high
degree of passive network sharing.
Sharing passive infrastructure appears to be the key
to removing entry barriers and favouring an econom-
ical deployment of high-speed broadband. There are
two ways of implementing this sharing: either by
using existing infrastructure or by co-investment
and/or coordination when networks are to be built.
It would make sense for the first operator installing
fibre to use ducts big enough, and in a sufficient num-
bers to accommodate the fibres of other operators.
Which investment model?
It is necessary to understand that the passive network
involves a long-term investment with a long-term
rate of return — more than 20 years. This can pose a
problem for the private operator who derives its
profit from an active network and needs to turn a
short-term profit, in three to five years.
Operators must control and own their active net-
work equipment because it's only at the active level
that operators can differentiate themselves and be
competitive. However, private operators can easily
share the passive network — ducts and dark fibre.
The ways of implementing network sharing can lead
to very different investment models, which might risk
in some cases recreating monopolies, even local ones.

In one model, the operator is vertically integrated
and installs a closed network, or a slightly open net-
work with only resale offers. This is the preferred
model of incumbents in the US.
In another model, long-term investors, which are
associated if necessary with local governments, adopt
an open-access model from the start, selling passive
network capacity without necessarily becoming
themselves operators.
The passive network is made available to operators
that want to sell very high-speed services. These opera-
tors install their active equipment upstream just as oper- ators did with unbundled copper networks to deliver DSL services. This model is used in northern Europe and also by some local government projects in the US. . There are basically two major types of network
architectures: point-to-point and PON, or passive
optical network. PON is a point to multi-point — tree-and-branch — architecture in which the same operator manages all the active equipment. Point-to- point networks, on die other hand, allow several operators to install their own equipment on dark fibre and at a subscriber's house. Whatever the choice of architecture may be it is of major importance that it should allow the sharing of passive infrastructure and the implementation by competitors of their own active equipment, in order not to reduce the competitiveness of the market.

What actions can government take?
It's clear that government — at the central and local
level — has a decisive role to play in facilitating the
upgrade of the future local loop. Central and local
government authorities must first reduce the entry
barriers for all players by encouraging the sharing of
civil work and the cabling of buildings.
By taking an interest in the digital development of
their jurisdictions some years ago, authorities — in departements for the most part, but also in municipal conurbations — discovered how constructive their fibre to the home management of passive infrastructure could be. Their role until now has mainly involved the connection via fibre of central offices or distribution frames to allow all operators to reach, on a non-discriminatory basis, the unbundled local loop and business parks. A number of local governments have begun to turn their attention to the access network, where they can play an important role in encouraging the sharing of civil work. First, they have the important task of gathering information about civil work and the existing telecommunication networks in their territories. Who is better placed than the local governments to collect this important geographic information? Secondly, they must govern well these public assets and be particularly vigilant that the public ownership of certain infrastructure remains public and accessi- ble to operators. Lastly, the local governments are the best placed to encourage deployments, by offering their rights of way at a fair price, and also by requiring operators to install networks jointly and even to build in reserve capacity for third party operators. Some have already decided to go beyond a simple policy of leasing ducts and have launched public access networks, similar to those of their US or Euro- pean counterparts, such as in Vienna and Amsterdam. Their aim is to accelerate the participation of opera- tors, without recreating local monopolies, by lower- ing the investment burden of private operators in the sharable, non-discriminatory part of the network.

Even though deployments are just beginning, it is
unrealistic to think that all operators have an equal
start. France Telecom has a large amount of spare
duct capacity, dating from when it was state monop-
oly, which the operator can use to significantly reduce
its FTTH deployment costs. This situation makes its
possible for these ducts to be made available, on a transparent, non-discriminatory and cost-oriented basis at to all operators deploying very high speed broadband.