opinion


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

fibre cable 2

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.

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