Next-generation broadband ‘unlikely’ in 3-5 years

25 Nov 2009

ComReg has defined next-generation broadband as 25Mbps and higher. However, unless there’s a co-ordinated effort by industry and State, widespread next-generation access is unlikely in Ireland in the next 3-5 years.

The overwhelming view of respondents to a ComReg survey on next-generation broadband is that unless there is a concentrated effort by key stakeholders, the widespread geographic deployment of next-generation broadband is unlikely in the next 3-5 years.

Next-generation broadband will be fundamental to the future of the Irish economy and arguably these super fast roads of commerce will be far more vital to regional economic regeneration than tar roads.

The Top 3

There are three pillars on which Ireland’s Smart Economy will rely – education, science and communications infrastructure. Without the right communications infrastructure, the €8-billion investment in science over the past decade and the €150-million investment in schools’ IT infrastructure will suffer in an era of super-fast communication and collaboration globally.

The clear and present danger is that other countries can and will race ahead. That time may be sooner than we think.

A survey of stakeholders took into account of views of individuals and groups like ALTO, BT, Chambers Ireland, Eircom, E-net, Ericsson, Forfas, HEAnet, Hutchison 3G Ireland, Imagine, Ireland Offline, Irish Rural Link, Magnet Networks, Satellite Broadband Ireland, UPC and Vodafone, to name  few.

Without doubt, a large number of respondents agreed that Ireland’s future network will have to be a hodge-podge of varying technologies with fibre, cable and wireless platforms having a key role.

Investments in future

However, some investments are unlikely to take place in certain areas of Ireland until 2010, and respondents agree that widespread geographic coverage of faster broadband speeds is unlikely in the medium term.

They stressed that a parallel strategy of investing in next-generation broadband access in urban and rural areas should be considered and argued a co-ordinated approach of using the State’s vast array of stranded fibre-optic networks would help.

Open and fair access on a wholesale basis to next-generation broadband (NGB) emerged as a key issue – especially as to whether there is a case for allowing a differentiated regulated rate of return for Eircom in relation to potentially more risky NGB investments.

Without giving statistics, ComReg said some argued there is no case for this while others said only if there was functional separation and true open access for wholesale customers.

ComReg said that while the telecoms sector in Ireland is not as badly hit as other areas of the economy, current conditions will have an impact on the timing and scale of a large-scale NGB rollout.

What is NGB?

In trying to define what NGB actually is versus current services in the market today, ComReg said 25Mbps should be considered a useful differentiator.

If this is the case, then ComReg said: “There will undoubtedly be geographic areas where the market, left to its own devices, is unlikely to provide NGB in a timely fashion, possibly even not at all. In this context, some form of appropriate intervention by the State may be necessary.”

The regulator said such intervention should only take place once a clear picture has emerged as to what coverage will be provided by the market itself. “This position is consistent with the DCENR’s position of seeking to encourage private-sector investment in NGB through targeted Government action.”

In defining what are the risky aspects of NGB investment, ComReg pointed out that fibre-to-the-home (FTTH) has a higher investment profile than fibre-to-the-curb (FTTC), FTTH would have higher operational efficiencies and would in time reduce the level of ongoing investment.

In English, rather than awkward, stumbling Irish State legalese: while it may be expensive, FTTH would be a better investment in the long run.

No proof yet

Although the industry has been talking about a collaborative approach to investing in next-generation access for two years now and studies have been commissioned, evidence of any kind of collaboration strategy has yet to emerge. A TIF study by Analysys Mason suggests that a next-generation access strategy would cost the State €2.5 billion over 10 years.

To hurry along the construction of next-generation access networks, ComReg points out that for as yet unbuilt NGB networks, an opportunity presents itself for Eircom (or indeed any operator) to design and operate its NGB network in such a way that eliminates bottlenecks at the outset and is not detrimental to future competition.

“This could be achieved through the commercially driven provision of effective open and non-discriminatory access to third parties which facilitates the development of sustainable competition at the retail level. In such circumstances, the regulatory regime that would apply could be materially different to that which currently exists and could, for example, allow for greater freedom to set wholesale prices, possibly subject to an appropriate ex ante margin squeeze test supported by any necessary transparency requirements.”

If Eircom were to go ahead and roll out such a network, ComReg said that in terms of incentives for the construction of a retail and wholesale next-generation network, a Weighted Average Cost of Capital (WACC) of 10.21pc is an appropriate return for Eircom on capital/investment.

The regulator said it would take a technology neutral stance on NGB regulatory issues and will endeavour to create a clear and predictable environment to allow operators to make investments.

By John Kennedy

Photo: Next-generation broadband will be key to the Irish economy’s future.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years