There are few people today that would dispute that future connectivity will be based on fibre; the questions are of timing and how the transition can be managed. Today there are two main intellectual camps – those that tend towards a top-down national roll-out and those that see a bottom-up locally led market transition. These thought processes imply three scenarios which may play out as next generation projects emerge in the UK:

• Da Wo (“Big Me”). This describes the development of a traditional vertically integrated operator willing to build NGA networks alone. This is essentially what occurred in Japan.
• Islands of Connectivity. A scenario where projects develop largely in isolation with few links with other projects. This is the traditional municipal network approach.
• The Patchwork Quilt. Local projects develop but exist within a framework which ensures a consistent interface to the market.

Da Wo is most likely to create a market which is very much as today; one where there is significant choice but limited variety much as the patisserie offers a great variety so long as you want cake. The scope for product differentiation and innovation is limited and largely in the hands of the network owner. However the biggest hurdle to overcome problem with this approach is the need to secure massive levels of investment – figures of £25-30bn are commonly talked about – which few if any in the industry believe delivers a business case.

The emergence of islands of connectivity may overcome the lack of variety and opportunities to innovate but many projects may struggle to achieve the scale needed to create a rich product set and vibrant market of service providers; even the very largest cities in the UK may struggle to attract some of the key media organisations, the elite of which make no secret of their requirement for a million customers before engaging with an organisation.

A patchwork quilt of local projects sewn together by a national framework permits local innovation, allowing projects to reflect local needs and colour, offering the benefits of the Da Wo approach without the potential problems.

It is possible that all three scenarios will play some role in the future of the UK’s transition to NGA networks. The cable companies, for example, may elect to remain vertically integrated and follow the Da Wo path; some municipalities may feel they are better able to deliver their strategy alone, developing islands of connectivity; while others may see benefits in working together to create a patchwork quilt.

The regulatory framework will need to develop to encompass all three scenarios as each will have a different impact on the consumer and the industry. In many respects the Da Wo scenario is the easiest to regulate as it largely describes business as usual with only fine adjustments needed to fully reflect the technical transition to fibre. The two new approaches will require more regulatory thought as they to varying degrees describe a transition from a tightly held monopolistic market to a more “perfect market” which perhaps demands less of an ex ante regulatory regime.

Is a framework necessary?

The first question must be “is it necessary to have a national framework?”. To understand this it must first be necessary to consider what the service provider market would look like without such a framework.

In this scenario each locality would have their own local infrastructure, possibly developed in isolation or possibly part of a regional organisation. It is generally accepted that it is desirable to have functional separation between the passive infrastructure and the active operators. If the market doesn’t provide sufficient local scale for the existing national operators then local operators will need to fulfil this role. This creates a number of problems.

Firstly access to good content and media is typically a function of scale. A service provider with a few hundreds or thousands of customers will struggle to strike any meaningful deal with the existing content providers. There is ample international case history to show this. The Utopia network owners in Utah predicted this and attempted to negotiate heads of agreement with media organisations to leverage the overall network’s scale rather than that of each service provider. This is an innovative approach, and one which may work in the UK for some of the larger city-wide municipal networks, but won’t work where the scale of the infrastructure is too small in the first place. Since the goal of this paper is to identify a model which can include all of the UK and which doesn’t cherry-pick the largest projects, then this is a significant problem – it can’t be acceptable for the residents of the largest “top” cities to have access to better content that those of the “second tier” cities, let alone the market towns and villages.

Secondly, the market for competition within islands of connectivity will be limited; the scale of investment and innovation will necessarily be more limited. While this may be partly offset by the greater flexibility and agility of smaller players, it is far from an ideal solution.  Some evidence already exists for this in the current market for consumer broadband services where much of the traffic competed for at local level by different ISPs is actually carried by one large service provider.  

Thirdly, and perhaps less importantly, the current approach to market will need to alter. Today internet providers are comfortable with national marketing campaigns to get their message across. This can no longer work in a fragmented market where it’s no longer clear where customers and operator coverage overlap. The capabilities of digital media will to some degree mitigate this – local insertion of advertising could reduce the impact, and perhaps some might say a focus on localised markets rather than a “one size fits all” approach may actually improve some aspects of service delivery.

Overall though, without the option of a national framework, customer choice and the quality of the market will suffer.

What is a framework trying to facilitate?

Before considering the form of a national framework, it is necessary to predict what the landscape for NGA networks will look like. It is already known that several organisations and localities are investing in NGA fibre and that:

• These range in size from major projects like those of Manchester and Bournemouth to individual housing association, such as West Whitlawburn, and villages such as Alston.
• These projects in themselves are islands of local connectivity
• A common need for all is some form of access to services
• It seems in everyone’s best interests to make sure that competing service providers can efficiently connect to these networks to offer these services

Several organisations exist that may be interested in providing services to homes and businesses attached to NGA networks:

• These range in size and capability from substantial network operators investing in their own network capacity to white-label resellers who are brands seeking to make their mark in the market
• Some of these will have substantial network assets
• Some of these will require network assets to build their service sets
• All have an offering which they would like to present to customers
• The brand-owners who have entered the market (such as large supermarkets) see synergy with their existing business and ownership of the customer as important aspects of service provision

Several organisations exist which operate middle-mile assets:

• Some of these own dark-fibre assets between locations (e.g. Geo, Neos, etc.)
• Some operate regional networks (e.g. SuperJanet)

Several organisations exist which offer specialist services

• These may typically offer international peering services, or access to content for example

These four broad groups form the building blocks of any network infrastructure – in this generation, the next, and long into the future. These roles will exist long after the NGA debate is long forgotten. Therefore a national framework needs to consider how these four roles can be bought together without the assumption of a single monopolistic incumbent.