2014: The year of emerging market connectivity, open access and smart cities

It is traditional for analysts to end a given year with an assessment of the major trends in that year and predict what the next year will be like. This year we thought we’d do a bit of that ourselves and update you on some of the things you can expect from us in the coming months.

Broadband and politics, unhealthy bedfellows

Probably the most significant news of 2013 in the broadband space will remain as the partial collapse of the Australian NBN. A highly political project from the start, its inability to deliver in the promised timeframe gave the Australian political opposition the ammunition to significantly reduce its ambitions when they won the elections.

We have written repeatedly about exactly this risk, and while the reduced scope and ambition of the new project is a dissapointment to those who looked at Australia as the beacon in forward-thinking government led broadband, at least the core of the structural separation has so far been preserved.

In New Zealand also, the highly political NBN has hit some roadblocks, though not quite as dramatic as the Australian ones. The government, by not adjusting the regulatory framework to fiber caused the whole UFB plan to be jeopardized by a drastic price reduction in wholesale copper just when Chorus and the other Local Fiber Companies were heavily investing in FTTH.

We have written about potential solutions, but they would require a fair amount of political clout and coverage, and it’s uncertain at this stage whether the government in place has that.

The conclusion from these events is that when large scale plans are put in motion to bring the telecom infrastructure into the 21st century, be it kicking and screaming, governments need to make realistic promises, execute efficiently on these and insure that regulation and policy go hand in hand. Good advice for a number of countries that have moved or are moving in that direction like Israel, Uruguay, and others.

Open Access is finally getting mainstream

At Diffraction Analysis we have long been arguing that Open Access not only makes economic sense but that in many countries around the world it’s the only way to get infrastructure deployed. A few years ago, the coalition of the unwilling incumbents was so deeply against this idea that even policy makers, for the most part, balked at exploring it. Things are slowly changing.

We’re seeing various forms of infrastructure sharing emerge around the world, be it around mobile network components (cell-towers, base stations…), access (open access fiber), backbone, etc. And the players involved, increasingly, include the same incumbent operators who had been fighting tooth and nail against any form of mandated open-access. Consequently we will see increasingly that Public-Private Partnerships that impose open access are likely to become more and more prevalent as even established players willingly consider participating.

Structural Separation doesn’t really get any closer…

On the other hand, the ultimate solution to infrastructure sharing and market fairness, structural separation, isn’t really gaining much traction. There was hope that Italy would represent a major landmark earlier in the year, but shareholder Telefonica seems to have killed that one in the nest (and nabbed a few assets in Latin America in the same move). The aforementioned Israeli project is closer to the mark although the continued existence of the copper-based incumbent may become an issue down the line.

The sad thing is that structural separation (and we now have a functional example of it in New Zealand) would solve most of the issues the market is facing both with funding and competition, at a lower cost to market players than the current model. I don’t have high hopes for policy makers to have the gumption to push this any further, although the UK and Poland might be places to keep an eye on. In the former, the incumbent seems to have aggravated the government so much that I hear the subject is at least no longer taboo. In the latter the incumbent seems keen on making it happen. If only it wasn’t owned by another incumbent who won’t hear of it…

The year(s) to come

While the above trends will continue to unfold, and hopefully a more radical approach to policy, at least in Europe, will be understood to be necessary, there’s little that we can do at our level to influence that. In emerging markets things are a little different because pragmatism generally trumps ideologies and even lobbying to some extent when you try to get from nothing to something. The example of the Colombian national backbone project is very enlightening in that respect, and probably the smartest piece of policy we have seen in telecommunications in years.

This helps us focus where are work will be needed, and it’s essentially in three areas:

  • Emerging market connectivity: the field to further connectivity out in emerging countries and in the rural areas of developed countries is wide open, and smart solutions and approaches emerge everyday. Our research has convinced us that the traditional view that only wireless will do and then only in dense urban areas is increasingly erroneous. We are releasing a white paper in the next few days on this topic, so watch this space. We expect to work more and more with emerging markets in the coming years to help policy makers set up the right context for connectivity growth and to help businesses build smart, effective and profitable networks addressing the massive opportunity there. Rural broadband in developed markets will most likely rely on similar approaches although the legacy may prove to be a big hindrance.

  • Open Access: now that the ideas of infrastructure sharing are gaining traction, an increasing number of players, public, private and in-between hop on board. At the same time, they start to realise that there’s no ‘Field of Dreams’ effect in technology adoption, and that you have to work hard to make an open access model work. We have been hard at work in 2013 assisting neutral operators, both municipal and national in fostering the right ecosystem for adoption to happen as swiftly as possible, and we will continue to do so. Figuring out the proper wholesale offerings, establishing the right levels of trust between partners and taking an active role in promotion and commercialisation are all part of the solution.

  • Smart Cities: it’s a sad state of affairs when you realise that many cities that have invested massive amounts in their own municipal fiber networks are not using it for much beyond delivering broadband to their citizens. Furthermore, cities that don’t have their own assets are increasingly puzzled as to how they can become smarter while having to rely on third-party networks not designed to do what they need them to do. This will be a big focus for us in the coming year as we try to establish the infrastructure bedrock for local governments to really launch themselves in the world of Smart Cities.

These areas are of course in addition to our usual coverage and analysis. In the next few weeks we will announce a lot of releases from Diffraction Analysis, including but not limited to the new iteration of our FTTx World Database, a report presenting 5 Ways to Supercharge an FTTx Implementation, in-depth analysis of user-by-user consumption data from a gigabit fiber network, a thorough examination of the reality of Chattanooga’s Gig City and much much more.

We will also attend rather more events than we did last year, including the just-round-the-corner FTTH Council Europe conference in Stockholm from February 18-20th. We will be presenting very exciting results from the first ever Fiber Usage survey. Stay tuned for more in the coming days.

This is going to be an exciting year, both for Diffraction Analysis and for the industry in general. We certainly hope it’s an excellent year for you, and we hope to see you around before December!

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