National wholesale broadband network operators need to avoid the monopoly mindset

David James/Ovum
15 Dec 2015
00:00

OvumA growing number of governments around the world are encouraging the rollout of wholesale-only, open-access, next-generation broadband networks. In many cases, the intention is that - at least for the immediate future - the new networks will be the only network of its type in that country. However, the operators and regulators of these networks must be careful to avoid any return to the old “monopoly mindset.”

The creation of a single national fiber backbone, fiber access network, or 4G access network that all retail service providers (RSPs) can use on an equivalent basis makes sense when capital is in short supply. However, monopolistic companies are often risk-averse, inefficient, and unresponsive to their customers’ needs. This monopoly mindset runs counter to government objectives to increase broadband penetration and customer choice. Steps must be taken by the network operators and regulatory authorities to avoid the temptation of reverting to the easy life of a monopolistic operator by stimulating demand and offering value-added services to support RSPs.

Benefits of increased broadband penetration

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Wholesale Insights November 2015

Many governments have declared plans to increase broadband penetration among their populations by investing in wholesale-only, next-generation fiber backbones, fiber access networks, and LTE wireless networks. Most of these investments are through public/private partnerships (PPPs) in which public funding supplements investment from commercial organizations, but some are entirely state-funded.

State-sponsored national networks result from governments’ frustration that a non-interventionist approach to the rollout of broadband infrastructure has failed to increase broadband penetration sufficiently, and has in some cases resulted in costly duplication. These countries have identified that if broadband rollout is left to commercial operators, those companies would concentrate their infrastructure on centers of population where they can earn sufficient ROI. However, that would inevitably leave many more remote and less densely populated areas without broadband services at all. To avoid this, many governments have decided to invest in national network infrastructure that will provide wholesale services to existing and new RSPs. Sensibly, these governments have realized that their expertise does not lie in owning or operating retail telecoms companies.

The Singapore government announced plans for its state-funded national broadband network in 2007. It features structurally and operationally separate entities responsible for passive and active network infrastructure on a wholesale-only basis. Australia’s government-owned NBN Co is rolling out a wholesale-only national broadband access network using a combination of fiber, fixed wireless, and satellite technologies. New Zealand’s Chorus fiber broadband access network operator was structurally separated from incumbent Telecom New Zealand (now Spark) in 2011 as a condition of participation in the national FTTH program, which is part-funded by the government.

Under the “Argentina Conectada” plan, state-owned Arsat will own and operate the only national fiber-optic network in Argentina (there are also regional networks). Although primarily a wholesale network, Arsat will also serve retail customers in regions where there is no other operator. Following a failed auction, Arsat received wireless spectrum in the 850-MHz and 1900-MHz bands, to operate an LTE access network on a wholesale-only basis.

In 2012, BoFiNet was established by the Botswana government as a wholesale provider of national and international telecommunication infrastructure for the country. Hungary’s national broadband strategy also includes governmental investment in the construction of a national backbone network.

The Mexican government’s “Pact for Mexico” makes broadband access a constitutional right for the population. It is investing in a PPP to create a state-owned wireless network in the 700-MHz band, which will provide wholesale LTE access (no other operator uses this band, although some are using other bands to provide LTE access). The Zimbabwe government, too, is reportedly considering the creation of a national infrastructure entity that will provide wholesale services within the country.

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