Analysis: The broadband squeeze

Feature by Derek Parkinson

The UK is lagging on high-speed broadband, vital for competitiveness. What can be done to plug the speed gap, asks Derek Parkinson

The UK is lagging on high-speed broadband, vital for competitiveness. What can be done to plug the speed gap, asks Derek Parkinson.

Only last year the Government claimed it understood the importance of broadband services for the UK economy. Other countries are investing in new, fibre-based infrastructure, delivering considerably higher bandwidth than is currently available, and the UK must do likewise if it is to compete in the global marketplace, said Stephen Timms, the minister of competitiveness at the time, in a speech at the Commonwealth Club in September 2007. Looking back five years to his time as minister for e-commerce, he noted ruefully that Britain had been slower in its takeup of broadband than its international competitors.

Today, the UK lies fifth in the global rankings for total broadband subscribers, behind the US, China, Japan and Germany, according to Point Topic's Quarterly World Broadband Statistics report for the first quarter of 2008. The ranking is the same for new subscribers added in the same period, although the acquisition rates are either levelling or dropping off in most of these markets.

Although DSL and cable modems remain the most common broadband technology globally, according to research carried out by broadband analysts Point Topic, fibre services delivered to both “street cabinets” and individual premises showed the greatest growth in subscribers in the first quarter of 2008, up 11.45 per cent from 7.4 million to 7.93 million.

More than 80 per cent of fibre subscribers are based in Asia, says Point Topic. Amounting collectively to more than 35 million subscribers, the leading countries are China with 16.7 million subscribers, accounting for 40 per cent of all fibre subscribers, Japan with 12.12 million subscribers, or 29 per cent of the total, and South Korea with 5.4 million subscribers, some 13 per cent.

While broadband is a key piece of infrastructure for the rapidly growing economies of Asia, it could also play a decisive role in regenerating less-industrialised parts of the UK or regions that need to attract clean new industries.

Sunderland City Council has secured more than 40 inward investment projects over the past five years, bringing 9,000 new jobs to the city, including many in the financial services sector. This strategy has seen unemployment fall from a peak of 22 per cent in the 1980s to around four per cent today. Looking forward, the strategy will focus more strongly on exploiting the potential of broadband technology, with Sunderland branded as “Software City”, according to the council.

Some of the business opportunities were explored in a year-long pilot project called N-Code, supported by One NorthEast, the Regional Development Agency. The project looked at the commercial feasibility of providing archiving services to holders of rich media content in a range of formats.

“We identified big commercial opportunities, not just in services for digitising content, but also in spin-off businesses that could turn the content into money,” says Paul Vaclik, head of the digital media technologies programme at Codeworks, the regional centre of excellence for the digital industry. Codeworks also acts as a focus for the growing community of online games developers in the region, he explains.

But if broadband is to deliver the business benefits hoped for, it is essential for high-quality services to be available across the country, not just in isolated pockets. As part of a survey commissioned by the Confederation of British Industry (CBI) in June 2008, 25 per cent of respondents said that national access to broadband communications with similar upload and download capacity is necessary for successful integration of IT services.

According to the CBI, the construction and engineering sectors show the greatest desire for parity of broadband access  (35 per cent of respondents) followed by manufacturing (30 per cent) and the public sector (28 per cent).

Next-generation broadband services providing up to 100Mbps seem to appeal most to mid-cap companies, with a combined 25 per cent indicating they believe they will help them sustain IT-enabled change, says the CBI.

Until recently, progress with deploying higher bandwidth services has been restricted to small and carefully chosen locations in the UK. From this month, BT will use fibre to connect 10,000 new-build homes, commercial space, and retail, leisure and community facilities at Ebbsfleet Valley in Kent. The service will support speeds up to 100Mbps, says BT.

Following successful trials in Ashford, Folkstone and Dover, Virgin Media says it will upgrade its entire cable network. The company currently offers a top speed of 20Mb, and plans to make the new 50Mb service available to more than nine million homes by the end of the year.

An innovative approach has been taken by H2O Networks, which has negotiated an agreement with local authorities and utilities companies in Bournemouth to lay fibre throughout the city's system of sewers in September, with the potential to reach almost 90,000 homes in just over two years. According to H2O, residents can choose to opt out of the scheme or have the basic infrastructure needed for a connection installed free of charge.

The Bournemouth network will deliver 100Mbps capacity to businesses and consumers, and is expected to cost around £30 million. Backed by venture capital, H2O Networks will not provide connectivity and services to residents, but will lease its capacity to ISPs and providers of bandwidth-hungry content such as interactive TV. The company has signed a similar agreement with the Scottish city of Dundee, which will offer similar services to 55,000 residents, says Elfed Thomas, H2O's CEO.

Using the sewer network means that H2O can lay fibre-optic cables to the premises without any public funding, says Thomas. “Not one pound of our investment comes from EU grants or public money,” he boasts.

Other countries are facing broadly the same issue concerning how to maximise the public and commercial opportunities of higher-speed broadband, but because markets and regulatory regimes all differ, there are no strict parallels to what is happening in the UK, points out Richard Allan, former MP for Sheffield Hallam and now head of government affairs for UK and Ireland at Cisco Systems.

However, some issues may well have parallels. “In France, for example, they are looking at intra-building access. In other words, as you change the access network, does that mean you allow one supplier to provide services for the whole building?” he says.

“In Spain, Telefonica is arguing that there are areas where cable provides genuine competition, and so regulatory restraints should be reviewed. The Netherlands is more of a telco/cable duopoly, but the telco sector appears to be getting rid of its local exchanges. The Netherlands is also interesting because there has been quite a lot of public investment,” Allan continues.

BT recently added impetus to its fibre rollout plans by announcing it will commit an extra £1 billion to the technology over the next four years, spending a total of £1.5 billion to connect around 10 million homes by 2012. How many connections will be to premises and how many to cabinets has yet to be decided, and partly depends on “the interest shown by government and regional and local authorities”, it states.

BT says that fibre connections to premises will deliver maximum speeds of up to 100Mb, while those to cabinets will provide between 40Mb and 60Mb. The company remains committed to providing wholesale services to independent providers, it claims. The move is designed to engage the regulator Ofcom in a discussion, as much as sending a message to BT's customers and shareholders, and the wider industry.

“We're talking about new physical elements of the broadband infrastructure. Deploying that network infrastructure involves risks, and that needs to be reflected in the regulatory regime,” says Antony Walker, CEO of the Broadband Stakeholder Group, the main industry body advising government on the issue.

“If it is the case that BT is delivering the fibre infrastructure to the premises or the cabinet – as seems likely – then there are questions that need to be asked about the services BT must provide for other companies upstream,” he says.

BT's concern has its roots in the move by Ofcom in 2005 to partition BT's Openreach wholesale operation from its retail business. “The separation of Openreach and the retail business had the aim of bringing competition deeper into the network, and the general opinion is that it has worked,” adds Walker.

A key element of this competition has been local loop unbundling (LLU), which has seen BT's competitors in the retail market buying access to BT's local exchanges and the so-called “last mile” of the telecoms network, with direct access to customers. “There needs to be discussion about how this unbundling model might work for fibre. It is technically possible to provide unbundled services at the cabinet level, but with fibre to the premises it's a bit more difficult to see. In the absence of obvious unbundling equivalents, there has to be a discussion about what takes its place,” says Walker. “That must include what wholesale products BT offers, and to what extent that allows its competitors to differentiate their services.” he says.

In the UK, one of the first government moves to engage the industry in a discussion came with the appointment of former Cable & Wireless CEO Francesco Caio to head an independent review of the market and technologies.

In 2007 at the Commonwealth Club, Timms confessed to a feeling of déjà vu in returning to the topic of broadband access after five years. With more at stake it must be hoped that we do not see a repetition of the UK's sluggish response to the first generation of broadband technologies.

 

Technologies capable of delivering fastest broadband

 

Cable (Hybrid fibre coaxial)
Fibre is deployed to a street cabinet capable of serving around 500 premises. Combined coaxial cable and copper pairs are deployed over the last few hundred metres to the customer, providing TV, broadband internet and telephone services.

Based on the Data Over Cable Service Interface Specification (DOCSIS) standards, the next generation, DOCSIS version 3.0, is expected to be commercially available from late 2008. It could offer around 220 Mbps downstream and 120 Mbps upstream, but services are contended at the street cabinet, which can reduce peak rates.

Asymmetric digital subscriber line – ADSL and ADSL 2+
ADSL services are available to 99.6 per cent of UK households, offering a minimum of 512Kbps and a maximum of 8Mbps, depending on the length of copper line. Upstream speeds are significantly lower than download speeds.

BT and independent operators such as Sky, Carphone Warehouse and mobile service providers are deploying ADSL2+ technology in some exchanges, providing a maximum of 24Mbps downstream. UK-wide availability is expected by the end of 2011. In practice, the maximum speeds are likely to be 18 to 20Mbps downstream and 800 Kbps upstream, but this will diminish with distance from the exchange.

Fibre to the cabinet (FTTC) and VDSL
Fibre is extended from the local exchange to a street cabinet, and very high-speed DSL (VDSL) connects to the customer premises. VDSL can provide a maximum of 12Mbps over distances of 1,500 metres, rising to 52Mbps at 300 metres.

Further development of VDSL may provide higher speeds over short distances, but as with copper-based technologies such as ADSL, performance drops over distance. Access points would need to be located in the street or building.

Fibre to the Home (FTTH)
The ultimate next-generation broadband service, with end-to-end fibre connectivity that removes local access constraints, making bandwidths of 100Mbps routinely available to end users. FTTH may also be more secure as it does not require active street cabinets, and operating costs could be lower.

However, the cost is high, estimated at around £16 billion to reach 80 per cent of UK homes. An estimated 70 per cent of that cost would be incurred by the engineering work needed to reach premises directly, and does not include additional backhaul or core network costs.

Wireless
A wireless metropolitan network based on the 802.16 standard could deliver a maximum capacity of around 70Mbps to an individual user. In practice, performance could be limited by physical factors such as line-of-sight restrictions, the need for symmetrical upload and download capacity, and the availability of suitable parts of the spectrum.

However, wireless could play an important niche role, providing backhaul routes, linking nodes in the network or reaching the end user. If use of fixed wireless continues to grow, the cost of equipment will fall, making technologies such as Wimax an affordable option.

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