Wolter Lemstra, TU Delft and Aalborg University

“Do we need Policy 3.0
for Telecom 3.0?”
WIK Conference
Brussels
2015-10-12/13
Dr.Ir. Wolter Lemstra
Senior Research Fellow
w.lemstra@planet.nl
+31 653 216 736
1
Do we need Policy 3.0 for Telecom 3.0?
Prof. Eli Noam, Columbia University (2008/2010)
Is Policy 3.0 going to be equal to Policy 1.0?
Have we come full circle?
• Is Telecom 3.0 merely a high speed version of Telecom 1.0,
extended across borders of countries and media,
supplemented by oligopoly at best?
• How can we avoid this tendency towards the past model of
regulated public utilities?
• What models can we establish to encourage regional and
national competition in infrastructures?
• What comes next in this apparent cycle?
2
Workshop
Ministry of Economic Affairs NL (2009)
Question: “Do we need Policy 3.0 for Telecom 3.0?”
Action: Longitudinal country case study on broadband in NL
3
Workshop Ministry Economic Affairs (2009):
Longitudinal case study
FttB in The Netherlands:
• In all (major) municipalities, often multiple providers
FttH in The Netherlands:
1991: KPN Fibre to the Home pilot, Amsterdam-Slotervaart
2000: Govt.‘Kenniswijk’ FttH Project Nuenen, application development
2001: ‘Glasvezel Net’ City Amsterdam initiative, 2006 start roll-out
2003: KPN launches ‘Deltaplan Glas’ – aim 80% of homes by 2010,
invitation to CATV-cable providers to collaborate
2004: Top-30 municipalities: 29 planned FttG; 23 FttB, and 15 FttH
2005: Reggefiber starts fibre network built, open access, tariff regulation
2005: KPN All-IP – FttC and VDSL plans
2008 JV KPN & Reggefiber approved by OPTA and NMa (now ACM)
4
Workshop
Ministry of Economic Affairs NL (2009)
Question: “Do we need Policy 3.0 for Telecom 3.0?”
Action: Longitudinal country case study on broadband in NL
Response: “No, only an extension of Policy 2.0”
Second case:
Belgium-Flanders
Case comparison:
Difference>Similarity
Twelve case studies:
BE,DE,DK,EL,ES,FR,
IT,LV,NL,PL,SE,UK
5
Collaborative research project….
The Dynamics of Broadband Markets in Europe
Realizing the 2020 Digital Agenda
Editors and authors: Wolter Lemstra and William Melody
Authors: Richard Cawley; Marlies Van der Wee, Sofie Verbrugge and
Reinhard Laroy; Anders Henten and Morten Falch; Marco Forzati and Crister
Mattson; Juan Rendon Schneir and Olga Batura; Richard Cadman; Davide
Gallino, Claudio Leporelli and Alberto Nucciarelli; Audrey Lorridan-Baudrier;
Claudio Feijóo, José-Luis Gómez-Barroso, Rafael Coomonte and Sergio
Ramos; Anastasia Constantelou; Iwona Windekilde and Piotr Latny;
Andris Virtmanis and Edvins Karnitis
6
Do we need Policy 3.0:
Research findings as input to the debate
1.
2.
3.
4.
5.
6.
7.
8.
9.
Fibre as technology is not the issue
Response to Noam’s question depends on when it’s posed
Legacy networks drive dynamics of broadband markets
Non-telcos play an important role in roll-out
Unbundling is a necessary but not sufficient condition
PSTN backlog leads to technology leap-frogging
Perceived limits of copper
Impact of Moore’s Law
Need for intervention
7
Global Crossing
Tele1
Deutsche Telekom
Tiscali/NETS
Telecom Italia
Telia
5000- 17000
Route-km:
TyCom
KPNQwest
Interoute
GTS
COLT
WorldCom
Level 3
LDCOM
Viatel
Enitel
Lucent-driven
Pan-European Networks
8
1. Fibre as technology is not the issue…
Case of Amsterdam
Perception 2004
FttH
100000
•
ADSL @ 8 Mbit/s
90000
•
ADSL2 @ 12 Mbit/s
80000
•
FttH @ 100+ Mbit/s
70000
•
ADSL not future proof
60000
50000
40000
•
Average observed data rate
quadratic path
•
Peak rate 3x average
20000
•
IPTV take-up 2012: 50%
10000
•
IPTV overlay 2=>24 Mbit/s
DOCSIS2.0
30000
ADSL2
ADSL
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
0
2004
Assumptions:
9
2. Response to Noam’s question depends on the timing…
Endowments
CA-TV
PSTN
0%…
…~100%HH
WE:100%… …CE:60%HH
CE: Mobile BB
Infra-based competition
Price convergence
Fixed price + Higher data rates
DAE target? FttC but no FttH
DOCSIS-3.0 A waiting game
> 100 Mbit/s
DAE target?
VDSL2+
< 100 Mbit/s
Third party actor – Open FttH access
Municipalities – Construction company
Housing corporation – City carriers
Demand bundling
FttH > 100 Mbit/s
3. Legacy networks drive dynamics of broadband10
markets, but...
Source: Lemstra & Melody (2014)
Breaking the Waiting Game…
From: Waiting for customers
To: Creating customers
1. Housing corporation
Portaal
2. Construction firm VolkerWessels Telecom
3. Reggeborgh funding
4. Establishing Reggefiber
5. Open-access model
6. Demand bundling
7. Incumbent response??
8. KPN share in Reggefiber
9. CATV target marketing
Line-up to sign-up for Ons Net in Eindhoven, Jan. 2006
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4. Non-telcos play
an important role in FttH roll-out...
Source: Rood (2010); Lemstra & Melody (2014)
FttH in the Netherlands
Number of homes
2.500.000
2.000.000
1.500.000
Case analysis - Follow-up questions:
Why was acquisition of Reggefibre by KPN approved?
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May we expect a Reggefibre II to emerge?
Why not in other countries?
1.000.000
500.000
0
Municipalities in fibre: Sweden - 1 out of 2
Skånet 100 Mbit/s, homes passed
Findings:
• Govt. bootstrapping development
• External costs => Internal costs
• Increasing service competion
• Improving business conditions
• Improving socio-economics
• Reducing migration
60,00%
50,00%
40,00%
30,00%
20,00%
10,00%
0,00%
1
2010
2
2011
3
2012
4
2013
13
5
2014
3. Non-telcos play Source:
an important
role
in FttH roll-out...
Forzati & Mattson (2014)
in
Lemstra & Melody (2015)
Access-based competition:
Climbing the ‘Ladder of Investment’
Example: Free – France
LLU: necessary condition
1999 – 2002 – 2004 – 2007
• 2006: Paris Digital City
Initiative
• 2007-06: Fibre-based offer
50 Mbit/s €29.99
• 2007-07: Fibre-based
100/50 Mbit/s €29.99
•
•
•
•
Fibre everywhere?
No…
Sufficient: ≥15% share
Ducts: sewers => Orange
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Lemstra & Van Gorp
(2013);
Lemstra
&
5. Unbundling is aSources:
neccesary
but
not
sufficent
condition..
Melody (2014)
Grass roots initiatives by 670-2000
providers
Example: Bulgaria
• Underperforming incumbent BTC
• Delayed investment due to sale
incumbent (AIG)
Result: Pent-up demand
• Private entrepreneurship
• Lax enforcement building codes
• Exploiting cost differences:
•
£8 => £100 / €5 => €40
Building codes now being enforced
Exploiting shared trenching:
• Direct savings: 30%; 7% project
Sofia
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Source:
Rood (2010);
Lemstra
& Melody (2014); leapfrogging...
6. PSTN backlog
leads
to
technology
AnalysysMason for GBP (2008); EC (2013); Tahon (2013)
Future of copper:
Case of Belgium: Belgacom vs Telenet
Assumptions 2012:
high peak average low
Telenet:
DOCSIS3.0
Average observed data rate
quadratic path
100000
Peak rate 3x average
90000
•
IPTV take-up 2012: 50%
80000
•
IPTV overlay 2=>24 Mbit/s
70000
•
Bonding @50 Mbit/s
•
Vectoring @80-100 Mbit/s
•
VDSL in-year upgrade
VDSLvectoring
60000
2xVDSL2
50000
40000
VDSL2
30000
VDSL
20000
10000
ADSL
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7. The perceived limits of copper...
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
0
2005
Supply side upgrades:
• Bonding required 2013
• Vectoring required 2016
• FttH required 2020
Data rate (kbit/s)
•
2004
•
Belgacom competitive response
Comparing prediction with reality…
Average Peak
from x3 to x5
Average
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Case of Belgium: Proximus vs Telenet
Telenet: DOCSIS3.1
300000
Assumptions 2015:
•
Average: +16%
•
Peak rate 4.4x average
•
ADSL2+ @ 10-15 Mbit/s
•
VDSL2 @ 40 Mbit/s
•
Vectoring @ 2x
•
Bonding @ 2x
•
V&B @ 4x
250000
200000
150000
G.vector
100000
G.fast+G.vector @ 250+
Mbit/s; 100 m or less
FttC+VDSL2
50000
ADSL2
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Source:
Akamai (2015);
TNO
(2014); Van der Law...
8. The
impact
of
Moore’s
Wee, Verbrugge & Laroy, 2015)
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
0
2004
•
FttDP+G.fast
Revisiting the question:
Do we need Policy 3.0?
1. To correct limitations of legacy technology… No
•
•
Moore’s Law leads to extended life of copper
But, when digging do deploy fibre, intrinsically higher capacity
•
•
Resolve building access bottlenecks
Provide access to civil works
2. To remove potential barriers and to lower costs… Yes
3. To prevent market failure… Depends
• If FttH is deployed in competition: No regulation
• If FttH is deployed without competition: Open access regulation
4. To correct failure of upgrade or supply… Open-up
•
•
Breaking a waiting game => Enable non-telco actors
Rural areas => Allow co-investment
Avoid a hold-up
19
Imagine the Future
It is Ours to Shape
The Internet bubble
the impact on the development
path
of the telecommunication sector
20
20
Wolter Lemstra
Literature:
•
•
•
•
•
•
•
•
•
•
AnalysysMason for GBP (2008). The costs of deploying fibre-based next-generation broadband
infrastructure. Cambridge, UK.
Forzati, M. & C. Mattson (2014). Case study Sweden. The dynamics of broadband markets in
Europe - Realizing the 2020 Digital Agenda. W. Lemstra and W. H. Melody. Cambridge, UK:
Cambridge University Press.
Lemstra, W. (2009). Do we need Policy 3.0 for telecom 3.0? The case of The Netherlands. TPRC,
Arlington, VA: George Mason School of Law.
Lemstra, W. & W. H. Melody, Eds. (2014). The dynamics of broadband markets in Europe Realizing the 2020 Digital Agenda. Cambridge, UK: Cambridge University Press.
Lemstra, W. & N. Van Gorp (2013). Unbundling: Regulation is a necessary, but not sufficient
conditions to reach the final rung of the investment ladder. Second Annual Conference on the
Regulation of Infrastructure Industries in an Age of Convergence. Florence, Italy: Florence School
of Regulation.
Noam, E. M. (2008). Policy 3.0 for Telecom 3.0. New York: Columbia University.
Noam, E. M. (2010). "Regulation 3.0 for telecom 3.0." Telecommunications Policy 34(1-2): 4-10.
Rood, H. (2010). Very high speed broadband deployment in Europe: The Netherlands and
Bulgaria compared. Telecom Policy Research Conference, Arlington, VA: TPRC.
Stratix (2013). FTTH Monitor - 2013/Q3 Glasvezelontwikkelingen in Nederland. Hilversum, The
Netherlands: Statix Consulting.
Van der Wee, M., S. Verbrugge & W. Lemstra (2012). Understanding the dynamics of broadband
markets: A comparative case study of Flanders and the Netherlands. ITS Europe, Vienna.
21
Imagine the Future
It is Ours to Shape
The Internet bubble
the impact on the development
path
of the telecommunication sector
22
22
Wolter Lemstra