Ovum has recently completed a study that has benchmarked the pricing of duct and pole access across a set of key European countries with a similar offering. When using Openreach’s October 2011 pricing, Ovum’s benchmark suggests that overall the UK is up to 21% below the European average in urban areas.
Crucially, in the more rural areas, the UK is as much as 38% below average when considering pricing in France, Portugal, and Spain. The importance of a successful physical infrastructure access (PIA) product in these areas cannot be underestimated as the UK government has committed to having “the best super-fast broadband in Europe by 2015.”
Across a range of scenarios and allowing for a mix of assumptions, the UK is consistently below the EU average; in some instances by up to 40%.
In benchmarking prices over a ten-year period, we have assumed the use of a 25mm surface area shared in a duct in the transport side of the network and one of 15mm in the distribution side. The headline results from the benchmarking exercise show that:
- in FTTP scenarios, charges incurred by communications providers (CPs) in the UK are between 15% and 22% below the European average.
- in FTTC scenarios, charges incurred by CPs in the UK are between 17% and 38% below the European average.
- the UK pricing for FTTC scenarios is the lowest in a remote rural area but similar to Portugal and Spain in a rural town.
Around the world governments and regulators have been facilitating the deployment of next-generation access (NGA) and committing to ambitious targets to ensure ubiquity of fiber. Considerable investments are required, and national regulatory authorities (NRAs) have been looking to reduce the costs involved. With the major costs of fiber deployment being in the civil works, allowing operators to use existing network infrastructure to develop their own services lowers the barriers to entry and increases efficient investment.
PIA allows service providers to install fiber in the access network using the incumbent operator’s ducts and poles. The importance of PIA grew in significance following the European Commission’s recommendation on regulated access to next-generation access networks, and is now being imposed by a number of NRAs across Europe.
While we expect other wholesale products such as virtual unbundling to form the basis of a competitive NGA environment, duct and pole sharing is expected to play a crucial role in ensuring broadband ubiquity, particularly in rural areas.
It is generally assumed that for broadband, rural areas make up a third of the UK. Being more rural and less populated makes them more challenging to reach, but with £830 million [€956 million] of public funding available, there is real potential to make use of existing passive infrastructure such as ducts and poles.
Details of the reference offers vary considerably by country. As such, a simple comparison of the prices applied to the main features of the reference offers has limited value…because processes and pricing structures differ significantly from country to country.
While this is necessary to accommodate different national circumstances (including differences in network service types, location and accessibility of the infrastructure, population distribution and political considerations), it makes comparison of per-meter pricing difficult. As such, it is necessary to harmonize the offers and then compare pricing for several types of network deployment that CPs are likely to make.
Through building a flexible Excel-based benchmark model and using a set of given assumptions, we have been able to produce a range of price estimates for all countries. This has allowed us to make meaningful comparisons between offers.