The UK is moving incrementally closer to towards the day when full fibre networks outnumber and will eventually replace copper telecommunications networks. At some point on that journey its highly likely that it will be recognised that the rural most networks have a natural monopoly, simply because the economics don’t support multiple infrastructures in the hardest to reach and therefore most expensive places to build.
Monopoly providers tend to attract regulation, as do BT and KCom today for their copper networks. Current Ofcom consultations are already starting frame a shift in their thinking with a proposal to regulate three distinct markets rather than a single national market as they do today.
At present are few indications that Ofcom is likely to extend this regulation to cover alternative rural fibre operators as their thinking remains somewhat stubbornly and ironically unhelpfully focussed on BT alone, but I would imagine that largely depends on the good behaviour and the lack of well-formed complaints against new entrants.
As the alternative fibre operators grow their footprint there will be an increasing expectation that those in rural areas especially ensure they are at least making genuinely efforts to encourage some level of service competition over their infrastructures.
Today there is marginal interest from ISPs in delivering retail services over anything over than Openreach’s networks, but this is starting to change. Cityfibre have been particularly successful in securing a deal with Vodafone and are in the process of closing another with TalkTalk. There are other discrete talks going on between other operators and significant service providers so expect to hear more in the coming months.
There is also growing discussion amongst several the newer operators about how they might encourage service providers onto their networks and avoid having to expend significant investment in developing a retail proposition. And there are early, tentative signs that some of the larger service providers may be preparing to reciprocate.
These are all encouraging signs that the alternative network operator space in the UK is starting to mature. But it is not without risk.
Like several other countries, the UK has several community-led fibre initiatives. The US has the likes of HBC in Minnesota, the Netherlands has OnsNet near Eindhoven, and the UK has B4RN. However, the motivations of the UK when contrasted with many of the international networks would appear to be somewhat different.
The Dutch networks, for example, often grew out of a movement to develop a sense of what could be called eWellbeing where the physical infrastructure is simply a means to deliver community-focussed services like healthcare, education or to support independent living.
Many of the US projects have very similar goals. HBC developed close links to healthcare providers, for example, while others may focus on developing the local economy or attracting inward investment.
Very few, if any, international community-led projects get directly involved in building the networks. While they will be heavily involved in securing the investment and facilitating the build, they typically use external contractors to carry out the works and may even outsource the day-to-day operations to a specialist company, much as traditional operators do, freeing the community to focus on delivering the services.
The UK projects, in contrast, have typically had a sharper focus on delivering the infrastructure, often with their own sweat. While they are typically very supportive of developing digital literacy among their communities, they have not typically become as directly involved in delivering local online services beyond being an ISP. But in fairness to them this is not always through a lack of trying.
What has this to do with telecommunications regulation?
If Ofcom were to be tempted to regulate rural fibre networks as natural monopolies with significant market power, the community-led projects would be required to open their doors to the major service providers.
Since the prime, and in some cases only, community service they offer is to be the ISP of last resort, they risk over time seeing their customer-base eroded as people migrate to the major brand providers with their bundled packages and special offers.
In the Netherlands, for example, they have often found that a local set of services further boosts community loyalty, making the projects somewhat immune from mainstream service providers. Members of the community would risk losing access to the independent living services or specialist healthcare programmes delivered over the community network, but in many of the UK community projects that risk doesn’t exist for local people to the same degree.
This potentially risks the UK community providers increasingly becoming wholesale operators for mainstream service providers, eroding some of the community cachet that they have worked so hard to develop.
While many of the new breed of alternative operators increasingly take part in industry workshops and debates in preparation for the day when retail competition arrives on their networks, the community initiatives are largely missing. Yet if they are to protect what they have worked so very hard to create, their preparation is likely to be more complex.
The UK healthcare and education systems have not been as supportive of these kinds of schemes as they have been on other countries. The NHS has carried out any number of trials over community networks but few if any have evolved into live, sustainable, long-term programmes. This is huge missed opportunity!
Some of the earliest investors in fibre programmes in the Netherlands were social housing associations; the Dutch Government even developed guidance to encourage them. Yet in the UK I’m aware of only one housing association being directly involved in a broadband programme.
The UK has something of a crisis in delivering social care, especially in rural areas where an aging population and isolation are growing issues. Local Authorities have invested significant sums into broadband programmes as economic development measures, yet none appear to have considered using the networks themselves as a smarter, more efficient means of delivering social care – something the Dutch were doing over a decade ago.
Community-led fibre programmes in the UK are the perfect size and have the greatest level of local support structures for public bodies to safely learn how to reinvent the delivery of expensive and increasingly creaking services in some of the hardest to reach areas.
And if this can happen the UK will have finally found a means to protect the immense level of social capital invested in some of these schemes – and found a nuanced way to regulate the market.