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Contact: Mr. Matthew Howett
Ovum Pty Ltd., UK
Tel: +44 0207 551 9000
Fax:
E-mail: [email protected]
ASIA-PACIFIC TELECOMMUNITY
12th
APT Policy and Regulatory Forum
Document:
PRF-12/INP-07
21-23 May, 2012 – Bangkok, Thailand 13 May 2012
A benchmark of Physical Infrastructure Access
Prepared by
Mr. Matthew Howett
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A benchmark of Physical Infrastructure
Access
Matthew Howett
Practice Leader, Regulation & Policy
May 23, 2012
12th APT Policy and Regulatory Forum, Bangkok
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PIA as a regulatory remedy
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Introduction – what is PIA?
Physical infrastructure access (PIA) allows service providers to install
fiber in the access network using the incumbent operator’s ducts and
poles.
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.
We expect other wholesale products 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.
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How is it defined?
The EC defines civil engineering infrastructure as physical local loop
facilities deployed by an electronic communications operator to host
local loop cables such as wires, optical fiber, and coaxial cables.
Typically refers to subterranean or above-ground assets such as:
Sub-ducts
Ducts (underground pipes or conduits used to house (fiber, copper, or
coaxial) cables of either core or access networks)
Manholes (holes, usually with a cover, through which a person may
enter an underground utility vault used to house an access point for
making cross-connections or performing maintenance on underground
electronic communications cables)
Joint-boxes/chambers
Poles
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PIA in the toolbox of remedies
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Importance of PIA for ubiquitous broadband
The EC’s Digital Agenda set out targets for current and next generation broadband coverage:
100% current generation broadband coverage for all by 2013
100% coverage of 30Mbps or faster by 2020
50% of households subscribed to 100Mbps connections or faster by 2020
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Progress towards meeting superfast broadband
targets has got off to a slow start
50
Mbps
100
Mbps
100
Mbps “Very
high
speed”
100
Mbps
100
Mbps
24
Mbps
50
Mbps
2014
2020
2020 2025
2020 2015
2017
2010
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Denmark France Germany Italy Portugal Spain Sweden UK
NGA coverage target (%)
Current NGA coverage (%)
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How to achieve the targets?
The business case for NGA in less dense areas remains shaky, and likely requires shared investment and new approaches:
the creation of shared fiber local loops or
a more active role for authorities in facilitating the use of civil infrastructure,
Removing all barriers to deployment for those who can see a business case
...however entail painstaking consultation between parties that often have quite different agendas
These are early days for NGA, and regulators must be mindful of the
considerable deployment costs associated with laying fiber. As such,
regulators must ensure that the regulatory framework does not curb
investment, but rather ensures sufficient incentives are provided.
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Overview of regulatory obligations for NGA in Europe
Country Date of latest
market analysis
Sub-loop
unbundling (SLU)
Duct access
obligation
Bitstream access Unbundling of fiber Dark fiber access
Austria May 2010 (Market 4)
November 2010
(Market 5)
Yes (cost-based) Yes (cost-based) Not for FTTH Yes (“virtual-ULL”,
cost-based)
Yes (cost-based,
subsidiary obligation
to duct access)
Belgium July 2011 No (except where
VDSL is not
deployed)
No No No No
France June 2011 Yes (cost-oriented, to
the new access
points)
Yes No No No
Finland November 2008
(Market 4)
March 2009 (Market
5)
No Yes Yes (not subject to
price control)
Yes (not cost-
oriented)
No
Germany January 2011 Yes (cost-oriented) Yes (between
primary connection
points and MDF)
Yes (ex-post price
controls only)
Yes (not cost-
oriented, ex-post
price control only)
Yes (where cable
duct access is not
possible)
Italy January 2010 Yes (cost-oriented) Yes (not cost-
oriented)
Yes (to be further
defined)
No Yes (not cost-
oriented)
Netherlands December 2008 No No Yes (cost-oriented) Yes (cost-based) No
Norway April 2009 No Yes (for FTTH) No No No
Sweden May 2010 Yes (cost-oriented) No Yes (cost-oriented) Yes (cost-oriented) Yes (cost-oriented)
Spain January 2009 Yes (without offer) Yes No (imposed on
products up to
30Mbps)
Yes (cost-based) Yes (cost-oriented)
UK October 2010 Yes (cost-based) Yes (cost-based),
only for providing
NGA
Yes (subject to
charge control)
Virtual unbundling
(not subject to price
control)
No
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Comparison of regulated duct offers
Country
Market through
which obligation
imposed
Date of
implementation of
duct access
obligation
Scope of current
offer
Designated
operator
Cost
methodology of
regulated
pricing
Access to other
civil
infrastructure
France Market 4 July 2008 All ducts and poles
for the installation
of fiber cables
France Telecom A cost-oriented
approach based
on current
economic costs
Sewage systems
in Paris
Portugal Market 4 July 2006 All ducts and poles
for the installation
of fiber cables for
retail broadband
provision
Any operator with
physical
infrastructure
A cost-oriented
approach based
on current cost
accounting
All civil
infrastructures of
state-owned
authorities
Spain Market 4 March 2009 All ducts and poles
for the installation
of fiber and co-axial
cables for retail
broadband
provision
Telefonica A cost-oriented
approach based
on current cost
accounting
CMT will
intervene,
imposing access
to civil
infrastructure if
established
commercial
agreements are
not sufficient
Switzerland A separate market
for ducts
April 2007 Only duct for the
installation of fiber
cables
Swisscom LRIC Access to in-house
wiring
UK Wholesale local
access market
(market 4)
January 2011 (draft
reference offer
published)
All ducts and poles
for the provision of
NGA services using
fiber and co-axial
cables
BT Prices are
regulated through
a cost-orientation
obligation
By commercial
agreement
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A simple comparison of per metre pricing is of limited
value
A direct comparison of the prices applied to the main features of duct
and pole access offers has limited value.
Process 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 a comparison of per-meter pricing
difficult.
Instead it is necessary to harmonize the offers and compare pricing
for several network deployments that CPs are likely to make.
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Benchmarking PIA
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Background
We have recently done a benchmarking study for BT Openreach that looks at how duct and pole access has been implemented in a selection of countries (France, Portugal, Spain, and the UK) with two main intentions:
Firstly to identify the main features of the reference offers in each of the countries in order to find out similarities or major differences in approach
Secondly to try to find a way of benchmarking the charges of using PIA across all countries by a Communication Provider (CP) in a way which would replicate the same network deployments that it would use in the UK.
UK used as the “base” country.
In this way it would be possible to estimate how costs of PIA varied across the selected countries.
By doing so we obtained a better understanding of duct & pole sharing pricing in a selection of European countries for understanding PIA pricing competitiveness against European benchmarks
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The project consisted of 3 main tasks
Task 1 – scenario building
Using UK geotypes, definition of a number of (typical) scenarios in which CPs may use PIA products to deploy FTTx – these are be the basis for benchmarking of PIA products across the selected countries
Task 2 – full analysis of reference offers
Necessary to obtain a full understanding of operational requirements & processes in each of the countries considered, but also to establish the best approach to compare the pricing of different offers for the scenarios identified
Task 3 – building a benchmark model
We have developed a “regulatory” cost model to compare costs incurred by CPs for each scenario in accordance with the Reference Offers in the selected countries
To cover most of the situations a CP might encounter we use different network deployment scenarios within different geotypes that imply a different usage of the access network by a CP in each case. We then take seven (typical) scenarios which a CP could face in four geotypes.
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Assumptions made
We make the assumption that a CP will use the existing network and
PIA products exclusively for providing:
FTTP, using ducts and poles from the local exchange to end-users
FTTC, using ducts and poles from the local exchange to street cabinets (in
this case we do not model the street cabinet to end-user part)
The geotypes are:
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Key regulatory differences across countries
FRANCE
The first regulated offer was
published in September 2008
(access to ducts is authorized for
fibre cables for implementation of
FTTx networks only).
The cost methodology is the
same as that adopted in 2005 for
copper LLU – it is based on
current economic costs.
The pricing structure
varies depending on the
location of the ducts
Varies depending on the
surface area occupied and
length (a flat-rate pricing
scheme has been
introduced for less dense
areas where tariffs are per
access for
mutualized/shared area)
PORTUGAL
The first regulated offer for ducts
was published in July 2006;
since 2010 PT is also required to
have a regulated reference offer
for poles.
The cost methodology is based
on cost estimations derived from
the PT cost accounting system
(top-down, historical costs, FDC
and ABC-type model). Costs for
new services are estimated
based on current costs.
Pricing structure is based on the
location, the surface area and the
length.
SPAIN
The first regulated offer was
published in 2009; ducts and
poles are covered.
Dark Fibre must be provided by
Telefonica if there is no available
space in ducts for the requested
route.
The cost methodology is based
on Telefonica's cost accounting
using current costs. April 2011
prices were calculated using
2008 accounting information.
Pricing structure is based on the
type of ducts
sub and full duct are
charged at length
shared ducts are charge
per surface area occupied
and length.
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Comparing the regulated environment
As a result of our analysis it is clear that the approaches have followed divergent paths as follows:
In France until very recently (June 2011), ARCEP did not choose to mandate pole access
In the UK, BT Openreach has adopted a pricing of duct access that is not calculated as a function of surface area occupied in a duct – unlike all other countries
In France, ARCEP is encouraging mutualisation of different parts of the network, either vertical access within buildings or infrastructure deployed by an operator from a sharing point in the access network
Although prices contained in Reference Offers are claimed to be cost oriented, methodologies for calculation and allocation of costs to ducts and poles are quite different. Likewise geography and network investment and maintenance costs are different.
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The model and the results
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Presentation of the modeling and results (1)
Our detailed analysis of each reference offer has permitted us to identify
6 main tasks/cost categories for which we can aggregate prices. These
are:
information Request - Route maps and chamber occupancy level
feasibility study - survey, approval, build / reservation / joint survey
basic Work required - remove congestion / blockage (no new build)
exchange access link - tie cable
sharing and hosting - duct products / junction boxes and manholes
sharing and hosting - pole products
The benchmark model is fully flexible and allows for the inclusion or
exclusion of any of the above charge categories in the calculations.
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Presentation of the modeling and results (2)
In order to reduce the complexity of the model no account is taken of:
timeline for service provision
specific engineering rules for installing fibre into ducts/poles
other costs a CP could incur outside the direct scope of PIA reference offers
For the following sample of results (taken from our benchmarking study
for Openreach) we have run the model to calculate charges incurred over
a ten year period:
taking into account the following charges: links to exchange, duct products
(one-off, rentals for using ducts, manholes and junction boxes), and pole
products (one-off, rentals of attachments, manifolds, cable up to poles)
the diameter of the fibre cable used in a duct is a crucial variable for costs
incurred by a CP. Hence the model is capable of comparing costs in each
country for different size cables and surface area occupied in a duct
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Presentation of the modeling and results (3)
1st run assumptions:
surface area occupied in a duct for E-side (spine) is set to 25mm
surface area occupied in a duct for D-side (lead-in) is set to 15mm
we are using values from the Spanish offer to estimate poles charges for
France (lowest value of the benchmark)
1st run main results:
in FTTP scenarios charges incurred in the UK by a CP are between 15% and
22% below the European average.
in FTTC scenarios charges incurred in the UK by a CP are between 17% and
38% below the European average
the UK pricing for FTTC scenarios are the lowest in a remote rural area but
similar to Portugal and Spain in a rural town
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Presentation of the modeling and results (4)
2nd run assumptions:
surface area occupied in a duct for E-side (spine) is set to 21mm
surface area occupied in a duct for D-side (lead-in) is set to 11mm
we are using SP values to estimate poles charges for FR case (lowest value
of the benchmark)
2nd run main results:
in FTTP scenarios charges incurred in the UK by a CP are as much as 7%
below the European average
in FTTC scenarios charges incurred in the UK by a CP are as much as 24%
below the European average
the UK pricing for FTTC scenarios are the lowest in a remote rural area, but
are similar to Portugal and slightly above Spain in a rural towns
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Presentation of the modeling and results (5)
Illustrative charts showing a sample of the scenarios:
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Presentation of the modeling and results (6)
Illustrative charts showing a sample of the scenarios:
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Presentation of the modeling and results (7)
Illustrative charts showing a sample of the scenarios:
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Presentation of the modeling and results (8)
Illustrative charts showing a sample of the scenarios:
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Presentation of the modeling and results (9)
Key messages
Results are very sensitive to:
diameter of cable used for other countries, especially France and Portugal
Portugal uses a different formula for calculating space occupied than FR/SP
France has higher price for ducts than PT/SP and is above UK for spine 18mm up (10
year term price) & for lead-in 22mm up (revised price)
Comparing information request – validation and surveying activities
cannot be done in isolation as the level of information provided is different ; some activities
are to be performed by the operators in different countries and/or some require the presence
of the incumbent in assistance to CPs workers (these costs are not included in calculations)
the number of chambers/poles surveyed during validation in Portugal/Spain is crucial
however an overall cost value could be useful to estimate a public total cost per country
subject to other costs to be incurred by each operator
in most case costs calculated are maximum to be incurred by a CP
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Questions?
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Useful URLs
Ovum press release
BT Openreach press release
A Benchmark of Physical Infrastructure Access – public report