John Kennedy wrote an excellent piece on why we shouldn’t take our foot of the gas when it comes to rolling out NGA networks. Click here to read it.

I strongly welcome the commitment to a fibre NGN rollout in the Programme for Government. For those of you that haven’t seen it, it sets a target of 90% coverage of fibre to the home or kerb within the lifetime of the government.

The telecoms industry can and should be central to Ireland’s economic recovery but it is also in a state of flux. In that respect, the policy decisions that Minister Rabbitte has to make are some of the most important that face this new government. Critically, policy appears to have shifted to recognise the fact that the State needs to invest, with a co-investment model between the State, private and commercial semi-state sector being put forward.

It’s clear to me that this investment needs to commence immediately – the longer we leave it, the less of a competitive advantage we’ll derive from it. The crucial next step is to clearly identify how policy and industry can combine to ensure that the return is maximised for all stakeholders.

Crucially though, everyone concerned needs to be mindful of the possibility of re-monopolisation of the access network. The MANs have helped the telecoms industry move away from “ransom strips” – so future investment, particular from the State, should not replicate the errors of old.

For an international perspective on all things fibre and broadband related, you could do worse than to check out Benoit Felten’s blog, entitled “Fiberevolution” (www.fiberevolution.com).

The availability of ubiquitous Next Generation Access (NGA) is critical for economic recovery and it’s certain that Government policy will be central to the successful delivery of this vital infrastructure. If the delivery of NGA is just left to the market, homes and businesses in densely populated parts of Leinster and a small number of other areas will get services and the rest of Ireland will be left behind. Simply put, market economics don’t justify NGA investment in most parts of our country and if market economics don’t justify this necessary investment, then policy must be crafted to either:
1. Come up with the money that the market won’t;
2. Change the market economics to make NGA investable.

Come Up With Money That The Market Won’t
We all know how this works. As with the MANs, the State can identify market failure and intervene with its cheque book to resolve that failure. In my view, market failure in regional Ireland on NGA will be proven and the State will be free (under EU law) to invest.

Based on a recent TIF study, the total cost of NGA rollout is €2.5 billion. If we assume that Industry will fund 50%, the exchequer would need to invest c.€1.2 billion. You may have noticed that we are not exactly flush at the moment and while this level of state investment will, at best, be hard to find it is equivalent to the roads budget for 2011 alone. It’s interesting to note that the national motorway programme took 10 years and cost €8 billion. Dublin Airport’s T2 is a €600 million investment and the cost of Metro North looks to be around €3 billion.

All are infrastructure projects that contribute significantly to our economic development and NGA rollout must be seen in the same light, not least because it will, arguably, contribute far more to our economic growth. I think it’s fair to assume that the investment required would be spread over a number of years and therefore the annual cost will be reasonably modest.

Back in the 1980’s, during bleak economic times when national debt was also a major concern, Ireland made a similar, large scale, investment by becoming one of the first EU countries to implement a fully digitalised telecommunications network. This was at a cost (in current day values) of around €10 billion. Many believe that it was this move that positioned Ireland to exploit the growth of the services economy and attract many multi-nationals to Ireland.

Change The Market Economics To Make It Investable
The other option for policy is to change the market economics, to do that we must first understand how market economics prevent NGA roll out?

The key issue for the market is simply that there is huge variability in the cost of connecting premises whilst the revenue available from those premises is broadly the same. Left to its own devices, the market will connect the cheap (urban) homes and the rest (rural) will be left with nothing.

By doing the maths we start to see how policy can help change market economics – if the total cost of NGA rollout is €2.5 billion, this works out at roughly €1,750 per home, though the true cost per premises varies wildly from a few hundred Euro to many thousands, with the cost being largely driven by housing density.

What’s interesting is that the average cost of €1,750 is (in my view) investable and that given the right regulatory and financing environment, a private sector investor would pay this to acquire an exclusive residential fibre connection (a 10 year loan at 4% for €1,750 costs €17 per month to repay). This is where policy comes in. Policy must somehow dictate that the cost of connecting any premises is equalised to the average regardless of location and ensure that investors have certainty. It must also find a way of eliminating (wasted) duplicated investment without creating a monopoly.

There are a number of ways to achieve this; one way would be for the State to source the funding and build a single national network and to then, over time, to recoup the full cost of doing so by selling individual premises back to operators at €2,000 each. For this fee, operators acquire permanent ownership of the connection and are free to offer their retail services (wholesale services would have to be offered as well). By taking this approach, operators become service companies as opposed to network companies.

This approach would eliminate the variability in cost that operators face and allow them to service business where demand arises as opposed to where costs permit whilst also creating a more level playing field with regional Ireland being fibred up in tandem with the urban centres.

Q. How Do You Eat An Elephant? A. One Bite At A Time.
It’s clear, however, that the current economic climate makes capital projects of this size (even ones that payback) extremely difficult, but it is also clear that if we don’t do something soon Ireland and our putative knowledge economy will be parked for a very long time. We must begin the task now.

In a previous Blog (“First Up, Best Dressed”) I spoke about how countries that built extensive NGA networks early would reap the benefits for many years and long after other countries had caught up. This is particularly the case with the business community.

It seems logical to me, therefore, that we focus whatever resources we have on giving Irish business a much needed Next Generation leg up. Although the analysis has not been done and I think that it is a reasonable assumption to make that business premises will, on average, cost no more than homes to connect.

If we work on this assumption and look at the estimated 120,000 or so business premises in the state we can say that it may well be the case that, by the state guaranteeing a €200m loan to the telecoms sector, we could provide a high quality, unlimited capacity fibre connection to every business in the state within months. This €200m could be provided privately and it is highly likely that it could be fully returned within less than five years.

Think about it – a country where every business has fibre broadband achieved at little or no long term cost to the state. As a real stimulus to the knowledge economy – I can’t think of a better move.

Can We Do It? (Yes We Can!)
This solution requires some upfront outlay which should be relatively straightforward to source, but it also requires imagination and flexibility from our industry and our policy makers. If we get both, industry and country will benefit. NGA networks are the key infrastructure that will help define winners and losers in the next decades much in the way that other infrastructure such as canal, railways, electricity or roads have helped do so at various points in the past.

Listening to various players from the State and the industry talk and knowing many of them, I believe that the goodwill and ambition exists amongst them to pull something like this off. We have led the way on plastic bags taxes and smoking bans – so why not on NGA?

Finally, I was intrigued to note that Comreg estimate that they will generate in the region of €250m with the sale of spectrum in 2011.

I know I’m stating the obvious when I say that fibre is not copper but let me elaborate from a very non-technical perspective.

Fibre, and its inherent capacity and flexibility, facilitates competition. Due to the virtually limitless capacity of fibre, multiple telcos can offer services over a single, fibre network and this allows for competition in a way that is not possible over copper. Whereas a copper network means that most operators must do everything in the same way (same sandwich different wrapper – if you like), fibre gives individual operators sharing a network much more choice as to exactly what and how services are delivered.

Naturally, this competition drives the cost of telecommunications down for the end user and ultimately provides a better range and quality of services as well. Also, if, at a later date, the customer opts for a different service provider on the same fibre-optic network, the switch is straightforward, without any technical problems or further civils needed. This flexibility is as much a benefit of next generation networks as the capacity.

There isn’t even a “Fibre Vs Copper” debate anymore – fibre is universally accepted as the best technology to carry high bandwidth traffic. Incumbents, with their copper access networks are slowly but surely moving to fibre because they know that a NGA rollout, in reality, means a fibre rollout.

e|net is in the fibre business and fibre is a hi-tech sector. The big risk in any hi-tech business is redundancy. Someone comes up with a new piece of technology that renders yours redundant. You’re just starting to make money on faxes and someone comes up with email. People often ask me if new technologies like 4G or WiMax are bypassing fibre optics as the telecommunications technology of the future much in the same way as broadband technology has killed off dial-up?

The simple answer is no. All new communications technologies need fibre. There are a raft of new technologies and concepts that are all about higher speed communications – WiMax, 4G, WiFi, LTE, XDSL, DOCSIS 4+, etc etc….. All of these technologies make it easier for consumers to access higher speeds, but each is constrained by capacity bottlenecks. The best way to deal with these capacity bottlenecks is by bringing fibre (which has hundreds of times more capacity than any of these technologies) closer to the access technology.

And I’m speaking from firsthand experience. The MANs were deployed as a middle mile fibre solution that would work in tandem with and complement multiple access technologies. At the minute the telecoms traffic carried by the MANs originates in a variety of way such as fixed line fibre, LLU, wireless, mobile, cable and WiMax. As these technologies become better and faster, our customers are finding the need for fibre is increasing rather than (as you might have expected) being displaced.

Its due to the variety of traffic as well and the sheer bandwidth needed by these last mile technologies that fibre is, in fact, universally accepted as the only true future proofed technology out there.

The critical point in all of this being that fact that the more access technologies there are out there and the more traffic they are carrying, the greater the need for an extended fibre network – one that reaches deep beyond our towns and cities.

The development and further deployment of next generation communications infrastructure is central to future economic and social development of this island and obviously the Government has a key role to play in this. The key question is how? Is it time to unleash the dogma and change Government policy that telecommunications is a matter for the private sector.

Current stated policy revolves around allowing private sector investment through ensuring that the proper regulatory regime is in place. To me it is becoming obvious that the digital revolution means that telecommunications is now a critical national infrastructure which (like roads, water, sewerage and power) cannot be left to the private sector in the hope that they will deliver what the nation requires. I would strongly argue that telecommunications is at the heart not just of a 21st century economy but also a 21st century society.

I fully accept and applaud that many positives steps have been taken in our recent digital development. Broadband subscriptions continue to rise, the National Broadband Scheme (NBS) has been launched, as has Project Kelvin, the Metropolitan Area Networks (MANs) have been rolled out across 93 towns but these successes need to be built on. We need to come up with a clear plan as to how we are going to deploy a true Next Generation Access (NGA) network.

If simply left to the private sector it will be the usual suspects – Dublin, Cork, Galway and Limerick that end up with a NGA network. Great for them but all that does in my mind is create a different kind of digital divide. The State recognised this kind of market failure in the past and invested in creating a world class middle mile fibre network around regional Ireland – the MANs. Having seen the MANs continue to deliver against their objectives, the State can clearly see that this type of investment works.

Obviously, the business case for any investment must be sound but prompt action is called for if we are to ensure that Ireland is at the forefront of the global knowledge economy.

While Ireland’s latest greenhouse gas emissions projections show compliance with Kyoto Protocol (mainly due to the recession), there are even more ambitious targets to reduce carbon emissions by 2020. These targets are more worrying, considering further reduction measures are yet to be identified and the bad news is that should we not meet those targets, it’s the taxpayer that would foot the bill.

The State response to the 2020 targets will, I’m sure, necessitate an economy-wide response. Of course there will be much clamour for investment in green technologies. I’d argue that fibre enabled broadband is green technology and can in itself facilitate significant reductions in the State’s CO₂ emissions.

Don’t just take my word for it. PwC research has underlined the green benefits of broadband. Specifically with regards to telecommuting, they highlighted greenhouse-gas emission savings of 330Kg per user – that’s equivalent to a car travelling 2,000 kilometres! Other anecdotal commentary suggests that international, as well as interurban travel could be reduced if the bandwidth was in place to support first-rate video conferencing.

In the energy sector, fibre broadband will be essential to monitor and, if necessary, manage power adjustments in distribution. This will result in reduced power consumption and lower costs for the user.  With consumption reducing, there is greater energy independence, reduced greenhouse gas emissions and there’s a very real possibility that the State could sell the “unused” power on the market and actually make a financial return. 

Initiatives such as e-health and e-learning will, as well as providing vital public services, promote efficiencies and remove unnecessary travel and CO₂ emissions. It was reported in August that the HSE has spent over €121 million on taxis since 2006. While I’m assuming the majority of this spend is for patients and vital medical supplies, logic would dictate that some patients could be diagnosed remotely if a nationwide NGA network existed. Additionally, criticism is often levied for the transfer of x-rays in taxis, a practice that could be eliminated if an NGA network was deployed.

And x-rays would just be the start of the “de-materialisation” – music, films, books, concert tickets and a whole lot more could move from the physical to the virtual with appropriate bandwidth in situ.

So, a fibre NGA network isn’t just about downloading movies faster.  I’m convinced that it’s the platform upon which the green, smart economy will operate in the 21st century.

Last year, the Australian Government, stated that they are creating a new National Broadband Network (NBN) Company that will invest up to Aus$ 43 billion (c. €27.5 billion) in rolling out fibre to at least 90% of the homes and workplaces across the country.

Good for them, but I can’t help being a touch jealous. Why? Well, because they have recognised the fact that fibre can and will act as a huge economic stimulus. Interestingly, this has played well politically, with few doubting that it needs to be done.

The Australian State is encouraging private investment in the NBN Company but will remain the majority shareholder to ensure that it will operate as the Government intends. It almost goes without saying that the operating model will be an open access, carrier neutral model, operated on a wholesale basis…..the same model the MANs operate under.

Again the thing that strikes me here is action. The Aussies are just getting on with it and doing it. In fairness, previous policy has given the incumbent, Telstra, the opportunity. However, the State judged that they had failed to deliver and stepped in.

Now the incumbent is chasing the policy and has recently agreed to make suitable infrastructure available for the rollout of the NBN. More significantly, Telstra, is likely to become the NBN’s largest customer with a progressive migration of customers from their own copper and pay-TV cable networks to the new fibre network.

In one of my previous postings (The Case For NGNs – Private Vs Public), I looked at the business case for private investment and public investment in an NGN – but maybe the Aussie hybrid model is the way to go. Should the industry be looking at a network that is paid for by a number of stakeholders?

I believe that how a country competes in the 21st century will be defined by the relative quality of its digital infrastructure in the same way as physical infrastructure defined the winners and losers in the 20th century. And like physical infrastructure, everyone will get there sooner or later but the real winners will be those who are pioneers and get there first….first up, best dressed.

Ireland and our policy makers need to make decisions. We need to make the most of the opportunities that exist. We need to begin to fully exploit the global digital revolution. And we need to do it now.

Of course these are difficult economic times, but it is important that we move forward and recognise that we have the significant advantages in this digital age. The telecommunication and digital industries have the expertise, the know-how and the appetite to move forward and be a major part of our economy, if given the opportunity to do so. Our young, educated, flexible and technology literate people stand ready to liquidate the phenomenal economic benefits that flow from the development a world class digital environment.

Countless countries are getting on with it, investing in Next Generation Networks and positioning themselves as best place to reap the digital dividend.

The stakes have never been higher. On one hand, there will be those countries that seize the opportunity to develop their infrastructures, embrace the new possibilities and use them to grow their economies and nurture social benefits. On the other hand, there will be those countries that run from the problem, choose to ignore the current communications revolution and be left with aging networks quickly heading towards economic obsolescence.

Ireland needs a statement of intent and ambition, a commitment to infrastructure and access, and we need it now. As the French writer and aviator, Antoine de Saint-Exupéry, once said, “A goal without a plan is just a wish.” I tend to agree.