A benchmark of Physical Infrastructure Access€¦ · Ovum Pty Ltd., UK Tel: +44 0207 551 9000 Fax:...

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

© Copyright Ovum. All rights reserved. Ovum is a subsidiary of Informa plc. 1

A benchmark of Physical Infrastructure

Access

Matthew Howett

Practice Leader, Regulation & Policy

[email protected]

May 23, 2012

12th APT Policy and Regulatory Forum, Bangkok


PIA as a regulatory remedy


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.


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


PIA in the toolbox of remedies


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


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 (%)


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.


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


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


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


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


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.


Benchmarking PIA


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


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.


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:


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.


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.


The model and the results


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.



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



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



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



Illustrative charts showing a sample of the scenarios:



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


Questions?


Useful URLs

Ovum press release

BT Openreach press release

A Benchmark of Physical Infrastructure Access – public report

http://ovum.com/press_releases/revised-uk-duct-and-pole-pricing-compares-favourably-to-other-eu-countries/

http://www.btplc.com/news/articles/showarticle.cfm?articleid=%7bbcc96d42-80df-4f6e-8436-24a35f8c0858%7d

http://ovum.com/wp-content/uploads/2011/10/Ovum-PIA.pdf




A benchmark of Physical Infrastructure Access€¦ · Ovum Pty Ltd., UK Tel: +44 0207 551 9000 Fax:...

Documents

Transcript of A benchmark of Physical Infrastructure Access€¦ · Ovum Pty Ltd., UK Tel: +44 0207 551 9000 Fax:...