Fibre to the Premises and High Speed Broadband Take Up: It turns out there is not much connection

A highly contentious issue in the Australian broadband debate has been the choice of technologies.  The previous Labor government wanted to build fibre to the premises (FTTP) to every home in the fixed line footprint.   Some advocates make the case for this approach with almost religious fervour.

By contrast the Abbott Government believes a more rational strategy is to use a mix of technologies including cable (the HFC networks originally built for pay television) and fibre to the node (FTTN).  The NBN Strategic Review, conducted once the Coalition came to power in late 2013, identified a preferred scenario involving 44% FTTN, 30% HFC and 26% FTTP.

Often the passion in this debate has not been matched by the rigour of the data assembled in support of the various arguments.  So I was interested to read a recent report from Professor Christopher Yoo at the University of Pennsylvania’s Center for Technology, Innovation and Competition, which takes a comparative look at broadband deployment in the US and Europe.

Defining high-speed broadband (‘Next Generation Access’, or NGA) as connections of 25Mbps and up, the report found that there is no basis in the data for the belief that FTTP is essential for the delivery of high-speed broadband access.

FTTP made up only a small portion of high-speed broadband coverage  – and the European countries which had focussed their network deployment efforts on FTTP were actually the laggards in speeds.  Sweden, France and Italy had low levels of HFC coverage and had emphasised FTTP; they also had low levels of NGA coverage when compared to their neighbours.

In Europe, HFC using DOCSIS 3 accounted for 39% of NGA coverage and VDSL 25%, while FTTP accounted for just 12%. When measured by subscriber numbers, the weighting to HFC was even greater: 57% of users, compared to 26% on FTTP and 15% on VDSL.

The report also concluded that the US approach of lower regulation and competition between networks produced better outcomes than the European approach of higher regulation, on metrics like latency and packet loss.  Networks are also more highly utilised in the US, carrying an average of 27GB per month per user compared to 18GB on European networks.

Of course, the US has the great advantage over Europe (and Australia) that almost every home historically was served by both a phone network and a pay TV network – which became the basis for two separate networks both offering broadband.   Regulation mandating access to a monopoly network, as used in both Europe and Australia, has historically been used as the next best approach when there is little prospect of a second network being built.

The findings on this point, though, do highlight what we are losing thanks to Stephen Conroy’s policy of paying Telstra and Optus to withdraw their HFC networks from service.  Prior to Conroy’s intervention a fortunate minority of Australian households were in the HFC footprint, and hence were served by more than one physical network capable of offering broadband.  Conroy forcibly and permanently altered that position – locking it in under contracts between NBN Co and Telstra and Optus.  

While his successor, Communications Minister Malcolm Turnbull, has been able to vary those contracts sufficiently to allow the HFC networks to be included within the NBN, it was not possible to unscramble the omelette and secure the retention of multiple, competing networks.

Finally, a highly relevant observation from the paper is that there is a disconnect between NGA availability and end-user adoption. Availability and cost are not the barriers to adoption – rather, “non-subscribers do not see the need for the service.”  This is a point that the ‘build it and they will come’ true believers in fibre will never accept.

Source: ‘US vs European Broadband Deployment: What do the Data Say?” from the University of Pennsylvania Law School and the Centre for Technology, Innovation and Competition.