With the UK Prime Minister David Cameron announcing plans to give everyone a legal right to fast broadband by 2020 and ahead of our channel response next month, we spoke to Cormac Whelan, CEO of Alcatel-Lucent in the UK, who says competition has to take a different form, and governments need to get involved, if that is to come true.
The latest analyst predictions say that within five years, approximately one million minutes of video content will cross the global fixed or mobile network every single second. The demand for broadband has never been greater and it’s heading in only one direction.
But the challenge for service providers looking to meet that demand – both individually and collectively – is how to reverse the trend of the last ten years where market competition has consistently driven down the price for broadband – by as much as 40 per cent in the UK.
Within Alcatel-Lucent, I have been talking for some time about the broadband war that is brewing in the UK. The psychologist and author Wayne Dyer once said that ‘conflict only thrives when both parties have an appetite for it.’ As we watch the different strategies between the broadband players in the UK, I wonder where that appetite might take us and question whether we wouldn’t be better off if we all focussed our collective energy on making the UK a stronger broadband nation.
Broadband has a relatively short and turbulent history. The first Fibre-to-the-home deployments were in Florida in 1986. As the last century came to a close, ADSL was bringing 6 Megabit connectivity to more than 350 million households around the world. The race for speed has since accelerated – 50 megabits achieved in 2007, 100 in 2012 and this year we hit 1 gigabit. In our Bell Labs G.fast trials this year, we clocked up record speeds of 10 gigabits; the direction of travel is clear.
We’re expecting annual global IP traffic to pass the zettabyte threshold by the end of 2016. What’s a zettabyte? Well, it has been estimated that every human word ever spoken could be stored in 5 exabytes; and a zettabyte equals 1000 exabytes – so that’s a pretty phenomenal amount of data traffic.
The nature of network traffic is also changing. Two-thirds of it will originate from devices other than PCs and mobile and wireless access will exceed fixed traffic within a year. Furthermore, by 2019, 80 per cent of that traffic will be video. Last year, metro network traffic outstripped long-haul traffic, and it will continue to grow twice as fast as long haul for the next five years. So operators face a major challenge investing in the equipment and regeneration that is required.
However, competition is driving down prices at a time when the need for investment is arguably at its greatest. It’s our view, that other dimensions of competition – around service levels and converged product offerings – must be introduced for this market to thrive and for consumers to have a choice.
On top of this, governments and local authorities can and should do more. We need a step change in the UK’s ambition and delivery policy for broadband if this country is to hold its own in the digital revolution.
Such ambition can be seen in other parts of the world, and is characterized by the investment in gigabit cities like Chattanooga in the USA. The deployment of a gigabit fibre network in this Tennessee city has helped attract new businesses and entrepreneurs and has allowed it to differentiate itself from other cities. It not only used ultra-fast connectivity to meet specific needs; it also created gigabit aspiration and desire. Since the fibre-optic network was switched on four years ago, the signs of growth in Chattanooga are unmistakable. Former factory buildings and warehouses have been converted to loft apartments, open-space offices, restaurants and shops. The city has welcomed a new population of computer programmers, entrepreneurs and investors.
This is a great example of what can be achieved when government, service providers and utilities work together to create a network platform for growth.
Studies by Bell Labs, the research arm of Alcatel-Lucent, and by the ITU [the International Telecommunications Union], have been looking at the impact of broadband networks on GDP. These have shown that within OECD or high income countries, a 10 per cent increase in broadband penetration can yield between 0.9 to 1.5% per capita growth.
For the UK broadband market to flourish, and for the population and the economy as a whole to benefit, competitive participation is important across the board. It cannot be just the service providers beating each other up in an accelerating race to the bottom, because that will only ever result in reduced competition as some players retreat from the market and its reduced margins.
The Government, local authorities and communities as a whole need to play an increasingly important role where broadband initiatives can drive innovation and growth to keep the UK in the vanguard of the digital revolution. This can only be achieved through value-added competition in markets and, ultimately, through partnerships.
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