Govt's role in NGNs can be dealing with legacy networks

Monday 14 December 2009 | 17:05 CET | Market Commentary
The OECD has released a new report supporting the mass roll-out of FTTH. The report estimates the potential cost savings for four public sectors at 0.5-1.0 percent per year, suggesting sufficient reason for governments to support the deployment of FTTH nationwide.

The estimates are based on (point-to-point) FTTH only, and do not include ADSL2+, VDSL2 and Docsis 3.0. The justification is that the maximum benefits of broadband can only be achieved if such a national network provides the maximum bandwidth, and also that the bandwidth can be easily expanded. The report authors also point to the importance of good upload speeds (in effect a symmetric connection) and low latency. The network also needs to be open access, to allow competition to fully mature.

While all these factors are inherent already to p2p FTTH, the fundamental question remains should the government intervene or leave it to the market? The OECD argument is that as private investors aren't concerned with any spill-over effects, the government has every reason to stimulate roll-out. If this is true (and it appears in every way to be so), then the authors have a point. Looking at it more logically, there's something wrong. Why would the government take account of all the (side) effects and a private investor wouldn't? Well, private parties have to deal first with impatient investors, with a heavy focus on the short term, when in fact it's all about the long term in this case.

Another, no less fundamental question is what to do with the legacy infrastructure. Heavy investment has gone into expanding various networks. The answer to this is less obvious. Australia may offer an answer to this, as its plans for a national broadband network (NBN) will likely include existing assets from incumbent Telstra, which will be allowed to sell network elements to the NBN.

Conclusion: few do not consider FTTH as an 'end game'. An almost as large group group want to see government get involved; as long as it keeps to stimulating the roll-out of next-generation networks, few market parties will have a problem. The biggest problem remains what to do with the legacy infrastructure. And perhaps that is where the government will find its role.

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