Copper and fibre: the price relationship

An interesting report has been published on the relationship between the pricing of telecoms services over both old-style copper wiring and new-fangled, so-called next generation (glass)fibre.

Written for ETNO – the European Telecommunications Network Operators’ Association – the report was published initially last month by Plum Consulting, but I’ve seen it as a result of a news item concerning an ETNO workshop held this week and intended to raise awareness of the impact of the pricing of copper-based services on the case for investment in next generation networks.

Copper pricing, which refers to the bit that we pay for our residential telecoms services either to BT or, where the line is BT-owned but leased to another, to that retail provider, is a topical issue not least because Ofcom has recently launched a new consultation on the prices that Openreach – BT’s provider of wholesale network services – can charge its own customers (which then sell retail services to us). So, the timing of the workshop and the publication is highly important in the UK context.

Plum Consulting makes several points in its document, among them that the running of copper and fibre networks in parallel during the period of transition from old to new will present serious challenges as regards pricing – not least that falling copper prices may well discourage investment in next generation fibre since there would be less incentive for customers voluntarily to migrate to (more expensive) fibre. This would act in turn to reduce retail price levels for high-speed broadband, thus jeopardising the investment case. The prospect of fibre investment being treated in the same way as copper – by being subject to continuing price reductions – is also likely to provide room for second thoughts among investors.

In some ways, this might well be a ‘Well, they would say that, wouldn’t they?’ scenario given the nature of the commissioning body, but Plum Consulting is right to point out that adoption of, and investment in, next generation fibre is not a given and that the policy framework must seek to ensure that incentives to operators are correctly aligned with the public policy goals for high-speed broadband. This means, not least, that copper prices should be maintained at levels which support efficient migration to next generation fibre, thus assisting operators with investment cases, and that – inevitably – fibre pricing must ensure cost recovery and deal with the long-term nature of investment and the uncertainty of demand. The latter is uncontroversial – but the former ought to provide some considerable food for thought for Ofcom, and other regulators across Europe.

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