Wednesday, May 13, 2009

Is broadband a utility (part 3) - Open Access?

Last month, I asked the question whether more governments should follow the Australian lead and take the lead in investing in a next generation broadband network.

The latest is this saga is that the Australian government has earmarked an 'initial investment' $3.6 billion into its National Broadband Network. The NBN promises Fibre-to-the-Home (FTTH) delivering 100Mbps broadband to 90% of Australian homes and businesses. The model of the NBN will be that of an open access wholesale carrier.

The question of open access is one that is creating a lot of debate right now. In the UK, for example, you have BT building out its NGN and Virgin Media, the only cableco after the implosion of Telewest and NTL, both coming under pressure to open up access to their network. In the US, the debate is even more fierce because the closed cableco networks are still the dominant providers of high speed internet.

The big question is though (and this is the argument used by regulators like the FCC), why should telephone companies invest in high speed internet infrastructure, if all they are going to end up being is relegated to wholesale providers of commoditised bandwidth to other ISPs?

It will be interesting to see how the BT 21CN wholesale model pans out. Just what will the terms be for ISPs looking to use the network? Will BT continue to make the process of choosing an ISP other than themselves so much harder and more tortuous as to incur the wrath of the regulator? Or will the regulator say fair's fair, they made the investment so they need to make the money back?

Ultimately, it really does seem as if the Australian model is the way to go. Competition of course drives innovation ... but only if it delivers differentiation and advantage. Where's the value in investing and innovating if others can just come along and stick their own label over the top?

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