Business models and SOCIAL models for FTTH

Now it is very common to talk about FTTH business models, but in this post, I want to follow a quite different road and talk about social models for FTTH.

The problem that we have with the deployment of NGNs is that the investment is huge and network operators work on revenue basis (following business models). So, if we rely on business models to deploy NGNs, then social models will be severely affected.

The statement behind social models for FTTH is that it is NOT because each individual is willing and able to pay the cost of reaching him or her; it is because SOCIETY has decided that it is better off if everybody (or almost everybody) is connected to a high speed network.

Until and unless SOCIETY (that means something more than a bare 50% plus one majority) feels that it is better off with EVERYBODY connected, business models will NOT get us connected to everybody.

From my point of view, this is a very important topic because it has been demonstrated that there is NO business model NOW in Spain that justifies the deployment of NGNs (specially FTTH) to the companies that can make those deployments (Telefonica). Telefonica have a predominant position in the market and competition is too week to force them deploy new networks.

Now it seems that Vodafone is entering into the fixed broadband market, but even in that case, I can not see Telefonica deploying NGNs in the short term. They prefer to reduce OPEX by reducing the investment on the outside plant, so investors are happy.

Here, we see a clear example of a divergency between social and business cases. We do desperately need new access infrastructure, but at the same time, there is no business model to justify them, as Telefonica can keep offering their ADSL services without problems during the next years without much competition.

I can only see two solutions to solve this:

  • the first one would be to desegregate Telefonica into different companies (like has happened in the UK with BT and like they are starting to do in Australia with Telstra)
  • to allow the public sector to invest in NGNs and deploy neutral infrastructure / bitstream operators that offer pipes to the service providers

Both options have a lot of legal implications so I assume it is difficult that we see any change in the short term, specially because the wireless market is very active and now it seems that operators see more revenue sources from wireless than from fixed lines.

In any case, I can easily justify that 4G systems will not efficiently work unless fiber is in place for the trunk network. I wrote about this on a previous post, stating that from the engineering point of view, the most cost effective way to deploy fixed and wireless services was to integrate all of them in a single access network.

Unfortunately, we, engineers, are not the ones who take those decisions…

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2 thoughts on “Business models and SOCIAL models for FTTH

  1. I dont know If I said it already but …Excellent site, keep up the good work. I read a lot of blogs on a daily basis and for the most part, people lack substance but, I just wanted to make a quick comment to say I’m glad I found your blog. Thanks, 🙂

    …..Frank Scurley

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