Chair: Coming up next, the founder of Ashtonbrooke, Mr. Brough Turner will talk to us about a structural bypass, a simple, proven path to a real broadband.
Brough: [laughs] beautiful networking and social network stuff, I wish I could get that kind of audience feedback because now I'm about to talk about fiber, policy issues, and so forth. My focus is entirely on policy issues for fiber in major cities. I put that around what I call "real broadband". At the moment, and this changes every few years, but at the moment I would say real broadband is 100 Mbps symmetric Internet access. How many people in the audience have 100 Mbps symmetric Internet access? One. No, to the Internet. Where do you live? Munich, there we go.
There are at least a dozen places in the developed world where you can get 100 Mbps Internet access to the Internet at a reasonable something. It's interesting to look at some of these places. Amsterdam is fairly new. It has a lot of talk about it, but it's rather expensive and there is only about 3,000 people connected, so far. We ought to go back and look at that five years from now and see what's happening.
If you look at Tokyo, they've had fiber connectivity for quite a few years now. If you look at the fine print, there are actually deals where, at least for the first year, you can get down to $44. Hong Kong is about $35. Seoul, Korea are about $24. Stockholm is $11 a month for 100 Mbps connectivity. These are just a few of more than a dozen major cities in the developed world who have "real broadband" by my definition. New York City is of course equally dense. There is no such thing at all. In fact, if you look at the major cities in the U.S., none of them have anything like that.
What's the issue here? It's worth looking at some of these cities, particularly ones where the service has been available widely for more than five years to see how things have settled out. If you compare Stockholm and Tokyo, it's interesting that Stockholm has a very, very vibrant market. Tokyo has something that we in the U.S. would consider a vibrant market, also, but it's a lot less than what you see in Stockholm. I think that's partly because of the layers at which things are operating. That appears to be the pattern across a lot of cities around the world.
Of course, in the U.S., we're operating up at complete managed service Internet access from a vertically integrated monopoly or a duopoly, or if you're super lucky, there is a third pipe. We're stuck arguing about net neutrality. I claim if you're arguing about net neutrality, you're wasting your time because you've already lost. You're in a world that is completely wrong. You want to be in one of these other worlds, at which point, you don't have to argue about net neutrality.
Put layers labels, in terms of the way people talk about the Internet. Layer zero would be dark fiber. Layer two would be a bit stream. Layer three is what we get in the U.S., which is the Internet access.
Can you understand the stuff in terms of what's going on? Yes, local right of way is a real, natural monopoly. There is typically only one right of way to any given piece of real estate in any place, any society that recognizes ownership of real estate. There may be a second but it might - whatever it is, the right of way is either city, state, might be a condominium association, it might be a deeded right of way across a neighbor's property - in the lower right there.
There are also a bunch of issues. If you go and put fiber in, particularly in the ground, which is typical for major metropolitan areas - not quite on the right there, that's Dhaka, Bangladesh, where they don't have 100 Mbps Internet access, but they do have 100 Mbps access in the first mile. They just can't get out of the country.
These are things that have a big budget and I think you would have noticed; if you were here first thing yesterday in Malcolm's talk, he had a graph I noticed was rather similar to this. The cost of actually putting in the fiber infrastructure is quite substantial. You cannot make back money on that out of the triple play services unless you are a monopoly or a duopoly. You have something, certainly more than 20% market share.
By definition, if you have a fiber network and you're going for facilities-based competition, you're going for a duopoly or possibly a third pipe. You're not going for a competitive world; you're just where we already are.
Can we understand it in terms of what's happening? Yes, these are elements that have a long, long life, decades life. The cable, the poles and the conduits, and so forth, those are things that do not change regularly. The moment you light up a dark fiber, you're in the space where Moore's Law applies. The equipment you use to light the fiber has a functional lifetime - it might be ten or fifteen years, but it's functionally obsolete in three years, typically, because of Moore's Law. There is something better.
People may be willing to accept the same equipment for ten years, but there are other people who would benefit from upgrading the equipment in every eighteen months. Laws, regulations, political processes tend to run in decades. It makes sense, perhaps, to have structural separation at this layer.
Structural separation for the communications layer and policy wonks, that's something which everybody talks about but it's functionally impossible in any place that has a political process because of vested interests. You would like to have some kind of separation here, with public service, public company, a regulated monopoly, a condominium association - somebody owning a fiber infrastructure and everybody else above being competitive.
But, structural separation of the existing monopoly providers is politically impossible. There is actually one case, when it really happened, which was the breakup of the Bell system in the U.S. in 1984. That was a decades-long process and I would maintain that it only happened because the executives at the head of the Bell system were computer envious and they wanted to get into high tech. They consented to the breakup of the Bell system so that AT&T could become a computer company. It didn't work, but that was the idea.
Structural bypass is a name that I've coined for what has actually worked in quite a few cities. The political pitch to the incumbent, which is the vested interests who are going to violently fight any municipal Internet access service or municipality that is offering triple play, or anything like that; we've seen it certainly in the U.S. - violent reaction to municipal Wi-Fi and the vested interests get law passed that prevent any city from competing with the incumbent.
If you argue that we're not going into the communications business, we're only making dark fiber available, no services, "We're not going to compete with you, Mr. Incumbent, in fact; anyone can lease our fiber, including you Mr. Incumbent," that's a path that has worked multiple times now. It's the model that worked in Stockholm, which is at this point, probably the oldest of the success stories.
They founded a company called Stockhab in 1994. It was the result of a three-year political process, where they stumbled towards finally agreeing on creating this. Their answer to the incumbent at that time, named Telia, was "We're not competing with you; we're opening up infrastructure for anyone. We're going to reduce the number of people who are digging up the streets, and stimulate the economy so Stockholm becomes a leader in the world."
Also, they mandated a city-operated corporation, which was supposed to break even. In fact, they did break even within five years. Now, I believe the politicians have noticed that this is a money flow and of course, they're waiting for a profit as opposed to break even, but that's the way these things go.
Stockhab, fourteen or fourteen and a half years later has an enormous coverage for metropolitan Stockholm. Greater Stockholm includes twenty-nine other cities or towns and goes out about 70 kilometers from actual downtown Stockholm. I couldn't get a current map. This is a map from 2001. Everything in green was built before 2000. Everything in other colors were built in 2001, 2002. If I were able to get a current map, which I might yet come up with but not in time for today, it would basically be green across the entire area that's there.
What I would like to leave you with is a set of takeaways. Again I caution, this is applicable to large cities looking at more than a dozen different cities in the world that have actually got Internet access at 100 Mbps symmetric. It's because they've unbundled. Typically, the most success has been unbundling at layer zero, at dark fiber.
Net neutrality, if you're arguing about net neutrality you're doing something wrong. You're just wasting your time because inherently, you are operating in an environment where you will never be able to catch up with a place like Stockholm because you are going to have two or three players. You're going to be second rate forever.
Looking for facilities-based competition is no better than putting you in the same place where you will be fighting about net neutrality because you won't get more than two or three integrated pipes.
Structural separation at the dark fiber layer is, at this point, pretty well proven to be the most successful. It doesn't mean we can't envy the Japanese for their bit stream access. Structural separation at the dark fiber layer is the one that has been the most successful; not necessarily in the first year or two, but when you look back five to eight years later, that's what is most successful.
It's politically impossible to divide up the existing incumbent, but structural bypass, which has now been used in a number of cities, starting in Stockholm, is something that works and is feasible. If you want to argue about something in the U.S., realistically you want to look for a particular city and fight the fight in a major, urban area - say, one of the top fifty cities.
Get this going. Five to eight years later, that city will be so far ahead of the rest of the United States that people will pay attention. I don't see any U.S. people paying attention to what's happening internationally. I don't know what's wrong with us, [Laughs] but the success could be by doing something reasonable in even one U.S. city. Five to eight years later, you could see some success.
That's the pitch. Three minutes to spare, which means there could be some questions. Thank you.
Audience 1: Brough, I have one question. You mentioned these European cities. Why didn't you mention Tokyo Gas, [0:12:07.5 unclear] and those guys who really have 1 GB access?
Brough: I wanted to pick a reference point that is available in more than a dozen places now, of major metropolitan areas. There are a few places, like Tokyo and Hong Kong, where you can get 1 GB symmetric access. I just wanted to pick a reference point that I could get prices for readily.
Audience 1: It's $65 access. I'm crying, in Munich, just having 100 Mbps. [Audience - aaah]
Brough: I wanted something with a large enough base that I could make a comparison across more than a dozen cities and where I could get data. There is 1 GB symmetric Internet access available in a couple of cities, including Tokyo and Hong Kong. I will say there are provisos on a lot of those things. In Hong Kong, the access is not for "overseas" traffic. There are some "gotcha's" in a few of these things. The pattern is pretty clear. The thing that is obvious is that dark fiber is best, bit stream is second best, and anything that is based on 2 or 3 is just hopeless.
Audience 2: Hi, it's a little off topic, but why is there never any talk of this in the mobile world? There is never really any talk about unbundling the access from these. Nobody thinks of that happening and you really can't have any sort of real competition or ability to offer anything without that.
Brough: There is no doubt that there is a whole separate - in fact, we have a bit of a discussion panel, tomorrow afternoon, that I'm moderating on Spectrum 2.0. It's much less of a problem compared to the limited right of way that physically makes the fiber access be a monopoly or duopoly for the in the ground infrastructure. In the case of spectrum, there is an enormous amount of spectrum. A limited amount has been parceled out to a few operators, but we have had, at times, rampant competition in the mobile industry in the U.S., certainly in the initial roll out of voice. We haven't had much competition for the last three or four years because you can look at the average price people will pay for SMS; it's actually gone up for the last two and a half years. It proves we have a market structure fixed.
I think the reason people don't argue as much about mobile is that there is some level of competition there, much more than in fixed.
