UK Internet Fixed Network Economics – The OR Space & Power Challenge

Since the dial and broadband services were launched nearly 30 years ago, the basic assumption for networks was build a scale, national network (or as national as you could afford) – fill it as near 24/7 as possible with margin rich traffic balancing consumer, business and wholesale traffic and as the technology allowed provide QOS and network automation as quickly as possible to reduce costs and protect customer services.

It’s a model that most large national carriers and wholesalers have been managing since the internet began and required the building of back bone, core, metro and local access networks to connect the internet via the customer access circuits at the edge……until the last 5 years this was predominantly built on local access networks connecting the circa 5k BT telephone exchanges which through a hierarchy of backbone and metro layers leveraged the BT copper based services xDSL services and Ethernet access services to the different customer segments at the edge – the distance limitations of copper and speeds forced the launch of FTTC services (splitting the data from the exchange path and sending it via fibre from a powered CAB’s box to a high capacity parent exchange) allowed 20-30 meg speeds to increase to 60-70 meg, however, without a new approach this has stymied the increase of speeds more generally, without moving to full fibre networks e2e as OR, Virgin and the Altnet’s have now been driving in anger for the last 5 years.

The rapid growth of full fibre services in the UK, is now causing OR to rationalise its Local Access space and power across its Exchange Estate in preparation for Closure of circa 4k exchanges over the next decade, which is then flowing through to a number of UK CP’s and Wholesalers (who have Colo in those exchanges) and stems from the fact that as the legacy services are moved from the copper/local access infrastructure to full fibre infrastructure, OR and CP’s are left with unused racks, ports, space & power). Another unintended consequence is the potential impact on the Ethernet LA pricing model that a large chunk of the UK Ethernet services is currently commercially modelled and sold on which will become clearer as the CP’s/Wholesaler’s confirm their own rationalisation and exchange closure plans.

So from an end customer and partner perspective, the landscape for their existing services is fluid as the CP/Wholesalers optimisation and closure plans are formulated and communicated, commercial models around Ethernet will depend in the medium term on distance based charging and or the port based EAD2 OR model when its launched in scale with the problem “crystalising” for the customer/partner when either OR and or the the CP/wholesaler closes their infrastructure in advance – alternatively an Altnet strategy could alleviate some of these medium term challenges/risks if the supplier is likely to be viable long term and has the engineering skills to deliver an acceptable install for complex services. An additional challenge for all providers of networks (Fixed, Mobile, Altnet, Wholesaler etc.) utilising BT’s exchange Colo facilities is that as these sites close these other networks will be affected and will need regrooming with considerable cost and complexity.

How we help

In this fluid, and complex supply environment, Acuity Insight and partners such as sString has the skills to help the partner and complex end customers navigate through what will become a turbulent 5-10 years..