There always is a trade-off between investment and competition in telecom markets, as the latest Ofcom report on internet access in the United Kingdom illustrates nicely.
“We find that although consumers can receive better performance by switching to a different technology or upgrading to a service with a higher advertised speed, it is unlikely that they will experience a significant improvement by switching from one ADSL or FTTC package to another at the same advertised speed (as services will be provided over the same copper line),” says Ofcom.
In other words, policy can emphasize faster deployment (enabled by sharing and therefore lower costs) or more competition, but not both equally, at the same time.
Many would argue that even if retail providers cannot differentiate on speed, network reliability or other facilities-based features (they all use the same network), there still is competition. But some would question how much effective competition there really is.
When every provider has the same underlying network cost base, there is limited ability to cut such costs. Nor is there any ability to boost performance beyond the level “everyone else has” or to add unique network-based features.
To be sure, other ways to differentiate a service (bundling of additional unique services or apps; different retail channels; customer service innovations) are conceivable.
But nothing really can be done about the “speeds and feeds” part of the experience.
It is “unlikely” consumers can “experience a significant improvement” by switching from one ADSL or FTTC package to another at the same advertised speed,” since all the retail providers use the same network.
Only by “switching to a different technology” can “better performance” be obtained. In the case of the U.K. internet access market, that means choosing the cable TV hybrid fiber coax network instead of the BT Openreach net
Simply put, Virgin Media provides the fastest speeds, significantly faster than fiber-to-curb or digital subscriber line networks.
“Virgin Media’s ‘up to’ 200Mbps cable service provided the fastest average download speed of the packages included in the report, both over the whole day (193.6Mbps) and during the peak 8 p.m. to 10 p.m. period (184.3Mbps),” Ofcom says.
That is the result of a clear policy choice to use a wholesale business model (one facilities provider used by all retail providers). The upside is that investment costs are reduced; the downside is that every retail ISP can only offer what the wholesale platform supports.
To be sure, in most markets there are few other choices of ubiquitous fixed network platforms such as cable TV. Globally, most facilities-based competition has been provided by mobile networks.
And that is likely to be an issue in the 5G and subsequent eras, as mobile-provided speeds climb to gigabit levels. When that happens, retail pricing and packaging equivalent with fixed network services will be decisive in creating more competition for fixed network services.