Telecom giants in Europe and some in the U.S. want to build quick new fiber systems to deliver high-speed Internet and entertainment services into homes. But the only way to justify the billions in cost, they argue, is if rivals are prevented from having equal access the network and offering competing media services over the same pipes.
Swedish serial entrepreneur Jonas Birgersson, a scheduled speaker at Web Summit (pictured on Informilo’s home page), is out to prove them wrong. He says his open model offers consumers low prices and freedom of choice — and it could work everywhere. He has already proved the model in Sweden and Brazil. And this summer the government of Israel agreed to adopt his technology nationwide, with rollout to key parts of the country envisioned within two to three years.
“Israel’s network could be a game changer,” says Blair Levin, who served as chief of staff under U.S. Federal Communication Commission Chairman Reed Hundt and later led the writing of the Obama Broadband plan. Once everyone in the start-up nation has access to one gigabit-per-second Internet access it will give Israel a competitive advantage, potentially spurring other countries to move more quickly, says Levin.
Both he and Birgersson will appear on a panel during Web Summit that is focused on building a gigabit future, which Informilo will moderate.
At issue is how to drive the next generation of wired Internet. “For several decades the Internet has piggybacked on infrastructure build in the 1800s (the telephone networks) and the 1980s (cable networks that were designed to act as loudspeakers with lots of data flowing out and little flowing in),” says Birgersson. “For the Internet to reach its full potential we have to move from a world where the Internet is an unwanted stepchild strapped to a tired horse to one in which an Internet-first designed network is powered by a rocket and everyone gets access to broadband at speeds of one gigabit per second.”
While Europe was once a leader in the technologies that make up the backbone of the digital economy, many markets in Asia and North America now enjoy fiber access penetration that is up to 20 times higher and an LTE (long-term evolution) penetration that is as much as 35 times greater than that of Europe, says Luigi Gambardella, head of the European Telecom Network Operators association (ETNO), another scheduled speaker on the Web Summit panel. “This is true in markets which are larger but sometimes also smaller than the EU markets. Fast connectivity to the Internet is the foundation of a modern digital economy and a key enabler of innovation. Without it, Europe will fall behind on the world stage.”
Up to €750 billion in GDP growth and as many as 5.5 million jobs in the economy of the EU are at risk by 2020 because of the lack of next-generation network investments, according to a Boston Consulting Group report that ETNO has brought to the attention of policy makers in recent months. The report found that investment in telecommunications infrastructure in the EU declined by approximately 2% a year over the last five years. Investment in other international telecoms markets grew by roughly 2% a year over the same period.
“Let me be very frank in terms of the scenario that we face: by 2020, we estimate that that the shortfall in investment needed to meet EU Digital Agenda targets for broadband coverage and penetration will be between 110 and €170 billion, leading to an enormous missed opportunity for the broader EU economy,” says Gambardella.
Ben Verwaayen, the former CEO of Alcatel-Lucent, bemoans the fact that Europe has fallen so far behind. “Regulators in Europe look to low cost for consumers as the critical success factor and are reluctant to show any preference for investment. “We have starved the industry,” he says. In an industry where scale matters, Europe has 28 different solutions in a market with a size comparable to that of the U.S., says Verwaayen, noting that the market cap of Verizon is bigger than that of three or four of the largest European operators combined. “We are creating a digital desert in Europe,” he says
With telcos claiming they have no incentive to invest without regulatory changes in Europe, very high-speed networks are being built at the municipal level and more often than not, by nontraditional players.
A company called Deutsche Glasfaser, which is owned by the Reggeborgh Group, an investment trust and one of the largest network supplier companies in the Netherlands, is rolling out fiber optic networks in Germany, on a city by city basis. And in Sweden competing providers are serving municipalities. Birgersson, who made his first million at age 26, is now chairman of ViaEuropa, a Lund company that manages network services and infrastructure for 60 different Swedish cities that have their own fiber networks, a system that is akin to cities owning their own sewer or transportation systems. The company is also contracted to operate alternative fiber networks in Norway, Switzerland, Brazil, Costa Rica and Israel.
ViaEuropa assumes the job (from cities) of renting out capacity to multiple Internet service providers who compete to offer services to consumers. ViaEuropa employs technology that lets consumers switch from one service provider to another literally at the click of a button.
In this new world telephony and cable TV shows are just apps and thousands of entrepreneurs can compete for consumers’ business.
In the U.S., fiber is also being rolled out on a city-by-city basis, rather than at a federal level.
In 2010, Google announced that it would bring a one-gigabit-per-second fiber Internet service to one lucky American city, as a way of encouraging existing ISPs, including Verizon, to run higher-speed lines across the country. Google Fiber has been rolled out in Kansas City, Kansas, and as soon as the search engine giant said it was planning to do the same in Austin, Texas, AT&T announced plans to build a high-speed network there. And, Chicago and Seattle have both announced partnerships with a broadband provider called Gigabit Squared to bring fiber internet connections to residents.
“The upgrade problem everywhere faces similar math,” says Blair. “The question is how to you incentivize deployment, what policies drive down the cost of capex and risk? University towns in the U.S. can do it effectively, says Blair, now executive director of The University Community Next Generation Innovation Project or Gig.U, a group of 30 research universities interested in getting their home towns to deploy ultra-high speed broadband. Blair is traveling to Web Summit in part to have discussions with Europeans interested in using the concept to stimulate new Gig.U networks.
Australia and Israel are among a handful of countries that are attempting a nationwide rollout. In Israel, the decision to build a nationwide-FTTH network, using the electricity company’s existing fiber network and rights of way, comes after the Ministry of Communications enacted a dramatic restructure of the communication market. Israel had in 2009 three large mobile carriers and one small one. Although big clients — like the government — were offered discounts on mobile services the general public was being charged seven to 15 times as much, giving the operators a margin of 40% or more. In 2010 the Ministry forced the operators to drop their termination fees by 75% literally from one day to the next. MVNOs were introduced into the market but to ensure that all players were on equal footing the government decided to create a nationwide 27,000-kilometer fiber network that will serve as a carrier’s carrier.
ViaEuropa’s solution combined with Cisco architecture was the missing ingredient, explains Eden Bar Tal, then Director General in the Israel’s Ministry of Communications. Using the Swedish company’s and Cisco’s open technology will ensure that thousands of new services will bloom, he says.
The Israeli fiber network will be owned 60% by private companies, which include Israeli telecom equipment manufacturers and ViaEuropa and 40% by the Israeli electric company. Via Europa, along with local vendors/suppliers and Cisco, will provide the project with vendor financing; Israel’s Treasury is contributing $40 million. Bar Tal is now advising the Prime Mister Office on the next phase — named “Digital Israel” — the transformation of the country to the first digital country in the world.
The project includes the direct involvement of various ministries, with an eye towards quickly ramping up the delivery of all types of educational, government and health services as well as services developed by the private sector and those geared for the Israeli R&D sector. “We are not trying to engineer the future, just enable it,” says Bar Tal.