FTTx goldmine in emerging markets hindered by regulators, incumbents

This article was authored by John Tanner, and was originally posted on telecomasia.net.

There is a significant opportunity for FTTx rollouts in emerging markets, but only if government regulators shape up their policies and stop protecting incumbents.

That’s according to Benoit Felten, chief research officer at Diffraction Analysis, who kicked off the Broadband Access track of the CommunicAsia2015 Summit on Thursday saying that there are already some examples of FTTx success in emerging markets, despite more attention being lavished on mobile as an access technology.

But for many emerging markets, he warned, the overall fixed broadband opportunity is hindered by complex policies, unnecessary regulatory hurdles and discriminatory practices designed to protect the incumbent, such as high transit costs and rights-of-way regulations.

“Rights-of-way regulations are a major barrier in many emerging markets, making it nearly impossible for anyone other the incumbent to deploy fiber,” he said.

“In order to unlock this opportunity, we don’t need public money so much as we need enlightened government involvement.”

The big challenge, of course, is how to convince governments and regulators to back this view – especially if the plan involves public money for facilitating broadband backbone infrastructure.

Felten said that there is growing awareness among policymakers of the potential value of fixed broadband, but enormous hurdles remain in many emerging markets.

“How do you unleash that value in the face of opposition from the incumbents and other parties who see it as threatening their turf? Incumbents in many emerging markets are still locked in monopoly thinking – they don’t realize that what you’re proposing is not taking away their slice of the pie so much as growing the pie.”

Felten said that the industry “has to accept that existing players are no longer fit to invest in infrastructure. They are too focused on the short term. These are broadband infrastructure projects we’re talking about, it’s a platform that will last 40 years. It may be bleak for the first five, so of course it will look weak if you analyze a 40-year plan with short-term thinking.”

That’s why policymakers are wrong to assume that the incumbent should be the one to take the lead in building broadband infrastructure, he added. “That’s not the way to go – we need independent pure infrastructure players who are happy with a 15-year plan, whether it happens with public funding or not.”

Felten cited Hong Kong Broadband Network (HKBN) as an example of a successful long-term play.

“They lost money for the first seven years. After they broke even, the financial market looked at them and said what a great business model. But if investors hadn’t had that kind of patience, HKBN would have folded,” he said. “Everyone talked about how [HKBN] was sitting on a goldmine, but they had to build that goldmine. If you don’t want to put that amount of time and money into it, fine, but don’t block the people that do.”

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