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SWISSCOM AG

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Regulation: an own goal in network expansion?

11/04/2021 EST
Company
Regulation: an own goal in network expansion?
As a result of the latest rulings by the Competition Commission (COMCO) and the Federal Administrative Court (FAC), the optical fibre expansion (FTTH) in Switzerland is stalling. According to Urs Schaeppi, CEO of Swisscom, this has far-reaching consequences for Switzerland's future ICT infrastructure, especially in rural areas.
Sepp Huber, Head of Media Relations
04 November 2021
Mr Schaeppi, the FAC has confirmed precautionary measures taken by COMCO against Swisscom. What does this mean?

Urs Schaeppi: In the short term, we may only build network elements that comply with point-to-point (P2P) network architecture. This is more complex because each customer is connected via a separate fibre to our local exchange. Figuratively speaking, the FAC is demanding that Swisscom build a four-lane highway into every town/city.

P2MP enables rapid and more efficient expansion, which means networks can be built and operated economically, even in remote regions.

What does this mean for customers?

We are no longer allowed to market our new connections according to the very efficient point-to-multipoint (P2MP) network architecture that is currently standard worldwide. The decision will have strange effects, and it even means that we now have to connect newly built houses with copper cables in some cases. That doesn't make any sense.

According to the FAC, at round table meetings between 2008 and 2012, the industry pretty much agreed on a nationwide P2P standard.

At that time we were at the beginning of the FTTH rollout in the big cities, and it was important to avoid multiple structures by different partners such as electricity companies and Swisscom. We agreed on the four-fibre model for the optical fibre connection of homes so that customers could switch providers very easily. Swisscom is currently laying, and will continue to lay, four fibres from the conduit in the neighbourhood to homes. This is undisputed.

However, it was never decided that four fibres per residential unit were also needed from our local exchange to the conduit in the neighbourhood. For further expansion in rural areas and smaller towns, a fast, innovative and more cost-effective method is needed, especially since Swisscom usually expands in these areas without a partner.

Does Swisscom need to play catch-up compared to other countries?

No. On the contrary, we are far ahead with ultra-broadband when compared with other countries. At present, the major cities and conurbations are connected via P2P to a large extent with around 1.5 million FTTH connections, and 90% of customers nationwide are already connected with ultra-broadband (at least 80 Mbit/s). But the momentum continues unabated: to further increase the Internet speed, we have set ourselves the goal of building a further 1.5 million FTTH connections by 2025, especially in smaller towns and rural areas.

How will Swisscom achieve this goal?

Where we are building on our own and in less densely populated areas, we are reliant on P2MP technology, which is much more suitable. This means that many more customers can benefit from even faster Internet access in the same amount of time. A delay and a switch to P2P is not in the interests of customers, who want very fast Internet access quickly; nor is it in the interests of Switzerland. The expansion of the network is now in danger of being massively delayed because COMCO and the FAC are giving greater weight to the particular interests of providers without their own networks than to investment incentives in the industry and the interests of customers.

What if Swisscom had to build P2P consistently?

If we had to use P2P architecture everywhere, a lot more civil engineering work would be required. This would mean delays, building permits would be needed, and roads would have to be opened up to enlarge cable ducts. In cities, the channels are usually large enough for a sufficient quantity of fibres from the exchange to the cable conduit, but not in rural areas. Thanks to P2MP, we can build networks that can be constructed and operated economically, even in remote regions. If P2P is imposed on us, the optical fibre expansion will stall and rural regions will fall behind.

Isn't P2P the technology of the future?

No, on the contrary. P2MP has gained international acceptance in recent years. The model is only criticized in Switzerland, which we cannot understand. The global telecommunications industry is focusing on P2MP, so there's a lot of investment in innovation. P2MP is the technology with the highest dynamics. We offer speeds of 10 Gbit/s via P2MP, which is something that few other countries can offer. For customers, it's not the technology that makes the difference, but the service they get in return.

Smaller providers without their own network complain that P2MP will force them out of the market.

All competitors can use our networks - including the newly built P2MP optical fibre networks - with their full bandwidth, and they can design their own offers via so-called Layer 3 access. Many competitors are very successful with this. Other network operators such as the cable networks, which themselves cover 83% of households, do not offer network access to their competitors. The regulation is therefore incomprehensible in another respect: expensive building regulations are imposed on us unilaterally, while competitors active throughout most of the country, such as cable providers, are completely free in their activities.

You have entered into a partnership with Salt for direct access to the P2MP network.

This demonstrates another contradiction in the FAC's rulings: this cooperation promotes competition and customers benefit from additional offers - but this partnership is currently blocked by the ruling.

Couldn't the regulators' interventions have been foreseen?

No, because a few years ago the national parliament debated on the precise issues now raised in the revision to the telecommunications law, and it explicitly decided to focus on infrastructure competition and forego optical fibre regulation. This competition promotes investments and innovations. And now the opposite is happening: regulations are being imposed and incentives are declining, which in the end risks a regulatory own goal.

What will happen now?

We need clarity as quickly as possible so that we can speed up again when it comes to the expansion of the network. It is essential that Switzerland doesn't fall behind in international comparisons due to uncertain conditions.

Switzerland occupies a top international position in relation to broadband coverage. However, the demand for ultra-broadband is unabated.

Competition between different infrastructures and technologies is leading to high broadband usage in Switzerland.

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Swisscom AG published this content on 04 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 November 2021 08:32:08 UTC.


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Urs Schaeppi Chief Executive Officer
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