Of telecom networks and Free Markets

Market competition for telecom access services is great. When it exists, that is.

This guest post is the translation, with minimal editing and with permission, of a message to the NEXA mailing list by Dino Bortolotto, president of Assoprovider that the largest Italian association of 100% italian, 100% self-financed suppliers of access to digital transport networks. Emphasis and subtitles, added for readability, are mine.

How would you like your network centralization?

I see several discussions about whether telecom infrastructure should be in the hands of the private sector, or if it should be owned by (local) governments, as if these were the only two options on the ground: but both positions share the same assumption that infrastructures must be managed, planned, financed ONLY and exclusively in centralized way.

This is too bad, because those infrastructures are geographically distributed, because their users are geographically distributed. Consequently, those infrastructures must be built using geographically distributed resources (crossing physical spaces, using portions of the electromagnetic spectrum…)

We are talking about infrastructure that CANNOT BE DELOCALIZED: infrastructures that must be built where the user is located (and the bulk of the investment is often in building and other physical structures built close to the user’s premises).

Where do you fight digital divides?

We would not be talking of digital divides for twenty years now, if such divides could be entirely closed and solved centrally.

Luckily for citizens, there is not just one single infrastructure model (centralized), that only leave to decide is whether the owner should be a private company, or some public administration: There are also distributed models of infrastructure building, that change according to the density of users, or their geographical distribution.

If we just abandoned the centralist ideology that is dominant today, but functional only to a certain type of finance, and visited some “digitally divided” area, we would discover that the same service, under the same economic conditions, is provided by some subject… but a subject with economic and organizational characteristics that are totally different from those of the big players who have never be present in the same area for twenty years.

Smaller and distributed is better

This is not a utopian dream, but a reality that in Italy is represented by about 1000 companies that implement this model, providing complete connectivity services to about 3 million Italians, with the SAME technological QUALITY of the big telcos. The rest of Europe is also full of subjects with the same characteristics, who are NOT big telcos and do not need any big telco to provide top notch telecom transport services.

Where is the real obstacle?

Why do I say all this? because the real obstacle to the expansion of an infrastructure with timetables and services dictated by the territory and not by financial returns for some centralized subjects is tied, even before of the use of public money by private subjects (and the bigger those subjects, the more money they get, by default), to the exclusive (and therefore discriminatory) use of territorial collective goods such as the electromagnetic spectrum.

You cannot build bridges

What happens today is like saying that if some country X needs a bridge (that is, some public good infrastructure), its government carries out a tender that guarantees its winner the exclusive right to build bridges everywhere in Italy, while leaving the same winner completely free, without accountability, to decide whether or not to build bridges in any given location of the whole country.

Free Markets, where are you?

Wouldn’t it be MUCH more like an actual FREE MARKET, and much less like fake capitalism, if each town, or local community could decide if and when to build a bridge on its territory, and who should build it? Especially today, with technologies that do not need 500 people to build “bridges”?

The Italian government, instead, made tenders to assign 5G frequencies over the whole country. But do you really think that any big telco operator will ever place a 5G cell in a town with less than 1000 residents? (in Italy there are about 2000 such towns, plus about 6000 with less than 2000 residents each).

Small cells are beautiful. Not

This will never happen, because the cost model of a big telco implies that that cell will NEVER recover the costs incurred for the equipment and for the management (CAPEX + OPEX).

Luckily, there are Italian subjects capable of activating cells that offer the same services with a cost profile (CAPEX + OPEX) that can be one tenth of those of the Big Telco and whose only OBSTACLE is access to those frequencies in that territory.

At the formal level, the nationwide 5G tender did include a “use it, lease it, loose it” principle. Too bad that, as usual, the principle is there, but the rules for applying it in practice are not.

It’s because it would cost more money, right?

NO. Does all this result in an economic loss for Big Telco? NO, because smaller operators would be well prepared to pay the cost of using assigned frequencies (we are talking about 2 Euros/year per user). This means that big telcos would even pay less, nationwide, for their own use of those frequencies.

Why doesn’t this sub-assignment happen?

Because, from what I have seen while working for thirty years in this sector, what big companies really want and care about is, even before profits, to have total control of the market, and being sure that no other competitor can even enter the field.

Who owns communication?

Bortolotto wrote that message to stimulate general reflections on these topics because, he told me, he considers all kinds of infrastructures as building blocks on which fundamental rights and freedoms of people rest: especially communications infrastructures, that are capable of physically and heavily altering the actual access and practice of freedom of expression.

I agree, and this is why I translated his message.