bert's blog

I live in Belgium, where internet access is sadly very expensive (around €45 per month), and always limited by volume, generally around 25GB per month. If you transfer more, you get charged €1 per GB extra. That may sound insane, and it is — such limits simply can’t exist in a healthy, competitive market.

Therein lies the rub: broadband access in Belgium is controlled by a duopoly consisting of the incumbent operator, Belgacom, and a large cable operator, Telenet, which operates only in the northern part of the country. People in the southern part of the country pretty much get it in the shorts.

European law dictates that incumbent operators must share their networks, in order to create competition in a formerly monopolized market. This has been the case since 1998, and in many countries this made a big difference. Not in Belgium, however. The government owns over 50% of the shares in Belgacom — and is also in charge of regulating Belgacom. That, of course, is not a recipe for creating a competitive telecoms market. So the politicians did what politicians do: they stacked the regulatory agency (BIPT) with a bunch of toadies that let Belgacom run wild, and every so often skimmed the cream off of Belgacom’s massive profits, generally right in time to fill a hole in the government budget. Amazing how that works.

The result is a thoroughly distorted broadband market. This has not gone unnoticed by the European Commission; its 2008 report lays out the awful state of the Belgian broadband market in quite a bit of detail — it even mentions a few of Belgacom’s nasty anti-competitive moves.

So while Belgacom is required to offer wholesale, bitstream and unbundled access to other operators, they are allowed to make all of these offers prohibitively uncompetitive, expensive and complex. The wholesale offer is ridiculously uncompetitive; if you sell it to customers at the same price at which Belgacom offers the same product, you will lose money on every DSL line. The bitstream offer is very expensive and complex to deploy — more about this below — and the unbundled offer is even worse. Practically speaking, very few operators do unbundled DSL, and none do wholesale. The bitstream offer is somewhere between the two, and while it’s complex and expensive, it’s the only real choice ISPs have. This bitstream offer is called BROBA.

So what makes deploying BROBA so hard? For starters, the whole thing is based on ATM — an outdated network technology that died years ago, in every aspect of networking except DSL. ATM equipment is expensive, and very limited in speed; where nowadays every computer comes with a gigabit ethernet interface built in, the Belgian BROBA infrastructure is basically built on STM-1 cards — those are 155Mbit/s, and ATM guarantees at least 20% overhead, so those really aren’t going to do more than 140Mbit/s of IP traffic. And that’s just one of the reasons ATM died years ago.

Another problem is that Belgacom forces ISPs to buy VPs (virtual links) to every single local exchange where they want to offer DSL service, and more VPs if you want to offer different classes of service. There are about 1000 of these, and Belgacom forces you to buy access lines to various (arbitrary) “zones” of the country to transport these VPs. Your customers then come in on a certain VC (virtual circuit) over those virtual links. You terminate these in something called a BAS, which authenticates the customer and connects him or her to the internet. This is all massively expensive, and requires a lot of expertise to boot.

In the meantime, the rest of the world has moved off of ATM, and onto ethernet. It’s a huge trend in the telecoms industry: everything IP, and everything on ethernet. There are enormous advantages to ethernet: the per-port cost is very cheap, and new standards for ever-higher speeds, quality of service, troubleshooting, and multiplexing are being developed all the time.

So Belgacom started moving off of ATM years ago, along with every other large telecom operator. But their BROBA offer didn’t move off of ATM: keeping ISPs on expensive ATM gear suited them just fine, thanks very much. They have tons of ATM gear anyway, so keeping it around for the regulated offer doesn’t cost them much. Of course, even the toothless BIPT would at some point start making noises about this; it was only a matter of time until they required Belgacom to offer BROBA on ethernet to ISPs. So about four years ago Belgacom set about designing an ethernet interconnect setup that would somehow disadvantage the ISPs.

Now there are really only two ways to multiplex ethernet links: MPLS and VLANs. MPLS is a tag-switching technology very popular in large networks; it allows various services like QoS and VPNs to exist as a kind of “overlay” onto the physical ethernet backbone. VLANs are virtual ethernet networks, very popular in smaller networks and easy to use, but don’t scale as well as MPLS. So the logical way to hand over customers from a telco providing DSL service to an ISP providing internet access for them, is simply to put each customer in his own VLAN. Easy to implement, easy for ISPs to filter, route, put in their own VPN, etc.

So Belgacom decided that this was the one thing they were NOT going to do. One of the requirements they set for the new BROBA over ethernet design was that ISPs would NOT be able to identify customers by their VLAN ID on a certain link. So that’s what they did. Amazingly, the BIPT outdid themselves in this case: they didn’t even demand BROBA on ethernet from Belgacom. This was four years ago. Seriously.

Belgacom put forward their new BROBA over ethernet design recently, and in addition to the deliberate VLAN sabotage, they also put in a few more zingers! They won’t support anything but PPPoE — so you’ll be buying new modems for most (all) of your existing customers, and swapping them out at the exact moment of migration to the new ethernet design. If you want to check if the migration worked, well, you can forget about that too, since they won’t support ethernet OAM (it’s “not possible”, according to Belgacom, in a hilariously deadpan lie).

This is not the usual Belgacom attempt at sabotaging anything that smells of competition. They’ve always tried nasty stuff, but they could only go so far. The BIPT, toothless as it is, still had to abide by European law. So while not competitive, there was in the end something of a market. But recently, Minister Q — an unusually clued in politician, thoroughly in favor of free markets — managed to get a law voted that gives the BIPT more power over operators. He then threw out the BIPT’s entire board and chairman. Replacing them takes a while, however, and many political parties will try to stack the board with more toadies that will keep Belgacom from losing ground in the market; they like filling holes in their budget, after all. So with the old board getting thrown out and the new board members getting vetted, and then no doubt taking some time to get their feet wet in such an important regulatory body, we’re looking at a period of no regulation at all.

That, presumably, is why Belgacom published their new design now. It’s a total attack on what little broadband competition there is in Belgium; they mean to kill off what little there is, and to do it while the regulator is not in fighting shape.

The broadband market in Belgium has never been healthy, but if Belgacom gets away with this there won’t be any competition at all. That’s what makes this latest nastiness on Belgacom’s part so different: it’s a flanking attack on the entire market at once.

Belgacom has always been against competition in what it regards as its domain; this is very much in its DNA as a company. No amount of timid regulation or fines will tame it; not even the larger fines the BIPT can now apply. The only way Belgium will ever have a truly healthy and competitive broadband market is if Belgacom is forced to spin off its local networks; i.e. putting the copper wire, the equipment it terminates in, and the networks connecting the buildings or street cabinets that equipment is in, into another company, which then offers only wholesale services to operators, where Belgacom is just one of the operators.

This was done in the UK, for example, where BT spun off Openreach. This was also done in Belgium for the electricity and natural gas markets, where the incumbent (Electrabel) was forced to let go of their local networks. Electrabel, you see, was not majority-owned by the Belgian government. And this is the problem, of course. The Belgian government will never neuter Belgacom like this while it’s the majority shareholder. And in Belgium’s current unstable political climate, there isn’t a soul that will even try to sell off Belgacom. Unless they need a lot of money in short order. So do we have to hope for massive budget shortfalls before this gets fixed?

Full disclosure: I am an independent consultant, and among other things I often do work in the Telecom and ISP market in Belgium. I do not, however, have any financial interests in any of them; I am simply passionate about free markets, and utterly outraged about this latest stunt Belgacom is trying to pull.