BT has this morning surprised many by announcing a £1.5bn fibre rollout programme which is expected to give up to 10 million homes access to fibre by 2012. The plans will allow for delivery of broadband speed of up to 100 Mbps, but more importantly, the network will allow BT to stay at the forefront of fast connectivity far beyond current technology into 1Gbps, 10Gbps and further as demand for faster services rises connected directly by fibre to the premises.
The telco has stated that this plan is subject to an appropriate regulatory regime and removing current barriers to investment including ensuring that those investing in fibre are able to earn a fair rate of return for their shareholders, the previous sticking point on why BT has not started this fibre rollout earlier.
"Broadband has boosted the UK economy and is now an essential part of our customers’ lives. We now want to make a step-change in broadband provision which will offer faster speeds than ever before. This marks the beginning of a new chapter in Britain’s broadband story.
This is a bold step by BT and we need others to be just as bold. We are keen to partner with people who share our vision for the next phase of the broadband revolution. We want to work with local and regional bodies to decide where and when we should focus the deployment. Our aim is that urban and rural areas alike will benefit from our investment."Ian Livingston (Chief Executive), BT
This move will allow BT to compete head on with Virgin Media who will now have a difficult decision to make in deciding when to upgrade their existing coax-fibre hybrid network. The BT expansion is a significant expansion in fibre and starts the ball rolling on fibre-to-the-home, but initially most premises will be connected via a local street cabinet, similar to the Virgin Media network. We therefore suspect VM will not be updating their plans for some time as they are still in a relatively good competitive position. It will also be interesting to see how BSkyB will react to the market and whether BT is likely to try and extend its BT Vision service to deliver equivalent or better services than Sky and Virgin Media in high-definition television content.
The increased bandwidth offered by fibre will not only allow 'super-fast broadband' services but the capability for the entire family to watch different HD television channels. BT also point out the improved upstream speeds would encourage a new generation of video conferencing options at home.
BT has stated its commitment to wholesaling the fibre-based services to ensure a competitive environment. This is undoubtedly designed at least in part to ensure minimal intervention from the regulator, but also it wants access to any other next generation network operators' networks. This is particularly good news for those in less populated areas as it is difficult enough to justify fibre rollout to them even for a single operator. It is however worth noting that this project is not delivering fibre to every home in the country, although it is a significant step forward.
It is important to note that this is not a full "fibre-to-the-home" (FTTH) rollout although many new-build sites including the Olympic Village will have FTTH deployments. Other areas are more likely to be served by "Fibre-to-the-cabinet" (FTTC) services which is a reasonable compromise to get going on this project. Homes connected directly to fibre (FTTH) will expect services around 100Mbps whilst those connected via a street cabinet (FTTC) are likely to receive services in the 40Mbps region initially, rising potentially to 60Mbps. The future capability of FTTH however is far greater as it is possible to upgrade the components that light the fibre at each end as technology improves.
This development should be welcomed by everyone including BT shareholders. Provided the regulatory environment is effective it is the beginning of the next wave of broadband in the UK, and BT shareholders will no doubt share in the success.