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Geo withdraws from the BDUK game
Wednesday 16 November 2011 14:54:49 by Andrew Ferguson

Geo Networks Ltd has announced the reluctant decision to withdraw from the BDUK Broadband Framework and future Next Generation Access procurements.

The lengthy press release on the Geo website explains the firms reasoning, but while complaining about BT and its ability to exploit a pre-existing fibre backbone, withdrawing from the BDUK process and future NGA procurements is almost handing BT a victory without BT having to work for it.

"The primary reasons for our withdrawal are threefold. Firstly, we feel that the current gap-funded subsidy model being adopted by BDUK and local authorities automatically favours the incumbent, which has the security and knowledge of revenue streams on its current network as the dominant and often only telecoms network owner in these regions. Secondly, the absence of any opportunity provided in the current procurements either to underwrite any take-up risk or to guarantee public sector revenues – for example under a Public Private Partnership model – removes the ability for us to share this with the public sector. And finally, the uncertainty around the terms and pricing for PIA, and the heavy restrictions as to what we can use it for means that, in our view, this market is not contestable.

Whilst pricing may have reduced for the current PIA product (still not far enough in our view), the real issue is that it can only be used for providing the final drop from local exchange to a residential broadband consumer’s house. PIA cannot be used for the far more costly task of crossing the long distances in rural areas to get to these remote communities (backhaul) – making the idea of being able to build new fibre connections within them faintly ludicrous. It cannot be used to connect mobile or wireless infrastructure (a critical way of quickly rolling out competitive services in hard to reach geographies) and it cannot be used to provide leased lines to businesses. Quite simply, our business case does not stack up because of these restrictions."

Geo’s Chief Executive Chris Smedley

Geo are behind a Welsh Assembly funded project in North Wales called FibreSpeed that concentrated on linking business parks with fibre to create a fibre backbone independent of BT. The project as of June 2011, had over 100 businesses receiving service at their premises and over 1,000 remotely e.g. via masts. Coverage of North Wales with wireless runs to around 40% of all businesses located in North Wales.

The PIA products were always focussed on the last mile of access to homes and businesses. While BT with its fibre network that links its telephone exchanges has the most widespread fibre connectivity across the UK, there are plenty of other backbone providers that exist, alas they often concentrate on connectivity between regional points of presence.

Coming on the day of positive news from Fujitsu over the PIA products, there will be questions over whether the way that the BDUK scheme is operating in comparison to previous schemes ran by the Welsh Assembly had led to the Geo decision. For smaller telecommunication firms the problem of raising matched investment, which is needed for the majority of BDUK work is a massive stumbling block. While this requirement does go against the smaller operator, it also does guard against firms just using the BDUK funding as a way to prop up a business.

To rule yourself out of future NGA procurements is worrying, as it must bring into question any further expansion of the FibreSpeed project. Though we assume if a BDUK bid winner was to approach Geo with a contract for work, they would accept it if the price is right, they just don't want to enter into bidding wars.

The level of profit available in the final third of the UK has always been marginal, hence why both BT and Virgin Media have given evidence to Parliamentary Committees saying as much. Any service built solely in this final third will have a very long payback term, even with the split funding coming from BDUK and other bodies. Additionally as many people in these areas already have some form of broadband (even if it is slow) the take-up of a service without the guarantee of the big providers coming on board is likely to be low.

Comments

Posted by GMAN99 over 5 years ago
What stupid arguments from Geo, complaining because they can't use PIA for business leased line and ducts that are not from premises to exchange.

This ISN'T what PIA is about, its about stimulating home broadband provision/speeds across the UK not giving other businesses the ability to pillage other people's ducts for their own capital gain. The cheek of some people. Why not force C&W to open their ducts for business for everyone else? Or Virgin's to put leased lines in.

Nice try Geo...
Posted by themanstan over 5 years ago
The arguments they're using are more for the final 10%, than the 20% for which BDUK is intended for.

As for leased line, OFCOM excluded that from PIA because BT does not have SMP and there is a heap of competition in the market already.
Posted by GMAN99 over 5 years ago
May Geo should have read the definition of PIA?

"Physical Infrastructure Access ("PIA"), which will allow competitors to deploy their own NGA infrastructure between the customer and the local exchange, using BT's duct and pole infrastructure, to provide broadband and telephony"

http://stakeholders.ofcom.org.uk/consultations/wla/statement

Its about "local" access not building your own UK fibre network on the cheap for business purposes.
Posted by cyberdoyle over 5 years ago
Poor old digital britain. Lets stay a third world country so that bt shareholders and fat cats can finally kill the golden goose that once was one of the best telephone networks in the world. BT wont replace their copper with fibre, and it seems they don't want to let anyone else have access to their legacy infrastructure either. Ancillary charges stop PIA working as a viable business model. We have to jfdi ourselves and the sooner we all realise it the better.
Posted by Bob_s2 over 5 years ago
BT know that PIA is the key to competion in the Fibre market which is why BT are doing their utmost to stop it and so far they have succeeeded.

All that the competition are asking is that they get access to the ducts on the same basis as BT. Currently it is not a level playing field
Posted by andrew (Favicon staff member) over 5 years ago
Fujitsu appear to disagree with people then...

LLU was not a great product at first, but did develop in time.

As for viable business model, is the last 10 to 15% of the UK ever going to be a viable business for fibre? Or will it only work if reliant on the goodwill and effort of an advocate
Posted by GMAN99 over 5 years ago
cd, this has nothing to do with the phone network (you always seem to do that?). What legacy infrastructure are you referring to, if its their ducts they are available under PIA. Fuji seem ok with PIA so.... its ok for some jut not GEO as they want more which they can't have (and rightly so)
Posted by GMAN99 over 5 years ago
Bob, I don't think that is all that is being asked. Geo are asking for access outside the remit and definition of PIA.
Posted by Somerset over 5 years ago
Strange how mobile companies manage to use radio links between mobile base stations.
Posted by herdwick over 5 years ago
"get access to the ducts on the same basis as BT" - like Sainsbury should have access to Tesco's distribution network on the same basis ?

It was sold off over 25 years ago, will you never move on ?
Posted by GMAN99 over 5 years ago
Exactly
Posted by Somerset over 5 years ago
cd - BT is laying of 130,000 kilometres of fibre in Cornwall. OK?
Posted by mervl over 5 years ago
Perhaps if BT's telecommunications licence were amended (by agreement with BT's goodwill of course, as they wouldn't want to upset our Westminster friends) to require them to provide an adequate fibre backhaul with 21CN to all telephone exchanges by 2014. After all it can't be that difficult can it? Then could LLU and PIA sort out the rest?
Posted by New_Londoner over 5 years ago
@mervl
You would of course be amending the licences of all the operators presumably, so all are given the same additional overheads? And you'd somehow get them to maintain the £2.5bn investment in FTTC at the same time?

And presumably deployment to any exchanges that are deemed "uneconomic", which might be a good chunk of the small ones, mainly in the final third, would need public funding. Would this come out of the BDUK pot?
Posted by New_Londoner over 5 years ago
Contd.

Long-winded way if saying you might struggle to put new conditions on something that has already been purchased so is not public property. Remember that the directors have a legal duty to look after the interests of their shareholders.
Posted by andrew (Favicon staff member) over 5 years ago
Urm what do people think the 21CN network does now for backhaul from exchanges, and the ATM network prior to that - fibre.
Posted by New_Londoner over 5 years ago
Weird to see some of the opinions given above about how bad things are with PIA hot on the heels of the announcements from Fujitsu which seemed to be saying the exact opposite. I suspect Fujitsu are better informed about what is actually on offer.

And why any sympathy for the CEO of Geo? Apart from being contradicted by Fujitsu on the viability of PIA his other comments don't really stand up to examination.
Posted by New_Londoner over 5 years ago
Contd.

He didn't want to invest his own comapny's money money alongside that of the public sector (the gap funding comment), and he also wanted a revenue guarantee.

The way it reads suggests he basically wanted to place a one-way bet, with his stake money coming from us tax payers! I don't blame him for asking but who on earth would agree to that? Presumably not the people running the tenders, thank goodness.
Posted by New_Londoner over 5 years ago
Contd.

And whilst Geo may have gone home, that stil leaves Fujitsu, Cable & Wireless and others, so hardly "handing BT a victory without BT having to work for it". This surely overstates the importance of Geo in the whole process?
Posted by Somerset over 5 years ago
Why has a company like Geo just realised what PIA covers? Everyone else knew ages ago.
Posted by andrew (Favicon staff member) over 5 years ago
Dont rate C&W for BDUK, saw no mention in its financials, and Demon got a cursory mention this week, churn and price pressure.

Broadband for residential/SME market does not appear to be in their sights.

Two horse race for most counties at present.
Posted by creakycopperline over 5 years ago
our resident BT propaganda mouthpiece, strikes again.one biased as always
Posted by GMAN99 1 day ago
What stupid arguments from Geo, complaining because they can't use PIA for business leased line and ducts that are not from premises to exchange.

This ISN'T what PIA is about, its about stimulating home broadband provision/speeds across the UK not giving other businesses the ability to pillage other people's ducts for their own capital gain. The cheek of some people. Why not force C&W to open their ducts for business for everyone else? Or Virgin's to put leased lines in.

Nice try Geo...
Posted by themanstan over 5 years ago
@Creaky

Normally, I have alevel of admiration fir the smaller players in the infrastructure telecoms, like Hyperoptic, etc... But here no. Leased lines make mega bucks £300 to £1000s per month. That is why OFCOM leave it out, LL should finance themselves.
Business is risk, Hyperoptic has risked a fair amount of it's own money, no BDUK help, and has got an excellent FTTH set up for flats.
Geo is looking for a low cost, low risk solutions to help it's margins.
Posted by themanstan over 5 years ago
Also, theoaning about ancillary charges is vacuous. BT duct is fit for purpose if the telephone lines running throug them work. If BT runs fibre through, they fix it and bear the cost. In PIA a blockage needs clearing then it should be charged to the company, BT shouldn't be absorbing costs for other companies network roll out.
As I've pointed out previously, VMs suggested charges are practically material cost price and less than what they charge contractors that damage their network.
Telecoms are in it for their own benefit, they are not altruistic (NFPs might be).
Posted by GMAN99 over 5 years ago
creaky if you read my comments and understood them you'd agree.

Its like someone advertising a house for sale and then a bidder pulling out as even thought it didn't say on the description they thought it was for the house and the surrounding 100 acres of land.

And that's without them not wanting to risk their own money, foolish. Its not bias its fact, read for yourself.
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