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Superfarce or superfast, is the UK in slow lane or not?
Wednesday 12 March 2014 10:15:20 by Andrew Ferguson

Point Topic has thrown another set of data into the vast boxing ring that is the state of play for a Digital United Kingdom. The data analysis firm has sat down and used combined data sets from various sources to model and validate its latest set of figures which indicate that some 20.4 million homes across the UK have access to a superfast broadband service, either via Openreach FTTC/P or Virgin Media cable broadband. With some 27.2 million homes in the UK this means 75.2% of households can get superfast.

"Britain was ahead of all the other big countries in the EU a year ago. With its growth in 2013 we are confident that it has held its place.

Consider the plan to take BBC3 off air, for example. We reckon about 1.2 million homes would not be able to get those programmes online if that happened today.

Being able to get a service doesn’t mean you actually buy it, of course. Many people in superfast areas are still using standard broadband over the telephone network and find it’s enough for their needs. Many other homes don’t have fixed broadband at all, although they may be using mobile connections."

Oliver Johnson, Chief Executive of Point Topic

1.2 million homes is 4.4% of UK households and basically means those with speeds too slow to stream SD BBC iPlayer which we showed last week to require a speed of just under 1 Mbps. If you take 4 Mbps as a minimum for a reasonable broadband connection (i.e. a couple of SD streams or 1 HD stream) then currently around 9% of UK homes are believed to not meet that criteria.

Hopefully with superfast services so widely available, RightMove will update their website to make use of the superfast data from Point Topic and update the faux speed test to include the faster services rather than just the ADSL/ADSL2+ speeds that are given prominence currently.

Some notes for the aficionados of broadband coverage data, Point Topic has adopted 30 Mbps as its baseline speed for superfast services (inline with EU) and has only included households that it has modelled as capable of getting that speed or faster. So in theory as the FTTC roll-out continues apace we should see the coverage climb and find out if the NAO projection for 90% coverage in 2016 is correct. The estimate was that by the end of 2015, superfast in the UK would be available to some 88% of households.

If the Prime Minister was feeling upset by Angela Merkel's broadband jibe, they could always dig deeper into the sofa and find a few billion to throw at BT, and start building out with GPON FTTH from the many thousands of fibre aggregation nodes BT has deployed (1 aggregation node for each FTTC cabinet, meaning essentially FTTH is already close to all FTTC sites). For now by only funding the less exciting FTTC roll-out, there is still scope for the disruptive influence of other operators to bring FTTH on a scale of millions to the UK, unfortunately this looks to be a short queue.

Comments

Posted by adslmax over 3 years ago
David Cameron can do it, all he have to do is HS2 to be abolished and use that money toward for 100% of UK to have FTTH, job done. If he do this, he will remain as Prime Minister next election.
Posted by m0aur over 3 years ago
@adslmax - He will remain in no.10 anyway, as people will realise a vote for UKIP puts Liebour in power.
Posted by ValueforMoney over 3 years ago
She has seen the subsidy levels in the NAO report and laughed. DC should be very annoyed. UK Gov are investing enough (£1.2bn + £250m) to make UK rural top of class in all measures, but BT's ambition and thus the UK's is being set by the level of costs BT can get past ERDF audits in Cornwall. NAO estimates the contracts permit £47k subsidy per cabinet and fibre path. I hope, this catch us if you can approach can be changed and proper reference costs published.
Posted by ValueforMoney over 3 years ago
The exchange might have been.

Merkel 'Dummkopt - you pay BT a public subsidy of £47k for something you buy on the internet for £5k and install for another £5k. TIA;-) and they effectively withdraw affordable FTTP for rural TIA;-)
Posted by andrew (Favicon staff member) over 3 years ago
I thought Germany was talking of spending 20 billion Euros to do its 50 Mbps for all.

How much subsidy will that be?
Posted by New_Londoner over 3 years ago
@VFM
Any actual evidence that you can buy a populated cabinet (let's say a small Huawei one for example) on the internet for £5k and install it for another £5k? Including power, a fibre connection, any civils works, permit costs etc?

Or indeed any evidence that BDUK are not scrutinising the invoiced costs correctly? Or are these just opinions? No problem if they are your opinions, just think its important to distinguish between opinion and fact.
Posted by adslmax over 3 years ago
@ m0aur...for me I don't want Labour to be power again as I don't trust them as they costing my last job redundant in 2008 because of them (credit crunch)
Posted by ValueforMoney over 3 years ago
@New_Londoner Fair point - evidence from suppliers at populated box down to £8k, assuming buying 30k BT can do better.
BT communication to analysts on Commercial rollout points to £1.3bn capital for c55k installs (cabinet/fibre paths/handover points puts fully allocated cost at £23k - so your pure incremental will be much less.
The NAO number of £28,900 which represents 36% of the BDUK cost is a joke and it is good to see BT Spokesperson admitting to BBC the Framework price does not have economies of scale.
Posted by ValueforMoney over 3 years ago
@New_London BDUK will be scrutining anything BT decides to submit. 35% off PM costs which will be £100m if nailed across all contracts suggests the submitted Framework costs do not reflect all the efficiencies of the commercial roll out as stated multiple times publicly by BT.
Posted by New_Londoner over 3 years ago
@VFM
You'd expect the "BDUK" cabinets to have higher average costs than the commercial ones , which suggests an average figure in excess of £23k per cabinet based on your figures.

Is the £8k you mention for a populated cabinet the cost for a Huawei one, or for another type? Does it come with support or is it buyer beware? Important to be sure these are like-for-like comparisons.
Posted by Dixinormous over 3 years ago
'1 aggregation node for each FTTC cabinet, meaning essentially FTTH is already close to all FTTC sites'

This implies each cabinet has its own aggregation node, is that what is intended by those words?
Posted by andrew (Favicon staff member) over 3 years ago
Believe that 1 ag node per fttc is normal.

Now sits back and waits for the person with an ag node serving two cabinets (should point out a second cab to add extra capacity would be fed by the first node)
Posted by gerarda over 3 years ago
Comparing with Germany and 3 basket case economies is hardly relevant in 2014. This points our where the real competition is now coming from
http://www.telegraph.co.uk/technology/broadband/10692321/Broadband-Europes-best-is-not-enough.html
Posted by Dixinormous over 3 years ago
There are a few cabinets per aggregation node, the aggregation part of their name is because they aggregate the fibre runs from multiple cabinets.

The node serving the cabinet I'm typing this via aggregates at least 4 cabinets.
Posted by ValueforMoney over 3 years ago
@New_Londoner - Cabinet with 1st 64 port card,power, support on top - lowish volume. Not Huawei but widely supported in EU and US. Huawei and ECI in volume will be lower.

The £23k will be a fully allocated cost (cabinet, path, handover point contribution and any core network and common costs, not incremental. BT seniors are recorded online saying economies of scale available up to 90% coverage. So it is not 100k each as per CEO's public comment and it is not an average £40k subsidy as BDUK/BT submissions to NAO.
Posted by ValueforMoney over 3 years ago
@New_Londoner I do not understand given the Gov is willing to spend more why BT has changed the positioning of FTTP. The opportunity to initiate more cost transformation when the Government is paying is too good to miss.
Let's hope the subsidies in Cornwall for FTTC are no more than NI +12.5% as indicated to PAC. This £47k average is such a farce.
Posted by andrew (Favicon staff member) over 3 years ago
At £23k per cabinet, then every cabinet in the UK could be enabled for FTTC for just £1.9 billion, well under BSG estimate for national FTTC of £5 billion.

Was BSG very wrong? Or is difference labour?

What has been costs for similar numbers of cabinets overseas?
Posted by TheEulerID over 3 years ago
Indeed, if it was £23k per cabinet, including all the installation work, such as power, getting fibre to it and so on, then the commercial rollout would have gone much further. It would have been in BT's interests to do so as it would put more of the broadband infrastructure "value chain" in their hands.

I just love the way that people make up numbers to support their case without any obvious sources.
Posted by ValueforMoney over 3 years ago
@Andrew Yes, although that is a bit harsh. The £1.3bn capital is read from a BT slide given to analysts in February.
BT ability to manage its supply chain and the nature of an overlay network allows for finishing 18 months and 'comfortably' under budget. It is a terrific achievement.
Posted by ValueforMoney over 3 years ago
@TheEulerID -Maybe and maybe the Government money came too early. CallFlow on a single cabinet/path install itemise their costs at £25k- 50% of which are payments to BT for ECC and EAD. This is for rural. There is an aggregated sample of 60 rural quotes for unbundling and that comes at 30k average, numbers are all verifiable.
Posted by ValueforMoney over 3 years ago
@Andrew @The EularID This does not say FTTP will be cheap, but there is enough in the pot to begin. In fact, and I hope much of the £250m to be spent at all, needs more transparency on the points raised, so additional progress on FTTP could be made. Thanks for the discussion.
Posted by ValueforMoney over 3 years ago
@TheEulerID - The callflow and 60 aggregated average would their incremental cost, not fully allocated.
My estimate of BT of £23k based on their slideware will be incremental cost plus their decisions on how common costs, cost of capital etc are attributed.
Posted by TheEulerID over 3 years ago
@ValueforMoney

I'm sorry, but that doesn't address the point that at £23K per cabinet, BT would have installed many more on commercial grounds.

In addition, if CallFlow could install cabinets for that cost, then other bidders would have emerged for BDUK money.
Posted by TheEulerID over 3 years ago
Incidentally, this is not to say that I don't think that costs will fall from original estimates. If BT had bid on artificially low costs, then there would have been screams about predatory pricing.
Posted by ValueforMoney over 3 years ago
@TheEulerID £23k why not more? You have a private circuit business to protect, you do not need to compete where there is no virgin service, you replace once ADSL2 assets are on last legs. Nothing odd, fully rational.
Other bidders did not offer an established wholesale service, did not have an existing network, and do not have economies of scale to name three.

Indeed. But BT have consistently made public a commitment to match economics of commercial roll out, yet last week confessed the Framework prices did not reflect economies of scale.
Posted by ValueforMoney over 3 years ago
@TheEulerID the latter is not entirely BT's fault as they can justify the position as the cost of sitting on Framework to whom they would be obliged to wholesale services should they have lost a bid.

Given that risk has diminished the zero in absolute terms, we can now progress to a transparent subsidy based on most efficient incremental costs, so as to avoid the possibility of distorting other markets.
Posted by TheEulerID over 3 years ago
@ValueForMoney
It's certainly the case that there will be cost reductions as all the BDUK bids were individual. However, if you are expecting itemised costs to be published, dream on. BDUK will see them, but even if BT agreed to publish costs, their suppliers will never agree to release such commercially sensitive data.
Posted by TheEulerID over 3 years ago
@ValueForMoney
You might, however, see costs (like project management) which are not constrained by supplier commercial contracts. However, you are never going to see the latter.
Posted by ValueforMoney over 3 years ago
@TheEulerID That which is confidential should remain so, but confidentiality needs to exclude that which is either convenient or expedient. The problem remains as BT has confessed that Framework rates were not optimised even though they repreatedly said they were. In state aid terms this is a high risk for BT Shareholders and suggests the Framework rates need to be reset to reflect incremental costs and not that which BT Group decided to reveal.
Posted by Gadget over 3 years ago
@VFM and isn't this exactly what we all hope the project auditors will be examining.
Posted by TheEulerID over 3 years ago
@Gadget
It is, indeed, the job of the BDUK auditors to police the costs and invoices presented to them. Given the size of the project, there's no excuse not to put in the required expertise to do so. Note that BDUK suppliers were required to carry risks of cost overruns.
Posted by ValueforMoney over 3 years ago
@Gadget @TheEuliar - clawback is reasonable where there is reasonable elbow room and a revenue upside on takeup to measure.
Clawback is not suitable where this level of inflation is evident. The possibility of billing £47k subsidy on average for FTTC is a barrier to planning a better more transformational outcome.
Why should we wait for auditors when BT can calibrate based on NI and the Commericial Rollout data? Anything more is a breech of state aid.
Posted by New_Londoner over 3 years ago
@VFM
Why "calibrate" if all costs have to be invoiced? I don't believe you can Bill based on averages, have to show actual costs for the contract in question. Do you believe there is some other arrangement in place?
Posted by ValueforMoney over 3 years ago
@New_Londoner Actuals within a budget which is within say the threshold of NI subsidy +12.5% not bill an average of £47k subsidy if you think you can get it past an ERDF auditor. anything beyong that £13-£14k subsidy per path are exceptions, like power where the decision to deploy FTTC or push for FTTdp or FTTP or leave to 4G(+antenna) can be made - given the engineering area may be an area of 100 premises. Forgive the insinuation, but I do mot know if project teams are bonused on billed revenue or optimising the coverage with available funds.
Posted by TheEulerID over 3 years ago
@VFM
Now you are living in fantasy land. What on earth makes you think that cabinets are being rolled out at a fixed public charge per location. That's simply not how it's working.
Clawback is only invoked when the take-up rate exceeds a set level. It's not designed to recover some sort of overbilling.
Posted by ValueforMoney over 3 years ago
@The EulerID Never said that only that a budget can be set from a set of reference costs should you have cared to provide them. I assume the next PAC session you will confirm the Framework prices are not optimised against the commercial rollout (as previously stated) and the Framework prices were based on winning one (not a national price, and without concessions previously referenced), thus few if any economies of scale could in that case be factored in.
Posted by TheEulerID over 3 years ago
@VFM
I'm sure the actual costs will turn out lower than estimates for the reason that the bids were probably produced using conservative assumptions. However, BDUK is structured to reinvest savings, much like Superfast Cornwall went from 80% to 95% coverage on the same budget.
Posted by TheEulerID over 3 years ago
@VFM
It was already stated at PAC that bids were made on the basis that each one was independent. If bids had been made "agressively" on price, the complaints would have been they were predatory.
What matters is the implementation efficiency, not the original bid.
Posted by ValueforMoney over 3 years ago
@TheEulerID It was stated at PAC that substantial concessions were given and the full benefits of the commercial rollout were factored in. None of this is evidenced.
The numbers support your contention of a price to win one contract not a set of costs which reflect allowable costs suitable for gap funding under state aid.
Thanks for the interactcion.
Posted by bluesbros over 3 years ago
Oliver Johnson said "Being able to get a service doesn’t mean you actually buy it, of course. Many people in superfast areas are still using standard broadband over the telephone network and find it’s enough for their needs." I have been in that position for years. I have just decided to update to fibre broadband to see if it is worth the expense. But not before I screwed a cut-price deal out of my ISP. One years trial starts now.
So it's not the Government or BT or the suppliers or the ISP's it's the cost. Pure and simple for me.
Posted by TheEulerID over 3 years ago
@VFM
I've been reading this. Whilst any company's submissions have to be taken with a pinch of salt, there's a simply enormous difference between your NI & BDUK cabinet cost comparison & that on comment 45.
http://www.publications.parliament.uk/pa/cm201314/cmselect/cmpubacc/474/474vw06.htm
Posted by ValueforMoney over 3 years ago
@theEulerID On assignment, so can you state the 2 numbers? I will happy to reply tonight. Any number I refer is documented in a BT or DETI press release or presentation.
Posted by TheEulerID over 3 years ago
@VFM
Margaret Hodge claimed that in NI subsidy was £14K per path/cabinet and £47K under BDUK.

BT claim (according to NAO report) the difference is 12%, £25.5k per cabinet in NI versus £28.8k under BDUK.
Posted by TheEulerID over 3 years ago
@VFM
The NAO report numbers for the BDUK bids are in Figure 12 in the report (page 34) and range from £19.6K to £51K with the average being £28.9K (for England)

http://www.nao.org.uk/wp-content/uploads/2013/07/10177-001-Rural-Broadband_HC-535.pdf
Posted by ValueforMoney over 3 years ago
@TheEulerID That represents 36% of the total cost over the total project which creates a problem, go to 100% of cost, take out BT's operational costs and calculate the average subsidy for the contract value.
Posted by ValueforMoney over 3 years ago
@The EulerID - so NI was subsidy of £16m paying for 1265 cabinets (some extras afterwards) with 70% of cabs and 60% of budget for outside Greater Belfast.
NAO found cabs averagng £28,900 representing 36% of contract value, add in the other items and opportunity to bill to £47k subsidy emerges if BT can generate the invoices. Some questions on future proofing per route, or on what routes, but you run out of routes.
Posted by TheEulerID over 3 years ago
@VFM

I'm not sure of the validity of stripping out costs from one case and not the other. After all, it's NAO that was comparing the costs of the subsidies on a per-cabinet basis. Why would they not use the same basis? They also used a couple of independents to model costs as well (albeit the seemed to adopt wholly different methods).
Posted by andrew (Favicon staff member) over 3 years ago
Is the cost of the fibre aggregation node (i.e. often a new pavement chamber) included? And the subsequent passive fibre optic hardware, which then allows for a GPON FTTP build out in the future?
Posted by ValueforMoney over 3 years ago
@The EurlerID - it is best to strip out operaional where the number is available. You cannot track it in the accounts (published or regulated) to any degree.
Andrew - A rather large allowance is in the NAO report but whether it is for every route or just some is not clear. It is ok if quoted on a countywide basis but not on a route by route basis. But it is now academic as BT has repositioned FOD as business only, so counties might be justified in spending that money with someone else if this becomes possible.
Posted by TheEulerID over 3 years ago
@VFM
Operational costs are specifically not part of the BDUK subsidy. Indeed, it's one of the requirements of any tender that the solution is operationally financially self-sustaining. Personally, I would not think that labour costs (internal or external) of planning, designing, installing FTTC cabinets and paths would be considered operational. However, an OR engineer visiting a premise to enable an ISP's customer would be operational.
Posted by TheEulerID over 3 years ago
@VFM
However, I note that the NAO's main concern is over the auditing of staff costs submitted by BT (whilst they don't see a significant issue with invoiced costs from contractors, for equipment and the like. From what I read, such costs are about 40% of the bid, and it looks like about 30% reductions (or 12% overall) are being trimmed off of those.
Posted by TheEulerID over 3 years ago
As it happens, my experience of very large IT projects was that, rather than operational costs being dumped into projects, the reverse often happened. New projects tended to not include costs incurred by operational teams as part of implementation. That is operational staff were treated as "free" during implementations. Dangerous grounds.
Posted by ValueforMoney over 3 years ago
@theEurlerID - As long as the master agreements are accessible, then yes it is BT costs and how BT has chosen to allocate internal costs. The need to assess BT's investment is also needed. I was expecting the contracting labour element to be closer to 80% as this is largely a civil engineering project. Thankfully it is not a IT project, it is an extension of a layer2 wholesale data transport service.
Posted by TheEulerID over 3 years ago
@VFM
Reading the NAO report (fig 11), contrary to my initial impression, there is an operational subsidy (23% of total) for the 7 year contract after which it's meant to be self-sustaining. Of the total cost, only 36% is actual cabinet enablement.
Posted by TheEulerID over 3 years ago
@VFM
Interestingly, 20% of costs are attributed to other solution, mainly FTTP. The 17% other BT capital is attributed to a mixture inc proj management & improvements to back-haul. Opex auditing seems to be the main concern.
Posted by ValueforMoney over 3 years ago
@TheEulerID The operational costs are counted as part of BT's 'investment' which is self ratified and not open to exernal scrutiny. Neither can I see how BT can generate invoices for enabling core network, given £1bn gov cash spent on enabling services for schools in the last decade.
I cannot see how you spent 20% extra on the other solutions as 36% of £1.9bn (sum of 42 contract values /£28,900 =23,600 cabinets serving an average of 250 to reach 5.9m premises in the intervention areas. You spend one or the other in an area.
Posted by Gadget over 3 years ago
Why has the spending on school's services got anything to do with the costs of BDUK broadband deployment? Schools are connected using private circuits which have the cost associated with them for the core they use the same as any private circuit.
Posted by ValueforMoney over 3 years ago
@Gadget The fibre routes to rural schools can be re-used for the rural roll out. It should at the very least mean fewer ECC, more fibre available for re-use and handover points readied. Given the first customer pays the most the legacy of the school build will be paths which are readied or more ready for an ungrade, partuclarly from exchange back to nominated handover point.
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