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Government response Rural Affairs Report on Broadband
Thursday 26 March 2015 16:17:22 by Andrew Ferguson

The Government has officially responded to a Rural Affairs Committee report that was published in February 2015. The response can be read in full online and the response is short enough that even those with slow broadband should manage to access the page.

The response is largely a summary of what the Chancellor in his Budget, the DCMS and Ed Vaizey MP have been saying in the last week.

  1. The Government is committed to ensuring 90% coverage of superfast broadband by early 2016 and 95% coverage by December 2017. The National Audit Office memorandum of 28 January 2015 confirmed we are on track to achieve these targets. In addition we will deliver a universal service commitment to give all remaining premises access to speeds of at least 2Mbps by the end of 2015.
  2. The Government has no plans to change the 2Mbps universal service commitment for delivery by the end of 2015. However, many of the premises which are not yet scheduled to gain access to superfast broadband will have speeds higher than 2Mbps.
  3. The Government is looking to raise the Universal Service Obligation from dial-up speeds to 5 Mbps to ensure that no one is left behind as faster speeds become available and are more widely used. The Government will consult on this change early in the next Parliament.
  4. The Government's definition of 24Mbps for superfast broadband is based on the fact that speeds above this level can only be delivered using Next Generation Access technology. The European definition of 30Mbps has no specific technical or user basis for it. Most premises which can receive speeds over 24Mbps will also be able to receive speeds above the level of the European definition. The Government's rollout is future proofed. It is a requirement of the broadband framework contract that solutions have an upgrade path; for example, fibre to the cabinet could be upgraded to fibre to the premises if needed.
  5. As a condition of their funding for the phase two projects, local authorities will be required to provide public information on roll-out plans to 7 digit postcode level. Publishing information to address level runs the risk of being misleading given the uncertainties involved before deployment takes place.
  6. The Government is currently developing its plans for delivery of its commitment that all premises will have access to standard broadband with speeds of at least 2Mbps by the end of 2015. Within this, eligible premises will have access to satellite services which can provide superfast broadband speeds.

While it is natural for the Rural Affairs Committee to take a rural view on the UK broadband situation, the BDUK project no matter how many times it is called rural was never JUST a rural project. It would only be that is 1/3 of UK premises were rural, and they are not only around 20% are rural. So since the original target of 90% superfast was announced, it should have been clear that the harder and more costly rural areas to reach would be missed out.

Point 4 from our summary is interesting, as while many will assume this is talking about fibre on demand only, it is referring to the fact that the standard deployment for a fibre cabinet means that the fibre support infrastructure to support a future FTTH or G.fast roll-out has made it from the exchange to near to the cabinet. Or put another way, Openreach has gone from fibre in around 5,500 exchanges to fibre to around 62,500 nodes. So while VDSL2 may be a medium term solution the ground work for a large FTTP roll-out has started, but the softly measured approach of the BT Group means no commitments beyond the current G.fast plans announced.

The vocal farming lobby was perhaps slightly assuaged recently when the Rural Payments Agency plans were scaled back and options to drop paperwork off at 50 drop-in centres put in place, citing problems with getting the mapping software by Kainos to work properly in the £154 million digital service. The talk about the system has been a mixture of failed software upgrades and software module integration along with concerns over those farms that have slow broadband not being to able interact easily with what going to be a complex system.

Comments

Posted by ian72 about 1 year ago
Point 4 is also interesting as it seems to rule out wireless technologies - these would not have such a clear progression path for significantly higher speeds.
Posted by chilting about 1 year ago
One very useful new piece of information is point five. Maybe this proves that someone has been listening?
Posted by ValueforMoney about 1 year ago
Rural would still be justified if the defintion of gap funding was enforced. So those cabs serving 200+ premises get a fraction of ELO or cabs <100 premises served. Perhaps state aid will catch up with this.
4 did not exclude wireless. The only EU technical docs supporting 30Mbps in rural were 4G capability papers from the EU spectrum group. But to get 4G functioning to 98% you need fibre at every hamlet. You also needed >15m masts and 20Mhz of spectrum.
Posted by andrew (Favicon staff member) about 1 year ago
@chilting Satellite for maybe 1% as part of USC has been mentioned a few times before, and not just recently either.
Posted by Blackmamba about 1 year ago
Hi Chil
In Surrey they are not interested in satellite they're going for fibre all the way it is cheaper do not be fobbed off.


Posted by chilting about 1 year ago
There is absolutely no way I would accept satellite. I tried that back in dial up days - never again!
Posted by chilting about 1 year ago
I really do question those who say it is to expensive to install FTTP in rural areas.
It must be much cheaper to run fibre in ducting along grass verges or in overhead cables than it would be through a town.
Also if the end user pay's for the final connection from the highway into their property this would also cut the cost.
Posted by ian72 about 1 year ago
In a town the ducts probably already exist. A single fibre cable run could server hundreds of houses. In the country a mile of fibre may require ducts the whole way and may only serve a small number of houses. In some cases it will be cheaper but in others it will be very expensive - especially where it crosses farmers property or requires a road to be closed where there are no easy alternative routes.
Posted by chilting about 1 year ago
@ian72
The point I am trying to make is that FTTP can be installed almost anywhere, as BT have demonstrated in Cornwall. The technology is very sound, unlike FTTRN?, and the investment case for UK PLC is also sound. It is only the investment that is lacking.
Posted by andrew (Favicon staff member) about 1 year ago
If it was cheaper than VDSL2 roll-out then am sure Openreach would be doing more of it.

Investment and then us the public paying that investment back with profits and in a regulated non-vertical environment that might be 25 years or longer.
Posted by ian72 about 1 year ago
@chilting - so basing this on the investment case for UK PLC are you saying the government should be putting more money into it via taxation? How much do you think the government (well, us in reality) should pay to get FTTP rolled out to everyone?
Posted by ValueforMoney about 1 year ago
@Chilting @Andrew
A 1500 metre overlay of fibre on extisting infrastructure serving a single manifold connecting to an existing AGN is about £4,000 + ecc if needed.
Your more than correct except BT are resourced constrained for FTTP.
On the VDSL, BT Group got totally distracted by the subsidies and it has taken over 2 years for the NAO to identify 38% inflation in BT's cost models.
Posted by ValueforMoney about 1 year ago
@Ian72 - since you asked.
FTTC - e-side to PCP will have cost £3bn (£1.3bn BT/£1.2bn state) to complete what BSG/AM estimated at £5.1bn.
My estimate for D-side is £10.4bn over 15 years with customers paying the final drop.
Current copper cost rec of c£87 pa per pair, includes £35 for d-side and £17 for the drop wire, although only a third of this goes to repair and renewal. Manipulating the incentives would not be difficult.
Posted by Somerset about 1 year ago
@VFM - 'customers paying for the final drop' What might that cost? Are your costings based on fibre to the top of every pole and DP?
Posted by andrew (Favicon staff member) about 1 year ago
Did no-one notice the speed at which KC are rolling out FTTH? 50% of foot print by 2015, imagine if BT was taking that long to reach 50% coverage when most people bought the slower tier fibre option anyway?

Do it slowly once, or do it quickly but repeat the steps until you eventually get to full FTTH. Two routes, both with good points and bad points.
Posted by ValueforMoney about 1 year ago
Somerset - a little crude, but 1500 metre worth of cable segments and a manifold on DP. 2.6m DPs worth.
To sustain a £100 connection, you would need 5 orders per DP, or set a threshold to start and a sunset date for the reaminder.
You could start with a £200 connection threshold in the current BDUK areas out of reach of a cabinet.
Posted by ValueforMoney about 1 year ago
@Somerset - Why would you dream of putting a second cabinet in a street if you could create space in the cabinet by fostering demand for FTTP?
Posted by ValueforMoney about 1 year ago
@Andrew but when are the repeat steps? 5-10 years time? G.FAST or FTTrn look incompatible with that hypothesis!
However a commitment to overlay FTTP as the first cabinets are filling might get us there. Hence how small a cluster of DPs can 'native' FTTP be assuming AGN and BFT is in the adjacent access network?
Posted by Blackmamba about 1 year ago
Hi Value.
I think the costing will be to the post code from the new Cab node hitting the first post code at 1610 mtrs + or - then extending to other DP,s that are unable to get 15 meg target (Surrey). The fibre used will either go underground or overhead the reason I state this 3000 poles have been pending to be changed out. This project is under construction.
Posted by ValueforMoney about 1 year ago
@Blackmamba This is on a project that is supposedly reported finished!
620 cabinets was c£14m out of Surreys £23m public subsidy.
3000 d-side poles (?) at c£800each =£2.4m - who pays for what is pending?
How much P is being estmimated from this effort or is this for rn and G.Fast?
Posted by Blackmamba about 1 year ago
Hi value
The money that is left in the pot plus the ( clawback money 7 years window ) they (SCC) have estermated the clawback and it is looking good due to the hard work from Katie and the team advertising 24/7 on their post codes.
Posted by Blackmamba about 1 year ago
Hi value
The 3000 D poles would have been in the mtce budget the fibre would have been planned in the beginning on the provision of the new cabs remember this is my observation.
Posted by chilting about 1 year ago
@ian72
Certainly all businesses should have access to superfast broadband. I would like to see the voucher scheme extended to cover all areas of the country. Residential and business customers who can already get superfast broadband with FTTC clearly don't need FTTP
Posted by WWWombat about 1 year ago
@vfm
Your costing seems to be missing a lot of content, and you can't fit a multi-page justification into 600 chars.

Have you seen the TNO estimates for G.fast for central Amsterdam? G.fast is still a small fraction of full FTTP costs. The bulk of the money in full FTTP comes in the final drop.

In pushing the cost only as far as the manifold, you are missing a lot.
Posted by WWWombat about 1 year ago
@vfm
FTTRN is really an infill phase at the end of the current FTTC step, so not valid as a new step.

However, g.fast works as a fresh step; pilots in 2016 will be 7 years after the same stage for FTTC. Expect a nationwide rollout to take 8-10 years. Allows FTTP to be a new step in 7ish years time.

Discounted cost of FTTdp now + FTTP in 2023 is the same as just doing FTTP now; the faster rollout of hybrid solutions really does pay you back.
Posted by WWWombat about 1 year ago
@andrew
Doesn't KC's latest announcement mean they get to 50% of their footprint by 2017?

Getting full fibre might be great, but it's slow progress; they'll be nowhere near the government's 95% target - and questions really ought to be asked.
Posted by WWWombat about 1 year ago
@vfm cont'd - post lost?
Wherever you think that overlaying FTTP works for full cabinets, you can argue that both g.fast and FTTRN are valid ways to do the same - and they might prove to be more effective as a quicker response.

Reading BT announcements, this seems more likely route.

Surrey is different, with 99%+ target much earlier than anywhere else; too early for g.fast. I wouldn't use Surrey to predict the rest of the country.
Posted by ahockings about 1 year ago
There are a lot of places here where FTTRn further out from an existing cab would be easy and would cover 20, 30 or 40 dwellings.
Posted by New_Forester about 1 year ago
Superfarce-Broadband-hoodwinking, For Openbreach to meet their goal of 2mbs min by the end of 2015 is a fib.
We have been told unless we pay for our own infrastructure, we wont see fibre until at least 2020.
And we live in south east England with demand from 1400 property's
Posted by andrew (Favicon staff member) about 1 year ago
Nothing says the 2 Mbps USC has to be delivered via a landline does it.
Posted by chilting about 1 year ago
@ahockings
Don't get to exited about FTTRn, it needs a reliable power supply. It may not be much cheaper than FTTP.
Posted by Blackmamba about 1 year ago
Hi Broadband watchers.
The target for Surrey is 99.7% over 15 meg and it is starting to look like they will achieve this result.
Posted by andrew (Favicon staff member) about 1 year ago
@Blackmamba really? 3% (or in other words around 15,000 premises) scattered across the county fall into the below 15 Mbps as things stand. The new bit of FTTP in South Godstone this week won't solve that on its own.

Posted by Blackmamba about 1 year ago
Hi Andrew Staff
So you have locked Surrey at 97% today's 15k date this is not taking in the other cabs not even open yet plus the fibre options . I do understand that this is your data from your database and not Openreach data.
Posted by ValueforMoney about 1 year ago
@WWWombat - Drop wire cost recovery is over 10 years, and only £17 of the £87pa in WLR/MPF terms, so this staged approach you propose looks odd.
Keeping copper regime in place because you can does look odd, particularly in the presence of 1/2 bn in claw back revenues.
Posted by davidnye about 1 year ago
@Blackmamba, No, the target for Surrey is now 94% of the intervention area at 15+ Mbps. See http://superfastsurrey.org.uk/faqs/ under "WHAT BROADBAND SPEEDS ARE SUPERFAST SURREY COMMITTING TO?". The original target of 99.7% refers to NGA network, but it's now 99%. See under "WHAT IS SUPERFAST SURREY?" on FAQ.
Posted by davidnye about 1 year ago
It now appears that Surrey never had a percentile minimum speed target for the whole county or commercial area. The contracted target for the BDUK project was often just announced as if it covered the whole county. Not that it really matters, since 94% (contractually 94.6%) of the intervention area must logically mean a higher percentage across Surrey.
Posted by WWWombat about 1 year ago
@VFM
You make an "interesting" choice to use the recovery cost for copper as a means to calculate the actual cost of the civil engineering work, in the future, to install fibre.

Do you have any basis whatsoever for believing that the financial means of calculating depreciation bears any relation to the cost of fibre?

I don't mean a justification in your own mind, but backing from anything published elsewhere.
Posted by WWWombat about 1 year ago
@vfm...
In 2005, BT had this to say: "If anything, BT's current valuation is likely to understate the true
economic value - it totally ignores assets fully written down for accounting purposes that
remain in operation, and which have enduring economic value." It goes on to mention that drop wires weren't included in the valuation at all.

It might be true that cost recovery, in book terms, is done over 10 years. But that doesn't mean that the asset has a life that short. In which case the actual cost to replace it with fibre is *much* higher.
Posted by ValueforMoney about 1 year ago
@WWWombat http://www.analysysmason.com/Research/Content/Comments/FTTH-rural-areas-Apr2014-RDTW0/ This piece is helpful as are the findings in Eircom for rural.
There is plenty of reports showing where 'new' or replacing copper, the civil engineering costs are not that different. Why would the civil engineering costs be different?
Posted by ValueforMoney about 1 year ago
@wwwombat - 2005? Much of the cost recovery is now on replacement cost. FLAM R used hypothetical costs of a PST network which is quite odd given the need for investment.

Capital costs are being recovered but not re-invested, not in the drop-wire or indeed the d-side.
Posted by WWWombat about 1 year ago
@vfm
Sure, civil engineering costs for new or replacement copper will be similar to the civils cost for fibre. That doesn't mean it is close to the value used in the accounting.

Likewise cost recovery that is based on replacement cost (though it was on CCA-basis in 2005 too), but the period for depreciation is not the same as the lifetime in service.

What's FLAM R?

BTW: Cost recovery is about getting the money back that pays the original investor. It isn't automatically available for re-investment. Profit is the thing that enables that.
Posted by WWWombat about 1 year ago
@vfm
Oh, and thanks for the link to a £500 report.

If I had that kind of money spare, I'd choose to go to the G.fast conference in Paris, and listen to BT explain why they think G.fast is a viable technology for the UK network.

It'd probably prove more useful to understand what will actually get used over the next decade; a decision which our back-and-forth arguments is never likely to influence.
Posted by ValueforMoney about 1 year ago
@wwwombat Fixed Line Access Market Review

Cost recovery on a regulated asset is split capital and maintenance, so the profit can and is generated by gaming these variables.
Posted by WWWombat about 1 year ago
@vfm
Profit still ends up being only a small proportion relative to costs; expecting all of cost recovery to automatically be used for re-investment is naive.

You still don't answer my question about whether you have a basis to believe that the cost recovery mechanisms (as an accounting process) bear any resemblance to the actual cost of the civil engineering.

So I've done some looking...
Reading Ofcom's analysis of setting WLR and LLU ceilings (2005) indicates that a lot of the drop line costs are considered to have been recovered already, and are therefore not included.
...
Posted by WWWombat about 1 year ago
In particular, prior to 2001, BT's accounting practice was to "expense" (ie write off) the entire drop wire charge in the same year.

Ofcom considered that drop wire expenditure fully recovered ... so the WLR and LLU cost recovery elements make no allowance whatsoever for the installed base. It also fudges the costs for newer copper with the retail price control, so excludes those costs too.
...
Posted by WWWombat about 1 year ago
Further, the studies that Ofcom use to help set WLR and LLU ("Valuing BT's copper access loop") specifically avoid valuing the drop wire portion. Analysys' report mentions "We note that drop wires have significant value, but [...] have historically been accounted for differently by BT"

BT's own response to that study was to report that there are £4-5bn of assets (in GRC terms) missing from the cost recovery mechanism.

I haven't found anything newer that suggests the drop wire asset base is being treated any differently.
...
Posted by WWWombat about 1 year ago
All of those statements are enough to make me think that "cost recovery" does not come close to stating the true replacement cost of the drop wires, yet these are the very things that are the most expensive part of a fibre deployment.

I think you need *extremely* clear evidence that the costs included in the current cost recovery are a true reflection of the full replacement cost of the entire asset base.

Without that, your entire case stands on top of a guess.
Posted by ValueforMoney about 1 year ago
@WWWombat In this particular case I was looking at d-side and drop wire elements, and yes cost recovery regime combined with the asset life suggests their is more than enough room to maintain and replace those assets, replacing an entire asset base is another matter given things like system x's are not being replaced.
Posted by Gadget about 1 year ago
@VFM, not sure why you are bringing SystemX (or AXE10)which are not a Openreach asset into the argument?
Posted by ValueforMoney about 1 year ago
@Gadget I was trying not too - wwwombat mentions BT's enitre asset base.
Happy to discuss any one element, simple cost of replacing a drop in this case.
Posted by WWWombat about 1 year ago
@vfm
The best answer you can come back with is "suggests"? No hint of evidence?

My previous reference to the asset base was solely about the copper access network, not exchanges - it comes from reading the Ofcom consultation on "valuing copper access".

One Ofcom document refers to there being £5.5bn of assets valued by net replacement cost (ie after depreciation) under the CCA calculation for copper & duct.

The BT document refers to £4bn - £5bn of assets already written down (ie because of depreciation) that are still in use.
...
Posted by WWWombat about 1 year ago
That looks like evidence that "suggests" you are using numbers that are half the value they should be. After all, you do need to total gross replacement costs, don't you? The rest of your numbers depend very firmly on these being right.

That suggestion alone ought to be enough for you to question your methodology. At least it should be enough for someone with integrity.
Posted by WWWombat about 1 year ago
Finally, take a look at this, which is a report from KPMG. Their valuation of the "missing assets" that can be attributed to *just* drop wires amounts to £2.8bn

http://stakeholders.ofcom.org.uk/binaries/consultations/copper/responses/btannexes

The discussions in the KPMG report are worth reading. What they say about an ENE applies roughly to BT if it had to re-deploy everything with fibre - certainly as far as the drop wires are concerned.

You can't dismiss that £4-5bn entirely. Not easily.
Posted by WWWombat about 1 year ago
IIRC, The Analysys Mason report that put the £25bn cost on FTTH for the UK allocated about £4n on the portion that comes only after a home is actually connected, and the biggest portion of that was on the drop wire. Let's say £3bn.

However, the total applied there was for 31% coverage of properties, so amounted to around 9 million properties.

£3bn for drop wire costs, spread over 9 million homes = £333 per home. Just for the drop wire part of the line.
Posted by ValueforMoney about 1 year ago
WWWwombat Thanks for the referances. I will read those and return to this topic.
The £25bn is out of date, AM work in 2012 on new fibre methodologies did take this down significantly and the costs and re-use of FTTC in the e-side will also have a big impact.
Your dropwire cost of £333 looks more than double that being discussed in Cornwall. But that needs verifiable usable evidence which I need to work on.
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