The day to day humdrum of the UK broadband scene is people getting on with their lives, peppered by those with Internet connection problems. Ofcom sits in the unenviable position of carrying out its first full review of the market since it created Openreach which is widely viewed as a success as it helped kick start the massive LLU scene that has Sky and TalkTalk has the number 2 and 3 providers with more combined customers than BT Retail.
The Telegraph features a article written by Mai Fyfield who is the chief strategy officer at Sky putting forward the Sky case for Openreach to become its own FTSE 100 company.
"In the era of copper-based services, Ofcom created complex regulation to deal with the conflict of interest at the heart of a vertically integrated BT.
But the system no longer works because of the transition to fibre, where ownership of Openreach gives BT a built-in advantage over rivals. When BT switches a customer to fibre, it just hands over a notional fee from one internal division to another. Other providers face a real increase in costs that makes it less attractive to invest in upgrading customers. This poses long-term problems for competition."Extract from The Telegraph
The argument centres around the belief that Openreach and BT Retail is ran as a vertical operation, or as TalkTalk would express it and has done via complaints about margin squeeze to Ofcom, BT Retail is too cheap for them to compete in the FTTC market place.
While there is every possibility that a totally separate Openreach may pander to the 2 and 3rd largest retail providers more, unless BT Retail shrinks in size substantially they will still be the biggest customer. There is also the question mark over where Virgin Media stands in all this, a more agile and responsive Openreach may not be in the best interest for the expansion they have planned and the long tail of smaller providers are very likely to be squeezed out in the product planning phases. CityFibre may also be worried as if Sky and TalkTalk get an independent national Telco where some extra investment will mean that start of a decade long national FTTH roll-out then their Gigabit city venture may wither away and become just enough metro network to add to the number already present.
So here in lies the big unknown, large players are talking about current fibre prices being too high, but also talking about investment being ready to increase the spread of broadband, but broadband in what form? Perhaps the way forward might be for Ofcom to sound out what actual levels of investment Sky and others would be willing to put into lots more FTTH/P in the UK and enshrine that as the goal if there is to be a Openreach standing on its own in the FTSE index. The current FTTC network while often derided as not future proof by its use of fibre aggregation nodes ready for construction of native FTTP/FTTH has reduced the investment needed for a larger FTTH roll-out, but delivering 69,000 to 95,000 fibre nodes is a lot easier and quicker than installing fibre manifolds with 20 metres of some 27,500,000 households in the UK.
Deployment of FTTH is not technically difficult (especially given the ground work already done as part of the FTTC roll-outs) the majority of the time and labour is old fashioned trench digging and pipe laying and if as it seems Openreach is struggling with the pace of roll-out of FTTC where commercial cabinets are being delayed to ensure milestones are hit on BDUK projects it seems clear that a much larger workforce is needed, utilising third party contractors will prove difficult too as once they sense the scale of the demand their price will go up due to the usual supply and demand equation.