A year ago BT Group announced the ambition for 10 million premises passed by ultrafast broadband using G.fast and now a year later and after Openreach survived the once a decade Ofcom review the group has announced more investment in Fibre to the Home. The new investment means that Openreach now has the aim of rolling out FTTH (FTTP) to two million premises by 2020, this is on top of the 10 million expected to use G.fast.
The roll-out is going to be aimed at new build estates and high streets and business parks, and we believe the roll-out will be in addition to any FTTH deployed via the various BDUK projects. Speed wise with the Gigabit FTTP trial underway in Bradford we should hopefully see 1000 Mbps as an option aimed mainly at the SME sector, with G.fast targeting speeds of 300 Mbps to 500 Mbps.
While it could be suggested that the announcement is a response to Virgin Media making a 1 million FTTH commitment, the actual press release suggests that BT see the two roll-outs as complimentary and lays down the gauntlet for other operators to also invest and thus further increase the footprint of FTTH in the UK. The level of investment is reported to be £6 billion which covers both the FTTH and G.fast deployment and reveals the scale of the task ahead, even though the VDSL2 and fibre cabinet roll-out has moved fibre closer to some 25 million premises already via 75,000 cabinets.
So what does 2 million premises mean for the overall UK picture? As things stand today Openreach has FTTH available to around 260,000 premises so just under 1%, the extra roll-out will raise this to around 7%, and once the Virgin Media roll-out and other FTTH operators are taken into account the UK looks set to be on course to FTTH coverage of 12%. The technology neutral ultrafast definition (100 Mbps and faster) will benefit from the roll-outs and therefore we are expecting to maybe see the UK hit 75% by 2020 well up from the current 50.2%, the exact figures will all depend on how much all the different networks overlap.
On the more traditional results area, Openreach now has some 5.9 million premises connected to its GEA network of VDSL2 and FTTP, which is 23% of premises passed. The grant level is lower than previous quarters as £229m of grant money has been deferred due to the previously announced claw back mechanism. Capital expenditure for the Openreach arm was £376m, this is after gross grant funding of £54m (lower grant levels than last year due to £78m of grant money deferred due to the claw back mechanism).
BT Retail may have have upset some with the price increases last week and this is now rubbed in with the news that profits are up in the retail arm, apparently driven by areas like BT Sport and broadband. BT Sport the service that no one seems to admit to using has regular audience figures of 1 million for football matches, with a best audience figure of 2 million. The financials detail that two of the reasons for the price rises at BT Retail are improved engineer response times with a better care level purchased from Openreach meaning BT Retail customers should see an engineer 24 hours faster than previously and also moves to employ 1,000 more call centre staff in the UK for both BT and EE customers has cost implications. In figures BT TV has 1.5 million customers (up 66,000 in the quarter) and added 94,000 customers in the quarter, with 204,000 net additions on the Infinity range.
Openreach added 130,000 broadband connections in the quarter, and with upgrades there was 415,000 new VDSL2/FTTP connections in the quarter, 201,000 of the fibre connections were with providers outside the BT Group.
The first reactions from BT competitors is in and there seems to be a stark contrast to what Sky was saying a week ago about being comfortable working with Openreach.
"Today's statement shows that BT continues to see copper as the basis of its network for 21st century Britain. Despite BT's claims, it is clearer than ever that their plans for fibre to the premise (FTTP) broadband will bypass almost every existing UK home. This limited ambition has been dragged out of BT by the threat of regulatory action, demonstrating once again why an independent Openreach, free to raise its own long-term capital, is the best way for the UK to get the fibre network it needs.”Andrew Griffith, Group Chief Operating Officer & Chief Financial Officer, Sky
To date neither Sky or TalkTalk have purchased the GEA-FTTP products from Openreach, this is thought mainly to be down to the small foot print and extra costs involved in paying for the cable link needed between the Openreach handover and the LLU operators network. This may change as with newer kit coming into play network operators will be able to buy just one link to cover VDSL2, G.fast and FTTP customers we believe with 1 Gbps and 10 Gbps options.
The question raised by the Sky statement is if other operators feel the same, how is the money to be raised to pay for the work to roll-out FTTP to the existing UK homes, and should this roll-out overlap with Virgin Media and others or explicitly avoid those areas? The other option is for CityFibre and others to expand their roll-outs and target homes rather than the core target of business and local authority contracts.
Update 12:30pm CityFibre has issued a response to todays news. It is an interesting response, particularly as G.fast which if the announced plans work out should deliver 300 to 500 Mbps to 10 million homes and be a foundation for further FTTP roll-out in 2020 to 2025. It is possible the two million premises of FTTP with a focus on high streets and business parks might bring competition to the model CityFibre has been busy carving out, but in the commercial world this should have been very obvious and is probably why CityFibre has generally only deployed its core fibre network to areas where a key tenant is on board, e.g. local council making extensive use of the network to connect council buildings on massive LAN.
"This announcement is simply a reluctant response by a sluggish incumbent to the tightening noose of regulatory scrutiny. While intended to grab headlines on infrastructure commitment, BT's announcement is largely signposting continued deployment of outmoded technology.
While any business constructing pure fibre infrastructure for our nation's homes and businesses should be encouraged, focusing on the entrenchment of an incumbent operator overlooks the essential contribution of alternative infrastructure builders like CItyFibre.
It is only through the growth of alternative operators and the stimulation of a truly competitive infrastructure market that the UK will see the innovation and better value services it so badly needs."Greg Mesch, CEO at CityFibre
In a world that is easily dominated by Fibre to the Press Release we look forward to spotting actual live customers carrying out speed tests on all the different competing networks. For the BT Group they are in a difficult place, since do nothing they are beaten up, do something and its either not enough or they are being predatory and blocking competitors - so in the PR sense its an impossible battle to win.