Can the UK afford £2.6 billion a year on FTTH roll-out?
The calls for a nationwide FTTH grow each week and everyone has their own idea on how to achieve it, but there is one part of the UK going for a full FTTH roll-out by 2020 and that is KC in Kingston Upon Hull with its Lightstream service and this makes for an interesting test case to look at what is possible and some of the costs involved.
The ballpark figure for rolling out FTTH in the UK is pretty old but still gets repeated with various mentions in the £20 billion to £30 billion region, but we thought it might be interesting to see what KC has achieved and how this might map to Openreach.
KC (KCom) has we believe 1,700 employees, which is a lot smaller than Openreach which is around 30,000 employees with 21,000 engineering staff but they do serve a smaller footprint. KC has managed to deliver around 45,000 premises passed by FTTH in a four year period, and if the employee to engineering staff ratio is similar to Openreach this will be around 1,100 engineering staff.
Using KC as the model is important, as unlike roll-outs by CityFibre B4RN, Gigaclear and Hyperoptic the incumbent in Hull also has to maintain its existing copper network so may be a better model to work on.
So with an engineering team 19 times bigger at Openreach, in four years working at the same rate they would passed 855,000 premises with FTTH, or if they had started in 2009 we would have 1.5 million FTTH premises passed. Of course to scale this up to a roll-out that matches the VDSL2 footprint of 23 to 24 million premises, it is not a simple multiplier as the number busy dealing with existing copper issues will remain static, so lets assume around half the Openreach staff are involved in the FTTH roll-out and the rest are doing the usual faults and installs. Scaling this up Openreach would need an extra 130,000 staff with an annual wage bill of £2.6 billion to have kept pace (Openreach engineer starting salary is in the £19,000 to £21,000 region, and we have ignored the extra costs of training, fleet vehicles etc for this simple projection).
If Ofcom was to mandate a FTTH roll-out now, of course some of the work for a GPON based FTTH roll-out has already been done as fibres and aggregation nodes supporting GPON FTTH are in every area where VDSL2 is available, but the work of pushing the fibre from these nodes to peoples homes still needs to be done. Lets presume that the nodes represent one third of the work needed for a FTTP deployment, to upgrade those premises to FTTH in the four years before 2020 would still be a mammoth undertaking that looks impossible without a much larger workforce.
With us all as consumers the contribution we make is around £8/month towards our VDSL2 connections, and given the demand for the faster services it is clear that not many would accept price rises that would make a significant dent in the salary bill and there is the problem - namely whoever builds the FTTH network will only see a reasonable return if it is a vertically integrated operation and even then the ROI period will be very long.