Another grilling for BT Group CEO by DCMS Committee
Today saw the BT Group CEO Gavin Patterson and Kim Mears, Managing Director, Infrastructure Delivery answer questions put to them by the Culture, Media and Sport Committee in an almost two hour long session.
The most useful item to emerge perhaps was an indication of what BT believes it may be able to do with regards to the 10 Mbps Universal Service Obligation. Two initial offers have been presented to Ofcom and will obviously be up for discussion along with what other operators believe they may able to do to help meet a legally binding USO that should take place this Spring.
- A fibre rich deployment would cost up to £2bn and should reach around 99% of UK premises. Fibre rich meaning a mixture of VDSL2, G.Fast and FTTH/P, with other tech helping the remaining 1%.
- A cheaper option likely to cost £100's of millions using a much wider range of technology including long reach VDSL and we presume this might include other options like fixed wireless, 4G and satellite broadband.Summary of current BT USO offers
The advantage of the more expensive option based on the technology mixture would we hope mean that many of those helped via the USO would not just hit the 10 Mbps target but exceed it by a large margin, where as option 2 sounds more like one that will tick the USO box, but may mean revisiting again in 5 to 8 years if the pattern of Internet use expands greatly beyond watching one or two HD streams at a time.
It is not fully clear who will pay the cost of the USO at this time and this is why a lot of discussion is expected, but Gavin Patterson made it clear to the committee that any investment from the group to meet the USO would be tied to the 'appropriate regulatory environment'.
As things stand today we believe that 5% of UK premises only have a 10 Mbps or slower option from fixed line broadband, expressed in raw figures this is around 164,000 postcodes comprising some 1.4 million premises. Obviously the tail end of the BDUK phase 1 roll-outs should help some (e.g. around Christmas 2015 we estimated the figure to be 170,000 postcodes) and the phase 2 extension projects will eat into this greatly. What the Government decides to do with the superfast pilots for the final 5% will also have a massive bearing on the USO discussions, as if the feedback from the pilots is favourable the number needing help to meet the USO in 2020 might be down to under 50,000 postcodes representing less than 1% of UK premises. While this may seem incredibly low, we are starting to see long delayed commercial VDSL2 cabinets going live in urban areas and partially complete FTTP areas being finished, add to this the commercial roll-outs by Hyperoptic, Virgin Media and Gigaclear.
Other aspects of the session were the usual discussions on roll-outs, 7 figure postcodes, digital mapping, over building and slightly more focus this time on superfast broadband availability for SME and micro-business that has outgrown a home office. At one point a member of the Committee seemed annoyed at the choice of a Bradford business park for the new interstitial Gigabit FTTP product that is intended to bridge the gap between GEA products and Ethernet services and the call was made for that trial to be done in a much harder (rural) part of the UK.
The question over Openreach profits subsidising the spend on BT Sport was put to bed, when Gavin Patterson stated pretty clearly that the investment in BT Sport was paid for by BT Consumer out of its own cash flow. We don't have the figures, but it is rare to see a pub that offers sports TV that does not have a BT Sport is here sticker/poster somewhere, so the revenue from pubs and clubs is likely to be a big driver, in the same way it has been for Sky for a couple of decades now.
The session is available as a video or audio only stream on the Parliament TV website if you want to see what other snippets got discussed in the 90 minutes or so.