Broadband News

Is full fibre an ambition that overrides the usual business rules?

The UK broadband scene is something that is increasingly difficult to judge and draw impassionate conclusions about, particularly as those that have maybe not seen any improvements for the last decade are increasingly desperate to ensure they are not ignored for another decade.

Into this mix in the last year the debate about a much larger full fibre roll-out in the UK has surfaced into the mainstream debate where the immediate knee jerk response is stop funding HS2 and divert the money to a full fibre roll-out. Alas given the many decades of regulation that continues to try and create more competition to what was once the GPO the situation we are in is regulation has given the UK many cable franchises that all merged and became Virgin Media that is available to half of UK premises and newer entrants such as Hyperoptic, Gigclear, CityFibre and then the operators such as Sky and TalkTalk that have generally piggy backed on the retail competition products to create themselves as the 2nd and 4th largest retail broadband providers in the UK.

Openreach consulted on plans for a larger full fibre roll-out earlier in 2017, which for those with long memories could be described as re-starting the abandoned ambitious FTTP plans that existed back in 2009 before they discovered the number of work hours involved in the roll-out to each property, thankfully the business grade leased line practices have largely been abandoned now and connectorised solutions with fibre drop cables that avoid a lot of the need for splicing and blowing are making a difference. Now we have the Openreach CEO talking about the results from the consultation.

We believe that under the right conditions, we could build FTTP connections to ten million homes and businesses by the mid-2020s. We want to do it, we think it’s the right thing to do for the UK, but it’s clear that we can’t do it alone, so I’m encouraged to hear that our wholesale customers support our vision."

Having said that, we’re under no illusions about the challenges that lie ahead because we need to build a business case that’s workable and fair for everyone. That means we need a regulatory environment that encourages investment, and we need to agree how the costs of such a huge engineering project can be recovered fairly from all those that stand to benefit.

Of course that’s going to be tough, but we need to get into the detail of that now with our customers, with Ofcom and with Government. I believe Openreach has a critical role to play in achieving such an ambitious goal, and the prize for our CP customers, their customers and the UK as a whole could be huge.

Clive Selley, CEO, Openreach

To read more the Openreach press release covers a lot more ground.

What is most interesting is some of the coverage around this, where it is being suggested that higher prices will be needed, and at that point after recovering from the shock that people buying a faster, more reliable broadband service just might have to pay more we have finally committed some letters into our news feed. Alas in the clickbait headline world we live in having discussions on the topic of who pays is never easy, but an old rule is either lots of people pay a little bit extra or a few pay a lot extra. As things stand today if existing Ofcom plans come into effect the Openreach 40/10 service is due a large price reduction in 2018 onwards and this would have a positive effect for consumers generally, but has the potential to hurt both Openreach and other operators expansion plans, since if you are to sell a full fibre (or DOCSIS or any other competing service to VDSL2) you need to not just sell it to those willing to pay top price for 300 Mbps to 1 Gbps products but also encourage the bulk of people happy with speeds in the 10 to 30 Mbps to convert too and while you can reduce your profit margin, selling your entry level service at a loss is not sustainable unless you think that you will be the market dominator in a few years and can then ramp up prices.

So is Clive Selley trying to sway Ofcom to behave in a way that suits the Openreach business model better? You bet, just in the same way that other operators are doing the same too and there in lines the difficulty for Ofcom, it has created via the LLU market a situation where the public is enjoying broadband that is cheaper than the dial-up days even before you take into account inflation but needs to now encourage someone (anyone) to build out full fibre to many millions of homes.

The key thing now is for there to be regulation and cross party agreement so that long term investment that is not reliant on vouchers, subsidy schemes or similar is created that is fit for the next 15 to 20 years. So much of what has gone on the last couple of years outside the BDUK deliveries (where the ROI/roll-outs are another topic) has been about repositioning the deck chairs on the Titanic so that people will be more comfortable and with very little actual concrete delivery on full fibre solutions. The most telling part of the story is that Openreach is still the largest full fibre operator to households in the UK, if there was a unicorn with 1 or 2 million premises passed and burning capital in the billions per year then the debates would be very different. The UK did have one in the past and that was the cable franchises that after a number of years of pretty stagnant footprint growth is growing once more with new owners investing in the UK, though whether as much as their other countries they operate in is open to debate (e.g. DOCSIS 3.1 is still not a reality in the UK).

To end on a succinct note, the UK needs to decide do we want Openreach to be a neutered owner of ducts and poles or an active local loop operator where its copper base is converting to full fibre.

A final final note, perhaps any public subsidy or voucher schemes that appear from this date forward should not be technology neutral but a full fibre service and only allow planning permission on any new build if full fibre connectivity is included in the same way one expects mains electricity and water to be available without fail.

Comments

In an ideal world, what would be the best solution ? A complete start again using the best technology currently available and every premises in the UK included in the scheme. How much would it cost? I`ve seen the figure of £20 billion mentioned which is not that much if it lasts 15-20 years. Chances of that happening ? 0%.

  • pipcoo
  • 17 days ago

Well put. The issue is about the nature of the economic and commercial market that Ofcom have put in place (cheered on by a lot of politicians, albeit the government now seem to have woken up to the consequences of price minimisation).

The phone network was put in place by a monopoly that could charge outrageous prices for phone calls which, at least, had the benefit of cross-subsidising rural services. BB has never had such a model, and I doubt it will. However, if the Govt was to prioritise universal fibre coverage, it can't be done using the current regulatory environment.

  • TheEulerID
  • 17 days ago

Well demanding FTTP on all new developments as a condition of planning consent would be the minimum sensible starting point.

  • jabuzzard
  • 17 days ago

Hear hear.

We need a stable underpinning, with that allowing 15-20 years of cooperation not quibbling.

Ofcom isn't fit for purpose for that role. Their decision on the 40/10 product makes that brutally clear.

  • WWWombat
  • 16 days ago

The FOD Fttp-GPON announcement suggests BT is willing to invest £700 per customer + £50 per customer passed. This requires the notes to be read at face value.

Given the Ofcom WLA adjustments to accommodate the B-USO offer, why can't BT/Ofcom insert a volume of customers at the above level, and see what the price control looks like?

What would an incremental £200-£300m capital pa add to the price control? There is not the resource to do much more than this. BT owe the government £477m! I guess the fear is existing replacement costs recovered are not finding their way into the network.

  • ValueforMoney
  • 16 days ago

@VFM

I wouldn't quite characterise it as £700 per customer are I suspect they are expecting more than one per PON. If they made the assumption (say) that there would be 4 properties out of 16 passed per PON enabled, that would about to £1500/4 = £375 per anticipated customer. However, we are not party to whatever assumptions that they've made in coming up with their calculations, but it would be interesting to know.

  • TheEulerID
  • 16 days ago

Whatever the build cost for an FTTPoD PON comes out to be (£1k or £30k), BTOR seems willing to drop the price by £700 per connected customer.

If the build cost is accurate (and not plumped-up, Currys-style, to make the discount look good), then I'd say that @VFM is right ... BT are willing to invest £700 per subscriber; any more than this becomes an ECC.

Meanwhile, the numbers for this "10 million FTTP" idea seem to suggest costs of £300-600 per premises passed plus something (was it £200?) per premises connected. At 20% takeup, that's £1700-3200 per sub, & at 40% it's £900-1700 per sub.

  • WWWombat
  • 16 days ago

@wwwombat if we have a unit cost (ish), all(!) we need is a volume. They could start with a plan for 250k lines a year extra and see how that goes.
You could insert the cost and the volume into the modelling Ofcom did for the voluntary USO offer and see the impact on the proposed 40/10 price control.
I am sure it would not be that big, and it would get the ball moving. Even Virginmedia would be happy with a slightly higher price.

  • ValueforMoney
  • 15 days ago

In my area, there are approximately 12,000 businesses run from home and about 14,000 run from business premises. With higher speeds, these businesses could generate an increased turnover, which would feedback to the government coffers. This, when multiplied across the country, would raise tax revenue and would endorse the need for the investment.

  • Ageingted
  • 11 days ago

Would the money and time be better spent accelerating a plan to connect to the home via 5G?

"5G mobile masts – will they be on every home and lamppost?" - https://www.hughjames.com/news/comment/2016/05/5g-mobile-masts-will-every-home-lamppost

  • nickweavers
  • 11 days ago

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