Industry News

Extract from an article published on ZDnet.co.uk, 15th July 2008

The move ends the long-running debate over who would be first to make a major investment in ‘next-generation access’ (NGA) in the UK. BT, which has already been trialling fibre to the home (FTTH) at a new development in Ebbsfleet, Kent, has said the new programme will cost £1.5bn. It has also warned that the new services are likely to be more expensive at the wholesale level than its existing copper-based connectivity.

On-Communications CEO, Ian Roberts comments:

Please see my CEO Blog, where I comment on BT’s announcement.  The views of key industry analysts quoted in this article are very insightful and well worth reading.

According to BT, the programme will see “as many as 10 million homes” hooked up to fibre-based broadband by 2012. However, the company has said the scheme depends on Ofcom establishing a new regulatory framework.

BT’s fibre rollout will be a mix of FTTH and fibre to the cabinet (FTTC), with the former taking place at new-build developments such as Ebbsfleet and the Olympic Village, and the latter being used primarily for existing residential developments. Homes benefiting from FTTH will get top speeds of up to 100Mbps, while those using a copper connection to their fibre-equipped street cabinet will get speeds of up to 40Mbps. BT said this will make it possible for households to run multiple high-bandwidth applications, such as high-definition TV, simultaneously.

Analysts were quick to respond to Tuesday’s announcement.

Dean Bubley, of Disruptive Analysis, noted that the £1.5bn figure was around a tenth of the amount many were claiming would need to be invested in a nationwide fibre deployment. “To me, this compromise looks like a fairly prudent risk-management approach on BT’s part, given the current economic situation,” he wrote on his blog. “[It is] sufficiently aggressive to catalyse some regulatory change — and maintain clear water between fixed and mobile broadband — but not large enough to act as a boat anchor on the company as the UK [economy] falters.”

Bubley also said BT’s move would give it the backhaul infrastructure to roll out mobile WiMax in the UK, should it gain spectrum in the upcoming 2.6GHz auction.

JupiterResearch’s Ian Fogg also noted the “suspiciously small sum” of £1.5bn. “I suspect the higher wholesale prices that BT plans for fibre, compared with DSL, will slow the uptake of fibre and so help BT save [capital expenditure],” he wrote on his blog.

“This is a game changer for the UK broadband market,” wrote Fogg. “The larger ISPs that have unbundled local loop networks (O2, Sky, Carphone Warehouse, Be, Tiscali) suddenly face the prospect of their copper DSL services becoming obsolete in just a few years. The small, niche ISPs that have struggled to remain in business in the face of higher speeds and thin margins offered by the [unbundled local loop] players, now have a lifeline with BT’s proposal to wholesale fibre.”