BT’s fibre expansion
BT first trialled FttH in 2004 to assess its technical and commercial viability. Given the development of its ₤10 billion Next Generation Network (its 21CN, due to be completed in 2011 and incorporating hybrid fibre / ADSL2+ technologies), the company initially concluded that it would only install fibre to new-build sites. However, in October 2007 the company indicated that it was ready to rethink its position, joining discussions with the regulator, Ofcom, on a national fibre network. In mid-2008 the company began installing a fibre network to a 10,000 home development in Ebbsfleet. The open network has been made available to other ISPs through a wholesale access product, Generic Access Ethernet (GAE).
The Ebbsfleet development was seen as a test bed for BT, which did not see the project as the first salvo in the widespread replacement of existing copper cables. Events have moved on quickly since then. BT’s recently announced £1.5 billion fibre rollout programme is expected to give up to 10 million homes access to fibre by 2012/13, representing about 40% of all homes. The remaining 60% of homes will receive ADSL2+ services. The fibre networks will deliver broadband at up to 100Mb/s to those areas connected with FttH (in greenfield areas, and in the Olympic Village being built for the 2012 Olympic Games) and allow for 1Gb/s connections as demand increases. However, most of the infrastructure will be FttC, with the last mile connection being through VDSL2 delivering up to 40Mb/s.
BT is one of the last incumbents to detail its fibre access strategy. In common with most other incumbents, it has emphasised the hybrid fibre / xDSL approach, though companies such as France Telecom and Teliasonera, which also went down this path, have since ramped up their FttH portfolios. A more extensive fibre network will also enable BT to compete with Virgin Media, which by 2009 will provide a 50Mb/s service throughout its network, currently serving about half of UK households. Virgin Media’s DOCSIS 3 technology that supports this network is capable of running at speeds in excess of 100Mb/s.
Geographical roll out will partly be determined by the cooperation which BT receives from local and regional authorities on access rights. On top of the existing ₤500 million set aside for fibre projects, capex is scheduled to include ₤100 million for each of the 2008/9 and 2009/10 financial years, with an additional ₤800 million spread over the following three financial years.
Regulating fibre access
Current telecom rules are based on BT offering wholesale services over copper infrastructure. For the Ebbsfleet development, BT was awarded special exemption by the regulator. In retrospect, BT’s fibre wholesale offer at Ebbsfleet was a sweetener for Ofcom (as ever, concerned about competition issues): BT’s new fibre ambitions are tied to an ‘appropriate’ regulatory regime aimed at securing a good return on investment - by throwing in wholesale services to other ISPs BT is likely to ensure minimal regulatory intervention. It would also give the company access to other operators’ NGNs.
Ofcom has been promoting a sympathetic fibre access regime for a number of months, mindful of the costs involved: in October 2007 it accepted the economic importance of a national fibre network, noting the need for regulatory clarity to support infrastructure investment that would require up to £15 billion. This level of investment is only practicable among Europe’s big incumbents.
Just a week before BT’s announcement, Ofcom set out a pro-investment framework for national ‘super-fast broadband’ networks, appealing or industry players to help set them up. In sum, Ofcom is fully prepared to treat participants with a kindly hand, providing regulatory and access environments which would encourage operators to make the necessary investments. Much of the ground plan has been prepared by other national regulators: the Swedes have concentrated on open access municipal fibre networks which have encouraged a large number of service providers to try their luck in a tight business, despite the country’s small population, while the French regulator has instigated access to fibre operators’ ducts, thus lowering capex, encouraging competition and driving down prices for consumers.
This investment-friendly approach is also seen on a European level: the EC has proposed a 15% ‘risk premium’ for NGN builders. Although this figure is ball-park, it does indicate that infrastructure-based competition is favoured, as long as open access and true equivalence can be guaranteed, so preventing incumbents from re-monopolising future telecoms networks.
It is early days yet, but those UK subscribers who long to get the same broadband services available across the Channel and North Sea can be comforted that BT has the money, and Ofcom the temper, to make it a reality.
Henry Lancaster - BuddeComm Senior Analyst Europe
For more information, see separate reports:
- United Kingdom - Broadband - Fixed Network Overview, Statistics & Forecasts;
- United Kingdom - Key Statistics, Telecom Market & Regulatory Overviews;
- Europe - Broadband Market - Overview & Statistics;
- Europe - Infrastructure - FttH, NGNs & IP;
- Europe - Regulatory Environment;
- Europe - Broadband - Regulating fibre access.
