British Telecom has announced a bold plan to spend just $3 billion to wire up some 40% plus of UK homes (10 million out of 22 million) with fiber to the home by 2012. It has called on the local regulator Ofcom to put in place investment protections, such as a promise that rivals will not be able to cheaply connect to the fiber, such as is the case with its copper network today, echoing the arguments that AT&T and Verizon had with the FCC in the US, before either would invest in fiber.
To help pay for the fiber investment BT will now stop buying back its own shares, even though it is £1.8 billion ($3.6 billion) of the way through buying back £2.5 billion ($5 billion) of its own shares.
The program, at a rate of just $300 per home, clearly implies that the fiber will be exceptionally cheap to lay, about half the price of large installations quoted elsewhere in the world, which implies that this is about using fiber in the cites, and to apartment buildings where the least amount of work will bring the highest benefits. It would therefore cost something closer to $8 to $9 billion more to reach the other 12 million UK homes, and there is no guarantee that BT will ever go that far. However, contradicting this, a BT statement said that fiber will be widely available and not just in the major cities. But somehow we don’t believe BT on this.
The fiber will deliver a range of services with top speeds of up to 100 Mbps, but initially 40 Mbps and 60 Mbps, with the future potential to move up to 1,000 Mbps in the future, so fast enough for High Definition video from the off.
BT chief executive Ian Livingston said: ‘Broadband has boosted the UK economy and is now an essential part of our customers’ lives. We now want to make a step-change in broadband provision which will offer faster speeds than ever before. This marks the beginning of a new chapter in Britain’s broadband story.
‘This is a bold step by BT and we need others to be just as bold. We are keen to partner with people who share our vision for the next phase of the broadband revolution. We want to work with local and regional bodies to decide where and when we should focus the deployment. Our aim is that urban and rural areas alike will benefit from our investment’.
But essentially for us this is a small investment compared to say the $20 billion for making BT’s entire operation IP based throughout, dubbed the 21st Century Network, an investment that BT is mid-way through. And in total this is just $2 billion of new spending (the rest is already in its build out plan).
BT says it will be discussing with Ofcom the conditions that would be necessary to enable this program to progress, which it says includes removing ‘barriers to investment’ a clear debate about not allowing unbundling on fiber, but allowing wholesale only, an at the right price. a move that would promulgate the BT monopoly rather than promote the competitive environment across the rest of Europe.
BT says that it already provides fiber to the premises of more than 120,000 businesses, and has deployed more than 10 million kilometers of fiber in its network.
It also says that it will deliver both fiber to the home and fiber to the cabinet, which means some spending like Verizon, direct to homes, and some like AT&T, to nearby cabinets, allowing copper VDSL2 to make the final hop. The exact split will be driven by the interest shown by government and regional and local authorities says BT but it really has to do a lot of the fiber to the home work it has to do in time for the 2012 Olympics for the Olympic Village.
The rest of the country would be given ADSL2+ at the same time, making UK broadband speeds universally up around 10 Mbps, with hot spots rising to 24Mbps.
BT is known to be happy with wholesale agreements these days, and this is likely a discussion about the exact pricing or such fiber services when provided as a wholesale service to the wider ISP community. Ofcom and BT may already have a penciled in agreement on how to make this fiber available to the rest of the community.
Ofcom immediately responded with Ed Richards, Chief Executive, promising to provide further regulatory detail on super fast broadband, emphasizing that this would protect investment.
France has already got itself to the point where multiple fiber connections are potentially being made to each home, by the three large ISPs there. Other countries such as Russia and China have better economics for the delivery of fiber in terms of the cost of manpower to dig up roads, compared to equipment costs and are already known to have fiber installation costs down to around the same as copper, but then again that’s all government coordinated.