BT wins pricing control over faster broadband
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BT has convinced regulators to allow it to charge rivals whatever it wants for access to its forthcoming £1.5bn fibre network, following an intensive lobbying campaign.
Ofcom said today that BT Openreach will have to offer rivals equal access to the network, as it does to existing infrastructure, but price controls will be removed. "This will allow investors to make an appropriate return on their investment, based on the risk they are taking but pricing at a level that the market will bear," the regulator said.
It means Openreach will probably offer competitors the choice of reselling active wholesale products, or of installing their own equipment in exchanges. Ofcom said BT Retail must be treated without favour.
BT plans to spend £1.5bn on fibre by 2012. New build developments will get full fibre to the home (FTTH) access at "up to" 100Mbit/s. The rest of the cash will be spent on cheaper fibre to the cabinet (FTTC) deployments capable of speeds of "up to" 40Mbit/s.
In total, BT chief executive Ian Livingstone said today, the investment will connect "at least" 40 per cent of households to higher speed broadband by 2012.
Internet users in sparsely populated areas are most likely to miss out because broadband investments in such areas show a lower return. LLU providers apply such economic analysis to the current generation of broadband services by shunning rural exchanges.
Similarly Virgin Media's cable network, which is being upgraded to offer speeds of "up to" 50Mbit/s, passes about half of households, in densely populated areas.
The first FTTC broadband packages are planned to go on sale early next year in Muswell Hill in London and Whitchurch, a small town in South Wales.
Ofcom's decision marks a significant - although widely expected - victory for BT. Since announcing the £1.5bn investment last July, BT executives have made repeated public threats they would withdraw the cash if they did not get free rein on pricing. With the UK's internet infrastructure being outpaced by international rivals, Ofcom was under great pressure to yield.
Lord Carter's much-criticised interim report on Digital Britain last month offered scant insight into how the whole of the UK might be connected to better broadband. Its pronouncements on next generation access were limited to vague references to mobile technologies and public works cooperation.
The internet industry now awaits more specific proposals in summer. According to the Broadband Stakeholder Group, an industry lobby, ubiquitous FTTH would cost up to £29bn.
Ofcom's announcment today and the accompanying documents are here.
An Ofcom spokesman sent us the following statement: "Ofcom's decision was based on nearly two years of public consultation. We did not "yield" to pressure from anyone, as suggested in your article. During our consultation we sought a wide range of views and in our announcement we are acting entirely in the interests of UK citizens and consumers, seeking to promote both investment and competition in super-fast broadband."®
Bootnote
Ofcom chief Ed Richards is appearing on The Telegraph's website this afternoon to answer questions about any area of Ofcom's responsibilities. Should be a hoot. Go here to join in. You can post questions in the comments box or, of course, via Twitter, the communciations medium favoured by the huddled masses whose interests Ofcom allegedly protects.
COMMENTS
Help BT/Ignore real problem
Having looked at fibre business cases in several European countries, the business case for fibre can be made to work in cities (just look at Germany) so I am not sure why BT needs any help or protective treatment in cities or for that matter regulation. The business case is more marginal in suburban areas but where ducts are in place and some fibre the transition to NGA can be made commercially (just look at Virgin). Where alternatives exist, then I feel no help for BT or regulation is needed as a supplier is established and BT is well placed to provide competition if it wants to survive. Where this report falls down is addressing how high speed broadband will be rolled out to areas where the commercial business case is more challenging. Here the report seems to contain a big fat zero as there is no help for BT or any push for them to do anything.
My view is that there should be two levels of regulation/incentive.
1) Dense urban or suburban where digital cable exists - free competition between BT and newcomers with light regulation concentrating just on ensuring no anti-competitive practises as the business case for fibre is equal between parties.
2) Suburban/other - regulated service giving BT a sufficient return for the investment it makes. In these regions it could be too expensive to deploy parallel networks. Mobile broadband would provide limited competition.
However for this to work, the government will have to give money for build out in the more rural areas as the business case is nearly impossible. I would also note that providing a wholesale service is in BT's interest as 3rd party distributers have proved much more effective at selling BT's product than they have (just look at broadband pre and post wholesale).
What we need to avoid is any party get protection and support to build out in areas where the commercial business case works on its own. That commercial case does exist look to Sweden, US, Germany, France so why is this ignored in the UK!
Alex @ Neu Mobile
@High Fibre Diet
I also remember something about BT being willing to fibre up homes or provide some whizz-bang service provided the Gov would allow them to provide TV as they were currently prevented from doing so (in the 80s I think). Tories said no, BT said bollocks to innovation.
I think if one does a little looking BT have provided quite a few technical innovations - customer service just isn't one of them.
@Private Investment
Typical costs for laying duct are £130 per metre. That's just under £210k a mile. The cost could be much higher depending on the type of road you lay it alongside and whether you need to manage traffic etc.. For your two mile run I'd budget on £0.5M
You'd then need suitable electronics on each end and a cabinet to put it in - £10k. You'd need to power that also, so add in the cost of the electricity company providing a feed.
All you'd then have though is a fibre run from your village to a BT building that may or may not have a network connection. The usual model in the UK is of radial coverage from each node so it's most unlikely that your line would be 6 miles long if a building 2 miles away could serve you.
Anyway, you've got to a building we'll presume has onward connectivity. You'll then need to pay for backhaul (don't know how big your village is). If there's 100 of you and you all want uncontended 100Mbbs access then you need 10Gbps of backhaul capability to an ISP.
Looking at Openreach's price list that's going to cost £14k to install and then £12.5k rental per annum. You've still not got to the Internet yet.
Assuming you'll pay back your investment over three years, that's £1866 each per month for three years, and that excludes an actual Internet connection or getting into each of your premises or the customer kit. There's no maintenance included in that figure, budget on 10-15% of your capital outlay.
I think you're looking at roughly £2.5k per month each, all in.
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