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Arthur D.Little Report Warns FTTC Broadband is Not Future Proof

Posted Tuesday, May 6th, 2014 (11:43 am) by Mark Jackson (Score 770)
fibre optic superfast broadband cable

A new report from Arthur D.Little and Exane BNP Paribas, which examines the Capital Expenditure (Capex) of European telecoms operators, has warned that incumbent providers will face a growing divide versus cable and pure fibre optic (FTTH/P) ISPs because the cheaper and slower hybrid-cheap (FTTC) approach is “not future-proof“.

The report, which somewhat states the obvious and is based off 118 company meetings across 24 countries in the telecoms and media technology sector, notes that future cable (DOCSIS3.1) networks and existing FTTH/P ISPs (described in the report as “the only competitive technology so far“) have developed a route to reach broadband speeds of 1Gbps+ (Gigabits per second), while FTTC (VDSL) services from incumbents tend to focus more on 100Mbps and below (Megabits per second).

Arthur D. Little estimates that incumbent hybrid-fibre providers will now need to “step-up” their capex by 20% in order to put more fibre optic cable into the ground (e.g. FTTdp, FTTRN, FTTS, FTTB etc.) and boost speeds. “The incumbents will need to spend an additional EUR20bn-25bn on top of what has already been committed, representing an uplift of c.20% to their fixed-line capex over the next 10 years,” said the report.

Meanwhile smaller alternative network providers (altnets) will find themselves “caught between a rock and a hard place“, which is perhaps nothing new given the current regulatory environment and pro-incumbent focus for public investment. “In Germany, the UK, Belgium and the Netherlands i.e. the FTTC/VDSL countries, altnets are likely to have to rely on a wholesale model, with lower EBITDA margins, less opportunity to compete on price and a weaker ability to differentiate compared to the current business model, which is based on the unbundling of the local loop [LLU],” said the report (some already do much of this).

The Key Conclusions

– Telco capex is rising to new peaks, both in mobile and fixed, driven by technological advancements and intense competition, notably driven by cable and mobile leaders.

– In mobile, there are genuine differences in network quality, but so far they have generally not resulted in better pricing power or market share gains. We expect operators to redouble their efforts in this respect – in particular Vodafone.

– This puts pressure on the challengers, which must act. Consolidation is an option but there are others too: network sharing is less risky and brings large savings as well.

– In any case, mobile leaders are likely to end-up facing challengers with scaled networks, in markets which may or may not be repaired, depending on antitrust decisions and whether there are fixed/cable players with strong mobile ambitions.

– In fixed-line, in most countries, cable will continue to extend its lead (route to 1Gbps broadband with DOCSIS3.1). FTTC/VDSL is not future-proof (<100Mbps), so incumbents must move to FTTH or FTTS/FTTB/FTTD with G.Fast. This means another 20% step-up in incumbents’ fixed capex.

– Fixed broadband altnets are caught between a rock and a hard place. We expect to see more consolidation, driven in particular by mobile operators, for whom the bolstering of their fixed broadband business is a matter of defending their mobile core.

– In conclusion, we see higher capex ultimately paying off in fixed-line, but it will cost incumbents more than currently expected; in mobile, we believe that higher capex will lead to a regrouping of networks but not necessarily to a decline in competition.

– We still model revenue decline for European telcos (-1.6% 2013-2016e CAGR), with a contraction in mobile and growth in fixed broadband; but after a dreadful 2013 (revenues down 5%, with -9% in mobile), we expect the decline to slow from 2014e.

It’s worth pointing out that the 20% capex figure assumes that incumbents offering FTTC (VDSL) based services, such as BT’s up to 80Mbps capable “fibre broadband” platform, will move on to more fibre rich solutions (like the examples given earlier) and combine them with G.fast (aka – FTTC2) technology to reach speeds of 0.5-1Gbps by reducing the length of remaining copper wire. “The cost is lower and the rollout is easier and quicker than FTTH,” said the report.

This 13th edition of the joint annual report by Exane BNP Paribas and Arthur D. Little can be read HERE, although it’s somewhat subjective given that the majority of operators interviewed appeared to be big providers. However the advocated longer-term approach seems to mirror planned developments in the United Kingdom, with Virgin Media expected to adopt DOCSIS3.1 and BT looking at FTTdp/RN + G.Fast.

Admittedly we’d rather there was a national strategy for FTTH/P but finding the tens of billions needed to do that has always been a huge stumbling block (scrap HS2?). In addition, we doubt many would be pleased if all of the funding for something as big as FTTH then ended up going into BT’s pocket again. Sky Broadband and TalkTalk are however already experimenting with their own alternative approach in York (here).

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19 Responses
  1. It would be a shame if subsidised VDSL appeared outside Business Parks in intervention areas, where existing duct is available for FTTP. 3 instances from customers reported this last week.

    I think VDSL will bring great benefit to many but this scenario looks poor all round. I hope it is not true generally.

    • fastman2

      FTTP (Fod) can only be deployed where the FTTc cab in enabled – FTTc cab will be cheaper to do than FTTP but likley to break county Cost cap (not good value for money) so not most business parks not in either commercal or BDUk build areas

    • Deploy FTTP now and miss out on more taxpayer cash when it comes to the next intervention?

      There’s really no incentive to do so. The only incentive that makes FTTP happen, beyond ‘trials’ is competition. Dolphinholme was good value for FTTP money when on B4RNs list, I’m sure bits of York will miraculously become commercial when TalkTalk / Sky start their FTTP.

    • DTMark

      @NGA For All – the main business park in our local down doesn’t have any broadband, unless you count circa 5Meg to 8Meg down 1 Meg up ADSL as “broadband” these days. No VDSL there. Most of the rest of the town was done. Ah well, suppose someone has to be fleeced for basic broadband services via leased lines, after all BT has pensions to pay, it’s not a charity, don’t you know.

      @Ignitionnet – got it in one, spot on.

    • FibreFred

      DTMark

      And in contrast to you, both retail/business parks near me have access to FTTC and the cabs are real close as well so I expect they’ll get great speeds.

      I wouldn’t want your picture to be the only picture ;)

    • @Fastman2 – FOD can only be deployed where there is a Cab! So FOD is now designed to be relaint on retaining a phone line? So ignore FOD and do FTTP where Voice over fibre is provisioned. That is an alternative. Is the VDSL/FOD design in a published white paper?

      You need to explain why subsidising a cab +FOD for £47k is sensible design at the edge of a business park where there is duct available throughout. It may just a BT Group portfolio decision but that does not mean it is sensible.

      It is little wonder BT needs to hide this type of thing behind confidentiality agreements.

    • @FibreFred Were these cabs privately or publicly funded? Reducing long term cost is also a factor so if the duct is available why would such a planning rule not kick in? If the D side is short with duct available then is a missed opportunity for all, customer, shareholder, but not perhaps those on a commission. If subsidised you can still claim the subsidy and claim the efficiency gain as well.

      Where does the Goverance rest for these decisions, Openreach or BT Group?

    • MikeW

      @NFA
      You’re getting more manic in your assertions, and more argumentative with others about known BT practices (such as their requirement, sensible or otherwise, to only allow FoD where an area has an FTTC cab). Yet you still fall down on the basic maths.

      If you still believe that NY is running at £47k per cabinet, and still want to assert it in every post you make (and worse, assert it as some sort of average), you can expect me to fail to believe any other assertion you make too. And to keep calling you on it.

    • @MikeW Thanks for 1. accepting the possibilty that VDSL cabinet followed by FOD as opposed to pre-planning FTTP in some instances will be sub-optinal.
      2. Referencing NY and NI is necessary as the evidence is referecable. You are free dismiss it, it may be incomplete but it exists and usable by NAO, PAC by virtue of the fact it is documented.
      You are also free to dismiss that Openreach gap funding requests for private capital are significantly less than the BT Group demands for public subsidy for areas served by the same PCP, but this will also be fully documented in the hope that the matter can be dealt with and the available funds made to go further.

      NY is recorded at £176 per premise past and at 70% rollout the average PCP is c276 premises – so the £47k holds until better data becomes available. This is a factor of 3 times higher that paid in similiar instances elewhere. I am happy to be corrected with verifiable published data.

    • FibreFred

      @NGA for all

      Private, they were well in before BDUK was even off the ground

    • MikeW

      @NFA
      Sorry this is long. It is what you asked for – I really only seek to get you to improve your figures.

      On 1.
      There is more than one way to look at the idea of “optimal”.

      I’m not sure you can read my acceptance from my statement in the last post, but I’ll make it clear that I agree, but also don’t see it as a problem: Yes, supplying VDSL first (with or without FoD, frankly) and FTTP later may be considered sub-optimal, but only in one narrow aspect: the total capex spent on deployment without considering loan interest; some (but not all) of the spending would not be required if we just rolled out FTTP in one go.

      However, a VDSL-first strategy isn’t sub-optimal in terms of the percentage coverage of the rollout that is considered commercial; it isn’t sub-optimal in terms of the speed of rollout; it may not be sub-optimal in total capex spend when you take into account the additional interest payments needed to fund FTTP; it isn’t sub-optimal in the number of properties that can be added by the size of the present government subsidy.

      If we went for an FTTP-only rollout, we’d probably find that take-up would have been slower than the current one: Monthly recovery would need to be nearer £20pm per customer, rather than the £5pm (or so) for FTTC: that additional sum would be highly likely to put off takeup… making for slower payback and higher interim interest payments. That isn’t optimal… and the worst case would be to send BT bust because the other players supply markedly cheaper broadband.

      There are a lot of factors in play here, and looking at a narrow factor to determine “optimal” is wrong.

      On 2:
      The original figures you use are clear, published and referable from NY – I found them myself long before others – but do not have the same meaning that you give them. The way in which you choose to use them – to either compare or to extrapolate – is also invalid.

      a) The figures are indeed published by NY to support your statement of £176 per home passed, but using that figure alone is a distortion of what it means. You’ve been corrected on where the distortion lies (the £5m budget for USC rollout), but you refuse to take account of it in your calculations.

      That refusal would be fine, provided you then only compared the figure to projects that also invisibly include the USC budget; for transparency, however, it is best to account for it separately – especially as the USC budget will alter (in NY and many other projects) as they add a phase 2, 3 and further (NY’s proposed phase 2 plans show an altered USC budget, making your calculations moot). Accounting for USC budget separately lets you compare it separately, and seek separate value for money there; leaving it hidden appears disingenuous.

      If you took separate account of the USC, the budget (spent on SF) per premise passed (at SF speed) would be £143.

      We can’t work out the “per premise” equivalent figure for USC, for phase 1, as the right numbers haven’t been published. However, we can see (from the phase 2 proposals) that if phase 2 went ahead and included FTTRN, it would leave 18,000 premises needing work to meet the USC commitment, and a pot of £3m – which would be £166 per line (which is a figure I’d never considered before. Wow)

      b) Taking the distorted figure to extrapolate into the cost of a cabinet continues the distortion, but thankfully would stop there if you were just using the final rollout numbers (of cabinets & homes).

      Just as I think it is wrong to include the USC budget when coming out at a cost per line, I think it is wrong to include that budget for calculating cost per cabinet – but even more so. The USC budget will get spent on zero FTTC cabinets, zero fibre distribution, zero FoD infrastructure, and won’t affect any of the cabinets that the SF budget is used to subsidise; including this budget in the “cost per SF cabinet”is also disingenuous.

      However, if you wish to compare this cost per cabinet figure to other projects, then you must only do so with projects that hide the USC budget *and* leave a similar proportion of their budget for USC work – which likely means that they would have the same proportion of premises left in the USC intervention area, and a similar land area that they are spread over. There are projects with the former (around 10% of premises), but no single county comes close to the size of NY (although Devon+Somerset combined are bigger).

      It seems unlikely that you’ll ever find another project that becomes validly comparable to your figure.

      Using the non-USC budget of £21.5m and the best-known target of 670 cabinets takes the average to £32k per cabinet.

      c) In calculating your “until better data becomes available” figure of 47k, you are using a wrongly-inflated value for now – and this value will come down in time.

      Is it right to use this temporarily-inflated figure for NY, and compare it with a final figure for NI in all your posts? Is it right to do so without acknowledging that the number will drop significantly?

      This is where things go wrong: You use the (distorted) county-wide average subsidy per line, but apply it to the first X subscribers on the first N cabinets.

      But… the first N cabinets have been considerably larger than the average; by your method of calculation, you allocate a very high level of subsidy to these cabinets simply because they are large, yet in reality they are likely to be “more commercial” and attract less gap-funding subsidy than the average. This wrongly inflates the subsidy for now.

      As more of the remaining cabinets, with fewer lines, get added to the deployed total, a re-calculation will result in a lower figure for average subsidy.

      To see why this is wrong, consider the cabinets that the project has left to convert: With 399 cabinets done, there are 271 left; with 107k premises covered, there are 43k left. If we use your (distorted) cost per line of £176, the average subsidy on each of the remaining cabinets would be just £28k (less without the USC distortion). Yet these are the smallest, most remote, least commercial cabinets in the project that you’d think would need the highest subsidy.

      Right now, you know *nothing* about the makeup of the cabinets converted so far, other than the number of cabinets and number of premises within superfast range. You don’t know how much subsidy is due on each, so can make no statement of how much cabinet subsidy is averaging at present.

      In 6 months time, a re-calculation using your method, applied to the same NY project, will end up at £40k per cabinet. Will you go back and edit all the posts you are plastering everywhere saying £47k?

      d) You continue to compare with NI (and did so again in your response), but continue to make a comparison of projects that had considerably different targets.

      The NI project had no requirement to get SF speeds as deep as NY, nor had a budget for USC speeds to the remaining population – as seen by the fact NI now has a significant BDUK project covering both aspects.

      That means the projects have different demographic/geographic targets (different places on the hockeystick**), and different financials. Both of these factors make a direct comparison near impossible.

      e) Finally, you maintain that comparison with an NI figure of “12k per cabinet” (from Fermanagh, Tyrone and Armagh) is valid, yet point out that 21k was valid for a “more remote area” (though exactly *where* is more remote, in NI, than Fermanagh, Tyrone and Armagh isn’t clear).

      As NY is pretty much the most remote area of England (barring only Northumberland), you don’t seem to have a clear picture of what should be compared. Shouldn’t it be the 21k figure, at best? (Even though, by (d), the 21k figure is probably too low to be compared).

      f) When you write a post (and I see lots more than I ever comment on) containing the comparisons, the subtext surrounding them rarely provides any qualification, or any context.

      The “£47k” figure is left for the reader to assume simply as the cost of a cabinet in England, rather than its true position: an average for a county that is likely to be around the upper bound of the phase 1 projects in England, never mind that it includes a distortion for USC, and that the value is going to drop by 20% over the next 6 months.

      Leaving context out is equally disingenuous.

      I’m all for making comparisons where they are valid – it is a perfectly sound idea.

      However, we have to be critical about what we choose to compare – and you don’t appear to have applied any critical review of that. To me, the maths & logic behind stuff I have commented on is *trivial*. I can’t help wondering to myself this: “If he can’t get this right, what else is he getting wrong? Why isn’t he seeking constructive criticism?”

      In fact, given the criticisms have been raised and ignored before, it is hard to reach any conclusion other than that you appear to be being deliberately disingenuous by trying to inflate the £££ differences as much as possible, yet trying to deflate the demographic/geographic differences.

      On a 3rd thing: “but this will also be fully documented in the hope that the matter can be dealt with”

      I can only hope that part of fully documenting the issue takes account of critical commentary. If you just ignore comments that you don’t want to hear, it’ll make that document useless too.

      I imagine that those who have the power to “deal with the matter” will only do so if persuaded by a sound logical and financial argument.

      (**) – I found an example of the hockeystick for UK deployment, for both FTTC and FTTP. Figures 1.5 and 1.6 in the 2008 “Analysys Mason” document for BSG: “The costs of deploying fibre-based next-generation broadband infrastructure”. The different geotypes are broken down in figures 1.1-1.4.

      There’s also an example of hockeysticks for fixed wireless and satellite. 2010 “Analysys Mason” document for BSG: “@NFA
      On 1.
      There is more than one way to look at the idea of “optimal”.

      I’m not sure you can read my acceptance from my statement in the last post, but I’ll make it clear that I agree, but also don’t see it as a problem: Yes, supplying VDSL first (with or without FoD, frankly) and FTTP later may be considered sub-optimal, but only in one narrow aspect: the total capex spent on deployment without considering loan interest; some (but not all) of the spending would not be required if we just rolled out FTTP in one go.

      However, a VDSL-first strategy isn’t sub-optimal in terms of the percentage coverage of the rollout that is considered commercial; it isn’t sub-optimal in terms of the speed of rollout; it may not be sub-optimal in total capex spend when you take into account the additional interest payments needed to fund FTTP; it isn’t sub-optimal in the number of properties that can be added by the size of the present government subsidy.

      If we went for an FTTP-only rollout, we’d probably find that take-up would have been slower than the current one: Monthly recovery would need to be nearer £20pm per customer, rather than the £5pm (or so) for FTTC: that additional sum would be highly likely to put off takeup… making for slower payback and higher interim interest payments. That isn’t optimal… and the worst case would be to send BT bust because the other players supply markedly cheaper broadband.

      There are a lot of factors in play here, and looking at a narrow factor to determine “optimal” is wrong.

      On 2:
      The original figures you use are clear, published and referable, but do not have the same meaning that you give them. The way in which you choose to use them – to either compare or to extrapolate – is also invalid.

      a) The figures are indeed published by NY to support your statement of £176 per home passed, but using that figure alone is a distortion of what it means. You’ve been corrected on where the distortion lies (the £5m budget for USC rollout), but you refuse to include it in your calculations.

      That refusal would be fine, provided you then only compared the figure to projects that also invisibly include the USC budget; for transparency, however, it is best to account for it separately – especially as the USC budget will alter (in NY and many other projects) as they add a phase 2, 3 and further (NY’s proposed phase 2 plans show an altered USC budget, making your calculations moot). Accounting for USC budget separately lets you compare it separately, and seek separate value for money there; leaving it hidden appears disingenuous.

      If you took separate account of the USC, the budget (spent on SF) per premise passed (at SF speed) would be £143.

      b) Taking the distorted figure to extrapolate into the cost of a cabinet continues the distortion, but thankfully would stop there if you were just using the final rollout numbers (of cabinets & homes).

      Just as I think it is wrong to include the USC budget when coming out at a cost per line, I think it is wrong to include that budget for calculating cost per cabinet – but even more so. The USC budget will get spent on zero FTTC cabinets, zero fibre distribution, zero FoD infrastructure, and won’t affect any of the cabinets that the SF budget is used to subsidise; including this budget in the “cost per SF cabinet”is also disingenuous.

      However, if you wish to compare this cost per cabinet figure to other projects, then you must only do so with projects that hide the USC budget *and* leave a similar proportion of their budget for USC work – which likely means that they would have the same proportion of premises left in the USC intervention area, and a similar land area that they are spread over. There are projects with the former (around 10% of premises), but no single county comes close to the size of NY (although Devon+Somerset combined are bigger).

      It seems unlikely that you’ll ever find another project that becomes validly comparable to your figure.

      Using the non-USC budget of £21.5m and the best-known target of 670 cabinets takes the average to £32k per cabinet.

      c) In calculating your “until better data becomes available” figure of 47k, you are using a wrongly-inflated value for now – and this value will come down in time.

      Is it right to use this temporarily-inflated figure for NY, and compare it with a final figure for NI in all your posts? Is it right to do so without acknowledging that the number will drop significantly?

      This is where things go wrong: You use the (distorted) county-wide average subsidy per line, but apply it to the first X subscribers on the first N cabinets.

      But… the first N cabinets have been considerably larger than the average; by your method of calculation, you allocate a very high level of subsidy to these cabinets simply because they are large, yet in reality they are likely to be “more commercial” and attract less gap-funding subsidy than the average. This wrongly inflates the subsidy for now.

      As more of the remaining cabinets, with fewer lines, get added to the deployed total, a re-calculation will result in a lower subsidy figure.

      To see why this is wrong, consider the cabinets that the project has left to convert: With 399 cabinets done, there are 271 left; with 107k premises covered, there are 43k left. If we use your (distorted) cost per line of £176, the average subsidy on each of the remaining cabinets would be just £28k (less without the USC distortion). Yet these are the smallest, most remote, least commercial cabinets in the project that you’d think would need the highest subsidy.

      Right now, you know *nothing* about the makeup of the cabinets converted so far, other than the number of cabinets and number of premises within superfast range. You don’t know how much subsidy is due on each, so can make no statement of how much cabinet subsidy is averaging at present.

      In 6 months time, a re-calculation using your method, applied to the same NY project, will end up at £40k per cabinet. Will you go back and edit all the posts you are plastering everywhere saying £47k?

      d) You continue to compare with NI (and did so again in your response), but continue to make a comparison of projects that had considerably different targets.

      The NI project had no requirement to get SF speeds as deep as NY, nor had a budget for USC speeds to the remaining population – as seen by the fact NI now has a significant BDUK project covering both aspects.

      That means the projects have different demographic/geographic targets (different places on the hockeystick**), and different financials. Both of these factors make a direct comparison near impossible.

      e) Finally, you maintain that comparison with an NI figure of “12k per cabinet” (from Fermanagh, Tyrone and Armagh) is valid, yet point out that 21k was valid for a “more remote area” (though exactly *where* is more remote, in NI, than Fermanagh, Tyrone and Armagh isn’t clear).

      As NY is pretty much the most remote area of England (barring only Northumberland), you don’t seem to have a clear picture of what should be compared. Shouldn’t it be the 21k figure, at best? (Even though, by (d), the 21k figure is probably too low to be compared).

      f) When you write a post (and I see lots more than I ever comment on) containing the comparisons, the subtext surrounding them rarely provides any qualification, or any context.

      The “£47k” figure is left for the reader to assume simply as the cost of a cabinet in England, rather than its true position: an average for a county that is likely to be around the upper bound of the phase 1 projects in England, never mind that it includes a distortion for USC, and that the value is going to drop by 20% over the next 6 months.

      Leaving context out is equally disingenuous.

      I’m all for making comparisons where they are valid – it is a perfectly sound idea.

      However, we have to be critical about what we choose to compare – and you don’t appear to have applied any critical review of that. To me, the maths & logic behind stuff I have commented on is *trivial*. I can’t help wondering to myself this: “If he can’t get this right, what else is he getting wrong? Why isn’t he seeking constructive criticism?”

      In fact, given the criticisms have been raised and ignored before, it is hard to reach any conclusion other than that you appear to be being deliberately disingenuous by trying to inflate the £££ differences as much as possible, yet trying to deflate the demographic/geographic differences.

      On a 3rd thing: “but this will also be fully documented in the hope that the matter can be dealt with”

      I can only hope that part of fully documenting the issue takes account of critical commentary. I imagine that those who have the power to “deal with the matter” will only do so if persuaded by a sound logical and financial argument – If you just ignore comments that aim to improve those areas, it’ll make that document useless.

      (**) – I found an example of the hockeystick for UK deployment, for both FTTC and FTTP. Figures 1.5 and 1.6 in the 2008 “Analysys Mason” document for BSG: “The costs of deploying fibre-based next-generation broadband infrastructure”. The different geotypes are broken down in figures 1.1-1.4.

      An example of the hockeystick for fixed-wireless and satellite comes from the same firm in 2010: “The costs and capabilities of wireless and satellite technologies – 2016 snapshot”

    • @mikeW – just noticed your post so let me read in full and respond. I will be very happy to adjust the cost per cab if I am wrong. In fact I will be more than happy to do so. I need to understand the dynamics of USC given the variety of ways it can be met and where the budget then goes. Thank you for this input.

    • @MikeW where do you want a reply posted. Lack of public information may lead to comments which can be construed as disengenious, which I can only apologise when that occurs, but your use of confidentiality agreements and BT’s announcement that you priced the Framework (a national framework) to win one bid does not inspire confidence in the value for money statements. The latter was not BT’s fault per se given the competition set before you, but it still needs fixing.

    • @Mike W – On 1.
      There is more than one way to look at the idea of “optimal”. –
      NGA for all …. Indeed I am thinking low long term incremental cost supporting the highest possible throughputs.
      I’m not sure you can read my acceptance from my statement in the last post, but I’ll make it clear that I agree, but also don’t see it as a problem: Yes, supplying VDSL first (with or without FoD, frankly) and FTTP later may be considered sub-optimal, but only in one narrow aspect: the total capex spent on deployment without considering loan interest; some (but not all) of the spending would not be required if we just rolled out FTTP in one go.
      NGA for all response.. I was also thinking of the operational cost of that active component and the power costs in the years to come and the inhibiting effect its presence has on additional transformation including the removal of copper from a site or engineering area.
      The absolute amount of subsidy is important as it shapes cost recovery and thus prices in the long term.
      A cabinet should not be put there as a means to tick a box on a service level agreement or coverage map. Coverage can be re-defined to include a capacity to order fibre access FTTP from a pit.
      However, a VDSL-first strategy isn’t sub-optimal in terms of the percentage coverage of the rollout that is considered commercial; it isn’t sub-optimal in terms of the speed of rollout; it may not be sub-optimal in total capex spend when you take into account the additional interest payments needed to fund FTTP; it isn’t sub-optimal in the number of properties that can be added by the size of the present government subsidy.
      NGA for all..roll out as defined narrowly then yes, you get to tick the boxes, but I disagree on the capex (subsidy).
      It is best to put this in context. If there are 25,000 cabinets to do, then we probably have no argument on 20,000 of them, where the population and the proportion of population served makes sense.
      But there will be some where the design decision is being supressed in the interests of collecting a subsidy while it is easy if not lazy to report ‘orderable’. It would be a missed opportunity if this occurred just for the sake of paying more attention.
      If we went for an FTTP-only rollout, we’d probably find that take-up would have been slower than the current one: Monthly recovery would need to be nearer £20pm per customer, rather than the £5pm (or so) for FTTC: that additional sum would be highly likely to put off take up… making for slower payback and higher interim interest payments. That isn’t optimal… and the worst case would be to send BT bust because the other players supply markedly cheaper broadband.
      There are a lot of factors in play here, and looking at a narrow factor to determine “optimal” is wrong.
      NGA for all …Yes FTTC is easier on many fronts but if you have duct in a business park itself, BT itself would pay for a cabinet to go in. Yes the take up risk is more uncertain but this is accommodated is subsidy level anyway.
      I think you will be finding in very remote Cornwall, where PCPs are serving few customers that fibre over poles to serve the small number of premises will be as cheap as paying for power for a cabinet and where the customer are more than a 1km from the intended cabinet.
      On 2:
      The original figures you use are clear, published and referable from NY – I found them myself long before others – but do not have the same meaning that you give them. The way in which you choose to use them – to either compare or to extrapolate – is also invalid.
      a) The figures are indeed published by NY to support your statement of £176 per home passed, but using that figure alone is a distortion of what it means. You’ve been corrected on where the distortion lies (the £5m budget for USC rollout), but you refuse to take account of it in your calculations.
      NGA for all.. I have not made that step because it is not clear whether the £5m is billed separately. It reads like an allowance which BT may or may have to spend.
      This point (contacting for the USC) has a little history, but it would be incredibly useful to Local authorities if this money was separate and could be spent differently and could form part of their superfast extension project. It is not clear it is and hence I do feel entitled to take that step.
      There is also £6m of possible clawback which should be accounted for. If this could also be released early as it is evidence of an inbuilt contingency.
      So there is £11m of public monies in NY alone which would make a huge difference to depth of fibre delivered, if NYCC had the flexibility to spend.
      That refusal would be fine, provided you then only compared the figure to projects that also invisibly include the USC budget; for transparency, however, it is best to account for it separately – especially as the USC budget will alter (in NY and many other projects) as they add a phase 2, 3 and further (NY’s proposed phase 2 plans show an altered USC budget, making your calculations moot). Accounting for USC budget separately lets you compare it separately, and seek separate value for money there; leaving it hidden appears disingenuous.
      NGA for all… If £5m is to be billed separately then this could be made clear. See point above. The contracting for USC is odd given given superfast extension monies, one assumes this USC allowance is merged with any new superfast extension monies.
      If you took separate account of the USC, the budget (spent on SF) per premise passed (at SF speed) would be £143.
      NGA for all…So £143 per premise is less than £176 per premise past. But what has been billed? My opinion and study on subsidies paid internationally suggests for cabinets serving 150+ premises, and where there 70% re-use of the network suggests the subsidies to reach 90% should not exceed £100 per premise if BT’s capital contribution per premise is consistent with its commercial investment on a per premise basis. For that I am assuming (capital, cash + capitalised labour of £1.3bn/19m premises as communicated to BT analysts.
      We can’t work out the “per premise” equivalent figure for USC, for phase 1, as the right numbers haven’t been published. However, we can see (from the phase 2 proposals) that if phase 2 went ahead and included FTTRN, it would leave 18,000 premises needing work to meet the USC commitment, and a pot of £3m – which would be £166 per line (which is a figure I’d never considered before. Wow)

      NGA for all …if the USC and the budgets can be separated which I wish was the case contractually then I agree. Your hypothesising a significant improvement to what I believe exists.
      The £3m or £166 per premise has no real basis. It is a way of mopping up available budget.
      b) Taking the distorted figure to extrapolate into the cost of a cabinet continues the distortion, but thankfully would stop there if you were just using the final rollout numbers (of cabinets & homes).
      NGA for all… If there is a distortion then the matter can be fixed by taking the steps you propose, or confirming your assumption. If your assumption is not the case then there is a weakness and my nuisance continues.
      I would like to be proved wrong on this point and would welcome any form of public statement saying the USC monies are clearly separated and will be re-mixed with the superfast extension monies into a revised plan.
      Just as I think it is wrong to include the USC budget when coming out at a cost per line, I think it is wrong to include that budget for calculating cost per cabinet – but even more so. The USC budget will get spent on zero FTTC cabinets, zero fibre distribution, zero FoD infrastructure, and won’t affect any of the cabinets that the SF budget is used to subsidise; including this budget in the “cost per SF cabinet”is also disingenuous.

      NGA for all… To confirm what you say, we need to know what is being billed, actuals or billed against delivering premises past. I would like to do what you say and I think local authorities would be delighted if they had control of the USC budget.
      The PAC report for February Page 9 paragraph 13 states, BDUK had yet to review actual invoices presented. This would suggest the bills are being paid using a premises past formula or some simple modelled number. It may get rectified but this is now nearly 2 years into the contract.
      However, if you wish to compare this cost per cabinet figure to other projects, then you must only do so with projects that hide the USC budget *and* leave a similar proportion of their budget for USC work – which likely means that they would have the same proportion of premises left in the USC intervention area, and a similar land area that they are spread over. There are projects with the former (around 10% of premises), but no single county comes close to the size of NY (although Devon+Somerset combined are bigger).
      It seems unlikely that you’ll ever find another project that becomes validly comparable to your figure.
      NGA for all…This is an assertion which needs a geographer to respond too. Fermanagh, Tyrone are all more lonely, beautiful and bleak than North Yorkshire. Shropshire is less so but the budget per cabinet is much higher.
      Using the non-USC budget of £21.5m and the best-known target of 670 cabinets takes the average to £32k per cabinet.
      NGA for all … So £32k average subsidy conditional on the separation of the USC budget is an improvement, it is not a £100k each. The only way you can reach £32k subsidy if there is substantial dig costs and substantial power costs in each case. And we do not have an indication as to the amount of future proofing done. £47k is outrageous, £32k is less outrageous.
      c) In calculating your “until better data becomes available” figure of 47k, you are using a wrongly-inflated value for now – and this value will come down in time.
      NGA for all.. Let’s hope so. The concern is that superfast connection projects are being announced yet there is no suggestion of efficiency gains, removal of contingencies, or as you suggest a re-contracting of the USC monies.
      Is it right to use this temporarily-inflated figure for NY, and compare it with a final figure for NI in all your posts? Is it right to do so without acknowledging that the number will drop significantly?
      NGA for all… £1.2bn/25,000 cabinets = £48,000 subsidy per engineering area, which is gross simplification but it is not £20k. If the target included 20% FTTP for instance then it starts making sense.
      Is it fair to compare a £12k subsidy in NI with a £32k or £47k subsidy in Northern Ireland. The NAO report shows cabinet costs varying between £19k and £51K with an average of £28,900 (excluding tie cables) but this accounts for only 36% of the cost as contracted.
      The NAO and PAC work suggests that BT and BDUK have modelled the £28,900 cost to reconcile cabinet/fibre path costs in NI and Cornwall and this allows BT to show NI is 12.5% cheaper that the UK. The challenge is the reconciliation looks to have only occurred on 36% of the total amounts contracted. The future proofing costs of £380m, the allowances for core costs, project management push and push the costs towards the £47k observed in NY. We do not know if all this will be billed but the opportunity to bill exists. The treatment and mechanics of billing for meeting the USC do need clarification.
      This is where things go wrong: You use the (distorted) county-wide average subsidy per line, but apply it to the first X subscribers on the first N cabinets.
      But… the first N cabinets have been considerably larger than the average; by your method of calculation, you allocate a very high level of subsidy to these cabinets simply because they are large, yet in reality they are likely to be “more commercial” and attract less gap-funding subsidy than the average. This wrongly inflates the subsidy for now.
      NGA for all…There is a problem here which I have not dealt with and I think the issue needs a full paper. Recently an LA showed me quotes for Openreach for 2 Cabinets where the gap funding for private capital was less than £20k each – PCPs numbers and quotes are in writing. The public subsidy being budgeted for the same PCPs were both in excess of £40,000 each.
      This is before we get onto how the subsidy is being paid. NY is reporting £176 (or £143)per premise past for highly variable cabinet sizes, including what look would like PCP serving more than 400 customers. The latter you would imagine would need no subsidy in the manner you describe.
      There is a great deal of distortion and disingenuousness present but I do not think I am the source.
      As more of the remaining cabinets, with fewer lines, get added to the deployed total, a re-calculation will result in a lower figure for average subsidy.
      To see why this is wrong, consider the cabinets that the project has left to convert: With 399 cabinets done, there are 271 left; with 107k premises covered, there are 43k left. If we use your (distorted) cost per line of £176, the average subsidy on each of the remaining cabinets would be just £28k (less without the USC distortion). Yet these are the smallest, most remote, least commercial cabinets in the project that you’d think would need the highest subsidy.
      Right now, you know *nothing* about the makeup of the cabinets converted so far, other than the number of cabinets and number of premises within superfast range. You don’t know how much subsidy is due on each, so can make no statement of how much cabinet subsidy is averaging at present.
      NGA for all… We can state NY is expecting to pay £176 per premise past and this at the time of writing given the information available this amounts to £47,000 a cabinet. Given the information we have available from the NAO report this is not atypical.
      In 6 months time, a re-calculation using your method, applied to the same NY project, will end up at £40k per cabinet. Will you go back and edit all the posts you are plastering everywhere saying £47k?
      NGA for all…I regret the irritation I am causing you. If I can find a way to say £47k if the USC is not separately accounted, or £32k if it is separately accounted and billed then I will very happy to do so. But I think I will becoming more irritating as the £32k to reach 90% is still very high. If the project released early the expected £6m clawback, then the £32k becomes £23k. We are then within £5k of where I think we should be for an average.
      If we add the clawback and USC allowance it is £11m more to extend superfast. The detail on the contract payments is important. All we can see is that NY is reporting £47k and the possibility of clawback which is huge and should be re-invested early. The precise treatment of USC and its payment is unknown. If it can be brought into play early then it will make a significant difference.
      d) You continue to compare with NI (and did so again in your response), but continue to make a comparison of projects that had considerably different targets.
      NGA for all .. Indeed but the components used are the same and thus the state aid rules while different, the principles on the incremental costs should result in very similar costs for similar geographies. BT is 21 months ahead of its commercial rollout which is evidence of how cheap an overlay can be, and BT MDs are active on social media saying they have economies of scale up to 90%.
      The NI project had no requirement to get SF speeds as deep as NY, nor had a budget for USC speeds to the remaining population – as seen by the fact NI now has a significant BDUK project covering both aspects.
      That means the projects have different demographic/geographic targets (different places on the hockeystick**), and different financials. Both of these factors make a direct comparison near impossible.
      NGA for all…The components used, the logistics required, and engineering required are all common.
      e) Finally, you maintain that comparison with an NI figure of “12k per cabinet” (from Fermanagh, Tyrone and Armagh) is valid, yet point out that 21k was valid for a “more remote area” (though exactly *where* is more remote, in NI, than Fermanagh, Tyrone and Armagh isn’t clear).
      As NY is pretty much the most remote area of England (barring only Northumberland), you don’t seem to have a clear picture of what should be compared. Shouldn’t it be the 21k figure, at best? (Even though, by (d), the 21k figure is probably too low to be compared).
      NGA for all…. A hockey stick would be appropriate with a c£15 subsidy to achieve a 90% and gradually upwards. You would not go above £20k as cheaper option including fibre over poles becomes available.
      e) When you write a post (and I see lots more than I ever comment on) containing the comparisons, the subtext surrounding them rarely provides any qualification, or any context.
      NGA for all… The nature of comments fields do not permit a full analysis.
      The “£47k” figure is left for the reader to assume simply as the cost of a cabinet in England, rather than its true position: an average for a county that is likely to be around the upper bound of the phase 1 projects in England, never mind that it includes a distortion for USC, and that the value is going to drop by 20% over the next 6 months.
      Leaving context out is equally disingenuous.
      NGA for all… I am trying not to be disingenuous and I hope the information shows there is a great need to get clarity on what is being billed. Unfortunately if the £28,900 identified by the NAO represents 36% of the total cost as contracted then the £47k will be more typical than we anybody would wish for.
      £47k per cabinet is not the highest by any means and it is not atypical. The evidence supports the notion that costs expanded to absorb the budget on offer. This is not BT’s fault but the matter needs to be fixed. It provides a permission to bill to that level but does not constitute what will be billed.
      I’m all for making comparisons where they are valid – it is a perfectly sound idea.
      However, we have to be critical about what we choose to compare – and you don’t appear to have applied any critical review of that. To me, the maths & logic behind stuff I have commented on is *trivial*. I can’t help wondering to myself this: “If he can’t get this right, what else is he getting wrong? Why isn’t he seeking constructive criticism?”
      NGA for all … I am very happy with constructive criticism and but I cannot change the £47k until it is confirmed that the USC payment are fully separate. You have not convinced me this is contractually the case. You highlight something really useful which if confirmed should release funding into the superfast extension projects. The NY report also shows a further £6m possible clawback. USC and Clawback take us within £5k of where I believe we should be but this is not uniform across counties.
      I can only work with data in the public domain and there is very little available so I use what is available. Precisely how the USC is contracted and whether all that money could become is not clear.

      In fact, given the criticisms have been raised and ignored before, it is hard to reach any conclusion other than that you appear to be being deliberately disingenuous by trying to inflate the £££ differences as much as possible, yet trying to deflate the demographic/geographic differences.
      On a 3rd thing: “but this will also be fully documented in the hope that the matter can be dealt with”
      I can only hope that part of fully documenting the issue takes account of critical commentary. If you just ignore comments that you don’t want to hear, it’ll make that document useless too.
      I imagine that those who have the power to “deal with the matter” will only do so if persuaded by a sound logical and financial argument.
      (**) – I found an example of the hockeystick for UK deployment, for both FTTC and FTTP. Figures 1.5 and 1.6 in the 2008 “Analysys Mason” document for BSG: “The costs of deploying fibre-based next-generation broadband infrastructure”. The different geotypes are broken down in figures 1.1-1.4.
      There’s also an example of hockeysticks for fixed wireless and satellite. 2010 “Analysys Mason” document for BSG: “@NFA
      On 1.
      There is more than one way to look at the idea of “optimal”.
      NGA for all.. The Analsys Mason report is a useful record and it has can be shown that the BT commercial rollout is £1.3bn capital not the £2.5bn in this report. The 2008 report, it can be argued the source of much of the subsequent modelling which failed to take full account of the how cheap it is to overlay an fibre network on an existing network.
      In summary, this interaction has shown I think that we need more information on how the USC is contracted, why clawback could be so large, and how these monies might be released back into the super-connected extension project.
      There are many many shortcomings in the comparisons, but we can only work with the information in the public domain. I will correct it as more emerges but there is too much ambiguity. It would be great to confirm that Local Authorities had control over how the USC funds were spent or re-contracted as part of their super connected extension project. It would be great to confirm the likely clawback in North Yorkshire would reduce the costs by nearly £9,000 a cabinet and given the performance, this can be released early. It would be great to confirm that there no need for subsidy where the cabinet serves 400 customers or more. But none of this is clear and if unanswered or unattended then the taxpayer, the customer and indeed BT shareholders are not getting the most from this once in a generation investment. Their needs converge on the need for long term efficiencies, but not on the short term gains.
      Thank you for your detailed comments. I will answer them more fully and will make the corrections and improvements your suggesting once the facts can be confirmed. It would be nice to be arguing over £18k versus £23k per cabinet and fibre path and not £32k versus £47k.
      There is a much broader context, involving access too and compensation for spectrum fees, access too unused licensed spectrum in rural areas the removal of phone boxes for instance, and access to masts to meet the USC. These possibilities could be resurrected if the 42 individual framework contracts became one but administered locally.
      NGA for all- May 2014.

  2. FibreFred

    Wow someone created a report to establish that fact!! Amazing :)

    Of course its not future proof

    • JNeuhoff

      “Of course its not future proof”

      So are finally waking up to the fact that copper VDSL is not future proof? :)

    • FibreFred

      Never once said it was so I’m not waking up from anything :)

    • No clue

      Good so you will not have anything to say when people in future mention FTTC is rubbish and in 5 years time will be antiquated. What a nice change that will make.

    • Raindrops

      ^^^ LMAO oh if only

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