The UK communications regulator, Ofcom, has warned that superfast broadband ISP service uptake is still too "low". The issue, which is blamed on the lack of a 'killer app' for superfast services and peoples questionable "willingness to pay" a premium for it, is apparently now causing "uncertainty within the sector".The comments emerged today as part of a speech given by Ofcom’s CEO, Ed Richards, to the Total Telecom World conference in London on competition and investment in superfast broadband. At the event Richards claimed that teenage children were the only kill app for 'superfast' uptake and questioned why, against a background of rising demand for content, that this should be the case.
Ofcom’s CEO, Ed Richards, said:
"Amid a cornucopia of entertainment and information services, and the promise of advanced telemetry, e-health and interactive education, it is interesting that the only ‘killer app’ we have so far is the presence of teenage children.
Social networking, streaming and sharing from the teenage bedroom, leading to local contention, the victim of which is the person typically paying the bill, seems to be among the strongest reasons for adopting superfast broadband.
But as an approach to promoting superfast broadband take up, ‘having more teenage children’ seems a little long term, and a little distant from reality."
"Amid a cornucopia of entertainment and information services, and the promise of advanced telemetry, e-health and interactive education, it is interesting that the only ‘killer app’ we have so far is the presence of teenage children.
Social networking, streaming and sharing from the teenage bedroom, leading to local contention, the victim of which is the person typically paying the bill, seems to be among the strongest reasons for adopting superfast broadband.
But as an approach to promoting superfast broadband take up, ‘having more teenage children’ seems a little long term, and a little distant from reality."
Richards goes on to correctly identify that Local Loop Unbundling ( LLU ), which allows ISPs like O2 , Sky Broadband and TalkTalk to gain more control over BT's telephone lines and to thus offer cheaper / more flexible services, is the "primary basis of competition in current generation ‘late copper’ [ ADSL / ADSL2+ broadband] services". Applying this principal to superfast broadband is sadly fraught with difficulty.
Richards explained:
"For superfast broadband the picture is subtly different. Our strategic principle, when applied, does not lead us to conclude that competition based on multiple providers deploying their own fibre networks in the same area will happen, or that it would be effective and sustainable. Industry players seem to share this view."
"For superfast broadband the picture is subtly different. Our strategic principle, when applied, does not lead us to conclude that competition based on multiple providers deploying their own fibre networks in the same area will happen, or that it would be effective and sustainable. Industry players seem to share this view."
Instead Ofcom continues to advocate the "bit stream type remedy", which is a reference to Virtual Unbundled Local Access (VULA). This method does not allow rival ISPs to install their own hardware at the telephone exchange or to take full control of BT's lines (copper LLU does). Separately the regulator also views Physical Infrastructure Access (PIA), where BT does allow rivals access to their fibre / cable ducts, as being more of a solution for the final third (33%) of UK rural areas.
Instead VULA is a "virtual" form of LLU (i.e. nothing like as good or as flexible as true LLU) that offers providers a greater degree of management freedom over the connection. Ofcom would ideally like to see this pushed further but, crucially, continues to let BT set the prices.
Richards continued:
"We are looking to open up as much of the network, control and ultimately value as possible to competition in order to replicate many of the LLU-driven benefits. VULA must therefore meet a number of key requirements, such as local physical interconnection, service agnostic un-contended capacity and place the maximum control possible in the hands of customer CPs.
However, we have allowed BT flexibility over the way it sets its prices for VULA. We’ve done this for two reasons. First, the investment case for NGA is uncertain and risky. Heavy-handed regulation could have serious effects in such a nascent market.
Second, while consumers might be prepared to pay a premium for superfast, we believed that the price for superfast services would be constrained by current generation services – whose prices are either subject to competitive pressures or regulated."
"We are looking to open up as much of the network, control and ultimately value as possible to competition in order to replicate many of the LLU-driven benefits. VULA must therefore meet a number of key requirements, such as local physical interconnection, service agnostic un-contended capacity and place the maximum control possible in the hands of customer CPs.
However, we have allowed BT flexibility over the way it sets its prices for VULA. We’ve done this for two reasons. First, the investment case for NGA is uncertain and risky. Heavy-handed regulation could have serious effects in such a nascent market.
Second, while consumers might be prepared to pay a premium for superfast, we believed that the price for superfast services would be constrained by current generation services – whose prices are either subject to competitive pressures or regulated."
The question is, are consumers "prepared to pay a premium for superfast"? Certainly some are, especially family units with teenagers, although Ofcom's statement would appear to be at odds with the introductions complaint about uptake still being "low".
Many, albeit perhaps not most, people can already get internet download speeds of at or above 6.8Mbps (Ofcom's July 2011 speed report). This is an adequate connection for present day needs (people will need more in the future) and can be had for prices of less than £10 per month (Sky, TalkTalk, Orange etc.) with relatively flexible usage allowances.
By contrast many superfast broadband services tend to attract a premium of at least +£10 and often come with smaller entry-level usage allowances, which presents a tough sell during times of worsening economic problems and job uncertainty. Ofcom, having just suggested that people might pay a premium, now backtracks.
Richards said:
"We recognise the challenges of providing superfast broadband. The costs of fibre deployment are substantial but, as yet, consumers appear to be unwilling to pay very much of a premium for the service it delivers. This puts pressure on the wholesale-to-retail margins.
The answer to this is unlikely to be to put retail prices up – that would simply reduce demand. At a time when disposable incomes are being squeezed generally, consumers are more demanding about value for money not less."
"We recognise the challenges of providing superfast broadband. The costs of fibre deployment are substantial but, as yet, consumers appear to be unwilling to pay very much of a premium for the service it delivers. This puts pressure on the wholesale-to-retail margins.
The answer to this is unlikely to be to put retail prices up – that would simply reduce demand. At a time when disposable incomes are being squeezed generally, consumers are more demanding about value for money not less."
The regulator instead wants to see this problem of demand and price being addressed by developing "new services or combinations of services that exploit the higher bandwidth" of superfast broadband connectivity and fibre optic lines. "Fundamentally, it’s not about regulation, it’s about innovation," said Richards.
Ofcom suggests that BT and other ISPs with their own infrastructure should also attempt to cut costs by developing new solutions, such as a WIRES-ONLY installation (i.e. no engineer visit required) method (BT already told ISPr that they had no plans for this). A simpler network configuration where voice and broadband are delivered over a single converged network is also suggested.
Generally speaking the short to medium term picture remains difficult for superfast broadband, at least short of any dramatic price drops. The longer term looks better, especially with Ofcom mooting Wavelength Unbundling (wavelength division multiplexing) via fibre optic lines.
This method could improve superfast broadband competition by allowing providers to offer "differentiated services on the same single piece of fibre", each able to offer far greater speeds than on offer at present. But that really is a longer term prospect (not before 2015).
Tweet
Comments: 30
SledgehammerPosted: 8 November, 2011 - 2:44 PM
Link to comment
I think it all boils down to "TRUST".
A lot of people still have reservations about BT and where it is going/being pushed (blocked web sites/clean feed system).
So they are reluctant to move to FTTC/FTTH/P.
I myself would go with another ISP even if it cost extra rather than BT.
MarkJPosted: 8 November, 2011 - 2:50 PM
Link to comment
I fear that VULA will not be strong or flexible enough to encourage the kind of competition and low prices that we've seen with copper ADSL / ADSL2+ based solutions. That, combined with the price premium of superfast solutions, could cause problems for awhile.
It's quite understandable that consumers are more than happy to upgrade (we've seen plenty of demand via our own surveys), but only if they don't have to pay too much more for the privilege. Some people see £10 extra as nothing (remembering, that is usually the minimum premium), while others would find it very hard to justify when their existing services already do the job.
BobPosted: 8 November, 2011 - 4:11 PM
Link to comment
VULA dds very litte to competition it just gives the ISP's slightly more control over the BT product they are reselling
It adds nothing to introducing real competition
MarkPosted: 8 November, 2011 - 4:16 PM
Link to comment
Chicken and egg...
Round here, people would like a TV service. Like cable.
If we put in FTTP, there is no off-the-shelf nicely bundled TV package (the "killer app"), as the article puts it. Yes, there's iPlayer, Sky Player, ITV player et. al but nothing "bringing it all together" (see what I did there!)
Because any attempts to develop one have been stymied by the lack of suitably fast broadband.
That would be why Virgin Media do well with bundled TV and broadband (both of which are conceptually the same service delivered in a very similar manner over the same FTTC network) because they have the technology to deliver this.
BT have never had a network capable of delivering same, so Virgin Media have had the on-demand market to themselves and the BT Vision thing could never be either a capable contender.
Virgin went TV > broadband, BT will have to be broadband > TV.
BobPosted: 8 November, 2011 - 4:33 PM
Link to comment
We are constantly one or two steps behind. As you say FTTC does not have the bandwidth to future proof it and in fact it is barely adequate for todays needs
I think PIA is the key which is why BT wants to try to keep people out of it.
If the Open network could get PIA at a sensible cost VM would start to extend its nework using the BT ducting.
New_LondonerPosted: 8 November, 2011 - 4:54 PM
Link to comment
@Bob
"As you say FTTC does not have the bandwidth to future proof it and in fact it is barely adequate for todays needs"
Based on? If you look at the pie chart here
http://www.thinkbroadband.com/news/4865-bt-claims-innovations-to-speed-up-fibre-roll-out.html
you'll note the projection that FTTC/P will give > 50Mbps to 75% of the population, and > 100Mbps to over 50%. Ofocm's own figures show > 30Mbps on FTTC now, and that's before the "band plan".
How is that barely adequate for today's needs, especially when the majority that have access to FTTC/P and cable are still choosing to use ADSL?
MarkPosted: 8 November, 2011 - 5:11 PM
Link to comment
It's pointless banding FTTC and FTTP together unless there's a detailed plan of which areas get which. If the plan was to do FTTP to all the properties which are approx > 600m from their cabinet (roughly the point at which FTTC fails the 25Mbps threshold), and replace all the aliminium and/or poor quality D-sides with new copper (might as well just run the fibre, really) then I'd believe the pie chart and this would be a good medium term solution. But I didn't believe that was or is the plan. To say the pie chart seeks to flatter would be an understatement.
Leave it outPosted: 8 November, 2011 - 5:27 PM
Link to comment
I would have thought, one basic rule of Business would be supply and demand, why supply areas that have similar established services.
BobPosted: 8 November, 2011 - 6:49 PM
Link to comment
Rember this should be a long term investment. Yet FTTC is only just adequate now particulary as many homes have mutiple users. The figures BT quote are upto figures and most will be lucky to get 25MBs
We should really be looking at FTTH for Urban areas but as outside of cabled areas BT has no real incentive to upgrade. It will not loose revenues if it does not upgrade as there is no where else to go.
Lack of competition at the infrustructure level is where the problem lies. You can bet BT would roll out a lot faster if it had competition
SomersetPosted: 8 November, 2011 - 9:09 PM
Link to comment
BT has competition at infrastructure level from VM in 50% of UK properties.
Bob - any published figures on how FTTC is inadequate? Are most <25Mb (not B)?
New_LondonerPosted: 8 November, 2011 - 10:41 PM
Link to comment
@Bob
Its worth bearing in mind that the pie chart was from a presentation to City analysts about future prospects. IIRC there are rules which apply to what can be said in that context - you can't just make things up!
Whilst 600m is relevant as an estimate of the distance Profile 17a can deliver > 25Mbps, its reasonable to assume that future developments will deliver both greater speed and reach. Andrew Ferguson @ TBB suggests 90% of us live within 1km of a cabinet, so maybe your needs can be met without the need to deliver FTTP at great expense when the money is not available.
On speed, Profile 30a supports 200Mb, and that's before you look at line bonding etc. Combine that capability with work to deliver greater reach (to 1km) and the phrase future proof does not look as hollow as some suggest.
New_LondonerPosted: 8 November, 2011 - 10:48 PM
Link to comment
Finally, when people state things like "FTTC is only just adequate now", you have to wonder why take up of higher speed services FTTC/P and 50Mb+ cable is still relatively modest at around 500,000? This is under 5% of homes passed (~ 5% for FTTC/P, ~ 2.5% for cable), so clearly most people are not yet buying any of the faster services.
So perhaps those of us on these sites over-estimate the current demand, something reinforced by the speech by the head of Ofcom today about the lack of a killer application.
By all means push for FTTP if you want but recognise if you are successful that far less people would benefit from the BDUK money, and that the market is much less likely to deliver when copper (FTTC and cable) is proving capable of exceeding the needs of the majority, with more developments still to come.
New_LondonerPosted: 8 November, 2011 - 11:01 PM
Link to comment
Last comment. Anyone interested in vectoring may find this article on the new ITU standard of interest.
http://www.ericsson.com/res/thecompany/docs/journal_conference_papers/broadband_and_transport/itu-ts_new_g_vector_standard_proliferates_100mbs_dsl.pdf
A good example of new developments already yielding greater speeds and reach, supporting my above posts.
MarkPosted: 9 November, 2011 - 12:36 AM
Link to comment
"its reasonable to assume that future developments will deliver both greater speed and reach"
Not really. It wasn't the case with ADSL2+ - reach was not extended, actually, it was shortened - it's a problem inherent to rate adaptive DSL based services which cannot currently be overcome.
If you look at the max attainable speeds of people whose FTTC profiles have been upgraded in readiness, while a small number are capable of about 50Mbps precious few are above that but more significantly, most see little change.
"Its worth bearing in mind that the pie chart was from a presentation to City analysts about future prospects."
I'd already got that, from the begging bowl comments about public funding. Which is why the pie chart doesn't have the credibility it might have done.
MarkPosted: 9 November, 2011 - 12:41 AM
Link to comment
"Andrew Ferguson @ TBB suggests 90% of us live within 1km of a cabinet"
He states the problem very nicely, although I seem to remember during my time on "that site" his complete refusal to accept that aliminimum and poor quality lines could possibly be the reason why ADSL is useless in many locations. All the customer's wiring, innit.
Is he a BT shareholder or employee too? (Sorry, I'd given you the benefit of the doubt until now)
"So perhaps those of us on these sites over-estimate the current demand"
Not interested in "current demand" - that's not what infra projects are about.
"that's before you look at line bonding"
Yes, odd, isn't it. If this was a serious push at superfast broadband, engineers would be instructed to bond/replace as many D sides as needed to get to 25Mbps+ right now. It's more about headline speeds and public money.
MarkPosted: 9 November, 2011 - 12:47 AM
Link to comment
@Bob: "Lack of competition at the infrustructure level is where the problem lies. You can bet BT would roll out a lot faster if it had competition"
Indeed it would.
It's only rolling out anything now because of the forthcoming threats from 4G/LTE.
Which rather proves your point.
Although I don't advocate this for a moment, throwing every penny of BDUK funding at 4G would see a mix of FTTC and FTTP rolled out very, very rapidly for the reason you state, and this highlights why broadband has been held back for so, so long: lack of competition.
That said, I'm interested to see how Hyperoptic get on and if their business model can really be extended beyond a few London buildings.
MarkPosted: 9 November, 2011 - 2:05 AM
Link to comment
"are consumers "prepared to pay a premium for superfast"?"
Well, if they have access to cable, they don't need to.
If you're trying to catch up upgrading an ancient phone network to a broadband capable one, having milked it as a cash cow for so long, having fallen so very far behind the capabilities of the competition and now hurriedly trying to catch up, and finding people won't pay any more than they need to in order to get said superfast broadband and lose their TV service..
Let's see the adoption and takeup figures for BT's FTTC in the areas with cable, and those without.
DeductionPosted: 9 November, 2011 - 10:30 AM
Link to comment
So i guess what this ultimately boils down to is us having to put up with more of BTs horrid current batch of TV adverts with elevator like music in each one of them to try and get us to sign up?
MarkPosted: 10 November, 2011 - 3:47 AM
Link to comment
Maybe. What makes me chuckle the most is the Ofcom statement
"Our strategic principle, when applied, does not lead us to conclude that competition based on multiple providers deploying their own fibre networks in the same area will happen..."
Well, it's happening now where BT targets an area which is already cabled. Now, I'm all for that sort of competition. It's what I've consistently argued for.
But, no wonder BT is ramping up the pressure for Someone Else's Money because (second part of that quote):
..."or that it would be effective and sustainable"
Thus directly criticising BT's choice of areas to target.
Ofcom's "strategic principle" is hilarious since they have no real power.
So: let's see the adoption and takeup figures for BT's FTTC in the areas with cable, and those without. Is the bid for public money about improving broadband, or market share?
New_LondonerPosted: 10 November, 2011 - 1:41 PM
Link to comment
Mark
You queried whether new developments will deliver greater speed and reach for FTTC. Take a look at the document via the link I posted earlier, this shows vectoring copmbined with VDSL Profile 17a can deliver > 40Mbps at 1km, around 100Mbps at 600m.
Profile 30a is already published, supports up to 200Mbps. I've not seen anything published showing the effect of vectoring on 30a, but the impact on 17a substantiates both points pretty well.
You suggested that consumers don't have to pay a premium for superfast broadband if they have access to cable. Take a look at the Virgin price list, 50Mbps is more expensive than 10Mbps, 100Mbps more so again. And you don't lose out on TV without cable, the two leading options for multichannel TV are Sky and Freeview, cable is a distant third.
MarkPosted: 11 November, 2011 - 11:42 AM
Link to comment
The growth area for TV is On-Demand TV, specifically, streamed at speeds which don't make the content look like it was upscaled from a YouTube video.
If the tender for an area is for superfast (25Mbps+) broadband, and BT win that, no problem. As long as the delivery is superfast broadband, not VDSL1 with cabinets with speeds ranging from (too far from the cabinet) to 40Mbps. "FTTC" in its present form does not necessarily = superfast broadband.
Sadly, I suspect that many tenders will be awarded without the council or other body looking at the small print.
I find it amusing that now there's a whiff of public money all of these things suddenly become possible, when they have been possible for a long time.
MarkPosted: 11 November, 2011 - 2:55 PM
Link to comment
"You suggested that consumers don't have to pay a premium for superfast broadband if they have access to cable."
Indeed I did. Quick look at VM versus BT Infinity:
Virgin Cable
- Speed 30Mbps down (UK real world average 30Mbps), 3Mbps up
- Plus free V HD box with terrestrial TV channels
- Inc. line rental if you take a phone line - you don't have to
Install: £0
Monthly: £22.40 for 3 months, £32.40 after
Term: 12 months
BT Infinity (pointless comparing other providers as they have to pay BT Wholesale costs, so can't compete)
- Speed between 15Mbps down and 40Mbps (UK real world average unknown), up to 10Mbps up
- No free TV box
- Plus line rental (mandatory)
Install: £0 to £129 depending on who you get in the sales department
Monthly: £30.00 for 3 months, £38.00 after
Term: 18 months
So: let's see the adoption and takeup figures for FTTC in the areas with cable, and those without.
New_LondonerPosted: 11 November, 2011 - 3:20 PM
Link to comment
Mark
"Speed 30Mbps down (UK real world average 30Mbps), 3Mbps up"
Suggest you take a look at the many posts on many sites highlighting the difference between the advertised speed on cable and the actual throughput. Congestion is a growing problem, even with the relatively limited take-up of the 50Mb and 100Mb services at approximately 2% of homes passed at present.
Its worth differentiating between sync speed and throughput, the latter is what makes a difference to the user experience.
MarkPosted: 11 November, 2011 - 4:10 PM
Link to comment
"Its worth differentiating between sync speed and throughput, the latter is what makes a difference to the user experience."
Indeed it is. If the cable network is properly resourced, then 445Mbps/125Mbps is possible with the current setup.
That's if it's properly resourced. While you seem to like to point to congestion issues on the cable network, which do indeed exist, they cannot be significant when independently published figures show that cable does indeed deliver close to the headline speeds. I'd rather look at figures than "postings on forums".
But we're not talking about giving money to expand the cable network. We're talking about giving money to BT to convert a phone network into a broadband capable one.
And so it's pointless to do so if the sync rates with FTTC are such that s/f bb can't be achieved because the tech is unsuitable. And that's *before* contention.
New_LondonerPosted: 12 November, 2011 - 12:29 PM
Link to comment
@Mark
"But we're not talking about giving money to expand the cable network. We're talking about giving money to BT to convert a phone network into a broadband capable one."
Not true. £2.5bn will provide FTTC/P to two thirds of the population, any public money is to provide coverage to most/all of the rest, which is not economically viable and certainly not served by cable. Important to be clear what the public money is for!
"If the cable network is properly resourced, then 445Mbps/125Mbps is possible with the current setup."
Not if a large % of the customers on any given coax segment take service at the max speed - if they do then congestion becomes a serious issue that affects them all and throughput will plummet. Its a built-in disadvantage of cable as speeds and usage increase.
DeductionPosted: 13 November, 2011 - 12:59 AM
Link to comment
Thats nonsense New_Londoner, if anything less people on FTTC will get the full "UPTO" rate than they do via virgin cable.
Especially when you start talking about speeds higher than 50Mb.
Data collected from more than one company shows Virgin average down speeds crush any average BT product.
As to congestion that applies to BT as much as Virgin, both have issues in certain areas of the country, neither firm is better in that regard, just suffer in different towns/counties etc.
Im no fan of either virgin or BT but in terms of the speed race virgin win every time on that regard... for now.
The future nobody knows, though i bet virgin deploy 200Mb and higher to more people and more get that 200Mb and higher than they do on BT based FTTC.
New_LondonerPosted: 13 November, 2011 - 9:43 AM
Link to comment
@Deduction
I agree all providers can suffer from congestion, however only cable suffers from it on the local coax before the traffic even gets passed the cabinet. The problem has got worse with the launch of the 50Mb and 100Mb services, and thats despite the very limited number of customers at 200,000. If/wehn the 200Mb service is launched the problem will not get any better!
BobPosted: 13 November, 2011 - 11:47 AM
Link to comment
With Cable you get what it says on the tin. If it is a 100MBS service that's what you get.
With FFTC UPTO Service you dont get whats on the tin. The spped you get is very dependent on line length & quality and the majority will only get about 40% of wht's on the tin and very many will get a lot less
BobPosted: 13 November, 2011 - 1:24 PM
Link to comment
If with the price compraion between BT Infinity & Virgin Cable you compare them with Typical speeds then Virgin looks even more attractive
With Virgin if you subscribe to a 50MBs service thats what you get. With BT it is line and line quality dependent. Relistically with BT Infinity an average user will see less than 50% of the UPTO speed
New_LondonerPosted: 13 November, 2011 - 3:09 PM
Link to comment
@Bob
"With Cable you get what it says on the tin. If it is a 100MBS service that's what you get."
Suggest you read the many posts from cable customers that flatly contradict your statement when you take into account throughput. Plenty of stories of the real-world customer experience being as little as 10% of the advertised speed.
So it is not correct to state "with Virgin if you subscribe to a 50MBs service thats what you get". And the position has got worse as 50Mb and 100Mb services are made available, even though less than 200,000 people have taken these services.
Generated in 0.67415 seconds.
DB queries: 8
Copyright © 1999 to Present - ISPreview.co.uk - All Rights Reserved (Terms, Privacy Policy, Links (.), Live Chat & Website Rules).