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UK ISPs Welcome Broadband Funding Approval But Seek More Competition

Thursday, November 22nd, 2012 (8:41 am) - Score 398
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Internet service providers have today given a broad welcome to the European Commission’s (EC) recent decision to grant final approval for the release of State Aid funding to help 90% of UK people gain access to superfast broadband ISP services by spring 2015. But privately many continued to express competition concerns.

ISPreview.co.uk canvassed all of the markets major broadband ISPs for their thoughts on this week’s decision by Europe and found that publicly everybody was pleased with the news (we’re still waiting for a few responses). But privately some major operators, such as Virgin Media, felt it was a shame that the money appeared “unlikely” to be used to create “credible” and long term infrastructure competition elsewhere. The similar need for a strong regulatory framework was also expressed by others.

Virgin Media in particular, alongside TalkTalk, supported Fujitsu’s somewhat failed ambition to build an ultrafast 1Gbps capable FTTH fibre optic broadband network (using BT’s PIA cable ducts), that could have reached 5 Million UK premises in rural areas by 2016 and rivalled BT in those areas. But it needed at least 1 million homes and businesses to break even and later fell out of favour with the government because of its past IT contracts.

Nick Lansman, Secretary General of the UK ISPA, told ISPreview.co.uk:

ISPA welcomes clarity from BDUK and industry on getting more of the UK connected to superfast broadband. ISPA members are bringing faster and better quality broadband to customers. It is important that the right regulatory framework is in place to ensure continued investment.”

A BTOpenreach Spokesperson said:

We are pleased to hear the European Commission has approved the use of state funds for BDUK projects. This decision is very welcome as it will give an important boost to plans to bring fibre broadband to rural parts of the UK. We can now commence work in areas where we have contracts in place and it should also make it easier for those counties who are yet to sign deals with the private sector. It is now full speed ahead.”

A Virgin Media Spokesperson said:

We fully support the Government’s ambitions to bring superfast broadband to areas not currently served by existing fibre networks.”

A Sky Broadband Spokesperson said:

We support efforts to extend the reach and penetration of fast broadband. And where new networks are built at tax payers’ expense, we look forward to appropriate wholesale access delivering consumers choice, competition and innovation.”

Most ordinary consumers don’t pay too much attention to the wider competition concerns, which tend to stem from BT being the only major operator seemingly able to win the related Broadband Delivery UK (BDUK) supported contracts. Indeed the vast majority will probably just be happy to have access to a superfast broadband service, irrespective of whether it almost all comes over BT’s infrastructure (and Virgin Media in urban areas).

But the prices we pay and services we receive are still very much influenced by competitive, which is highlighted by the success of unbundled (LLU) broadband services. At the infrastructure level BT, outside of urban areas, is still the dominant player and the EC’s approval means that BDUK funding is unlikely to change that and could even strengthen their position.

In the future this could result in more calls for a greater separation of BTOpenreach, which manages access to BT’s national UK telecoms infrastructure, from the wider BT group. But Ofcom have shown no signs of pursuing this and are instead set to focus on the development of more competition within the current model by improving access and control over BT’s own services (FTTC, FTTP etc.).

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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9 Responses
  1. Ignitionnet

    Ofcom have badly dropped the ball on NGA.

    BT have been enable to extract numerous concessions, some of which while apparently innocuous are a massive deal, not least of which how difficult it is now to separate Openreach from the rest of the group as NGA completely blurs the lines.

    VULA is, of course, a farce. It may make Ofcom happy but it doesn’t allow operators to innovate as they did under LLU.

    Outside of Virgin areas now it’s going to be impossible, I do mean impossible, for significant competition to Openreach to arise without legislation or state aid. Openreach have been allowed to do what Wholesale did during initial ADSL deployments – actively target competition at an early stage and kill it off.

    The really appalling part is that they’ve already had taxpayer funding to do exactly that and will continue to receive it, this ignoring concessions on the ‘fibre tax’.

    BDUK is supposed to address market failure, which at a level it might, however in some cases it’s addressing market failure having caused it.

    • Bob

      In my view BDUK & OFCOM have done nothing to address the market failure in HS Broadband in fact their actions have reinforced BT’s monopoly. With ADSL we at least had LLU which gave a dgree of competion , now we have nothing all that exist are a handfull of ISP’s repackaging and reselling the BT product

      Unless OFCOM deal with the PIA issues we will not have any competition. We really need a competitor to BT in the wholesale market. Then as demand increases a cost effective deployment of FTTP is possible in the urban areas

    • New_Londoner

      @Ignitionnet
      Perhaps these apparently disadvantaged operators should have participated in the BDUK bidding process, offered their own capital to invest in infrastructure alongside the government in these areas of market failrure when they had the opportunity.

    • Ignitionnet

      New_Londoner I am quite sure you’re not so naive as to think it’s that simple.

      Other operators were either excluded by the requirements to be able to tender, couldn’t make the maths work due to a lack of scale, or could not do so for regulatory reasons.

      The derogations Openreach received on NGA have ensured that no-one can deploy fibre to their cabinets anywhere close to as cheaply as they can, the complexities and difficulties with PIA alongside the derogations on FTTP have ensured that no-one can come close the pricing Openreach can deliver for fibre all the way to homes.

      Smaller operators whose business models might’ve been viable in smaller areas were excluded from the procurements, larger ones have no certainty about how much of the country they would’ve covered.

      Virgin Media would’ve struggled on two separate fronts, both in terms of tax bills, they pay full fibre rates rather than an ‘assessed’ rate as well as paying per home passed, and too much growth in their passed areas renders them vulnerable to being assessed to have SMP.

      A far better way would have been to gather together the entire country as a whole and have a combined, competitive tender submitted however BDUK has been governed by politics, especially localism.

      Either way to simply say that other operators should have just thrown their money in is a massive over-simplification of the issue.

      When the scope and restrictions surrounding BDUK were announced a friend of mine who has worked extensively on both the regulatory side and on deploying SLU and exchange-based broadband via Openreach products said his first thought was that they could save themselves an awful lot of money by just handing the money to BT.

      The scope of BDUK, in the context of the regulatory environment, was a sure way to hand the funds to BT. They do have quite a deficit in their taxpayer guaranteed pension fund after all, so it made sense on a number of political levels to do things this way.

    • New_Londoner

      @ignitionnet
      Not sure I agree with various of your points. For example, on the so-called fibre tax, both UK and EU courts have found that the (IIRC 4) different ways of calculating the liability do not inadvertently yield an advantage, specifically that the assessed rate does not benefit BT, KCOM, Virgin or others relative to smaller operators.

  2. zemadeiran

    What exactly does “local loop unbundling” cover?

    If it covers the last mile then surely all these spanking new vdsl cabinets fall under it’s remit?

    OFCOM, bring Openreach into public ownership!!!!!!!!!!!!!!!!!!!

    Surely we can create some momentum in this direction if everyone mucks in?

    • Gadget

      With LLU the ISP had access to the physical copper pair and had to install and run whatever equipment they wanted DSLAM/MSAN and as long as they keep to the Access Network Frequency Plan (ANFP) all is cool.
      With FTTC the ISP has to take a virtual unbundled access from the back of the fibre headend. The argument being that this reduces the ability to tailor the service and effectively hands the same price of access to every ISP. The Openreach VDSL kit is also bound by the ANFP from doing anything that would unbalance or compromise other services on the cable, the most common being “shouting”.
      With Sub-loop unbundling the ISP sites the equipment next to the existing BT cabinet again, like LLU using whatever kit and backhaul they choose. They are still bound by the ANFP again to prevent their kit “shouting” or interfering with signals to and from the exchange-based services.

      Not sure where the money would come from and if the necessary legislation to re-nationalise Openreach would succeed in the current climate.

    • New_Londoner

      @Zemadeiran
      Quote “OFCOM, bring Openreach into public ownership!!!!!!!!!!!!!!!!!!!”

      Obvious question, never addressed by those that raise this point from time to time, is how will such a purchase be paid for, as the price tage would be considerable? TBH I’d rather any money on that scale went into schools, hospitals etc.

      Those of us of a certain age will remember the “excellent service” on offer the last time the state owned and operated the telephone network, not sure it would be a welcome move by many. 6 months for a telephone line anyone?

      And you are of course assuming that BT wishes to sell it.

    • Ignitionnet

      Zemadeiran – one of the derogations Openreach received in return for deploying NGA was that there would be no requirement to physically unbundle NGA.

      Given that Ofcom gave them those derogations they aren’t likely to bring them into public ownership because of them.

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