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Openreach Find “broad support” for Large Scale UK FTTP Broadband Rollout

Tuesday, October 31st, 2017 (9:12 am) - Score 5,604
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After conducting an industry consultation Openreach (BT) has today claimed that ISPs offered “broad support” for their proposal to conduct a “large scale” rollout of Fibre-to-the-Premises (FTTP) ultrafast broadband across the UK, which could in theory reach 10 million premises by 2025. But no deal.. yet.

At present most of Openreach’s network across the United Kingdom remains dominated by slower hybrid fibre (FTTC) technologies, such as their ‘up to’ 80Mbps VDSL2 and the newer ‘up to’ 330Mbps G.fast service (only just starting to rollout), which mix fibre optic cable with less reliable copper lines that suffer signal degradation over distance (i.e. slower speeds on longer lines). FTTC solutions are quick to deploy and comparatively cheap.

On top of that the operator is also in the process of deploying their 1Gbps capable “full fibre” network, which uses significantly more expensive Fibre-to-the-Premises (FTTP/H) technology, to reach 2 million premises by 2020 (mostly new build homes and businesses). However the Government and Ofcom have been calling for more FTTP and so in July 2017 Openreach launched an industry consultation (here).

The consultation proposed a strategy that would aspire to reach 10 million premises with FTTP by around 2025, which they estimated could cost £300-600 per premises passed (total of between £3bn to £6bn); plus £175 – £200 to connect a customer. However they warned that this could only be done with support from the industry (ISPs) and key regulatory changes.

Openreach’s List of Enablers for Larger Scale FTTP

· Greater collaboration, including new investment, risk and cost sharing models.

· Agreement on how mass migration of customers onto the new platform can be achieved (Openreach proposes that all customers should be migrated over to the new network as quickly as possible after it has been built in a given area).

· Reducing logistical barriers, like improved planning and traffic management processes.

· Agreement on the right way to spread the costs of a FTTP investment.

· A legal and regulatory environment which encourages investment.

The challenge here is with the difficulty of marrying the industry’s many competing interests and turning that into some sort of workable agreement, which is essential in order to avoid future legal and competition disputes. Ofcom has similarly said that a “key test” of their new regulatory approach (Strategic Review agreement with BT) will be whether or not Openreach can “do a co-investment deal with another operator“.

Sadly Openreach’s update doesn’t announce a specific agreement and instead sets a more general tone for their future direction, which still has many hurdles to overcome. Apparently “most” of the ISPs that responded (e.g. Sky Broadband, BT, TalkTalk, Vodafone etc.) said they “expect Britain’s existing broadband technologies to provide enough speed for the majority of consumers,” but no consensus was found on when Gigabit speeds will be needed.

Nevertheless the ISPs did agree that “ultimately a large-scale FTTP network will be a necessity” and, given the time-scales involved in building that network, there is said to be “strong support” for Openreach to start the engineering work required “sooner rather than later“. Several ISPs also expressed interest in sharing the risk of investment, albeit in return for “preferential terms on the infrastructure that’s built.

However Openreach has so far not been able to reach agreement on how the investment costs can be fairly recovered, as well as any required changes to the regulatory environment (e.g. changes to business rates and wholesale rules/charges) and the operator says that it is also working to prove that it can build FTTP “at scale for a competitive cost” (their on-going rollout should help with this).

Interestingly Openreach said that ISPs “acknowledge that charging a large premium for ultrafast services alone is unlikely to succeed, but question how much more customers will be willing to pay for the same headline speeds on a better platform.” Rival ISPs may be unwilling to accept a solution that doesn’t enable them to offer a mass market affordable package or support some degree of wholesale control to help differentiate their products

The consultation also found strong support for a “switchover” approach to FTTP that would migrate all customers onto the new platform – and retire the old one – as quickly as possible after it has been built in a given area. But they warned that the “operational complexity and cost of such a programme would be significant.”

Clive Selley, CEO of Openreach, said:

“We believe that under the right conditions, we could build FTTP connections to ten million homes and businesses by the mid-2020s. We want to do it, we think it’s the right thing to do for the UK, but it’s clear that we can’t do it alone, so I’m encouraged to hear that our wholesale customers support our vision.

Having said that, we’re under no illusions about the challenges that lie ahead because we need to build a business case that’s workable and fair for everyone. That means we need a regulatory environment that encourages investment, and we need to agree how the costs of such a huge engineering project can be recovered fairly from all those that stand to benefit.

Of course that’s going to be tough, but we need to get into the detail of that now with our customers, with Ofcom and with Government. I believe Openreach has a critical role to play in achieving such an ambitious goal, and the prize for our CP customers, their customers and the UK as a whole could be huge.”

The trouble is that Ofcom may be part of the problem. The regulator tends to focus on maintaining low pricing for consumers via strict regulation, which is something that even the Government warns may make it difficult to develop an investment model for “full fibre” services (here).

By contrast Openreach clearly wants more flexibility to recoup their investment (e.g. higher wholesale prices) and support for a plan to switch-off their old copper network as the new FTTP is rolled out, which requires that years of complex rules be examined (these have built-up around copper lines). On the upside they do at least appear to have some support from ISPs that have invested heavily in that copper, such as TalkTalk and Sky Broadband.

One report in August 2017 did suggest that Vodafone, which hasn’t been back in the country’s residential market for very long, had proposed a “serious” co-investment deal as part of the consultation (here). Vodafone allegedly demanded a degree of exclusivity over any jointly built infrastructure (e.g. initial sole use of the infrastructure and first access to the fastest speeds), which might upset rivals and Ofcom.

The problem for Vodafone is that they have no real scale in the residential fixed line market and would need to gobble a rival in order to get that. At the same time anybody hoping that this will bring FTTP to rural areas should consider that the high cost of deployment, as well as commercial interests, will ensure that for many years most of it remains staunchly focused upon urban areas (give it a decade or two).

So what of Sky Broadband and TalkTalk? At present TT doesn’t have a lot of money to spare and so they could only be a minor partner in any co-investment arrangement. Meanwhile Sky does have the money but they seem happy to buy whatever Openreach builds, not to mention that the potential purchase by FOX also highlights a degree of uncertainty about their future direction in the broadband market.

Openreach could of course choose to continue ploughing the hybrid fibre route, although over time this might come under increasing pressure from rival FTTP providers and Virgin Media’s expansion (FTTP ISPs already offer Gigabit speeds and Virgin’s DOCSIS 3.1 upgrade should eventually do the same). Not to mention that future 5G fixed wireless links might also challenge hybrid fibre, but that’s still a long way off.

Openreach now intends to develop a new network strategy based on the feedback, which they hope to publish by the end of 2017 and this will then be subject to a further consultation.

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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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34 Responses
  1. Avatar Steve Jones

    It’s difficult to imagine mass-market ISPs agreeing to preferential access to new network infrastructure by co-investors, or how that squares with the regulatory regime. Presumably co-investors would also be recovering their investments by some share of the wholesale charges.

    As for produce differentiation at the wholesale level? I’ve no idea how that can work in practice as another Ofcom regulation principle is that all products are available on equal terms to all SPs. Apart from a bit of tweaking over bandwidths (which could largely be done within the SP network anyway), it’s a bit difficult to imagine just what tailoring is possible beyond, perhaps, different service levels.

    • Avatar NGA for all

      Steve, Ofcom should honour us with an explanation of these partnerships they have in mind. PIA investment agreements with no wholesale, and no further vula investment? Is this what they have in mind? I am not sure what they have in mind is practical but much could be spent ticking a few boxes.

      Openreach could do better here. There was nothing in the consult doc showing how investment could be moved from legacy to fibre. The incremental changes, as opposed to the incentives to begin transition work are not huge in the context of a national infrastructure programme.

    • Avatar Steve Jones

      As I see it, PIA+ with the fibre network owned by the co-investor is the only model compatible with Ofcom regulation. It’s difficult to see that working with the mass market in areas where there is already hybrid broadband from either OR or VM as there will be little room to charge a premium and, in addition, if it’s an exclusive network the sales power of the other ISPs will be lost.

    • Avatar NGA for all

      Steve , so how long is needed before this is acknowledged? In many ways a transition date only needs to be declared strongly enough and with enough time to allow a sensible implementation plan. The pricing will be gamed through anyway but Virgin and customer demand is there to provide enough cover.

      The competition angle is not really an issue.

  2. Avatar Mike

    The wonders of socialized broadband…

  3. Avatar Sheepdog

    Post widespread FTTP deployment and if Openreach can move an exchange completely to it, who would get the financial reward for selling all the old copper if they share costs for building FTTp infrastructure?

    • Avatar Joe

      The copper is ORs asset so they would logically defray the cost against their share of the joint investment. (Assuming its a join investment model not a build then cost recovery model)

    • Avatar TheFacts

      Fortunately no comments so far that the cost of the copper recovered would pay for the rollout of FTTP…

  4. Avatar Joe

    @Mark:

    “The trouble is that Ofcom may be part of the problem.”

    Understatement!

    Ofcom seem to be in a fight to the death with Ofgen to see which can make the most clumsy regularity interventions that damage their industries future proofing.

  5. Personally, what may be seen as a driver for more FTTP full-fibre coverage by Openreach would be neighbourhoods that have this standard of coverage provided by competing networks like the Hyperoptic, Gigaclear or other “altnets” that are running their own infrastructure.

    But what if Hyperoptic, Gigaclear & co start opening their networks up to other retail-level ISPs and IPTV providers, allow the mobile carriers to use them for backhaul from the mobile masts or allow the broadcasters to use these networks to serve their transmitters? It could be very interesting especially for Openreach as Britain sees better Internet-service competition.

    • Avatar 125us

      I think the economics of the altnets only works because of vertical integration. If they wholesaled they’d go from making a revenue of £50 or so a month per connection down to about £10 and they’d have to reduce their £50 price because of the competition. I think the investors would object.

  6. Avatar Adam Jarvis

    Let’s hope this means no more handouts to BT for Copper-based Infrastructure, including potentially, Pointless G.fast. Enough is enough.

    Ofcom, there needs to be an announced cut-off date for ‘new’ legacy Copper carcass lines.

    Consumers are sick to death with lax regulation and being bamboozled with crappy “up to” Broadband speeds, that just don’t match the hype at peak times.

    Those with lines longer than 500m (250m as the crow flies) need to be the focus of all new infrastructure roll-out. Focus on those lines must now come first.

    A decent non-Adobe flash based BTWholesale Speedchecker that includes much better analysis of congestion problems within the backhaul/local exchange level needs to be addressed too. The absolutely useless BTWholesale Speedchecker is well f’past its sell-by date.

    • Avatar TheFacts

      Where are there handouts for Gfast?

    • Avatar 125us

      If your proposal was adopted, people would wait much longer for better broadband. How is that a good thing for anyone? Your comment about long lines would leave all the people suffering on exchange only lines stuck on ADSL for the foreseeable future. That hardly seems fair.

      Peak time slowdowns are nothing to do with copper and everything to do with how much backhaul ISPs are willing to pay their network provider for.

    • Avatar TheFacts

      @TheFacts: You are either getting paid by or work for BT/Openreach. The same rebuttals every time.

    • Avatar TheFacts

      referring to ‘including potentially, Pointless G.fast’ Are there ‘handouts’ for GFast?

  7. Avatar BillyBob

    Ha, broad support. The same way there is “broad support” for another round down the pub so long as someone else is buying.

  8. Avatar Ultraspeedy

    Nice to see others are willing to share the risk of investment. Unknown as to why BT would want the ability to raise prices to pay for FTTH if others are willing to share the investment.

    • Avatar FibreFred

      Where does it state others are willing to invest?

    • Avatar Ultraspeedy

      Article clearly says
      “Several ISPs also expressed interest in sharing the risk of investment”

    • Avatar FibreFred

      But nothing solid… let’s wait until we see some firm plans before getting excited.

    • Avatar Steve Jones

      Source of capital investment are not the problem. If OR has a viable business case, then capital can be found from banks, bondholders and shareholders. What is required in terms of “risk sharing” is the ISP customers committing to a certain level of demand. That’s pretty well what BT Retail did for FTTC. Without some reasonable view of revenue, then no supplier of capital is going to come forwards.

    • Avatar Ultraspeedy

      Who gets what out of any deal and who invests what in any deal would obviously have to be discussed, but others are clearly interested in discussing things.

      When/if discussions happen we will then find out who is willing to put up and who should shut up.

      One thing is certain when business is involved with any investing is any figures from all sides quoted will be looked at and dissected with far more scrutiny than prior broadband deals. Lets hope all involved quote what they will invest and costs realistically eh?

    • Avatar TheFacts

      What is clear, maybe, it that nobody who is happy with their speed etc. will pay more because it comes down a bit of glass and is ‘future proof’.

    • Avatar Steve Jones

      @TheFacts

      That’s true indeed. If people are happy enough with the speeds that they currently get, the few that are prepared to pay a premium might well not enough to recover the investment. The current VDSL (and, for that matter, ADSL) investments are now “sunk costs” and as such, as they could theoretically be priced down to whatever is required to cover the operational costs. I suspect that’s pretty well the position with LLU ADSL equipment already. It might mean that the majority of people will stay with a product that is “good enough” if it’s cheap.

      The OpenReach statement implies something rather different in that it proposes a hard cut-off area by area when copper services would be withdrawn (which, I assume, means all the hybrid copper ones too). This is the sort of compulsory switch model that is happening in Jersey (albeit at a slower rate than anticipated) whereby, at one point, only fibre will be available. Presumably, at that point, a GEA-FTTP product of some sort will be the only option available at a notably higher price than that for MPF. Perhaps some protection for voice users, but the hyper-cheap ADSL and (by then regulated low prices from GEA-FTTC) will disappear. That sort of approach would involve Ofcom tearing up a lot of its current regulatory rules.

      I should add that, from what I’ve read, this isn’t a 100% FTTP coverage. Even this fairly radical model might only be cost effective in more densely populated areas (and, possibly, how OR might intend to reach that tentative 10m premises target). The financial model required for less densely populated areas would require something else again as once the investment heads towards the £2-3k per property level (as some of the very latest BDUK projects indicate) then it’s difficult to see how the investments will pay back at current wholesale rates (as financing charges have to be considered).

      So I think we are some long way away from a 100% FTTP Nirvana, although, perhaps, we might see some more realistic analysis of the realities and practicalities and a bit less of the point scoring and finger pointing which characterises much of the debate.

    • Avatar PaulM

      “What is clear, maybe, it that nobody who is happy with their speed etc. will pay more because it comes down a bit of glass and is ‘future proof’.”

      If nobody is willing to pay more for faster speeds then there is no point to G.Fast either. G.Fast may indeed be cheaper to deploy but that makes no difference if as you say nobody is willing to pay more for faster speeds. If true investment in G.fast is also a waste of money.

    • Avatar FibreFred

      And this is a real issue Paul.

      Just off the top of my head with no data to back it up, I expect millions saw a really big difference in speed between Adel and vdsl, so millions bought vdsl.

      For those same people the increase to gfast may not be so big, but the increase to fttp will.

      But in either case, if they are happy with their speeds on vdsl they won’t flip.

      What we will see is a rollout of fttp with a very poor take up for many many years.

    • Avatar Steve Jones

      @PaulM

      ***************************

      “What is clear, maybe, it that nobody who is happy with their speed etc. will pay more because it comes down a bit of glass and is ‘future proof’.”

      If nobody is willing to pay more for faster speeds then there is no point to G.Fast either. G.Fast may indeed be cheaper to deploy but that makes no difference if as you say nobody is willing to pay more for faster speeds. If true investment in G.fast is also a waste of money.

      ******************************

      That’s an outrageous failure in logic. The statement “nobody who is happy with their speed” is not the same as “nobody is willing to pay more for faster speeds”. The question is how many who are dissatisfied with their existing speeds will be willing to pay more for faster speeds. Clearly the lower the investment cost, the fewer the number of customers required. Pod-based G.Fast is relatively cheap to deploy and requires relatively few customers to recover the investment. In contrast, comprehensive FTTP requires a very much higher level of investment and consequently requires a much higher level of take-up.

    • Avatar Ultraspeedy

      ^^^ The only problem with that is if people are happy with their current speeds they are less likely to take G.Fast as the performance/or speed of that product deteriorates at distance. The only people that would get a significant speed boost from G.Fast is those that already have top FTTC speeds. The cost involved is still a risk, an equal risk it could be argued as the product targets less people capable of its full ability.

      Fred is correct with his statement of…

      “For those same people the increase to gfast may not be so big, but the increase to fttp will.

      But in either case, if they are happy with their speeds on vdsl they won’t flip.”

      Nobody knows for certain and thus any investment high or low if you look at the worst possible outcome (IE nobody buys it for whatever reason) is lost investment. Spending less does not minimise the risk it only minimises the amount of possible loss. Its no different to betting on anything and how much you bet.

      Of course that goes the other way also if something is popular the investment high or low pays off. To think though that G.fast has a better chance of success though IMO is wishful at best. It seems BT and Openreach also have accepted that with now wanting to do FTTP and the consideration of doing more of it than they ever considered before.

      The only concern i have is any multi-investment deal ends up with too many stipulations from Openreach and/or other things that put investors off (such as amount of investment vs return). No ideas from Openreach AFAIK in the past few years has attracted any big investment, mainly because the amount required does not equate to any reasonable return on investment in a reasonable time DUCT sharing and FTTPOD certainly do not have organisations falling over thereself to supply it.

  9. Avatar H Dignan

    We have one cabinet servicing a whole village of 200+ homes. The cab was updated to FTTC in 2015 and we’ve been charged For Faster Unlimited with BT ever since…..now sitting at £44.99 per month for 0.1-1mb download! All because we’re over 3km from the cabinet. On Openreach’s website it says that we are “in line for FTTP as FTTC is not able to provide a solution to faster broadband”. My concern is that through no fault of my own, and infrastructure that dates back to the 1930’s, parts of my village have not had a service worthy of an invoice dating back nearly a decade. To think that we will be pushed to the back of a potential rollout puts a spine chilling fear hough me.
    If a rollout is given a green light, could we please have the decency to update those who are receiving a service sub that of the base camp at Mount Everest (2mb) as a priority. Not those in Urban areas who have, for many years, been paying less than us for speeds greater than 800% faster than us. Our location is 7km from a Cambridgeshire town and 14km from a Bedfordshire Town, so not exactly remote access.
    Let’s share the joys of being able to stream tv and gaming, using online banking without drop outs, online shopping with no fear of crashes, watching On Demand films ….instantly instead of downloading overnight in the hope of watching it the following evening. …subject to not reading a “download failed” message due to another dropout mid download and dare we even dream of the possibilities of opening the door to “working from home” (to include school children who get their homework set via email accounts and are penalised when they cannot access the portals).
    Now that the violins are well and truly belting out for me, spare a thought when grumbling about being 500m away from a cabinet or when your live stream with a family member across the world was interupted……there’s always someone worse off…for me, it’s usually comparable to a remote village in a third world country!

    • Avatar Joe

      ” My concern is that through no fault of my own, and infrastructure that dates back to the 1930’s, parts of my village have not had a service worthy of an invoice dating back nearly a decade. ”

      Hmm. Not really. You chose a rural village (as did I) Live rural and you can’t expect there not to be a down side wether it be power cuts or poorer BB.

    • Avatar Steve Jones

      It’s not really the fault of anybody. When the telephone network was put in place (at great cost and paid for by fantastically expensive phone call charges by current standards), nobody ever dreamed of broadband. Those extra kilometres of copper cable, the ducts and telephone poles to support them and any way-leaves represent a much higher investment and maintenance costs per premises serviced. Rural telephone lines were, and still are, uneconomic and are cross-subsidised from profits made in more urban areas. The same is true of water and electricity. In the case of gas and sewerage, such services might not even be supplied.

      Broadband is a new service, and there’s only so much that can be done over longer phone lines. Given the way Ofcom regulate the market, and its emphasis on competition and low prices, the mechanism doesn’t exist to cross-subsidise. Hence the existence of the BDUK project which might yet deal with your case. The alternative would appear to be a commercial model that allows the higher costs of provision to be recovered from those affected. However, Ofcom seem dead set against differential costs.

      The claim that prices in rural and urban areas should be the same does not apply to such things as the price of a loaf of bread in a village shop vs a town supermarket. The cost base is different. If the government want price equalisation and universal coverage, then they had better put in place a regulatory system that makes it achievable. As it is, they haven’t.

    • Avatar Optimist

      I agree with Steve Jones, we should just accept that prices vary over the whole country for most things so why not telecoms? Governments should not be distorting the market by setting prices and subsidising investment (though it’s small beer compared to the VAT revenue on telecoms). No point in spending a fortune on fibre for remote areas when wireless solutions would be far more cost-effective.

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