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UK Digital Minister Will “strain every sinew” to Cover Britain in FTTP Broadband

Thursday, November 2nd, 2017 (12:34 pm) - Score 2,870
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The Government’s Digital Minister, Matt Hancock, has told the Broadband Stakeholder Group 2017 Conference that existing hybrid fibre FTTC services are “not fit for the future” and that they will “strain every sinew” (wrong fibre Matt) to get “full fibre” (FTTP/H) ultrafast broadband rolled out in Britain.

At present the Broadband Delivery UK programme hopes to extend the current generation of “superfast broadband” (24Mbps+) services to around 98% of homes and businesses by 2020, while the remaining 2% should be catered for by a new 10Mbps minimum speed via the Universal Service Obligation (USO).

However since last year the Government has begun directing new investment (around £600m) and policy support towards the encouragement of “full fibre” technologies, such as Fibre-to-the-Premises (FTTP/H), which is capable of delivering multi-Gigabit speeds to homes and businesses. “The purpose of this work will be to … make sure that the conditions are as good as they can be to maximise investment in full fibre,” said Matt.

Most of this was covered in the Spring 2017 Budget (here) and reflects a mix of support for alternative FTTP network providers, as well as a 5 year tax holiday from business rates for new fibre infrastructure, regulatory changes via Ofcom (e.g. legally separating Openreach from BT and making it easier for rivals to access their cables), plans for vouchers to help connect UK businesses to “full fibre” connectivity and so forth.

Matt added that “in the coming months” the Government will also be examining the market for investment in future connectivity, to ensure “we have markets and regulations that encourage investment now and in the future“. A big focus of this will be on making it even cheaper and easier to deploy new fibre.

Matt Hancock MP said:

“In May 2017 the Broadband Stakeholder Group published its report ‘Tackling Barriers to Telecoms Deployment’. This looked at the factors slowing down the rollout of UK Broadband, including local authority planning and the business rates regime for fibre.

As a direct response to this excellent report, our Barrier Busting Taskforce aims to reduce the costs of street-works, liberalising planning, to simplify wayleave agreements and tackle every and any barrier to rollout. We will systematically examine every issues flagged in the report, and then working with local bodies to identify solutions or to implement best practice.

We are working with local authorities to standardise their approach and reduce bureaucracy, and we’re prepared to change regulations if needed, on planning, transport, and wayleave rules if we need to. We want to hear from you about the practical barriers to deployment. Like you, we want to get the cost per premise passed down.

As well as government funding, and busting barriers, we are determined to ensure that we get the market structure and incentives right. I believe that the market for full fibre will look very different to the market for copper connections, and we want to see a fully competitive market for full fibre with a panoply of potential players.

We all want people to stop badgering us about their broadband. And I want to ensure they don’t have to badger us ever again, whether they are up in space or down here on earth.”

Elsewhere Matt said he found it “astonishing” that a “large proportion” of 4G base stations today are still connected via copper and radio links (fibre cables don’t reach everywhere). On top of that Matt said he was “concerned at the speed BT Group are moving in formally implementing the agreed split” and warned that “significant progress” must be made “very soon” or further action may be required (he doesn’t clarify where BT is falling behind).

As usual there are plenty of sound-bites to be had and we welcome the broad approach being taken, although there are still a few problem areas to overcome. For example, Matt welcomes Ofcom’s “efforts in these areas and hope the outcome of the Wholesale Local Access market review will further encourage fibre investment,” although the regulator’s drive to cut the wholesale price of 40Mbps FTTC services may conflict with this (here).

The work at present is also largely focused upon encouraging private investment for commercial deployments, which is a wise place to start given that early FTTP/H coverage is still only around 3% of UK premises and initial work will always focus upon the low hanging fruit of dense urban areas.

However, FTTP is painfully slow to rollout and as a result the Government really needs to develop a plan, ideally including clear targets and funding, to help support a truly national deployment, which could run for a couple of decades or more. A strategy that only works over a single parliamentary term isn’t going to be good enough and makes it hard for operator’s to plan their future strategies.

So far the Conservatives 2017 Manifesto has only put their “full fibre” target as 10 million premises by around 2022, which still leaves roughly 20 million of the more expensive premises left to serv. The costs of catering for that could easily reach well into double figures (billions). Private investment alone isn’t going to do all that. Hybrid fibre solutions (e.g. G.fast) will probably be sticking around for awhile.

Meanwhile all this talk of “full fibre” is probably very galling if you happen to live in an area where first generation copper line ADSL broadband services are still the only fixed line option. Many of those would argue that we should be trying to get universal coverage of superfast broadband figured out before we head towards an ultrafast future, although the real-world often takes a different path.

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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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47 Responses
  1. So far the only broadband roll out that has been completed in this country is to ADSL Max.

    I think consumers and businesses alike will believe this when they see it.

    Instead, even when they are promised “fibre”, then end up with an overly expensive GPON service from an altnet that never reaches the headline figure due to contention and bad network management.

    The industry needs to stop over promising, and recognise that to get the kinds of connectivity that these statements tend to promise across the entire UK will take probably hundreds of billions of pounds.

    • Avatar Steve Jones

      I think hundreds of billions is a bit much (even including mobile). The fixed line access network stuff is probably around £20-30bn (maybe with a very small tail).

      However, those who think that OR somehow have bottomless pockets need to put that in perspective. It’s a £5bn a year turnover business of which about £3.5bn is provided by line rental and the mass-market GEA products (the rest being largely leased lines). The capex figure is (on the current quarter’s figures) about £1.2bn annually. Given the call on operating costs, contributions to pension fund deficits and so on, then I doubt more than about £500m extra could be invested, even by suspending dividends, without some prospect of growth in turnover (effectively capped by Ofcom regulation).

      Hence calls for some increase in wholesale costs. Increasing capex over depreciation inevitably increases costs, and has to be paid for somehow. It’s only workable in the long term if there is an increase in turnover and/or related drop in other costs.

    • Avatar GNewton

      @Steve Jones: Isn’t it a bit misleading to only quote Openreach figure? Wouldn’t it be more appropriate to discuss how much BT as a whole should invest in fibre broadband? After all, Openreach is wholly owned by BT, even it’s budget is allocated by BT.

    • Avatar Steve Jones

      @GNewton

      Of course it isn’t relevant to talk about the turnover of the rest of BT, at least in terms of the UK land network. People have argued long and hard for the separation of the network from the rest of BT, and if that was done, then what we would end up with is a £5bn turnover company sitting on physical network assets worth perhaps £20-25bn. It’s income would come solely from the charges for using that network, and it would have to justify any investment based on that revenue.

      Any revenue from BT Consumer, BT Wholesale, Global Services and EE are nothing to do with investment in the physical network infrastructure. They are simply customers of OR and pay for the use of the infrastructure, just like TalkTalk, Sky, Vodafone or any other ISP. BT Consumer’s profits are from the retail operations and is a business that has to run on its own merits.

      What are you suggesting? That BT Consumer gives money from its profits to Openreach as some sort of grant? Of course they rest of BT could lend money to OR for investment, but then OR would have to repay it and it would add to OR’s operating costs.

      The EE part of BT has its own mobile network of course, so that is not relevant to the fixed network save it will, of course, use the OR fixed network and pay for the privilege.

      I’ve not idea why you find this difficult to understand. OR is a business in its own rights and has to sink or swim based on the revenue it can earn from running the physical network. That’s what the separation means. People cannot expect the rest of BT to subsidise OpenReach, and accounting rules wouldn’t allow it. At best, the BT Group can act as a source of investment cash (indeed it’s how the original Cellnet capital investment was financed as BT group could borrow more cheaply), but that was just a loan and was reflected as such in the books. It would be just the same with OR.

    • Avatar FibreFred

      Oh man, so GNewton wants a separate Openreach but also wants BT to just throw money at it from its other units?

      Wow…. I’m simply amazed. :O

    • Avatar Steve Jones

      @FibreFred

      Sadly, by now, I’m no longer surprised.

    • Avatar MikeW

      “The industry needs to stop over promising”

      Ironically, the industry aren’t making these promises – government is.

      The industry knows how much it is delivering, and keeps telling us the percentages based on the contracts it keeps signing. Government, on the other hand, keep making grand overarching statements of intent that never quite get pulled back to the reality being agreed to by the local councils.

      @GNewton
      The downside of separating Openreach is that it makes the ringfencing of Openreach income & capex even more stark. When 90% of that income is regulated, and 75% is under charge controls, how much more do you think can be sucked from a magic money tree?

    • Avatar GNewton

      @Steve Jones: So exactly does BT Group set the budget for Openreach? And why doesn’t Openreach own the physical network? And who benefits from Openreach’s profit?

    • Avatar GNewton

      @MikeW: A genuine independent Openreach should not be subject to today’s extreme regulatory framework imposed upon it by Ofcom, otherwise nobody would be interested in joint investment projects.

      But as we know, it is still owned by BT Group, it is subject to Ofcom’s regulations and price controls, and doesn’t even fully control its budget, nor does it own the physical network. There is a danger of the BT Group increasing its already significant market power, hence the need for the extreme regulations through Ofcom.

    • Avatar AndyH

      “A genuine independent Openreach should not be subject to today’s extreme regulatory framework imposed upon it by Ofcom, otherwise nobody would be interested in joint investment projects.”

      Well that’s never going to happen. The OFCOM SMP rules are enacted into law and won’t change if Openreach is part of BT or independent.

    • Avatar FibreFred

      GNewton, you simply don’t understand the landscape which is why your suggestions don’t make any sense either.

    • Avatar Steve Jones

      @GNewton

      The reason BT have title ownership of the network is because that was the only way Ofcom could get the Pension Fund Trustees to sign up to the separation deal. Their view (echoed in Ofcom’s consultation) was that BT needed the asset value and the cashflow stream to service the pension deficit. Without that, if Ofcom had attempted to force a legal separation and strip BT of the network assets, they would have gone to court and it was very likely that it would have stopped the whole thing dead in its tracks.

      As to the idea that Openreach would be subject to a less rigorous regulatory regime, that’s laughable. OR would still have exactly the same SMP over WLA as they do now.

    • Avatar Steve Jones

      @GNewton

      I should have also said that BT Shareholders will, of course, benefit from whatever Openreach profits are returned to the parent company as dividends. Who do you think would benefit? They do, after all, own the company.

      As BT will own title to the network, presumably OR will also have to pay the parent for the use of the network infrastructure. It also, presumably, means BT will be bearing the depreciation charges too. They will also, presumably, be making some contribution to the pension deficit, albeit it is unclear on what basis it is calculated in addition to paying in the normal employer’s contributions.

      Unfortunately nobody has spelt out clearly how the accounting is to be done as there are some unusual aspects. As it is, OR will be collecting the wholesale revenue, paying the operational costs and making the decisions on where capital investment is to be made, presumably with consideration to demands from all the customers of their wholesale products according to commercial considerations.

  2. Avatar Steve Jones

    ‘On top of that Matt said he was “concerned at the speed BT Group are moving in formally implementing the agreed split” and warned that “significant progress” must be made “very soon” or further action may be required (he doesn’t clarify where BT is falling behind).’

    The Telegraph has a story today about this “dragging the feet” and it appears to relate to issue regarding the Pension Scheme deficit. Apparently BT are slow in providing the required information (without detailing what this information might be).

    http://www.telegraph.co.uk/business/2017/11/01/bt-dragging-feet-openreach-split/

    “According to Westminster sources, the Government has been irritated by the company’s failure to provide a crucial piece of analysis of its massive pension scheme…”

    “The information is understood to be vital to officials drawing up new laws that will extend a taxpayer guarantee of the scheme’s £50bn liabilities…”

    There is also talk of some of the network assets being pledged to the Pension Fund trustees in the event of a company failure. As several of us warned some time ago (and others denied) the looming pension deficit – which is currently likely to soak up £500m a year – is highly relevant to this OR split due to the legal responsibilities and powers of the Pension Fund trustees.

    • Avatar GNewton

      @Steve Jones: Which part of BT exactly is nowadays responsible for the pensions scheme and its increasing deficit?

    • Avatar AndyH

      The pension deficit is not increasing, it’s decreasing.

      The rate rise yesterday will see the deficit decrease further now.

    • Avatar Steve Jones

      @AndyH

      There has been some talk that the drop in the value of the pound has increased the assets of the pension scheme. However, that’s not the general view. It’s currently recognised as £7bn, but a revaluation is due and everybody predicts that it will be higher. Some say to as much as £14bn. It is a major drag on the share price, and BT’s experience in this matter is paralleled by virtually every funded defined benefit pension scheme in the country due to a mix of increased life expectancy and lower rates of return.

      As to which part of the business is liable for the deficit, then it’s BT Group but the pension fund trustees have the power to stop any separation process by taking it to court should they feel that the structural move threatens the funding of the deficit. Hence BT (not OR) will retain ownership title of the network assets. OR are just the custodian.

      There is also another issue that, without a new act of Parliament, the Crown guarantee will not apply to Openreach Employees, at least insofar as it applies tp any new benefits accrued.

      http://www.telegraph.co.uk/business/2017/05/27/bt-cap-pension-pots-fill-14bn-hole/

      https://www.thetimes.co.uk/article/bt-pension-deficit-puts-credit-rating-on-the-line-rwzt38j2m

    • Avatar AndyH

      @ Steve

      BT’s pension deficit fell from £8.00bn to £7.70bn from June to September.

      The increase in the yield rates coupled with an increase in discount rates has led to the reduction across the board in the last few months. The pattern is expected to continue into next year.

  3. Avatar Robin Haywood

    What is happening with total fast broadband coverage,and all that is happening is foot dragging by the unfit for purpose BT and it’s subsidiary Openreach.
    Extending the fibre optic system amounts to little more than cable replacement,although a few extra poles may be necessary to connect people to nearer exchanges or cabinets,possibly a few booster stations,but that is all.
    The problem stems from a lack of Government guidance about ten years ago.This meant that BT just took the easy way out by providing high speed broadband to millions who do not need it.The correct policy would have been to get absolutely everybody up to 6GB,which is quite quick enough.Nobody actually needs a television streaming capability,but everybody needs a reliable 6GB.

    • Avatar Steve Jones

      6GB? Really?

    • 6 GigaBytes? Is that per second? I’ve not seen any 48Gbps FTTH broadband connections anywhere.. in the world.

    • Avatar CarlT

      The government did the wrong thing in encouraging BT to deliver high speed broadband to people who don’t need it but everyone needs 6GB/Gb?

      Troll.

    • Avatar Steve Jones

      The post is confusing and somewhat contradictory. I almost think he means a reliable 6mbps (a typo) for everybody is more important that providing superfast speeds. It is at least consistent with the statement that nobody actually needs streaming video.

      That is, of course, not so far different from a proposed 10mbps USO. Of course it would have fundamentally changed the nature of the BDUK objectives. It would also have been somewhat messy to do and would have surely still lead down the line to street cabinets and VDSL2.

      The “little more than cable replacement” is a masterpiece of wildly underestimating the logistics involved.

    • Avatar MikeW

      Let’s assume Robin meant 6Mbps.

      To get 6Mbps to every phone line means, of course, 6Mbps to the longest lines and more to shorter and intermediate lines.

      We could have solved it by putting an ADSL “booster station” at around the 2.5km distance on all the the longer lines (measuring from the exchange).

      Unfortunately, pesky technical stuff on crosstalk and interference means that those booster stations couldn’t realistically have run ADSL (or ADSL2+) in those locations unless ADSL from the exchange was barred – which would require that we got rid of all the rules about LLU. So – Sky and TalkTalk would have been banished too. Or forced to use a VULA product instead. Or forced to put Sky booster stations and TalkTalk booster stations next to the BT booster stations.

      In reality, Sky and TalkTalk would have not accepted this. The VULA option is, in effect, what BT are asking them to do with LR-VDSL for just 2% of premises, but they aren’t willing to let it happen.

      Regardless, the setup that we now have is what you asked for: a lot of booster stations. With the advantage that they aren’t just at the 2.5km distance, but they’re (on the whole) much closer to the subscriber. Even better, they aren’t restricted to mere ADSL speeds, but can give VDSL2 speeds instead. Even better, they don’t entire force LLU out of the picture – they only require VULA for the services supplied by the booster cabinets.

      Could BT have done things with fewer booster stations, and stuck with ADSL? Certainly – if they picked the distances carefully. But then they’d have not had the luxury of placing the booster stations in the locations where the existing PCP wiring cabinets were located.

      Instead, they’d have increased costs in trying to insert the booster stations into existing E-side cables. There would be no slack, and these cables are designed to NOT be tampered with. For example, there’s a lot of lead-sealed, paper-insulated cables that would not like getting wet (and are pressurised to keep it that way). And there would be no slack to insert anything. It would be expensive to do this.

      In the end, the PCP cabinets were the ideal location to roll out booster cabinets for cost reasons. And for 90% of people connected to those PCPs, it made more sense to use VDSL2 rather than ADSL2+.

  4. Avatar Optimist

    These dollops of taxpayers’ money sound generous until you work out the amount the government collects on the VAT it levies on telecoms services. I’d rather reduce the VAT and let telcos invest in infrastructure at their own risk.

    • Avatar MikeW

      The Ofcom CMR reckons that average household expenditure on telecoms is just over £1,000pa, but it looks like half of the retail revenue goes to mobile companies.

      If we figure on £500pa on fixed-line, then the VAT component is £83pa.

      Summing that over all households means the government would lose a tax income of about £2.3bn per annum. Which the telco industry would gain.

      That sum is about the same as BT were expecting to spend over the original 5-6 years of the NGA deployment. It is getting close to VM’s total planned expenditure for Lightning. It is more than the government has been putting into BDUK over a 7-8 year timescale.

      It is a huge sum.

      So, we would probably be able to get FTTP done in about 10 years.

    • Avatar Tim

      Reducing VAT doesn’t help companies – they don’t pay VAT, they just collect it and pass it on to HMRC. It may allow companies to increase their prices to keep the price a consumer pays the same (but that would increase costs to business users), but I would expect that to be seen as extra profits rather than extra investment. It also couldn’t happen until after Brexit.

    • Avatar MikeW

      @Tim
      That’s how I saw it working: Retail price kept the same, so it becomes excess profit. That profit can then be used as additional capex for a rollout.

      But ignoring the mechanics, that was the best outcome I could see.

    • Avatar Steve Jones

      @MikeW

      Abolishing VAT on telecoms would make virtually no difference to the amount of money available for capex. The way market economics works, the retail price would drop so there would be no profit boost. Not just that, it would make no difference to wholesale prices, and that is where the capex is required.

      If the national government wanted to encourage fibre investment it would require a much more direct method of directing VAT from telecoms revenue into fibre investment. That could be through direct subsidy or some form of directed tax breaks. However, I think it all misses the point – the problem is a market structure one. If the government really wanted a strategic telecoms infrastructure uplift to provide comprehensive fibre (including all the rural areas), it would require a change to the regulatory environment. Expecting a market-only solution to do it won’t work. After all, we do not expect water and electric supply services to be delivered by multiple competing networks.

    • Avatar GNewton

      @Steve Jones: “After all, we do not expect water and electric supply services to be delivered by multiple competing networks”

      I fully agree with that, it doesn’t make sense to have multiple access networks, but it’s too late now to change this. And with BT not being able to build widespread full fibre networks anytime soon you’d need some market competitions so other companies like Gigaclear can build their own fibre networks.

  5. Avatar Asrab

    Who wants to guess the 10m of the first FTTP/H isn’t going to be where the G.FAST footprint is going to be ?

    Its obvious the first 10m is going to be where the current FTTC is already deployed and simply extend from there, to achieve the cheapest and fastest footprint

    • Avatar FibreFred

      Yes, that is what any business does, invest wisely, invest where most of your customers are.

    • Avatar Asrab

      Feel like the digital divide is going to get worse over the next couple of decade, people already on fast speed will only get faster while the slow will be stuck where they are,

      Hopefully when fiber networks reach mass market and openreach realize the full cost benefits running fiber network vs copper, the decommission of the copper network will accelerate,

      it wont make sense to run two parallel network, when the cost and maintenance of fiber will be cheaper and more robust,

    • Avatar TheFacts

      Any numbers on the ‘digital divide’ over the last 10 years?

    • Avatar FibreFred

      Asrab the maintenance costs for copper would have to be crazy high for remote areas before considering replacing with fibre.

      If that wasn’t a driver for urban why would it be for the more expensive rural?

    • Avatar Tim

      @Asrab, you are right that the digital divide is going to get worse. When we had dial-up there wasn’t much difference between areas (maybe a factor of 2), but as we’ve moved through ADSL, to ADSL2/2+, to FTTC and FTTP, some areas are still stuck with ADSL at 100. Commercial pressures will never change this, which is why we need government interference to ensure everyone benefits. Unfortunately most the BDUK bodies are actually making the situation worse by only funding the most “cost effective” projects.

    • Avatar Tim

      Hmm, my previous post got a chunk cut out when I submitted it, possibly because I used less-than signs? – it should have said “… stuck with ADSL at mo more than 8Mbps while others have 1Gbps which is a factor of over 100.”

    • Avatar CarlT

      Wow where to start?

      So it’s not up to Openreach to decide when to decommission copper, it’s down to Ofcom.

      Openreach aren’t going to spend on G.fast then overbuild it immediately with FTTP.

      I agree on the digital divide – the few hundred thousand premises in largely rural areas with FTTP subsidised by the taxpayer are certainly in a way better place than the vast majority everywhere else. This is something that will only get worse as the gainshare BDUK money is spent delivering four-figures per premises passed in subsidies to supply FTTP to ever-more remote areas while most urban areas remain on enhanced copper.

  6. Avatar Mike

    The reduction in FTTPoD p/m cost is already a great help, just got to find a few £££ and I can get 330Mbps.

    • Avatar Tim

      Prices don’t change until 01/02/2018!

      Arn’t you still going to be quoted a cost for connection, just not based on the distance? Finding it hard to understand what is actually being offered with FTTPoD.

      There’s a cancellation charge which when you get the quote for £1,000’s you’ll have to pay if you cancel?!

    • Avatar Mike

      Pressumably the hefty cost is only the install now, contract is 3 years iirc so if you cancel within that period obviously its going to be a big exit fee.

  7. Avatar Cecil Ward

    “is probably very galling” – absolutely right. You are one of the few people who ‘gets it’.

    I would just like to confront this guy on camera, 2 mins, and ask him what he’s going to do for the 2.5Mbps people, such as me, and the 0.6 Mbps people nearby. Light a fire under him, in order to get the unsexy, greatest need jobs done first, jobs that involve dull real work that doesn’t come with sexy-sounding techno buzzwords attached that make it suitable for sound bites or headlines.

  8. Avatar Cecil Ward

    btw, Is this guy the minister for England? Or for the UK? I’m in Scotland – don’t know who to hassle

  9. Avatar Andrew

    There is a nice easy solution to this.
    Cancel Hinkley C and divert the cash to FTTP because let’s face it, with Offshore wind currently at £60/MwH and falling and Hinkley at about £90 and rising, it’s never going to be completed anyway. It is in fact, barking mad!
    Start with the hardest to reach and work backwards. That way you get everyone on some kind of high speed more quickly. You wouldn’t need 30 billion initially anyway since the vast majority already have some kind of high speed connection.

  10. Avatar jeep

    Better still ? get rid of the hs rail project for the “few” spend it on the existing crumbling network for all & on fttp.

    • Avatar Asrab

      I find it difficult to comprehend from the lasts estimates for HS2 (40 – 100) billion pounds for the project, of what overall benefit it will bring to the economy,

      And here is the government offering a measly 600 million in comparison to spur deployment, surely diverting 10 billion from HS2 to accelerate FTTP/H will bring (more/faster/efficient) benefits to the UK economy as whole,

  11. Avatar jeep

    Yes its staggering the rubbish that came out of ministers mouths crowing about video conferencing, the new age etc then spend a measly amount on fiber etc in comparison,
    to a railway link for the few & wealthy.

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