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BT Reveals Major £1.5bn Next-Gen Fibre Broadband Plans!
By: MarkJ - 15 July, 2008 (9:09 AM)

BT has today done something unexpected by announcing a major new £1.5 billion programme to roll out fibre-based, super-fast broadband to as many as 10 million homes by 2012! The project aims to deliver a range of services offering top downstream speeds of up to 100Mbps and the potential for 1000Mbps in the future!

The operator will use a mix of both Fibre to the Premise (FTTP) and Fibre to the Cabinet (FTTC) fibre optic (FTTx) technology to deliver the service. FTTP is expected to see speeds of up to 100Mbps and will most likely only be used at newer development / building sites.

FTTC is more likely to be used as an enhancement for existing infrastructure, with some form of DSL technology (e.g. VDSL2) being implemented to solve the last-mile copper wire run to homes. This will initially result in speeds of up to 40Mbps becoming available, potentially rising to 60Mbps with future enhancements:

BT chief executive Ian Livingston said: “Broadband has boosted the UK economy and is now an essential part of our customers’ lives. We now want to make a step-change in broadband provision which will offer faster speeds than ever before. This marks the beginning of a new chapter in Britain’s broadband story.

This is a bold step by BT and we need others to be just as bold. We are keen to partner with people who share our vision for the next phase of the broadband revolution. We want to work with local and regional bodies to decide where and when we should focus the deployment. Our aim is that urban and rural areas alike will benefit from our investment.

Readers will no doubt point out that the figure of £1.5bn is considerable less than earlier estimates of £10bn to £15bn for a full nationwide rollout of FTTC and or FTTH technology. Unsurprisingly this suggests that BT may be targeting only the most densely packed urban (city) areas first and ignoring much of the country's rural geography.

The operator is keen to stress that this will not be the case, claiming its "aim is that fibre will be widely available and not just in the major cities – unlike in some countries". BT has stated that it is currently working with the government, regional and local authorities to flesh out any plans before revealing further details.

BT states that the service will be openly offered at a wholesale level to rival UK ISP's, although it warned that such products would initially be more expensive than existing ADSL based land-line broadband services, which is hardly surprising.

The operator will work with Ofcom to ease regulation, which might include the removal of some investment barriers that would ordinarily be used to ensure a level playing field. However, the extreme costs involved in such a rollout and the lack of public funds support makes this somewhat of a necessarily evil.

BT is keen to stress that newer 'up to 24Mbps' ADSL2+ technology based broadband services would soon start to filter out and help to improve speeds to areas that may not immediately benefit from fibre. In addition, it is also seeking to resolve growing concern over national network congestion:

Are you taking action to reduce the congestion caused by services such as the BBC’s iPlayer?

Yes. BT has made it much cheaper for companies to buy extra capacity on the “backhaul” pipes that link exchanges to the core network. This move should ensure Internet congestion is minimised. BT will also invest significant funds in improving core network capacity. Both measures should ensure customers on BT’s network will enjoy a higher quality of service than those on cable networks where contention and internet congestion has been more of an issue.

Readers will note that BT takes a little indirect pop at Virgin Media in the last sentence, which has in the past suffered some criticism for its network congestion and related traffic management policies.

Overall the news is good, though the real meat and truth of BT's words will be determined by how they plan to rollout these services. Like it or not, the digital divide between those with access to faster speeds and those on the slowest connections looks set to grow. Meanwhile, those interested in the financial meat should see the following quote.

Financial details

BT plans to invest around £1.5 billion in total on the programme, of which around £1 billion is incremental to BT’s existing expenditure plans for fibre deployment.

BT expects its initial investment in the programme will result in around £100 million of incremental capital expenditure in each of the 2008/09 and 2009/10 financial years, taking the total expected capital expenditure in those years to around £3.2 billion and £3.1 billion, respectively. The remaining incremental spend of £800 million will be spread over the following three financial years.

Given the strategic priority of this planned investment, the Board has decided it would be appropriate to suspend the current share buyback programme with effect from July 31, 2008. By that date BT will have returned in excess of £1.8 billion of the planned £2.5 billion buyback programme.

The Board of BT remains committed to the dividend and expects to grow dividends per share in the 2008/09 financial year.

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