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BT - 50p Phone Line Tax NOT Enough for 100% Next Gen Broadband Cover

Posted: 03rd Jul, 2009 By: MarkJ
BT has revealed new details about its forthcoming £1.5bn rollout of next generation Fibre to the Cabinet ( FTTC ) broadband technology. The operator has also warned that the government’s 50p tax on all fixed phone lines will only be enough to help cover 80% to 85% of the country with fibre optic broadband, which differs from the 90% figure that they previously alluded to (here).

Past estimates have suggested that it could cost upwards of an additional £3bn to bring next generation broadband lines within reach of the 90% target, yet as reported before the new 50p tax would only raise approximately half what is needed. BT's own £1.5bn FTTC target aims to have 40% of the country within reach of FTTC by 2012, while Digital Britain targets 90% by 2017.

BT's Strategy Director, Liv Garfield, said:
"There's £1bn on offer here, but the devil's in the detail about which areas will get funded ... I could see a way to get 80% to 85% with [THE 50p Next Generation Fund/TAX] but we would struggle to get 100%. In fact it's impossible to get up to 100%."

Naturally BT would prefer it if the 50p tax were to work in its favour, although the operator has noted that it will have no say in how the tax revenue is used. We suspect that the government will seek to spread it around, although sadly the plan appears to have a target without any real clear design for achieving the desired outcome.

The issue of fibre taxation isn't touched on either, which effectively taxes the rateable value of the basic fibre optic infrastructure. In addition it also favours larger operations (economics of scale), which can make it very expensive for smaller providers ( e.g. i3 Group ) to deploy next generation fibre optic broadband links.

Jeff McKeown, Sales director for Fibre Technologies, recently suggested an alternative (here):
"I would suggest a minimum threshold before tax is due – perhaps 175km of fibre? One fibre pair point-to-point, or a fibre ring up to 175km with no tax; or two fibre pairs point-to-point or ring up to 87.5km with no tax; and stepped payment thresholds thereafter. An additional payment holiday of 3 years, for example, would then create the opportunity for smaller players to get started and encourage a realistic deployment of the community networks that currently feature in Lord Carter’s dreams."

Still it's not all doom and gloom today, BT did at least reveal a few more details about its FTTC rollout. We already know that the initial FTTC rollout will be capable of speeds reaching up to 40Mbps+, although BT has now confirmed that it will seek to "guarantee" a minimum download performance of 15Mbps.

Likewise BT will also offer a Service Level Agreement (SLA) to back this up, meaning that anything below 15Mbps would be considered a fault and require fixing. Likewise while upload speeds of 5Mbps to 10Mbps have already been touted for the trial, BT expects maximum upstream performance to reach 15Mbps before 2010.

Finally the operator has also confirmed that its previously announced "extended rollout" will bring FTTC within reach of 1m homes and businesses by March 2010 and extend to 1.5m by the summer of that same year. It's hard to tell whether this is really an improvement because of the limited details available beforehand.

We should also give a quick mention to FTTP technology, which often gets overlooked. While FTTC will be rolled out to existing homes, with VDSL2 tackling the "last mile" over old copper lines, FTTP is closer to FTTH in that it will run the fibre optic link directly into the building for speeds of up to 100Mbps (1Gbps in the future). Sadly this is generally for new builds and will thus account for only the smallest portion of BT's plans.
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