BT announces £1.5bn fibre broadband rollout
Tuesday 15 July 2008 09:55:18 by Sebastien Lahtinen
BT has this morning surprised many by announcing a £1.5bn fibre rollout programme which is expected to give up to 10 million homes access to fibre by 2012. The plans will allow for delivery of broadband speed of up to 100 Mbps, but more importantly, the network will allow BT to stay at the forefront of fast connectivity far beyond current technology into 1Gbps, 10Gbps and further as demand for faster services rises connected directly by fibre to the premises.
The telco has stated that this plan is subject to an appropriate regulatory regime and removing current barriers to investment including ensuring that those investing in fibre are able to earn a fair rate of return for their shareholders, the previous sticking point on why BT has not started this fibre rollout earlier.
"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."
Ian Livingston (Chief Executive), BT
This move will allow BT to compete head on with Virgin Media who will now have a difficult decision to make in deciding when to upgrade their existing coax-fibre hybrid network. The BT expansion is a significant expansion in fibre and starts the ball rolling on fibre-to-the-home, but initially most premises will be connected via a local street cabinet, similar to the Virgin Media network. We therefore suspect VM will not be updating their plans for some time as they are still in a relatively good competitive position. It will also be interesting to see how BSkyB will react to the market and whether BT is likely to try and extend its BT Vision service to deliver equivalent or better services than Sky and Virgin Media in high-definition television content.
The increased bandwidth offered by fibre will not only allow 'super-fast broadband' services but the capability for the entire family to watch different HD television channels. BT also point out the improved upstream speeds would encourage a new generation of video conferencing options at home.
BT has stated its commitment to wholesaling the fibre-based services to ensure a competitive environment. This is undoubtedly designed at least in part to ensure minimal intervention from the regulator, but also it wants access to any other next generation network operators' networks. This is particularly good news for those in less populated areas as it is difficult enough to justify fibre rollout to them even for a single operator. It is however worth noting that this project is not delivering fibre to every home in the country, although it is a significant step forward.
It is important to note that this is not a full "fibre-to-the-home" (FTTH) rollout although many new-build sites including the Olympic Village will have FTTH deployments. Other areas are more likely to be served by "Fibre-to-the-cabinet" (FTTC) services which is a reasonable compromise to get going on this project. Homes connected directly to fibre (FTTH) will expect services around 100Mbps whilst those connected via a street cabinet (FTTC) are likely to receive services in the 40Mbps region initially, rising potentially to 60Mbps. The future capability of FTTH however is far greater as it is possible to upgrade the components that light the fibre at each end as technology improves.
This development should be welcomed by everyone including BT shareholders. Provided the regulatory environment is effective it is the beginning of the next wave of broadband in the UK, and BT shareholders will no doubt share in the success.
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the BBC article mentions that these are BT's intentions, but only if OFCOM allow them to make a sufficient financial gain. Next step will be to see what OFCOM says, but either way i think 2012 will be optomistic. place your bets...
I would imagine most of us will have our wooden coats on before BT put talk into action.
"This development should be welcomed by everyone including BT shareholders."
At the moment, the BT share price is down around 4%, versus the FTSE 100 which is down around 2%. Everything hinges on the return on capital that BT is allowed to make. I doubt they will be allowed to make a high return, so it's unlikely this will give a significant boost the share price.
"Everything hinges on the return on capital that BT is allowed to make."
Of course, I'm ignoring second order effects, i.e. if they invest in FTTC/FTTH, does this enable BT to sell higher margin products (e.g. HD TV)? That might boost the share price.
What will it mean to those not in the fibre areas? Will IPs be loaded with more traffic from fibre and throttle back other users? My TalkTalk already seems to be limited to 400k (+/- 10k); its not the line and too consistent a test result to be due to general traffic.
And how long will it take to to reach the AUP limit of 1GB/month at 100Mbps...
If past experience with ISPs is any guide, there will be little point in having faster networks if we're scared of breaching an unspecified and arbitary limit...
staff member)
5 months ago
If a 1GB AUP is an issue then perhaps find another provider, as BT is aiming to wholesale these products there should be a range of usage and prices available.
Not all providers have unspecified or arbitary limits
Talk talk is the pits. Sky or o2 and you will find your speeds to be as fast as your line physically permits, using any protocol.
staff member)
5 months ago
The benefit to shareholders is a long term one, not what may happen to the share price over the next few months.
the ROI will be for media related services, hence the comment from BT regarding adsl2+ handling hdtv, sky are also probing the use of FTTC on their services for TV VOD services so we may possibly have both SKY and BT doing FTTC rollouts, the situation is changing for the better now in the uk. I agree on VM they are potentially going to be falling behind badly with a lack of investment.
How many exchanges will that be for up to 10 million homes? At present there are 5592 exchanges in uk had been enabled broadband. So, 10 million homes will not going to upgrades 5592 exchanges ? Probably half of it ?
I reckon my exchange will stand no chance of getting FTTH or FTTC by 2012. I am not getting any hope up too high. Never trust BT
I reckon that BT definitely goes for FTTC rather FTTH. It is a company which just knows how to make money.
Again by 2012, other countries will go even further for boardband speed.
We might still end up with a 100Mbps boardband with 10, 20 GB FUP.
At last some good news on fibre but why does it take 4 years?
"The benefit to shareholders is a long term one, not what may happen to the share price over the next few months."
You're right not to be obsessed with short term share price movements but, if this had been perceived as wonderful news for BT shareholders, I doubt BT shares would have underperformed the FTSE 100 today (BT down nearly 5%, versus 2.5%).
"if this had been perceived as wonderful news for BT shareholders, I doubt BT shares would have underperformed the FTSE 100 today"
Indeed, from the commentary in the FT, it looks like the market would have preferred BT not to have suspended its share buyback in order to invest the £1.5bn in FTTH/FTTC.
Perhaps, as BT makes its detailed plans known, the market will come to see the value in the investment?
"The benefit to shareholders is a long term one"
Not in the hedge fund era it isn't. It's all about this quarter's results and next quarter's forecast, which isn't really a comfortable kind of timescale for any sizeable company, never mind an infrastructure-dependent company like BT. BT are still UK owned; how many other former utility monopolies are still UK owned? Why the difference (other than the other former monopolies have had regulators with half a clue)?
It will be interesting to see how this pans out in the long term. I expect that if BT do deploy something it will target areas that already have VM and not areas that are badly served. Even more bandwidth for the haves and nothing for the have-nots! Oh well I don't care I'll have 16Mbps from O2 soon enough.
I will give credit and say well done to BT for finally putting their hand into their pocket and pulling out the cash we all know they have but for so long they pretended they didnt. So a big well done. As to the 2012 date i will believe it when i see it (I reckon 2015 or 2020 is more realistic for most of us). I could comment on what are they planning to charge the punter for this as well as stuff like if they intend it for HDTV and other next gen services i hope it isnt capped to stupid levels. Im going to remain positive and hope for once BT pull through on their promises.
lets face it shareholders who are only interested in short term gains will hate this news, but BT have done right to make this decision and it will be beneficial in the long term as in years down the line not next quarter.
with the short term dips I may buy some BT shares myself at a bargian price.
quote"with the short term dips I may buy some BT shares myself at a bargian price."
Blasphemy
The BT Fibre to the Cabinet is far superior compared to the ageing Virgin Media cable network.
The thing with Virgin Media, is that although the fibre may terminate at the end of your street, due to the implementation which may have been ahead of its time 15 years ago, the available overall bandwidth is very low when compared to what BT is implementing.
Even with the new Docsis 3 that Virgin Media is implementing, the BT network still wins hands down!
I’m no BT fan boy, but lack of investment by Virgin Media is really coming back to bite them.