BT Preps FTTC Trial

BT Group plc (NYSE: BT; London: BTA) is planning to deploy fiber-to-the-curb (FTTC) and VDSL technology platforms in a pilot program involving about 15,000 customers to see if there's any interest in the types of services that technology combination can offer That's according to Steve Robertson, the CEO of Openreach , BT's access network business.

And if the trial is a flop, then the carrier's plans to invest in what it calls "next generation access" (NGA) technologies could be revised or even scrapped, notes Robertson, who is in charge of building and managing a network that sells wholesale services to about 200 ISPs, including sister business unit BT Retail. (See BT Unveils $3B FTTx Plan.)

In an interview with Light Reading at Openreach's London offices, Robertson also said the carrier is concentrating on boosting the capabilities of its broadband services by maximizing the potential of installed ADSL platforms and investing in the connections between local exchanges and BT's core IP network. "Better backhaul will be rolled out soon," says Robertson.

The interview was set up following Light Reading's coverage of BT's high-profile next-generation access strategy announcement in July, when the carrier unveiled plans to invest £1.5 billion ($2.65 billion) in new broadband infrastructure. (See BT's FTTH Conceit.)

The press release made some grand claims. "BT today announced plans to roll out fibre-based, super-fast broadband to as many as 10 million homes by 2012. The £1.5 billion [US$2.65 billion] programme will deliver a range of services with top speeds of up to 100 Mb/s with the potential for speeds of more than 1,000 Mb/s in the future," it read. (See BT Invests in FTTH.)

That announcement generated many column inches of positive coverage for BT, with reports in the popular U.K. press talking up the investment -– for example, see this Daily Mail story; the Guardian's coverage; this Daily Telegraph article; the BBC's story; and this New Scientist report.

The reality, though, is that 10 percent or fewer of homes hooked up to the NGA by 2013 will have FTTH connections, while the remainder will be connected using FTTC/VDSL and ADSL2+, which might struggle to live up to anyone's interpretation of what "super-fast broadband" entails.

Yet Robertson says BT's announcement was a "statement of intent only, not a promise... the business case must stack up. It must be sustainable in the context of the U.K. market," and that can only be achieved if BT can "create a wholesale product that is economically viable."

So the news release was something of an overstatement? Robertson doesn't subscribe to that view, but says that BT needed to "make a serious statement of intent to attract attention."

Well, it certainly worked.

But now the real work begins, as Robertson is responsible for following up that statement of intent with actions. And for the amiable Scot, that means walking the walk, not just talking the talk. "It's not about grandiose claims -- it's about what we can achieve in the next 18 months," says Robertson.

So with July's grandiose claims set aside, what's going to happen now?

BT's next move
Robertson is most intent on stressing that the NGA investment depends on the development of a sustainable business model, for Openreach and its ISP customers. "If they [ISPs] can't create great products," that are used by paying customers, "then it won't fly, and it won't be viable," says Roberston.

But the BT man is confident that it will fly. "We'll only get the investment [from the BT board] if we can show we can create a sustainable business model for BT and the [ISPs]... I am confident we can go on this journey, but we need a degree of humility about the challenges that face us," states Robertson.

And there's only one way to find out if that business model can be created, and that's to try it out. So Openreach is engaging with its wholesale customers to develop a roadmap and some technical, service, and business parameters, and sort out a suitable pilot scheme that will help to answer a lot of questions.

"We won't know what people are prepared to pay for until we start doing something. No one knows the answers now. We want to go out and do something, and as we do it we'll learn more about the market," says Robertson.

What he does know, though, is that the economics of the service he offers to his ISP customers will be affected by three technical issues: transmission speeds -- the bandwidth that can be delivered to end users; compression technologies -- "we can do more now than we could a year ago, and it's not standing still"; and storage – "just think about how the cost of storage is coming down."

The transmission speeds are what everyone focuses on, notes Robertson. And with reason: FTTH using GPON technology, a combination that just might be tapped to connect about 4 percent of U.K. homes during the next five years, can, in theory, deliver up to 100 Mbit/s, while FTTC/VDSL can, at best, provide 40 Mbit/s at its maximum. That's a big difference, but Robertson contends that none of his customers can come up with any reasons to need more than 40 Mbit/s at the moment.

That seems strange, as 40 Mbit/s would not be an average speed: A more realistic standard throughput of 15 Mbit/s via a VDSL2 connection would soon be eaten up with a few high definition IPTV channels and some peer-to-peer downloading activity, and that's before a few hi-def VOIP lines and any online gaming might come along to siphon off guaranteed bandwidth.

BT's FTTH baby step
So can Openreach and its ISP customers learn anything from its initial foray into consumer fiber-to-the-home (FTTH) services at Ebbsfleet in southeast England? (See BT Goes With Huawei for FTTH .)

"That's just a baby step," says the Scot. "if you want speed to market and penetration, then FTTC and VDSL has a lot going for it, and some time next year we will have a significant pilot at a local exchange with about 15,000 customers so we can get some experience. We'll create a generic Ethernet access product and that will enable our customers to create their own services to run on top. We'll take a fiber from the exchange to a new [street] cabinet with VDSL. And then we need to discuss with the ISPs about a minimum assured speed."

But all the time it's the commercial model that Robertson comes back to. "That's vital for us and the CEOs of our customers. The commercial aspect is very important. If we get wrong-footed on the commercial side, it could all grind to a halt," he says.

And what about the option for ISPs to install their own VDSL equipment in street cabinets if they don't want to rely on Openreach? That has to be explored because there has certainly been an appetite for rivals to unbundle BT's copper lines and install their own DSLAMs in BT's local exchanges, as more than 5 million lines are now unbundled in the U.K.

Robertson says that option is available, but that "there's no enthusiasm for this, and if we offer the right product at the right price then they wouldn't need to do that. If we can't offer a decent product then they'll be more likely to want to do it... I'd be really disappointed if we couldn't offer a service that would meet our customers' needs."

Service guarantees
That's as may be, but reports from Openreach's customers suggest that there's some disgruntlement about the pricing and service guarantee commitments that Openreach has made at the greenfield Ebbsfleet FTTH site.

Robertson didn't want to comment on such suggestions, saying only that "we need to look beyond Ebbsfleet." Might that include a so-called "brownfield" FTTH pilot, where existing copper line connections are replaced with fiber connections? "I'm not ruling that out," says the BT man.

As for the potential to connect 1 million homes with FTTH/GPON, Robertson says only that the final number will be determined by a number of factors, including the health of the housing market and the cooperation of local authorities. "We never said it's going to be a particular mix" of FTTH and FTTC/VDSL, he claims, though that doesn't explain why BT managed to come up with a 1 million number for potential FTTH homes.

Ultimately, though, "it will all be dictated by economic realities."

As for the question of meeting customers' expectations, Robertson says the "whole NGA service set will have guarantees and assurances with SLAs [service level agreements], there's no question about that."

So what might the minimum guaranteed speeds be in the NGA service set? "We've no idea yet what our customers will want, and we don't know yet what can feasibly be delivered. We will be having a lot of meetings to discuss these things," says Robertson.

And what of the influence of regulator Ofcom ? BT stated in July that its plans were dependent on the right regulatory environment. Robertson says Ofcom "could make this very easy or very difficult, but every indication is that they'll make it easy. Ofcom has been very helpful."

All of which still leaves the U.K.'s broadband future somewhat in limbo, but Robertson is keen to stress that the current barrage of words will soon be followed by action. "I feel a burning urgency to get on with this."

And if Robertson's good to his word, it won't be long before we find out whether the grandiose claims of BT's press release can become more than just a statement of intent.

— Ray Le Maistre, International News Editor, Light Reading

lite-brite 12/5/2012 | 3:32:37 PM
re: BT Preps FTTC Trial I have to disagree 'slightly' RJ; as a residential customer, I pay around $40/mo. for 10Mb.; if I can get 25Mb. for an extra $5/mo., I'm going to take it. Assuming your take-up rate of 10%, even on the TRIAL group of 15,000, gives revenue of $800,000/yr. Throw in reduced phone charges, bundle deals, HDTV, VoD, HD Gaming, etc., it's a moneymaker provided your technology stays ahead of the game, and the'killer apps' are desireable at the price-point, as you say. Virgin Media see the benefit of the FTTC technology, with the ~$40/mo. broadband, added to the phone bill of ~$50/mo.! If you want to have the T.V., phone, and BB all on VM, it's $170/mo. (special deal for 6 months)!!! That's $3,060,000 at the same cost as discounted VM, with greater BW (if proven). For 1,500 users!
rjmcmahon 12/5/2012 | 3:32:37 PM
re: BT Preps FTTC Trial In my opinion the goal of a wholesale provider is to enable the application providers who will innovate and create the new stuff. In that context the sale pitch shouldn't be to 15,000 end users but rather to a group of new companies that will create and build the real broadband apps. In that context 15,000 potential customers is too few. Let's say one develops a new app that reaches 10%, a lofty goal in of itself, that would give a total of 1500 customers. Let's assume one could get $100 per year for that app. The gross revenue would be 150K which is 1-2 orders of magnitudes below what would be needed. Hence, this trial may end up merely being used as rationale to not to invest in the real stuff.
rjmcmahon 12/5/2012 | 3:32:35 PM
re: BT Preps FTTC Trial oops, thanks for correcting my math.

The problem with existing apps for revenue is that the existing network owners will use predatory pricing (combined with regulatory capture) to protect their position. Look what happened to the LD market and what's happening to sprint. Since they've inherited strategic legacy infrastructure they effectively avoid the sunk costs. The only way to really compete in this environment is to either bring new revenue generating apps to the table (e.g. yahoo, ebay, goog) or run the new infrastructure investors through a bankruptcy game (e.g. calpine). The former doesn't work without scale. The latter is a confidence scheme.

Government sanctioning new monopolists is another possibility though it doesn't solve the fundamental economics.
lite-brite 12/5/2012 | 3:32:29 PM
re: BT Preps FTTC Trial thing is, the APPS are there, regardless of the provider delivering them. Whether they justify a need for increased BW is open to discussion, but there are many that will pay for the increased BW, lower contention ratio (presumably), and additional services delivered.

I agree, though, FTTC is probably an interim solution, and short-sighted.

IMO, everything, including phones, T.V., music, will be wireless within 15 years, and will be provided and operated by a communications company that you pay your wages into, and they give you a small bit back to live on!
rjmcmahon 12/5/2012 | 3:32:28 PM
re: BT Preps FTTC Trial re: "thing is, the APPS are there"

This is like a school district claiming that everything being taught to our children is already *there", i.e. reality via tautology. What's missing, some call the null curriculum, has a significant affect on human potentials. What not provided may be more significant than what is provided.

The only "market" for real broadband app and content developers is enterprise (and maybe some college campuses.) This leaves out all kinds of potentials for society at large. Imagine if fraudband internet access was never opened up to the world. That's basically what's happening with real broadband and few are stepping up to the plate to take responsibility for the inaction. It's kinda a censorship and stifling of innovation via a belief in the status quo as good enough. It's not and never has been. Progress requires persistent effort.
rjmcmahon 12/5/2012 | 3:32:25 PM
re: BT Preps FTTC Trial seven,

What capabilities distinguish the human species from every other? It really doesn't take a rocket scientist to figure out that an important set of tools needed for human progress is based on modern communications infrastructure. Becoming a recluse, turning to porn, halo3 and monopolist propaganda is a bit regressive. We really can do better.

Like most primates, humans are social by nature. However, they are particularly adept at utilizing systems of communication for self-expression, exchanging of ideas, and organization. Humans create complex social structures composed of many cooperating and competing groups, from families to nations. Social interactions between humans have established an extremely wide variety of traditions, rituals, ethics, values, social norms, and laws, which together form the basis of human society. Humans have a marked appreciation for beauty and aesthetics, which, combined with the desire for self-expression, has led to cultural innovations such as art, writing, literature and music.

Humans are notable for their desire to understand and influence the world around them, seeking to explain and manipulate natural phenomena through science, philosophy, mythology and religion. This natural curiosity has led to the development of advanced tools and skills; humans are the only species known to build fires, cook their food, clothe themselves, and manipulate and develop numerous other technologies. Humans pass down their skills and knowledge to the next generations through education.
paolo.franzoi 12/5/2012 | 3:32:25 PM
re: BT Preps FTTC Trial
rj tells big enough and long enough that maybe they will become the truth.

So ---- if you believe the apps are out there - why do they not exist in Korea. Instead the primary application that drives bandwith (beyond porn) is gaming.

So, to paraphrase Decartes....rj posts therefore he makes it up.

paolo.franzoi 12/5/2012 | 3:32:24 PM
re: BT Preps FTTC Trial
Sorry rj - I am pointing out that the country that would qualify having deployed real broadband has no such applications just gaming, porn and other forms of entertainment. You can make up and type whatever you like. You can write anything you like. It makes no difference what you say, because in the end nobody is going to build a society changing application. All that matters is money, sex, and power. The sooner you realize that you will invest in it and be much happier. As the song says, "The Internet is for porn."

What makes people different than other species - nothing.

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