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FTTx

Report: UK FTTH Would Cost $50B

BT plays it cool
The FTTC/VDSL option is the one favored by BT, which announced its Next Generation Access (NGA) plans on July 15.

BT's initial plan, though, doesn't include a national rollout. Instead, the operator hopes to upgrade the broadband access architecture connecting about 10 million homes by early 2013, with the vast majority (90 percent or more) using FTTC/VDSL, while up to 1 million could get an FTTH/GPON connection.

The incumbent operator doesn't have much to say about the BSG's report: The carrier says only that it is "a sensible analysis of a very complex issue, and BT welcomes it as a contribution to the debate around NGA."

And BT is unlikely to say much else until it knows more about the factors affecting its own plans, including the introduction of new regulations from the U.K.'s Ofcom and the willingness of Britain's many local authorities to cooperate in the construction of the new fiber ducts that FTTC and (especially) FTTH deployments would entail.

Those factors, and more, will affect the potential costs associated with BT's plans, and if the economics aren't right for BT, then its NGA strategy will be revised, or even scrapped, according to Steve Robertson, the CEO of Openreach , BT's access network business.

In a recent interview with Light Reading, Robertson said BT's mid-July 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."

Robertson said BT Openreach is working hard, and consulting with its wholesale customers, to develop a business model that will make its NGA investments viable and that, ultimately, the plans can only be implemented if it's possible to provide a service to ISPs, including BT Retail, that enables them to develop and deliver services that broadband users will buy. "If they [ISPs] can't create great products, then it won't fly, and it won't be viable," said Robertson.

However, the Openreach man is confident that all the pieces will come together. "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."

The next report that Robertson and his team will digest comes from the U.K. government's Department of Business, which initiated a review of the country's broadband market in February this year. That review has been headed by Franceso Ciao, the former CEO of Cable and Wireless plc (NYSE: CWP), and has become known as the "Ciao report." The results are due to be published before the end of September, though Ciao has already indicated to the Royal Television Society's magazine that he will advise against any public investment in fiber access rollouts.

For more on BT's NGA plans and Steve Robertson's views, check the Light Reading site this Wednesday, September 10.

— Ray Le Maistre, International News Editor, Light Reading


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jayja 12/5/2012 | 3:32:27 PM
re: Report: UK FTTH Would Cost $50B Several years ago BT made a presentation reporting that between 1/3 and 2/3 of their subscriber drop cables could not support VDSL. I wonder how much drop cable replacement is built in to the $9B VDSL figure?
rjmcmahon 12/5/2012 | 3:32:30 PM
re: Report: UK FTTH Would Cost $50B I think an accurate cost analysis would look at the suppliers accounts receivables (per FiOS orders exclusively), labor costs incl. benefits, pole replacement costs, backhaul costs, government graft, sales and marketing, etc., etc., etc. all without cross subsidies from the existing, legacy natural monopolies.

I wonder if the only way to truly determine these costs is to break out the fiber over builders into independently audited companies? Then one could determine trend lines for costs per access bit transported and costs per internet bit transported. Technology selection, the focus of the referenced article, probably is mostly significant in that it supports churn (as deployment nearly implies obsolescence.)

Until we have actuals it seems like Robert Moses giving pro forma projections to build infrastructure by presenting estimates like $32,456,717,812.26 which implies significance and precision for an unknown that doesn't really exist.
Frank 12/5/2012 | 3:32:30 PM
re: Report: UK FTTH Would Cost $50B rj is correct, of course. Implied by this, also, is a larger issue: no broad consensus on accepted benchmarks yet exists for FTTH cost factors, never mind for auditing purposes, that would otherwise serve as legitimate comparison points in these regards. The following article from Last Mile Magazine may not be a direct hit in answering these issues, but I found it both helpful and interesting, nonetheless:

FTTH Architectural Choices
By Bhavani Rao | August 2008

http://www.lastmileonline.com/...
rjmcmahon 12/5/2012 | 3:32:33 PM
re: Report: UK FTTH Would Cost $50B VZ's data here for FiOS isn't complete and is far from transparent. I perceive it as similar to the real estate industry's data (including support from the Fed) about how the housing price increases weren't a bubble and similar to the government's method to a gauge inflation. These things are far from arm's length nor are they independently audited in a manner to earn trust despite their claims otherwise.
Duh! 12/5/2012 | 3:32:36 PM
re: Report: UK FTTH Would Cost $50B > Does anybody know the real costs of FiOS? Where does one get that info?

Um... how about here? http://investor.verizon.com/
rjmcmahon 12/5/2012 | 3:32:37 PM
re: Report: UK FTTH Would Cost $50B Does anybody know the real costs of FiOS? Where does one get that info?
DCITDave 12/5/2012 | 3:32:51 PM
re: Report: UK FTTH Would Cost $50B Gummint forecasting is usually on the high side for big infrastructure projects. In the States, it helps the forecaster get a bigger budget approved and that gives them more people, power, and a parking spot in the shade.
Mark Sebastyn 12/5/2012 | 3:32:51 PM
re: Report: UK FTTH Would Cost $50B There's no way it can cost this much. 20-25M UK households, aerial connections similar to East Coast USA but with higher density. Exactly why are they projecting costs higher than FiOS? It should be around $30B, and probably less.
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