BT Unveils $3B FTTx Plan
While BT's recently installed new CEO, Ian Livingston, believes this is "a bold step by BT, and we need others to be just as bold," at least one industry analyst isn't so enthusiastic, describing BT's strategy as "cautious."
Heavy Reading chief analyst Graham Finnie, who has spent a lot of time researching the European next-generation broadband market during the past few years, said the news was "exciting," but he feels it doesn't go far enough. (See FTTH Technology Fracas Continues and Report: EMEA Set for FTTH Surge.)
"BT is just about the last big incumbent to disclose its fiber access strategy, and this is a relatively cautious approach because there's no actual commitment to fiber-to-the-home in their existing network footprint," in contrast to operators such as Orange (NYSE: FTE) and Telia Company . (See TeliaSonera Commits to FTTx and FT Fleshes Out FTTH .)
The major hurdle: regulation
BT says the investment is dependent on Ofcom's willingness to create a regulatory environment that will allow BT to get a return on its investment.
The operator is making all the right noises in terms of meeting Ofcom's likely competition concerns, as BT has stated its commitment to wholesaling the broadband services to all ISPs on an equivalent basis -- which means BT's retail business doesn't get preferential treatment -- while a BT spokesman says he believes that BT's fiber ducts will also be made available to other service providers.
And Ofcom's CEO, Ed Richards, has been making conciliatory announcements, too. Ofcom has already stated its willingness to support "super-fast broadband" developments, and he welcomed today's BT news, acknowledging Ofcom's role in the process. "Given the potential consumer benefits, regulation needs to provide the right incentives for operators to invest, recognising the inherently risky nature of these investments," he said in a prepared statement released today. (See Ofcom Welcomes BT Move and Ofcom Makes FTTx Proposals.)
And just last week, Richards gave a speech addressing the issue of next-generation fixed access that suggests a meeting of minds with the incumbent carrier: "Super-fast broadband is crucial to the U.K.’s future. These next-generation networks form part of the critical infrastructure of the country’s economy and will be central to the way we live our lives in the future," Richards told a business conference. "Ofcom favours a regulatory environment for the next generation of networks and access that both allows and encourages operators to make risky investments, to innovate for the benefit of consumers, and, if the risks pay off, for the benefit of their shareholders, too." (Read the full speech at this link.)
BT says it's hopeful of reaching an agreement with the regulator. "We've been speaking with Ofcom for a number of months about this topic but we haven't discussed this particular announcement," says a BT spokesman. "Ed Richards's speech last week was very encouraging. I expect Ofcom will want to join us and the rest of the market to find ways of moving forward."
The key issues will likely revolve around the unbundling of assets such as fiber ducts and street cabinets, the impact on the existing broadband investments of alternative operators that have unbundled BT's copper access network, and pricing. "Pricing will be a big issue. [The proposed plan] is a riskier investment than many others, so we, and our shareholders, will expect a better return on investment to account for that risk."
The analyst team at Dresdner Kleinwort believes BT's announcement, which came as a surprise to Ofcom and the U.K. ISP community, is an attempt to put pressure on the regulator and the U.K. government to back its plans.
"In taking the initiative, BT it is trying to force the hand of Ofcom and... the U.K. government. BT's ambition would be for the regulators to confirm that it is not responsible for stranding other companies' assets and has freedom to offer wholesale products and invest geographically where it makes most sense commercially," stated the Dresdner team in a research note issued this morning.
BT says it will also be "pressing for any other next-generation access network in the U.K. to be open to other companies," but that this is not a condition associated with its own plans. "It's a point of principle, not a showstopper. We see no reason why other networks shouldn't be open, too," says the spokesman.
Ofcom says it will publish detailed proposals for the regulatory framework for next-generation access networks in September.
— Ray Le Maistre, International News Editor, Light Reading
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