Report: UK FTTH Would Cost $50B

Hooking up every home in the UK with point-to-point fiber would cost £28.8 billion ($50.8 billion), according to a new report

September 8, 2008

6 Min Read
Report: UK FTTH Would Cost $50B

Hooking up every home in the U.K. with a dedicated fiber connection would cost £28.8 billion (US$50.8 billion), according to a new report published by the Broadband Stakeholder Group (BSG) , the British government's advisory group on broadband issues.

The BSG's report, published today, examines the cost of taking fiber to each of the U.K.'s 27.2 million homes and businesses and examines the variations in costs that would arise from the use of different technologies.

The report comes only two months after the U.K.'s national operator, BT Group plc (NYSE: BT; London: BTA), unveiled plans to invest £1.5 billion ($2.65 billion) in so-called "super-fast broadband" technologies. (See BT Unveils $3B FTTx Plan and BT's FTTH Conceit.)

Digging deep for FTTH costs
The BSG report's numbers will provide an interesting reference for BT, its wholesale broadband customers, and the U.K.'s alternative broadband infrastructure players, all of which are keen to understand the economics of fiber access deployments.

“This is the most comprehensive analysis produced to date on the costs of deploying fibre in the UK,” stated BSG CEO Antony Walker in a prepared statement. “The scale of the costs looks daunting but the report does shed light on how some of these costs can be reduced and what the likely extent of commercial rollout will be. It should focus minds of commercial players, policy makers and regulators on the potential solutions to these challenges.”

Using data provided by analyst house Analysys Mason , which undertook an intensive study of various fiber access technologies, the BSG found that the most expensive option, costing £28.8 billion, would be to run point-to-point fiber from local exchanges to each home and business.

Hooking up each potential end user with an FTTH connection using GPON technology, with each fiber running from the local exchange being shared by an average of 32 customers, would cost £24.5 billion ($43.2 billion).

Deploying a fiber-to-the-curb (FTTC) infrastructure, and using VDSL technology to provide a broadband service over a copper line to each customer's premises, would be much cheaper, costing a total £5.1 billion ($9 billion), according to the BSG report, which can be found here.

That would put the cost of an FTTC/VDSL national rollout at 18 percent of a full point-to-point fiber network, and 21 percent of the cost of an FTTH/GPON network.

But even the cheapest fiber option would involve a much greater capital commitment to British broadband than has been made to date, notes the report. While the U.K. has nearly 100 percent broadband coverage from its numerous DSL and cable broadband service providers, a national FTTC/VDSL rollout "would cost three or four times more than the telecoms sector has spent in deploying the current generation of broadband services."

The BSG notes that the "largest single cost component is the civil infrastructure (the cost of deploying and installing the fibre in new or existing ducts)." Those costs could be reduced by reusing existing ducts, sharing infrastructure owned by other companies, such as utility companies, and "the use of overhead fibre distribution in some areas."

To Page 2

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

Interested in learning more on this topic? Then come to Optical Expo 2008, a conference and exposition showcasing the leading suppliers and service providers in the optical industry. To be staged in Dallas, October 6-7, admission is free for attendees meeting our prequalification criteria. For more information, or to register, click here.

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