Br0kenTeleph0n3

The Lancashire County Council’s next generation broadband plan  allows BT, its business partner, to duplicate large areas where community-owned network operator B4RN is building a fibre to the home network, driven by frustration with BT and LCC delays.

Green = B4RN; Red = BT; Flesh = Duplicated coverage

A LCC target calls for “A pilot project covering seven Lancaster rural parishes offering fibre based SFBB to a minimum of 73% of premises with viable options to increase coverage to close to 100%.” The LCC website does not disclose the lucky parishes. However, sources say they are, by and large, the same as those B4RN intends to cover.

This is of course entirely predictable and expected. BT responds only to competition. Its fibre footprint mirrors Virgin Media’s cable TV footprint, and where competitors have raised their heads, whether with wireless or fibre, BT has been ruthless in eliminating the opposition (see West Sussex, Ewhurst, and others).

B4RN plans to give about 1500 homes and farms a 1000Mbps symmetric service via a fibre to the home link from July. The LCC expects BT to deliver an asymmetric service of more than 30Mbps to 97% of all businesses and homes, 647,000 premises. They are still “exploring options” about how to get “SFBB” to the remaining 3%, which is where B4RN operates.

B4RN co-founder Chris Conder says BT’s deal with LCC deal is actually quite subtle. The LCC plan misses Tatham, which is hard to service as it is difficult upland terrain. Population density is very low, and there’s very little copper cable. “Most of them are on DACS (digital to analogue converters) up there,” she says. “The exchange is in Yorkshire.” Any high speed broadband service to Tatham is likely to be via satellite.

BT may duplicate around 90% of B4RN’s footprint. However, LCC’s inclusion of Caton skews the “homes  passed” figure for the area. Conder says Caton, a low-land area with an exchange and two street cabinets, adds around 1400 homes to BT’s figures, apparently halving the duplication rate.

Conder says B4RN left Caton out of its plan because it had an exchange. “All our area is too far from exchanges to get a decent connection,” she says.

Be that as it may, the LCC plan contains an implicit assumption that Lancashire farms are not businesses. If they were so considered, BT would be committed to provide prioritised “fibre based SFBB (superfast broadband) at speeds of up to 80Mbs to 100Mbs” to 90% of businesses. Faced with the same issue, North Yorkshire councils refused to accept a report on how to next generation broadband in their area.

BT played a lead role in creating the tipping point that led to B4RN’s formation. Now it may be forced to work with instead of against it. The LCC’s plan injuncts “potential partners” to design a solution that they “design a sustainable solution” for rural communities the LCC sees as “the vanguard rural communities” for early rollout.

Source: Lancashire County Council

The LCC pitched against B4RN for funding from the Defra Rural Development Fund, so it may not think B4RN, which has the public support of the EU’s Digital Agenda boss Nellie Kroes, is part of the “vanguard”.

There is a question whether BT will qualify under state aid rules to use taxpayers’ money in B4RN areas. If it can’t, it’s going to be expensive. An LCC graph of the costs of providing nextgen broadband to the “Final Third” shows that the per connection cost rises from around £450 to £1750.

That puts BT’s bill for competing with B4RN at a minimum of £3.0m. B4RN says it can provide a far superior service for £2m.

Europe’s incumbent telcos are sucking all the cash out of what is meant to be a competitive market in telecommunications infrastructure, endangering the chance that the union will meet its Digital Agenda targets of 30Mbps for all and 50% of citizens using 100Mbps broadband by 2020.

Members of ECTA, the association of “challenger” or altnet telcos, have asked Digital Agenda champion Neelie Kroes to force incumbents to cut the price of renting incumbents’ copper lines.

“At the prices charged for copper, all the cash flows have gone to the incumbent, and entrants have been persistently cashflow negative. In Portugal, we understand there are now no active competitors using unbundling, whilst in Poland there is only one remaining altnet,” ECTA director Ilsa Godlovitch told Br0kenTeleph0n3.

While local loop unbundling appears to have been a disaster in Europe, the same may become true for fibre access.

Incumbents argued previously that they need high prices for copper lines to fund fibre roll-outs. ECTA told Kroes yesterday most incumbents are not installing fibre to households, but are only installing fibre to cabinets (VDSL). This cost relatively little and could undermine competition by limiting altnets’ ability to unbundle the incumbent’s access network, they told Kroes.

“Many incumbents installing VDSL have been able to retain nearly 100% market share of these (local) lines, a position which would strengthen their dominant position even further in years to come,” they said.

ECTA chairman Tom Ruhan said, “The liberalisation experiment which Europe began in the late 1990s is close to failing.”

Regulations do not help even leading telecoms competitors. Without change Europe might go back to monopolies and duopolies for broadband services within five years. “This will not deliver more investment in broadband and will have a negative impact on the services and prices consumers receive,” he said.

The European Commission is redeveloping its ideas on wholesale charges and competition in the telecoms sector. Incumbents have challenged proposals that would compel them to invest in fibre to homes in exchange for retaining higher charges on their legacy copper infrastructure.

CEOs of altnets, which according to the FTTH Council, currently operate 55% of Europe’s FTTH lines, argue that incumbents have been receiving subsidies for years, and have drained competitors of capital, yet have failed to modernise their networks.

ECTA said these views did not represent those of ECTA members who are also incumbents, such as BT and Danish telco TDC. It is unlikely this difference can or will be resolved.

All ECTA members generally support the principle of open wholesale access to incumbents’ networks at home and abroad.

Now, if they can just get beyond their cosy gentlemen’s agreement not to rock the boat in each other’s home markets, Kroes might see her dream fulfilled.

BT published its numbers for 2011 this week. It revealed that its fibre “passes” 10 million homes. Of those, some 550,00 have subscribed to its Infinity VDSL fibre to the cabinet (FTTC) service.

BT says it added 589,000 retail broadband customers. It claims this is 54% of the net additions of 1,085,000, and took its retail broadband customer base to around 6.3m, up 10% in the year. Ofcom’s Communications Market Report, published in August 2011, said, “More than two-thirds (67%) of households have a fixed broadband connection and 17% have a mobile broadband (dongle) connection.”  That’s about 20 million homes, which puts BT’s share of the fixed broadband market at around 32%.

Despite doubling the network frequency in the local loop, which should have pushed its top download speeds from 40Mbps to 80Mbps, BT did not refer to it in its report. Nor does it respond substantively to questions about the  increase in speed actually experienced by customers.

The best indication of what customers might expect comes from Digital Region, the South Yorkshire wholesale broadband provider that is reportedly fighting for its financial existence due to earlier technology problems and a lack of customers. Digital Regional hired BT and Thales to provide its dedicated VDSL FTTC infrastructure. (This was an unhappy experience for reasons that we shan’t go into here.)

In early April, just after BT’s official speed upgrade, one of its resellers, the ISP Origin, provided its upload and download speeds to Thinkbroadband. The graph shows clearly how speed degrades with distance from the street cabinet.

The graph is not a smooth line because lots of things affect the user experience. They include distance to the cabinet, quality of the metal path (not every line is good quality copper), congestion on the link between the cabinet and the exchange, internal wiring in the customer premises, whether the modem or router is directly connected to the wall plug, whether the user is using Wi-Fi to connect, etc. The speed experienced by any individual is also increasingly affected by how many people in the premises are trying to connect at the same time, the so-called multiscreen syndrome.

The graph shows that BT may be underselling its VDSL technology by claiming a top download speed of “up to” 80Mbps. The Origin figures suggest that anyone living within 500m of their street cabinet should get an 80/20Mbps download/upload service, and anyone closer in should do better. That is if they, like Origin, have a dedicated rather than a shared service.

Points of presence of Digital Region’s dedicated VDSL FTTC service.

As Origin puts on its website, “BT’s cabinets are shared between all BT customers, Sky customers, PlusNet Customers and any other ISPs that piggyback on their fibre. So you’ve got loads of customers all wanting the same superfast speeds at the same time all using the same cabinet. This means that to make sure customers all get a half decent service, the ISPs have to limit and manage the speeds.

“We don’t like that. Our boxes are only used by Digital Region and we don’t fiddle with people’s connections, as everyone deserves the speeds they signed up for, surely?”

BTW, if you agree with that sentiment, you can join the 700-plus people who have singed Richard Brown’s petition for Ofcom to ban “up to” advertising here.

Richard Brown, COO of Wispa, a Welsh communications consultancy, has sent Jeremy Hunt’s department of culture media and sport a final letter of notice before legal action, which is a kind of gentle nudge before the lawyers’ fee-meter goes into hyperdrive.

Brown is mildly peeved, if that’s the right expression, for a number of reasons. Firstly, he wrote a book which explains in lucid detail how BDUK can get its job done for a fraction of the money it is paying KMPG to screw up the procurement of broadband in rural areas.

His ideas have been supported by none other than Peter Cochrane, the former BT CTO, who has attracted headlines because of his damning evidence to the House of Lord enquiry into broadband.

He is also ticked off because Ofcom has not had the courtesy to acknowledge receipt of his petition, signed by more than 600, calling for a ban on “up to” advertising of broadband speeds, which Brown claims, and Ofcom itself reports, are misleading.

Finally Brown is irked by the fact that BDUK’s procurement framework for rural next generation broadband access, which was meant to deliver at least six bidders for the taxpayers’ £530m, has delivered only two, BT and Fujitsu. In practice, it appears that the odds are stacked in BT’s favour, and Fujitsu has still to confirm its on-going commitment to the framework process.

So Brown has written to the DCMS, threatening legal action to stop BDUK under state aid rules from giving BT any money. Furthermore Brown is asking DCMS to refund him his share of the £530m, a sum he calculates as £8.98, whereupon he will cease his action.

DCMS no doubt would like to laugh this off as a publicity stunt, but there’s a sting in the tail. Brown is asking for all the records relating to the pilot rural broadband projects as well as minutes of all meetings between DCMS and BT. In some quarters, these documents will generate more interest than Lady Chatterley’s Lover when it was unbanned.

Normally, the courts might take the view that Brown’s action falls into the nuisance or vexatious camp, and chuck it out without a hearing.

Brown says, “The action is legitimate on the basis that it is effectively money that is not the government’s or the department’s, it is simply in the custody of the the DCMS. As it is a custodial amount they have a legal obligation to demonstrate that it is being used appropriately (should they be requested to do so). As I have requested on a number of occasions that they do that, and they have failed to answer, I can demonstrate that they have failed to act, and so the only courses remaining are to forget it, or take some form of legal action.
“The best case would be that they send a cheque for C£9 – then everyone can ask for their money back
“The legal direction suggests that even if they consider it to be nuisance/vexatious then it is their responsibility to respond regardless, prior to such action being referred to a court.”

DCMS has 28 days to respond.

This is the text of Brown’s letter to DCMS.

BDUK Funding of BT

As it has not been possible to find a resolution to this matter amicably and it is apparent that court action may be necessary, I write in compliance with the Practice Direction on Pre-Action Conduct.

Summary of explanation of pending action
That the Department for Culture Media and Sport (DCMS) is willingly pursuant of a course of action that is contrary to our interests as a UK company, and is detrimental to us as citizens. In following a route that will fund a private organisation (BT) to the amount of C£530m of public funds (funds that have been contributed to by the citizens of the UK, or will have to be recovered from those citizens via a process of taxation)

Summary of expectation in prevention of legal action
I respectfully request, for the final time, that the action of State Aid funding a private organisation cease.  This action is detrimental to the benefit of the UK citizens and is to be conducted without our express consent.  In ceasing the action it will then be possible for those who have the knowledge to best advise the DCMS on how to allocate the funding in a more appropriate manner.

Sum(s) to be claimed
The sum of £8.98 is claimed in advance of this action.  This has been calculated by the dividing the announced BDUK fund (£530m) by the 2001 census population (59m) and deriving the amount that a single individual will bear in new or paid taxation.  Should we receive this sum we will cease our legal considerations.

Listed below are the documents on which we intend to rely in our claim against you:

How the State Aid Rules impact upon funding for the delivery of public services including services of General Economic Interest (http://www.bis.gov.uk/files/file53292.pdf)
Treaty establishing the European Community Part three – Title VI – Chapter 1 – Section 2 – Article 87-92 [So-called Maastricht Treaty] (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12002E087:EN:HTML)
Broadband Delivery UK – specifically Goals 1-4 (http://webarchive.nationalarchives.gov.uk/+/http://www.bis.gov.uk/bduk)
Broadband Delivery UK – Discussion forums – specifically statement from Hunt (http://discuss.bis.gov.uk/bduk/pilots/)

In accordance with Practice Direction on Pre-Action Conduct I would request that you provide me with copies of the following documents:

Outcome reports from Rural Market Testing Pilots (all)
Meeting minutes from Department with BT meetings (all)

I can confirm that we would be agreeable to mediation and would consider any other system of Alternative Dispute Resolution in order to avoid the need for this matter to be resolved by the courts and would invite you to put forward any proposals in this regard.

In closing I would draw your attention to section II (4) of the Practice Direction which gives the courts the power to impose sanctions on the parties if they fail to comply with the direction including failing to respond to this letter before claim. I look forward to hearing from you within the next 28 days, should I not receive a response to my letter within this time frame then I anticipate that court action may be commenced with no further reference to you.

Yours sincerely

…

Andrew Ferguson, whose comments on our “Lies, damn lies and broadband data” story  have made an extensive contribution to our understanding of some of the more arcane features of broadband in the UK, has come up with an interesting analysis of BT and Talk Talk’s costs and prices.

It suggests BT’s gross margin on fixed costs for its copper ADSL2+ service is around 169% while the margin on its top end 80/20 Infinity fibre to the cabinet (FTTC) service is around 57%.

That may explain why it is reluctant to give up copper for a more fully fibred network. It also shows how much fat is available to it for price wars with other network operators.

Meanwhile, The Guardian, which is increasingly a digital construction, has lately woken up to the fact that the UK’s broadband services may struggle to distribute its fancy infographics. It quotes BT’s strategy head, Sean Williams saying, “Eighty Mbps is more than people need.”

Of course Williams walking a well-trodden path down which firstly the man who created IBM, Thomas Watson Senior, and more recently Microsoft’s Bill Gates have wandered. Watson said the global market for mainframe computers was about five. Gates said 640k (of RAM) should be enough for anyone.

Fortunately for their firms, they were both wrong, and I’m pretty sure Williams is too.  If he is right, then we are already at “peak broadband” and BT is finished both as a growth business and as an engine of growth.

Perhaps we’ll have a clearer picture on Thursday when BT publishes its 2011 results. The key figure to look for is the take-up rate of broadband, i.e. number of customers compared to “homes passed”. It’s been running at 5% or less, mainly because it’s been duplicating Virgin Media’s coverage footprint, and just can’t compete.

Is someone fiddling the broadband numbers, and if so, why?

INTUG, the international telecom users group, believes that officials in charge of Europe’s broadband roll-out are being misled by “vested interests”. It has written to Europe’s Digital Agenda boss Neelie Kroes, asking for the source of the claim that the UK has full coverage for basic broadband.

The claim was made in a Digital Agenda working document that said, “Denmark, Finland, France, Luxembourg, Latvia, Malta, Netherlands and the United Kingdom) have already achieved full coverage for basic broadband services”.

INTUG told Kroes, “Our UK Member, CMA (Communications Management Association), and the UK Federation of Small Businesses (FSB) met recently with OfCom and UK government representatives …to discuss broadband roll out. It was clear from the discussion that full coverage for basic broadband is still far from being achieved in the UK.

“This misrepresentation of a reality has been a consistent concern of users in the UK since BT’s often quoted claim of 99.6% coverage of broadband, which was similarly misleading. We would be grateful if you would share with us your source for this information. We can then assist the NRA (national regulatory agency i.e. Ofcom) in ensuring that future statistics on this sensitive topic are reliable and not unduly skewed by vested interests.”

This is not the first time questions have been raised about broadband claims. Announcing a 4G mobile technology trial in Cumbria this week, Everything Everywhere CEO Olaf Swantree said, “New independent research shows that one in five households in Britain could depend on 4G for superfast broadband in the coming years.”

Br0kenTeleph0n3 revealed in March that BDUK’s coverage maps exclude wireless coverage, even wireless networks that local councils are using today.

Sources say that BDUK is also worried about the accuracy of the maps of physical infrastructure such as street cabinets. Apparently BDUK’s maps show cabinets that are often 1km out and one is known to be 5km out. This, of course, drastically affect the ‘reach’ of BT’s Infinity broadband service, which one source put it, “goes 1300m with a following wind, and broadband itself which dies at around 5km”.

A further problem is that only Openreach engineers can tell the actual line length between a street cabinet and a subscriber’s house, and the information in BT’s asset database does not always reflect the actual situation.

These inaccuracies mean local councils may be making investment decisions using information that is wrong and potentially misleading.

We understand that BDUK is at last starting to worry about these issues as it prepares to release almost £400m to local councils to spend upgrading the networks in their “final third” areas.

I should have spotted this earlier – sorry, folks.

Vince Cable’s department (BIS) is looking to reform the competition law to make it easier for small business to challenge anti-competitive behaviour and to sue for damages they have suffered as a result of such behaviour.

The consultation opened on 24 April 2012 and will close on 24 July 2012.

BIS says a strong competition regime is fundamental to growth in the UK economy, to investment and innovation and ensure that consumers get the best deal possible.

Part of a reform package, the proposals in the consultation have two aims:

• to increase growth by empowering small businesses to tackle anti-competitive behaviour that is stifling their business, and
• to promote fairness by enabling consumers and businesses who have suffered loss due to anti-competitive behaviour to obtain redress.

The impact assessment that accompanies the consultation says cartels in the EU force up prices by between 28% and 54%.

“The process of pursuing (anticompetitive behaviour) cases through private actions is costly and complex,” BIS says. “This is particularly true as competition cases may involve very large sums but be divided across many businesses or consumers, each of whom can only claim a small amount.

“This means that most anti-competitive behaviour does not lead to private actions seeking redress: in 2005-8 there were only 27 cases resulting in judgements, and most OFT findings of infringements were not followed by private actions.”

You can download the consultation from the BIS consulttions website or by following the links above.

It’s easier for politicians to attract brickbats than bouquets, and opening up on Facebook is sure to encourage the disaffected to have their say.

Independent Cornish councillor Andrew Wallis revealed recently that some residents are unhappy with the cost of Cornwall’s “superfast” broadband service. Supplied by BT, the service is now available through 52 exchanges, he posted.

“Despite what some may see as positive news for the county, the first five comments the post received (all within half an hour) were negative, with comments aimed almost exclusively at the cost of the service and how unaffordable this is for all but the well-off,” he wrote in a separate post about social media.

Cornwall is poor. Average annual earnings are 18% lower than the UK average (£20,982 vs £25,727 – 2009 figures). Almost 90% of businesses have fewer than 10 employees, and nearly a quarter have annual turnovers of under £50,000. Some 14.4% of workers are self-employed compared to the UK average of 9.1%. The council, with 22,500 staff, is by far the biggest employer.

BT’s “up to” 100Mbps Infinity service is currently £35/month plus line rental from £10.75, or about 3% of average monthly pre-tax income. The price of the entry level service puts it comfortably inside the UN Broadband Commission’s target of less than 5% of monthly income, but is Cornwall a developing nation?

There also appears to be some confusion at the council about what it is getting for the £132m contract it signed with BT.

Replying to Facebooker Sheena Trigg, a council spokesman says, “By the end of 2014, 80% of premises in Cornwall are expected to have access to optical fibre broadband…”

The council’s original statement says only 50% are expected to have access to a 100Mbps fibre to the premises (FTTP) service. So, was the Facebook reply simply an error or has something changed? Has BT suddenly found it possible to fibre-up 30% more premises for no extra money? Or has the council has found more money to chuck at BT?

We await the council’s reply.

Kroes - put your money where your mouth is.

Here’s an Anglo-Saxon invitation to European Commission’s Digital Agenda champion Neelie Kroes – put your money where your mouth is.

Kroes is clearly frustrated by the lack of progress towards Europe’s  broadband targets – universal broadband access by 2013, and 30Mbps for all and 100Mbps for half of us by 2020.

Speaking in Italy this week, she virtually implored Italy’s geeks to apply for up to €7bn she is putting into the EU’s proposed broadband slush fund, aka the Connecting Europe Facility. She hopes this money will unlock €50bn in private sector funding for next generation broadband.

The facility is there because, she says, “sometimes the private sector seems unwilling to get involved in broadband projects. They see them as too risky, or too uncertain; especially in rural or suburban areas. Support from (the fund) could give that extra assurance that investing in high-speed broadband is safe and profitable.”

A couple of points here. Investment in telecoms is and always has been risky. It’s only a political idea that dial tone or internet access is a human right, and therefore deserving of taxpayer money.

When that idea became popular, governments nationalised the telcos. When it became unpopular, because the state monopoly telcos were expensive, bureaucratic, unresponsive and self-serving, governments sold them off.

Taxpayers seldom saw a penny of their money back directly. They are still saddled, by and large, with “incumbent telcos” whose attitudes and practices are unchanged. So, nationalisation and privatisation were not good investments from the taxpayers’ point of view.

The incumbents have every reason to fear challenger telcos or altnets. That is why they fight tooth and nail to make life difficult or impossible, i.e. risky, for altnets, and so deter investment.

As the German firm WiK Consult shows, only competition forces incumbents to behave better.

Investment in telecoms should stay risky. It keeps people (funders, suppliers and network operators) on their toes, makes them come up with new ideas, and compete for business. It’s Darwinian, but it works. Feather-bedding them with free or cheap money makes no sense.

Kroes says the fund would help reduce “perceived risk” and “crowd in private finance … from anyone who, like me, realises that broadband is a sound investment in tomorrow’s technology.”

So here’s the invitation to Kroes: there’s a brand new network company called B4RN that’s busy putting in a brand new fibre network that will provide rural subscribers with 1Gbps symmetric broadband for £30 a month. I don’t know of a better customer proposition in Europe or the US.

Details of the project, which is a highly tax-efficient investment, are on the web. Of course Kroes should do her own due diligence investigation, and the usual caveats about investments apply.

If Kroes finds B4RN too dodgy to risk a few euros, what chance do altnets have of tapping her fund?

And yes, I do have shares in B4RN.

Two usually reliable sources have said that the decision mentioned below is unlikely to relate to BDUK’s application for blanket approval for exemption from scrutiny under EU state aid rules.

One suggestion is that it relates to the UK’s postal service. This seems possible, given the information revealed in the linked document.

BDUK and DG Competition, which rules on the application, have not replied to requests for details.

Given that some high profile political careers depend on delivering “superfast” broadband to all in the next three years, it is likely that there is some pressure to bend the rules.

Getting blanket approval means up to 45 procurement contracts, most of which are expected to go to BT, will not receive independent scrutiny. It is also needed because few, if any, proposals so far, are believed to meet EU rules on state aid.

Approval is crucial to freeing up BDUK’s £530m if the UK is get get close to culture secretary Jeremy Hunt’s goal of the “best broadband in Europe by 2015″.

Approval would also scupper plans by some small independent network operators (altnets) to  sue local councils if they give money to BT (or another listed supplier) and BT then targets areas the altnets have said they will serve.  Their argument is that councils’ action would breach state aid rules. These prohibit using taxpayers’ money in areas where there is a competitive market.

Some altnets offer wireless broadband access, but there is no official record of their coverage. Local authorities are meant to consult on where basic coverage ends and so-called Next Generation Access starts. Some have been reluctant to do so. As a result, councils could face objections as soon as they issue contracts. This would delay network builds.

In addition, it would be extremely difficult to audit precisely where the money was spent, given that many “white” spots are surrounded by so-called black areas, i.e. where there is a competitive market.

BDUK is wrestling with these issues, but whatever goodwill it had in the industry has ebbed away. It has also failed to get more than BT and Fujitsu Telecom (which wants all BDUK’s money in return for a £2bn investment)  to bid for work.