Posts Tagged ‘broadband’
Credible evidence that BT is charging more than double what it should for wholesale superfast broadband products has probably prompted national regulator Ofcom to investigate a complaint that BT is conducting an illegal margin squeeze.
The evidence is contained in a confidential report commissioned by TalkTalk, currently the biggest user of BT’s local loop unbundling (LLU) products, which made the complaint.
Ofcom presently does not regulate BT infrastructure provider Openreach’s pricing for SFBB fibre products believing to do so would discourage BT’s claimed £2.5bn investment in fibre to the cabinet (FTTC). Openreach’s prices are generally meant to be very close to its costs, especially where it has ‘significant market power’, in this case, outside the Virgin Media Docsis footprint.
The 59 page report found that Openreach’s costs to build its FTTC network are £4.39 per line per month. BT Openreach charges resellers £7.40 or £9.95 depending on the bandwidth provided. Current prices for BT’s Infinity FTTC services start at £13/month and go up to £26/month. BT Retail offers discounted prices of £6.50 and £20 per month respectively for the first three months.
The report, by German telecommunications analysts Wik Consult, is a sequel to its 2012 report to ECTA, the association of European challenger carriers, that found incumbent operators price LLU access so high as to leave no money for LLU carriers to profit or invest in network upgrades or expansion. It showed that LLU had been a failure in Europe, allowing incumbent operators to retain almost 100% of the market.
“At the prices charged for copper, all the cash flows have gone to the incumbent, and entrants have been persistently cashflow negative,” Wik reported, adding the same might become true for access to fibre-based products unless regulators stopped it.
For its report to TalkTalk, Wik modelled Openreach’s costs based on publicly available information. It found the main factors that affect its costs are penetration (take-up of GEA on the FTTC platform), the weighted average cost of capital (WACC) including any risk premium applied to NGA, the extent to which existing ducts can be reused for the installation of fibre between the street cabinet and local exchange, the depreciation method and asset lifetimes.
It checked the results produced by its base model and sensitivity tests against BT’s own statements and evidence from more developed markets in Europe. The checks suggest Wik’s assumptions and conclusions are conservative.
In particular, it suggests that 65% of non-Virgin Media SFBB subscribers will take up an service provided using Openreach infrastructure. Active electronics had a life span of eight years, cabinets and fibre 20 years each, and ducts 40 years, it said.
Almost two years ago Kevin McNulty, Openreach’s general manager for next generation access commercial partners, told Br0kenTeleph0n3 BT’s NGA financial plan was based on a break-even period of 10 to 12 years and a 20% take-up.
For the record, Ofcom announced on 1 May that it would investigate a complaint from TalkTalk Group that alleged BT has been conducting an illegal “margin squeeze” on wholesale access to Generic Ethernet Access (GEA), BT’s FTTC product.
Ofcom said the complaint alleged abuse of “a dominant position in breach of (regulations) in relation to the supply of superfast broadband (‘SFBB’). Specifically, (TalkTalk) alleges that BT has failed to maintain a sufficient margin between its upstream costs and downstream prices, thereby operating an abusive margin squeeze.”
Ofcom said it could investigate such allegations if it had “reasonable grounds” for suspecting a breach.
TalkTalk said in a statement, “We have long maintained that there needs to be tighter regulation in superfast broadband to ensure a level playing field and therefore deliver real benefits for consumers and businesses. We are pleased that Ofcom is taking this matter seriously and have decided there is reasonable suspicion to investigate BT’s fibre pricing.”
BT said it was “disappointed” by Ofcom’s decision.
Ofcom expects to report its initial findings towards the end of the year. It will decide then whether or not to proceed.
BT is a great British company doing a great job for Britain. We know this because communications minister Ed Vaizey said so in parliament.
He was answering a question from one of his predecessors, Stephen Timms. Timms wanted to know why the entire rural superfast broadband fund is being handed to one company—to BT. “BT is now behaving like any monopolist that has everyone over a barrel, and we have heard about the consequences from all sides this morning. Why has competition been forgotten?” he said.
Vaizey replied, “It just so happens that BT has won the contracts, and I reject the suggestion that it is behaving like a monopolist. We are getting value for money for our contracts, and BT is a great British company doing a great job for Britain.”
He complimented Timms “who did so much to promote competition. As a result of that, BT has just a 30% share of the broadband market, and the market share of the historic incumbent in the copper broadband market is one of the lowest in the world. That is a testament to the right hon Gentleman’s great work, but we are carrying it on. We made sure that our process for rural broadband was competitive.”
As Francis Urquhart might say, “You may think that; I couldn’t possibly comment.”
Only 20% of the lines in Cambridgeshire’s new fibre to the cabinets (FTTC) cabinets will be enabled for superfast broadband (SFBB). If this is the case in the rest of BT’s FTTC roll-out, it suggests that BT’s claims that 15 million homes have access to SFBB are wide of the mark.
The revelation came at a feedback meeting to the Cambridgeshire Digital Champions on the county’s new contract with BT for next generation broadband.
According to notes taken by Mel Bryan at the meeting, Annette Thorpe, BT’s regional director for the east of England, told the meeting that BT would apply the same criteria for populating DSLAM cabinets under the CCC (Cambridge County Council) contract as under the commercial areas. “DSLAM cabinets (which come in two sizes max. capacity 256 lines or 288 lines) will initially only have 20% of lines in the PCP offered SFBB,” Bryan wrote.
Almost two years ago Kevin McNulty, Openreach’s general manager for next generation access commercial partners, told Br0kenTeleph0n3 BT’s NGA financial plan was based on a breakeven period of 10 to 12 years and a 20% take-up.
Bryan reported Noelle Godfrey, programme director of Connecting Cambridgeshire (CC), said CCC expects 90% of premises will be covered by SFBB speeds above 24Mbps plus a further 8% of premises will be covered by “fibre” below 24Mbs. 2% will receive at least 2Mbps. Where this speed is measured is not defined.
Bryan wrote, “This figure of 98% SFBB is somewhat misleading – only 20% of 98% will initially be able to receive SFBB. As customers in the Commercial Areas have already discovered, they may have to wait months post the initial DSLAM installation before BT adds more equipment in the DSLAM cabinet to accommodate the increased demand.”
Bryan wrote, “There are no plans to offer FTTP under the CCC contract but after heated representations from the floor who were prepared to pin their money on Annette there and then, BT /CCC agreed to look at this.”
Thorpe told the meeting the BDUK’s £6.7m contribution to Cambridgeshire had to be spent “within the life time of the current parliament” which ends on 17 May, 2015. This gives BT an installation period of just over two years.
“What happens if a general election is called earlier?” Bryan asks. “What happens post-2015 if a village DSLAM cabinet (capacity 256 lines) becomes full and another DSLAM cabinet is required? Will BT deem that commercially viable? In my village we only have one PCP serving 315 premises.”
According to Bryan, Tony Smith, BT Openreach programme manager, told the meeting “it was very difficult, at this stage, to forecast time-scales and even when BT had done their detailed planning down to the exchange level, they cannot forecast how long an installation of the fibre cables and DSLAM cabinets will take, due to the unknown condition of their ducts, planning permission in conservation areas (which most of our villages have), obtaining power supplies, permission to dig up roads and pavements, etc., etc., etc. “
The meeting heard that 20 suppliers had registered an interest in the county’s project. Only three were chosen for “dialogue” after which BT was chosen “for offering the widest coverage and best value”.
The names of the other suppliers were not disclosed, nor was the methodology by which value was measured.
Mike Kiely, the sacked BDUK whistleblower who warned that BT is inflating the cost of street cabinets for next generation broadband access in rural areas, has had his prediction vindicated by a BT deal with a parish council.
BT says it is to supply fibre to two new street cabinets it will install in the Oxfordshire village of Binfield Heath, giving villagers access to an ‘up to’ 80Mbps broadband service.
BT says the village, 2.9 miles by car from the closest exchange in Caversham, was not included in its commercial roll-out plan. However, the 648 residents (according to the 2001 census) clubbed together to find the necessary £56,000, or £28,000 per cabinet.
BT’s press release quotes Paul Rollason, chairman of Binfield Heath Parish Council, saying, “The residents were determined not to miss out on faster broadband speeds, and formed an action group to talk to BT about how we could help the economic case to bring fibre to our part of Oxfordshire. They worked out the extra cost to rearrange and uplift the network, and between us, we have raised the funds.”
Bill Murphy, BT’s managing director for Next Generation Access, said, “Binfield Heath’s residents … really engaged with us around the best solution for their community, and together we found a way to bring fibre speeds to almost the entire village; it’s a fantastic result.”
For BT. Two years ago the villagers of Iwade in Kent paid £12,667 for a street cabinet and fibre link to the exchange in Sittingbourne 4.4 miles away by car, a mile and a half further than the distance at Binfield Heath.
Iwade’s bill was close to the £13,000 average cost of cabinets installed during phase four of BT’s next generation (NGA) broadband roll-out in Northern Ireland, according to Kiely’s confidential report.
Kiely’s report showed that BT was inflating the cost of rural NGA cabinets to around £30,000 each, pretty much what Binfield Heath is paying.
The department of culture media and sport (DCMS), which manages BDUK, sacked Kiely after he blew the whistle on BT’s apparent price gouging and his report leaked to Br0kenTeleph0n3.
Binfield Heath vindicates Kiely’s report. Culture secretary Maria Miller should re-instate him at once, and sack those who turned a blind eye to his warning.
The European Commission faces tough questions over its role and commitment to an open, transparent and competitive market for next generation broadband.
News that the Valuation Office Agency is assessing how it plans to tax wireless broadband infrastructure prompted one Br0kenTeleph0n3 reader to ask the European Commission what it thinks of the move.
Mike Phillips of West Chiltington, West Sussex, has been battling to get high speed broadband into his village for years. He wrote to Neelie Kroes, the commission’s Digital Agenda champion, to question the apparent growing bias against fixed wireless broadband. He also asked Ms Kroes what she thought of Fujitsu’s decision not to bid for BDUK contracts, leaving BT with uncontested access to BDUK’s treasure, when EU state aid rules require a competitive process.
The reply came from DG Connect. It noted that nine firms had expressed an interest in BDUK’s money, but “seven of them withdrew during the selection process due to e.g. financial difficulties, change in strategy or preference for different intervention model than investment gap funding”. Fujitsu’s withdrawal would be “unfortunate”.
DG Connect went on to say that local councils can step outside the BDUK framework but still have access to state aid, including BDUK money. “In such cases the local authorities shall comply with the conditions of openness, transparency and non-discrimination when conducting the tender procedure in line with the principles of the national and EU public procurement rules,” it said.
Phillips is not leaving the matter there. He has written back to DG Connect to ask, “Does the EU agree with the principal of state aid being given to an incumbent telco to provide, at best, an overall maximum of 24Mbps, and often less, whilst an established fixed wireless NGA network is available and can be expanded at far less cost?
“Why has the Commission given the fixed wireless industry in the UK a far greater challenge than that given to BT, namely to provide a minimum of 30Mbps and to revisit served premises to upgrade then to fibre when available? BT have publicly stated they will not undertake the latter and cannot provide the former under FTTC.”
There are other questions one should ask. DG Connect’s reply does not mention the main reason BT is the only recipient of BDUK largesse: the game was rigged. Geo’s Chris Smedley, Vtesse’s Aidan Paul and others have been explicit and public on this: the Ofcom-approved terms and conditions attached to third party access to BT’s poles and ducts in rural areas make it impossible to compete against BT. Why does DG Connect ignore this?
In practice BT has made its NGA proposals to local councils subject to non-disclosure agreements. This has hidden the terms and conditions under which BT could receive up to £1.3bn of taxpayers’ money. Is this what DG Connect means by open and transparent?
The Broadband Stakeholders Group is hosting a meeting at which the Valuation Office Agency (VOA) will set out its views on the potential application of the non-domestic rating regime (aka ‘business rates’) to wireless broadband network infrastructure.
This meeting marks the start of a public consultation before the VOA publishes a Practice Note to clarify the valuation for non-domestic rates of wireless broadband network infrastructure. It is looking for inputs from industry on rental values and costs of installation.
The meeting comes less than a month after Vfast withdrew its proposal for a wireless broadband network for Tunbridge Wells, saying the VOA had told it the scheme would be subject to business rates taxes.
The VOA is the same organisation that saw fit to subject lit fibre to business rates and introduce three different ways of valuing it, two of which favour BT and Virgin Media. A recent Ofcom report on the market for >1Gbps services found the fibre tax is a serious inhibitor for investment.
Alan Bradford, head of telecoms at the VOA, will provide an update at the BSG meeting and there will be time for Q&A.
The BSG says this meeting is the VOA’s first opportunity to begin this industry consultation. However, Vfast’s reaction to its meeting with the VOA suggests that the VOA has already made up its mind to tax wireless networks. It is now just trying to fix the rate.
The meeting will take place from 10.00 to 12.00 on Monday 22 April at the Intellect offices, Russell Square House, 10-12 Russell Square, London WC1B 5EE.
The BSG thinks this will interest mobile operators, fixed wireless providers and other stakeholders with an interest in the non-domestic rating regime.
RSVP to firstname.lastname@example.org by Tuesday 16 April. Places are limited so early registration is advised.
Vfast, a wireless broadband provider, has withdrawn a proposal to supply Royal Tunbridge Wells because the Valuation Office Agency has told it such as service will attract business rates, making Vfast’s offer commercially unviable.
In a letter to Hilary Smith, the Tunbridge Wells’ economic development officer, Sean Doherty, Vfast’s strategy and business manager, said,”I am very sorry to say that we are unable to continue with the tender for Tunbridge Wells. We had a very exiting (sic) package put together and are really keen to do this however after our meeting today with the head of the telecoms team at the VOA it means that it will not be viable for us.
“We have been told quite clearly that the Tunbridge Wells project will incur Business Rates. The cost of this added to the cost of the franchise added to the share of revenue added to the start-up costs mean that we have regrettable (sic) decided not to proceed.”
Tunbridge Wells is not short of broadband. SamKnows says some parts can get Virgin Media and FTTC, not to mention Sky, Tiscali, TalkTalk, C&W, O2/Be and AOL.
Why does the town feel the need for a wireless option? Will BT offer the town a wireless service based on its new 2.6MHz mobile licence? If so, what business rates will BT’s new service attract?
Smith and Doherty did not respond to requests to comment. Nor did HM Revenue & Customs, which speaks for the VOA.
This is not the first time Vfast has been denied wireless business in Kent. It was gazumped by BT in Iwade when the incumbent unexpectedly offered to upgrade three of the four cabinets that serve the village for free. This let parish councillors spend £13,000 to upgrade the remaining one, rather than the £49,000 originally promised by Kent County Council for the whole village.
INCA CEO Malcolm Corbett, who attended the Vfast meeting with the VOA, described it as “exploratory”.
“The meeting was exploratory in the sense that VOA are trying to work out where FWA (fixed wireless access) providers fit in their scheme of things. If you read the VOA practice notes they either cover mobile operators where masts/towers form part of the hereditament or fixed line NGA providers charged either per user connected or under a receipts and expenditures regime. FWA doesn’t fit neatly into either category. Essentially the VOA are going to think about what it all means…”
Given that the European Commission permitted wireless access for state aided next generation projects last year, and that in February BDUK issued guidance to local authorities regarding the use of wireless, the VOA’s unsettled position is inexcusable.
Br0kenTeleph0n3 has already highlighted the double standard BDUK is applying to wireless broadband operators. BDUK asks them to meet higher performance targets than BT for NGA and to commit to a fibre to the home roll-out at some point in the future, unlike BT. Further uncertainty due to VOA prevarication begs the question, what is the game here?
Many existing wireless broadband operations are run by volunteers for their communities at cost or less, solely because it is the only way to provide a more or less acceptable and affordable broadband service in those areas. Adding a tax burden would immediately kill most of them.
The few remaining commercial wireless operators would be hard-pressed too, and likely forced to raise prices. If they went out of business, taxpayers would have to give more money to BT’s rural roll-out to resupply the service. It is unlikely that the money raised by taxing wireless access would cover the cost of rolling out FTTC to areas currently being served by wireless.
The only party that stands to benefit from a tax on wireless broadband access is BT.
Is that what this government means by a competitive market in telecommunications?
The Financial Times has come to the belated view that the BDUK procurement of next generation access to broadband is a farce.
The trigger appears to have been Fujitsu’s decision not to compete for any of the contracts available under the BDUK procurement framework, a process that has cost taxpayers £10m to create and left BT as the sole supplier.
The formal announcement has been a long time coming, but has been anticipated ever since the Cabinet Office effectively blacklisted the company by describing it as a “high risk” supplier of government IT systems.
That description did not preclude Fujitsu, with BT the only qualified suppliers under the BDUK framework, from bidding for business.The final straw for Fujitsu appears to be BDUK’s absurd requirements for wireless suppliers of NGA broadband to rural areas.
These were published on 18 February in response to the European Commission’s sensible relaxation of the ban on wireless as a means delivering next generation broadband.
Much of Fujitsu’s business plan, at least in Cumbria, relied on wireless to get around the need to access BT’s poles and ducts. When this was ruled inadmissible, Fujitsu withdrew, leaving BT as the sole bidder in Cumbria.
The commission then rethought the ban and raised it. However, it still appears to believe that fibre to the home is the end game, but it is willing to acknowledge that high speed broadband delivered by cellular technologies such as LTE are the way to go.
This is making life hard or impossible for fixed wireless broadband providers. In its guidance to local councils regarding the use of fixed wireless in their coverage plans BDUK asks for service levels that not even fixed line suppliers have to meet.
For example, wireless providers must show that their system is capable of providing access speeds in excess of 30Mbps download, with at least ~15Mbps download speed to end-users for 95% of the time during peak times in the target intervention area.
Then it says the wireless operator must put in a fibre to the home network . “The subsidised solution must be an interim solution chosen where a fibre-based solution is not yet economically viable, and there shall be a commitment to replace non-wired connections with fibre at a later stage.”
Kijoma Broadband, which supplies high speed wireless connectivity in the south of England, says, “There is no such guarantee (on download speed) for FTTC for example. FTTC starts at 15 Mbps sync speed and as previously reported, 5 Mbps orders will be accepted via wholesale providers,” he says.
BT has doubled its original offer of 15Mbps download speeds to “up to” 30Mbps. Ofcom this week reported that the average national download speed is 12Mbps, due largely to Virgin Media’s largely urban roll-out of high speed broadband over cable TV channels.
FTTC connection (speeds) will be lower in practice due to line length, crosstalk, ISP contention, traffic management policies, and other issues, Lewis adds.
Regarding the commitment to install fibre, Lewis says, “If fibre in a low density area is viable in around five years, then it is viable now. The only time it would improve is if the rural area in question gained a large new housing estate.”
Fibre is going into rural homes and businesses, but it is due to community-based efforts such as B4RN and Gigaclear. Both face hostile responses from BT, which has consistently failed to publish precise coverage plans for both its £2.5bn “commercial roll-out” of FTTC to two-thirds of UK homes, and its BDUK-funded roll-outs in “not spots”.
As Ewhurst resident Walter Willcox notes elsewhere on the blog, even having a fibred-up street cabinet in your street doesn’t guarantee access to a high speed service because the cabinet’s capacity may already be taken up.
This should raise questions regarding the percentage of “homes passed” that can actually be served by the cabinets BT has installed so far. BT has said in the past that it would add more street cabinets if the newly installed ones reach capacity. Ewhurst’s experience is to the contrary.
Virgin Media was responsible for more than half the rise in the UK’s average broadband speed, Ofcom told Br0kenTeleph0n3 today.
Ofcom senior telecommunications analyst Nick Collins said VM has been doubling the speeds of its customers, and this was mainly responsible for the national average broadband speed rising one-third from 9.oMbps to 12.0Mbps in the six months to December 2012.
Collins said the national average reflected a combination of headline speeds and market share. He said these data were confidential as they contained competitively sensitive information. He confirmed that Ofcom looks at these figures in assessing the national average, but does not publish them.
VM’s acceleration programme will end towards the middle of the year, Collins said. At that point growth in the national average is likely to depend mainly on the take-up rate of BT’s Infinity fibre to the cabinet product, which will dilute VM’s influence on the figure.
In February US cable TV firm Liberty Global agreed to buy VM for around $23.3bn. The deal will create a multinational broadband company that covers 45 million homes and serves 25 million customers. Around 80% of its estimated $17bn sales will come from the UK, Germany, Belgium, Switzerland and the Netherlands.
VM’s skills in mobile telephony and B2B networking were cited as key to the future growth of the group. VM CEO Neil Berkett, who will leave the company, said the combined company will be able to grow faster and more profitably by capitalising on the “exciting opportunities” that the digital revolution presents in the UK and across Europe.
Emails between Richard Brown, the site owner, and BT reveal that BT doesn’t even own the site it accuses Brown of copying.
Brown received a letter from BT’s legal department informing him that he had copied much of the content of the website Superfast-Wales.com, including the design of the front page, and giving him seven days to remove material that was BT’s intellectual property.
Brown wrote back asking which bits infringed BT’s copyright. “As you have chosen to give this the highest of priorities (just 7 days) I would like to expedite this for you, but in the absence of a response to my request for clarification regarding the specific nature of the changes you wish to see it is somewhat challenging to assist you.”
Bernadette Mee, head of trade marks at BT, who wrote the original letter, apparently went on leave in the middle of this correspondence. As a result it escalated to Miles Beckingham, BT’s senior trade mark attorney, who thundered, “BT requires that you remove from your website all content which has been directly copied from www.superfast-wales.com.”
Brown had done some homework in the meantime. He responded to Beckingham, saying “Well, as you are apparently unclear as to what elements of the site are in question, perhaps it would be helpful if we clarified what we are discussing.
“Firstly, http://superfast-wales.com is not a BT property, as demonstrated by the leasing arrangement for the URL that can be evidenced here:
This shows that Superfast-Wales.com is registered to one Gary Mortensen-Baker. Googling Mr Mortensen-Baker throws up a credit for a YouTube animation that explains the next generation broadband technologies BT plans to deploy in Lancashire, home to the B4RN fibre to the home community project.
Brown wrote, “Whilst superfast-wales.com is not a BT property, I am nonetheless keen to try and assist you with concerns you have expressed with regard to your copyright and/or IP.
“Perhaps you can find the time to identify those elements that you believe are BT property, regardless of the ownership of the superfast-wales.com website?
“With specific regard to your artificially short deadline – this would have already been completed if your department had acted promptly, as per my requests.”
Meanwhile on Twitter, @BroadbandBill, widely believed to be Bill Murphy, managing director of BT’s next generation access project, indicated that all Brown has to do is remove the blurred image that BT’s legal department believes represents the BT logo.