Broadband duopoly looms for Final Third (well, that’s one more than now)
The British government is expected to include up to 12 high speed broadband providers in a framework procurement for four-year contracts worth between £750m and £2bn, but only two have a real chance of getting most of the business.
The framework aims to deliver high speed broadband communications in the so-called Final Third of the country where the government believes such service is commercially unviable.
Because the qualification thresholds are so high, the mostly likely primary contractors are likely to be BT, and Fujitsu Telecom, which together with Virgin Media, has already indicated its willingness to invest £2bn in broadband networks.
The framework is likely to increase the divide between urban and rural communities as contractors will not be required to deliver speeds above 15Mbps to areas with a housing density of between 20 and 50 houses per square kilometre.
In general the access speeds required range from 2Mbps to 50Mbps. The documents do not say whether this is purely for download or symmetric traffic.
Candidates must show a turnover of at least £40m over the past two years. They must also show that they have delivered at least one residential or business network, excluding backhaul, that serves at least 30,000 subscribers, and are currently running a network that serves at least 10,000 subscribers.
In a document published in the EU’s Official Journal, the government said, “There may be a small number of local broadband projects that do not use the framework agreement and this will be agreed with BDUK.”
Smaller operators that wish to take part will have to form consortia with the primary contractors or “special purpose vehicles” vetted by Broadband Delivery UK (BDUK), the government’s delivery arm.
Contractors will generally work on a county scale through county councils and local economic development agencies, with the BDUK supplying up to £10m per project.
Those working with community broadband networks condemned the proposals. Giving the BDUK document “null points”, the Independent Networks Community Association (Inca) said the document discriminated against small network operators.
“The financial and other criteria clearly exclude all but a handful of large players,” it said in a statement. “There are provisions for smaller companies to join consortia, but only if a consortium can be set up and ready to go in a month – and that month is July.”
Inca said the document also gave the lie to “ministerial rhetoric” by appearing to redefine “superfast broadband” as anything above 15Mbps, down from the previous 24Mbps, itself regarded as unambitious.
This meant that culture secretary Jeremy Hunt was likely to miss his target of having the “best broadband network in Europe” by 2015, Inca said.
“We could find up to £830m of public funding spent on networks that deliver half the minimum speeds of our European competitors,” it said.
At a European Competitive Telecommunications Association conference on triggering investment in fibre, delegates heard that incumbent operators were responsible for just 19% of fibre installed throughout Europe, while alternative operators such as cable companies had installed 73% of the fibres.
Incumbent operators enjoyed profit margins of 75% to 80% on their copper networks, Karl-Heinz Neumann, director of Wik Consult and author of an exhaustive report on wholesale prices for copper and fibre, told the conference.
They did not want to lose that cash flow by investing in fibre when there was little consumer appetite to pay more purely for extra speed, he said.
Speaking at the same event, Sean Williams, BT’s director of strategy, policy and and portfolio, defended BT’s £2.5bn roll-out mainly of fibre to the cabinet, saying it was the quickest way to get fibre service to consumers.