Br0kenTeleph0n3

Following the broadband money

Why the UK needs to put BT on a high fibre diet

with 14 comments

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.

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Written by Br0kenTeleph0n3

2012/05/09 at 08:02

14 Responses

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  1. The bit everyone seems to miss is that its ‘up to’ 80 Mbps, and a lot of the people on cabinets will only get 5Mbps. Also not all the cabinets are enabled even in urban areas, especially those near business parks where people have expensive leased lines…

    chrisconder

    2012/05/09 at 08:46

  2. @ChrisConder

    Ah the old a lot will get 5 Mbps.
    http://www.thinkbroadband.com/news/5161-how-fast-will-fttc-run-at.html

    98% of lines connected to VDSL cabinets getting 15 Mbps
    75% 32 Mbps

    Of course the small percentage getting slow speeds have good reason to complain, but to lead with comments like yours Chris is simply wrong.

    Yes full fibre would be vastly preferrable, but there seems to be no desire from those who have a few billion in the bank to bank roll full fibre.

    Andrew Ferguson

    2012/05/09 at 09:17

    • Andrew, BT doubled its network frequency in April, claiming to push its “up to” 40Mbps service to “up to” 80Mbps. What actual change have you seen?

      Ian Grant

      2012/05/09 at 09:31

      • The link includes the change from profile 8c to 17a.

        The actual frequency change took place from Nov 2011 onwards, so by the launch in April people were already getting the extra speed.

        The launch was more of an un-capping of throughput speeds for those getting 40Meg down or 10 Meg up.

        In general the FTTC speed estimator from Openreach is working better than the ADSL one did.

        While its not symmetric, an upload that is potentially three times the national download would be pretty cool to have. Would love to own a PC that could encrypt a 20 Mbps HD stream in realtime.

        Andrew Ferguson

        2012/05/09 at 09:55

    • So in that case Andrew, all the people further than 750 metres from the cabinets (according to your table on the link above) won’t get the minimum speed defined as ‘superfast’. Those not on the cabs, ie on the exchanges won’t either, as they will still be on adsl not vdsl. Those on cabs that are full before the lines are migrated won’t get it either. Therefore I agree I will stop using the old ‘5megs’ statement, its unnecessary any more. I guess the ISPs will cherry pick the closest ones till the cabs are full. Then BT will claim 100% homes passed, and many will still be on adsl? Could you clarify if this is correct? Thanks for the tip off. And thanks for the facts.

      chrisconder

      2012/05/09 at 10:02

      • Yeap 75% should meet the EU 30 Mbps target. Note I still say should, not will.

        In terms of full cabinets, people are reporting additional cabinets in areas with high demand. So not unlike the ADSL roll-out where one DSLAM was installed, and then a second added when capacity needed it.

        The ASA rules may lead to cherry picking, already you cannot order Infinity if estimate is low. You have to order BT Total Option 3 with Fibre instead.

        There is the wildcard of Fibre on Demand in FTTC areas, where in 2013 those willing to pay can get full fibre to the home. This may free a VDSL2 port, and for the 10-20% who want the 300 Meg/30Meg services they will have the chance to buy it. Price unannounced, but £500 to £1500 is all BT will suggest when talking to them.

        On the exchange only line issue, got an answer recently, that as funding allows then cabinets or FTTP will be used. With Government money so well signposted since 2008/9 then no surprise to see a teleco doing all the easy stuff on its own, to then take a hand-out to part subside the rise. Even if BT gets all £1.3bn they are expected to add around £1.1bn of their own money.

        I cannot clarify future BT statements, no one can, until they are made and when they are I try to give as clear an idea as possible. Not just BT that play this game, CityFibre claim is it 25,000 homes passed in Bournemouth, non of the connected fibre stats show anything like this figure. IFNL talk of 50,000 homes, but believe this includes new builds still in the pipeline.

        Andrew Ferguson

        2012/05/09 at 10:18

      • Thanks Andrew, glad you are around to keep me straight with all these facts. One more for the pot. What happens when your ISP gets fed up with you downloading all day on a fast connection? Are we still going to see all this throttling and capping, which will virtually kill off the speed increase we got? Or what price will we have to pay for ‘unlimited’?

        chrisconder

        2012/05/09 at 10:24

      • What’s this ‘Those on cabs that are full before the lines are migrated’ about?

        You seem to be desperate to run down any service that gives customers an improvement, why?

        Somerset

        2012/05/09 at 10:51

      • The new cabs can’t take all the lines from the old ones, so its first come first served in one area I was looking at, maybe this is just a one off, but I doubt it. I would love evidence to confirm or deny.
        As for running down any service, no, it will be very nice for some to go faster, but it remains a waste of public money if any is used for cabinets. We have just upgraded our little wifi network but no public money was involved. We know its a waste of money, but its our money and it will keep us going until we get onto the B4RN fibre. BT are welcome to put as many cabinets in as they like, wherever they like, and good luck to them. Where public money is concerned it has to be used for something that is futureproof. Cabs are not. You can put what you like in the cabs, but the old phone lines are not the future, nor is the complicated wholesale model rationing how much goes to everyone. The internet has abundance. Our out dated infrastructure turns it into a scarcity model.

        chrisconder

        2012/05/09 at 11:58

      • “What happens when your ISP gets fed up with you downloading all day on a fast connection? ”

        Basically read the Terms and Conditions before signing on the dotted line.

        There are services that cater for people who want to download and upload all day, they may not be the cheapest of course.

        Broadband history pretty much always has one provider will to take the hit from people using 2TB or more a month, Sky being the current one.

        Sky manage it by allowing natural contention to take effect on its fibre backhaul, the result can be high latency and worst case packet loss until they decide to upgrade fibre capacity in an area.

        The UK average usage is 17GB a month (Ofcom data from 2011), so possibly 20GB by now. Virgin Media reported a higher figure of 25GB at that time.

        The rise of TV viewing OTT will accelerate this, but there will come a point where this slows down, i.e. you can only view so much TV at once.

        Andrew Ferguson

        2012/05/09 at 11:34

      • A 500k connection used for 4 hours a day will download 20GB/month…

        Somerset

        2012/05/09 at 11:52

      • What do you mean by ‘take all the lines from the old ones’. FTTC cabinets are sized for demand and expanded if required according to those who know.

        So… the government should fund the rollout of FTTP to all. No other way of doing it while people want to pay less rather than more for investment. This is the only option.

        Are the VM and C&W/Sky/TalkTalk LLU networks a ‘scarcity model’?

        Somerset

        2012/05/09 at 12:12

  3. Seem to have wandered off the 80meg topic. sorry Ian. The fact remains that if we were all on a proper fibre connection instead of via a copper phone line we wouldn’t be having this discussion anyway. I agree, we need a high fibre diet, do the job once and do it right. Fibre to the home. Start with the rural areas, build altnets, provide competition, and the telcos will soon up their game and stop pretending next generation access can come through obsolete technology. I just wish all the digital switchover money wasn’t going to be wasted on cabinets. That is gonna be a hard lesson for government to learn.

    chrisconder

    2012/05/09 at 10:28

    • But we still need to sort out the funding. How much FTTP would the DSO money provide?

      FTTC is not obsolete technology (soundbite alert!), it’s a current product from manufacturers.

      Hang on though – is there a large demand for faster speeds beyond 5M/10M or whatever? Yes for those with next to nothing, but they are the ones that are expensive to serve.

      Somerset

      2012/05/09 at 11:06


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