Archive for June 2012
It appears that BT and Fujitsu have signed contracts to supply broadband infrastructure under the BDUK framework following months of negotiation between the department of culture media and sport and the European Commission’s competition authorities over state aid issues.
Unconfirmed reports on the EDP24 website say the county councils’ broadband procurement programmes can begin at last after the names of the two suppliers were revealed last night. However, the press release sites for BT, Fujitsu, DCMS and the DG Competition, which has to rubber stamp the terms and conditions for state aid, carry no mention of the deal.
Br0kenTeleph0n3 understands that a deal has been done, but it’s being downplayed as a ‘soft launch’. However, officials have been told not to deny it if asked.
The government has set aside more than £830m of taxpayers’ money to extend high speed broadband into rural areas and provide cities with up to 100Mbps services. Contracts are expected to enjoy matched funding from the suppliers, and unknown millions more from the EU and other sources like Defra.
The hold-up was apparently due to the DG wanting taxpayers’ money spent on projects that would see the UK’s broadband not spots gets access to a minimum 30Mbps download service between now and 2020. This is above the proposed 24Mbps previously offered by BT and Fujitsu.
BT and Fujitsu were later said to be refusing to sign the procurement framework contract because the extra 6Mbps target is likely to raise their costs considerably. However, contracts already signed, such as in Cornwall and Rutland, will apparently go ahead because they were done outside the BDUK framework.
Cumbria County Council recently rejected proposals from both suppliers, sayin it is looking for a ‘future-proof’ solution.
It will be interesting to learn who blinked. Did BT and Fujitsu agree to go for a minimum 30Mbps service? Did DCMS agree to give them more taxpayers’ cash? Did the DG compromise Europe’s Digital Agenda targets in the UK’s case?
We hope to find out on Monday.
The time has come to consider whether CEO Ian Livingston’s cost-cutting at BT has now started cutting into bone.
That he has been successful so far is without doubt. Livingston managed to pump £2bn into the pension fund just before year end, he’s been able to blow £786m for the rights to screen 38 football matches, the share price has doubled, and he’s raised the dividend from £388m in 2011 to £453m. He claims ‘superfast broadband’ now ‘passes’ 10 million homes. No doubt many shareholders feel he’s earned his £7m salary.
At the sharp end, i.e. where people dig trenches, lay duct and hook up customers, things look different. The Surrey village of Ewhurst is no stranger to disappointment brought on by BT. For years it has tried to get high speed broadband into the village, so far with negligible results, thanks to BT.
Villagers’ hopes lifted about a year ago when BT published plans to upgrade their street cabinets with fibre backhaul. Now it seems unlikely Ewhurst will see a next generation connection before September.
There may be many explanations for the delays, but some are clearly of BT’s own making. Take this Reversed PCP 5352 cabinet, right outside the post office at Cranleigh, whose BT exchange serves Ewhurst. The housing has been put on back to front and cemented in. So the next time a lineman needs access to the frames, it will be all but impossible for him to get at them.
Is this the only problem? No. In a videotaped council meeting Waverly councillor Diane James described progress in Ewhurst as “way behind schedule”. Ewhurst was meant to be finished in March, and now looks like missing the June deadline, she told fellow councillors. “The activities of BT and its agent are at best shambolic and incoherent,” she says.
According to Walter Willcox, who also took the pictures, Ewhurst has “two cocked-up (street cabinet) planning applications, a set of damaged cables where the idiots rammed their drain rods, so potential damage (has) still to manifest itself, a re-sleeved PCP put on back to front, and now a long length of large ducts which also ought to be excavated entirely.
“Then add the Cobblers Brook lash-up (with fibre rental @ £105,000 p.a.), at least three truncated electricity poles, a still-connected line protection unit giving a very nasty bridged tap condition, at least two poles with dangling redundant drop wires providing excellent radio connections via cross-talk, and finally an unknown quantity of rotting aluminium alloy cables buried un-ducted directly in the ground.”
Willcox has been documenting BT’s efforts in Cranleigh. “We now have details of two FTTC services in Cranleigh; the first installation near Notcutts went well and provided a capped downstream IP Profile of 38Mbps and an upstream one of 2Mbps over a distance to the FTTC (cabinet) of about 712m. (BT promises ‘up to’ 80Mbps downloads.)
“The second installation in (name withheld) with a FTTC cabinet distance of 439m is one of the worst examples of BT’s incompetence over a trivial fault I have encountered, even though now there is a good downstream IP profile of 73 Mbps and an upstream one of 20 Mbps on a premium service.”
That customer kept a log (BTInfinityfault log) of BT’s actions from when he ordered Infinity. It took BT six weeks and five engineers to install his service, which went live last weekend.
Some will say that Ewhurst’s problems are what you’d expect for shooting your mouth off at a monopoly. That may be true, but that is neither acceptable nor the point here.
What should worry county councillors deeply is that they have to spend taxpayers’ money on next generation broadband procurement, but how much might have to go to fix up BT’s duct and pole infrastructure. Then there is money they might have to spend to repair shoddy or incompetent work, such as the resleeved cabinet in Cranleigh.
The Ewhurst saga demonstrates a lack of professionalism, of historical jerry-rigging, and a willingness to do what is expedient. We must hope it is unique. After all, Sean Williams, BT’s director of strategy, assured the House of Lords communications committee ( videoat 17:08:13) that BT’s Infinity roll-out is a mass market, industrial-scale effort, and shouldn’t be disturbed. The hard evidence from Ewhurst is to the contrary.
There are now serious doubts over the government’s programme to get “the best broadband network in Europe by 2015” following Cumbria County Council’s decision to reject bids from BT and Fujitsu for a £40m next generation broadband network.
In a statement this afternoon, the council said it would enter fresh talks with the two firms to get the network Cumbria has been looking for all along. A decision is expected in September.
“Neither of the final tenders had completely fulfilled the original, and full, requirements of the procurement process,” it said. Despite extensive talks between Cumbria and the suppliers, the bids met neither the technical specification nor the funding terms Cumbria had called for.
To be fair, BT has been upgrading its copper network in Cumbria at its own cost. But its capabilities fall far short of what the council expects from a next generation network.
Fujitsu has still to build a public access network in the UK, and was widely expected to get the nod in Cumbria. This is said to be to keep BT on its toes and to preserve the semblance of competition for most of the £830m the government has earmarked for next generation broadband.
How we got here
The government set up Broadband Delivery UK shortly after took power to set up the procurement and disbursement process. Following Vince Cable’s faux pas over the BSkyB bid, responsibility for BDUK shifted to Jeremy Hunt’s culture media and sport department (DCMS), whose first priority has been the London Olympics.
Public procurement specialists, believed to be as many as 20, from the audit firm KPMG were drafted in via a Treasury framework procurement deal to help BDUK. According to insiders, none of the KPMG secondees had ever procured a large communications network. However, the rate for their junior staff is reputed to be more than £1000 a day. DCMS has refused to answer Br0kenTeleph0n3’s Freedom of Information Act request to provide details of the consultants’ qualifications and day rates.
The disparity in pay and the lack of technical expertise is believed to have led to friction between the permanent and drafted technical experts and the KPMG staff. Several DCMS reorganisations have seen staff with telecoms experience moved or or out.
BDUK set up a procurement framework that was guaranteed to exclude all but the biggest supply companies. Nine were invited; two, BT and Fujitsu, are still in the running. The rest say among other things, the Ofcom-approved terms and condition that govern access to BT’s poles and ducts made for a ‘incontestable’ environment.
Neither BT nor Fujitsu has signed up formally to the BDUK framework because the European Commission’s DG Competition, which rules over state aid disbursements, has so far refused to approve it. It is believed DG Competition is doing so because BDUK’s proposed procurements would lead to taxpayers’ money going into networks that would fall short of Europe’s Digital Agenda targets. These are for a universal 30Mbps service with 50% of citizens using a 100Mbps broadband service by 2020.
This has delayed local procurements, which are to be led by county councils. Cumbria felt it could no longer wait, and set off on its own, as it is entitled to do.
The present delay is not the first. Cumbria was meant to have picked a winner in January. But it may be the last.
It is less clear what will happen with councils that stay with the BDUK procurements, and the money. There are some clues. DG Competition quickly gave the nod to Birmingham’s plan for a state-aided, £10m, wholesale-only, open access, fibre to the home network that will supply everything from dark fibre down to anyone who wants to resell it.
It is understood that both the UK and European authorities are less anxious about broadband network procurements in cities, where there is usually a choice of network operators, than they are about what happens in rural areas, where BT has a regulated monopoly. However, the speed with which DG Competition approved Birmingham points to a preference for the features included in its proposal.
In addition, the European Commission’s vice president and Digital Agenda champion Neelie Kroes is on record saying national regulators have to make incumbents open their networks and to sell dark fibre.
That gives BT a massive problem. Having to sell dark fibre would destroy the business case for a fibre roll-out, BT’s director of strategy Sean Williams told the House of Lords communications committee. Installing fibre is five times more expensive than copper, he said.
Williams did not provide evidence to back this assertion, but if it is the case, it is hard to understand why Ofcom has not investigated why BT is selling its copper broadband for the same price as its fibre broadband. Or perhaps it knows. After all, Williams worked for Ofcom and was, he told their lordships, responsible for Ofcom’s broadband strategy.
So it seems the UK has a stand-off. BT is religious in its determination not to sell dark fibre; BDUK can’t disburse taxpayers’ money, so a lot of voters can’t get next generation (or even first generation) broadband.
It is hard to see how this will resolve itself. In the meantime, potential investors go elsewhere, talent follows them, and the UK grows a little less competitive every day. The only winners are BT’s shareholders, but for how much longer?
The blame for this must fall on BDUK, DCMS and ultimately, the culture secretary. If Hunt could escape the sack over Sky, he is definitely sackable for this cock-up.
Birmingham has won the EU’s permission for a £10m bung from the UK government’s city broadband scheme that will see it put in a new open access fibre network to provide dark fibre, 40Gbps managed services, 1G/100Mbps Ethernet, colocation services and backhaul for wireless networks by 2015.
The European Commission’s competition authority, which is sitting on BDUK’s rural broadband procurement framework proposal because its targets are too low, gave the nod to the release of €6m in public funds “because it will be genuinely open to all operators and will therefore promote competition”, it said in a statement.
Phase one will include an initial 37km duct for FTTP (fibre to the premises) project, in the city’s Jewellery Quarter and Digbeth/Eastside that passes about 5,000 businesses. Phase 2 will hook up other “digital districts” , notably in the Eastern Corridor.
The commission said service providers will have open access for at least 25 years instead of the required seven. And the network will be wholesale-only. “Finally, all possible wholesale access products will be offered to third party operators, including dark fibre, which is one of the most pro-competitive wholesale access products,” it said.
A £100Mbps symmetric service could cost £200-£300 a month, a quarter of present prices, according to the the Birmingham proposal. The city expects a 30% take-up by Year Three.
The city expects to select a partner by January 2013, for work to start that March, and to be finished by March 2015.
David Harrington, spokesman on regulatory affairs at the Communications Management Association, was kind enough to respond to my invitation to give us a view from the business communications users’ perspective on the government’s plans and procesess to develop the next Communications Bill. This is what he says.
Either government policy on the communications sector is in chaos, or it’s founded on a deliberate, laissez faire approach that lets the industry slide into a state where infrastructure competition no longer has a role to play.
On the one hand there is an apparently disjointed programme of handing out taxpayers’ cash, in which several Whitehall departments are engaged against a backdrop of EU rules and (some) EU money, overshadowed by the fallout from Leveson. On the other we are seeing Openreach extend its dominance in the provision of broadband access and the MNOs moving ever closer in sharing their physical infrastructure. There are Ofcom-imposed restrictions on how BT’s physical infrastructure can be accessed and there is a marked reluctance to encourage (never mind support) the smaller players in the market for FTTC/FTTH.
Oddly enough, there’s a certain synergy between these seemingly binary positions: the chaos theory, while superficially politically embarrassing, is small beer in comparison to Leveson and the Euro crisis and is a convenient mask for laissez faire.
It seems likely, therefore, that the era of the “railtrack philosophy” is creeping up on us, driven not by regulatory intervention on a scale larger than that seen during functional separation, but by a realisation that there is only one company with the clout to fill the final third with fibre (of some sort or another). Meanwhile the government’s limp-wristed approach to the 4G auction debacle encourages site sharing and wider cooperation in infrastructure between the MNOs. It’s becoming ever clearer that the Commission’s (and hence the UK’s) devotion to infrastructure competition is at the end of the road.
While lack of competition in the provision of wireless, copper or fibre has been referred to historically as the “bit-pipe nightmare”, that was at another time and in different economic circumstances. It’s entirely feasible to postulate that a national carrier would thrive on carriage fees charged to OTT players and would innovate and invest in response not only to regulatory pressure but also to demands from content providers and end users. Competition would be fierce at the service and content level. Current issues such as net neutrality and the lack of a broadband USO would be seen in an entirely different light against a regulatory policy refined for a utility sector that would be similar to, but rather different from, the other utilities.
Would a national ‘digital railtrack’ be good or bad news for business customers? Would it improve UK’s position in the ECTA scorecard or in OECD league tables? It’s not possible to be certain at this point, but UKplc is unlikely to be worse off. The next five years are going to be exceptionally interesting.
Harrington adds that CMA will press for Ofcom be required to give business users as much attention as they do the citizen-consumer. On content competition it will press for a stronger “open access, carrier neutral” stance in regulatory policy.
The government has released a schedule of seminars designed to gather information that will inform the Green Paper that will lead to a new Communications Bill in 2015. The supporting rationale suggests it is bent on solving last century’s issues, not those of a fully digital, hypernetworked, globally competitive economy. In short the department of culture, media and sport (DCMS) just doesn’t get it.
Starting in July delegates will address
- The Consumer Perspective (4 July)
- Competition in the Content Market (9 July)
- Maximising the value of spectrum to support growth and innovation (12 July)
- Driving investment and growth in the UK’s TV content industries (16 July)
- Supporting growth in the radio (audio) sector (September)
Fundamental to the debate is the broadband market in the UK, which underpins everything DCMS would like to happen. The government appears to think this job is done. It is wrong.
It says it “is already investing a total of £830 million by 2015 into improving broadband connectivity in poorly served, mainly rural areas, upgrading mobile infrastructure and establishing some of Europe’s best connected cities. Government must now also consider the other crucial building block of digital infrastructure: spectrum.”
In fact, there is not yet a single live line in the country that has come through the BDUK procurement framework process, which governs the £830m. The nine firms invited to pitch for the business resulted in two suppliers – BT and Fujitsu – hardly a rampantly competitive scenario.
Furthermore, the European Commission has stalled the release of BDUK’s funds because none of the UK proposals put forward so far meet its target of a universal 30Mbps broadband service by 2020. There has been some movement on this; existing contracts such as Cornwall, which offer “up to” 24Mbps, will be allowed to go ahead, but new ones must meet the 30Mbps target.
The timing of the seminars is curious. Not only is DCMS distracted by the Olympics, but the House of Lords communications committee is looking at the broadband issue. It has heard evidence that the fibre to the cabinet solution proposed by both BT and Virgin Media is a technological dead-end, unlikely to meet Europe’s secondary target of 50% of users receiving a 100Mbps service. The committee’s findings and recommendations are unlikely to inform the seminars, but may be out in time for the Green Paper DCMS hopes to publish early in 2013.
Similarly with Ofcom’s business connectivity review. This three-yearly review of the network services available to businesses, such as leased lines and backhaul, will not start before July, an Ofcom spokesman says. Its conclusions, which will assess issues such as competition levels and barriers to entry in this £2bn/y market, are unlikely to be available much before year-end. This leaves little time to absorb and debate them before they are incorporated, or not, in the Green Paper.
Fit for purpose?
It is true that DCMS has some important issues to put to bed. These include online copyright, content creation and protection, and access to content. However, these issues derive from rather than drive the physical networks.
The government appears to believe that the UK has a network infrastructure fit for purpose for the networked age. There is plenty of evidence that this not the case.
At the consumer level there are just two physical networks, BT’s and Virgin Media’s. They presently overlap, duplicating coverage for about 50% of the UK’s houses. It is unlikely that VM will go much further than this for fear of being forced to provide third parties like BT with physical access to its ducts or wholesale access to its fibres and cables.
This is likely to leave BT with an effective fixed network monopoly in the two-thirds of the country where the “Final Third” of the people live. Of course, there are other fixed networks, such as those of Geo, of Cable&Wireless Worldwide, of Vtesse Networks, that criss-cross the country. But they do not offer connections to residential customers. Some, such as Gigaclear, do. But they are very small and their business models fragile.
BT has a product, PIA or physical infrastructure access, that allows third parties access to its poles and ducts. So far only Andy Conibere’s CallFlow Solutions has taken it up. Matthew Hare, CEO of Gigaclear, says CallFlow can do it because it gets its money upfront from customers. Hare has looked at PIA and rejected it. He’s put off not so much by the price (which Fujitsu and Virgin Media say is way higher than cost) but by the terms and conditions.
“You can use PIA only for residential customers,” he says. “BT knows that any viable business plan to service rural areas relies on being able to go to all customers, including businesses,” he says.
That’s not all. Hare says, among other things, you have to disclose your entire roll-out plan, and pay BT to survey the ducts you want to use. “They should know what’s available and what condition it’s in,” he says.
Other firms, such as TalkTalk and Sky, simply rent BT’s local access networks to deliver TV, broadband and voice services to customers. The rent they pay BT, or rather Openreach, ensures that BT still profits from the transaction. This is common practice throughout Europe
Then there are the wireless network operators, led by the mobile phone companies (MNOs and MVNOs like Virgin Mobile who rent their entire network infrastructure from Vodafone, Orange, O2 or Three). They are increasingly interested in serving data products to consumers, but preferably only in towns. Besides, they have to rent space on fixed networks to hook up with the UK’s core networks and internet peering points.
This is why Vodafone’s mooted takeover of CWW is a possible game-changer; it gives the mobile operator instant access to a fixed network whose backbone is probably as extensive as BT’s and which could backhaul wireless local access links in competition to BT. It also responds to the £100m, eight year backhaul deal between Virgin Media Business and MBNL, the network company for Everything Everywhere (O2 and Orange) and Three, signed in September 2011.
The only wireless network operator with coverage comparable to BT is Arqiva, whose main job is distributing TV and radio broadcasts. BT and Arqiva are in a joint venture with Detica to compete for the network for the smart meter project that will connect the UK’s 28 million homes and offices.
The UK has the world’s second largest independent television production sector, is the second biggest exporter of music, the largest video games industry in Europe, and the fourth largest film market. That suggests the UK’s content businesses are doing all right.
DCMS says the “creative industries” including publishing, contribute 2.5% of GVA (gross value added), about £36bn, and employ 1.5 million people. Ofcom’s Communications Market report for 2011 largely corroborates it. It says TV revenue was up 5.7% to £11.8bn, radio was up 2.8% to £1.1bn, recorded music was down 8.6% to £1.2bn (but legal downloads were up 5% to 24% of sales), advertising was £16bn, 24% of it online, about the same as TV.
But that hides some problems. Publishers and other rights holders worldwide have been stunned by the proliferation and fragmentation of media. Facebook, Twitter, YouTube, Huffington Post, Google, Amazon etc have made mincemeat of business models that depend on high-priced access to exclusive content.
Even so, it is staggering to find DCMS wants to debate “whether convergence in the content market should require a degree of convergence in the telecoms/broadcast competition regimes”. It is hard to know what this actually means. It makes no sense unless it is a veiled threat to the ability of the likes of Google, Amazon, Apple and Sky to do deals that aggregate content and deliver it to customers for a price they are willing to pay.
These firms provide platforms for ordinary people to create and distribute their own content, without bothering cartel-like middlemen like record companies and book publishers.
There are things to be said about excessive market power and abuse of personal information, whose disclosure is often the price paid. But that is a different issue to one that should inform a Communications Bill.
By ignoring the issue of competition at the network infrastructure level, the government is in danger of condemning the UK to a sclerotic digital infrastructure that is not fit for purpose in the 21st century.
By missing or ignoring the fact that the future networks are as much about uploading and sharing as downloading and consuming, the government risks duplicating the content distribution cartels of the previous century.
Let the debate begin.
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.
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.
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.