Following the broadband money

End game for traditional telco model

with 23 comments

The end game for the traditional telco business model is already in play.

On 12 February the European Commission cut €8bn from its €9.2bn broadband fund. This was money that telcos expected would be coming to them to spend on fibre networks.

The next day, the ITU said, “The move to IP-based communications is irreversible – and the timescales for business models, regulatory frameworks, development cycles and infrastructure investment in the internet world and that of traditional telecommunications may be dangerously out of sync.”

BT's Don Clarke - programming the network

BT’s Don Clarke – programming the network

And on Valentine’s Day, at the launch of its software defined network strategy, Huawei’s director of dolution marketing, Dai Libin, said telecoms operators “had to change their genes” if they are to survive. They can no longer afford to provide ever-faster performance if they cannot also reduce costs the way the computer industry has, he said.

That same day saw the official launch of B4RN, the community-funded point to point fibre to the home network in rural Lancashire. B4RN customers get a nominal 1Gbps symmetric service for a £150 connection fee plus £30/month, which you can halve if you want to give up your BT phone line and rely on Skype for voice calls.

In contrast, BT’s up to 330Mbps fibre on demand service, due out in spring, will cost £500 to connect and £38/month, plus a distance-related fee averaging £1,000. And it will be available only in BT’s fibre to the cabinet footprint. And you’ll have to hold on to your £15.45/month phone line.

Some at BT are certainly alive to the threats. Last October BT told ISPs about its new Multiservice Edge (MSE) roll-out that will see more than 500 data centres installed around the country on the “edge” of its network. This is to cope with greater consumer demand for data services, it said.

MSEs will give BT Vision subscribers a better quality experience because it cuts down the distance signals must travel. It will also improve subscribers’ experience of Netflix, Facebook, YouTube and other “over the top” (OTT) services too.

BT is also deeply involved with ETSI’s effort to standardise how certain network functions are virtualised; Don Clarke, BT’s head of network evolution innovation, is the working group’s technical manager, largely because he’s been studying the problem for the past two years.

Virtualising the network means that networks will be programmable. According to the pitch, it will be quicker and cheaper to provide and change services because all the devices in the data centre will be virtual machines and will run on very fast industry standard servers. Provisioning and changes will be done via a dashboard rather than physically patching cables and using command line instructions to install and set them up.

This situation pretty much is at least partly true already for core networks, if only because Cisco so dominates this market that it is effectively the industry standard. But this ETSI network function virtualisation (NFV) initiative is really about increasingly that agility across the entire network, even right into the home.

Clarke says his team wants to finish its initial work within 18 months. Telecom standards can take years or even decades to establish, so this urgency suggests a penny has dropped somewhere.

This software defined networking and/or NFV heralds so many changes in the traditional business models of equipment vendors and telcos that we could be at what the gurus call an inflection point. It is like the meteor that some say wiped out the dinosaurs.

It’s not the only source of change. So many subscribers are giving up their fixed line services for mobiles, or taking up cheaper offers from unbundled local loop operators like Sky and TalkTalk, Ofcom is reportedly toying with the idea that the duopoly enjoyed by BT and Virgin Media should end at the kerb rather than at the wall plug inside your house.

This could make it easier for new fibre network operators like B4RN and Gigaclear to compete with BT and VM (and may be partly why VM was sold to Liberty Global, a US-based European cable TV operator). This is because the home owner could, as they do in Scandinavia, dig his own trench to the kerb and connect to his service provider of choice. This would save the operator a lot of time, hassle and cost, around £100 per household.

There is already a robust public interconnect standard (Active Line Access), so in theory this should not be a problem.

However, BT is the monopoly fixed local access infrastructure provider in two-thirds of geographic UK. The reserved 800MHz mobile licence currently at auction will provide only a 2Mbps indoor connection. So for fibre to the kerb to happen on large scale Ofcom would have to revise the terms of BT’s physical infrastructure access (PIA) product. PIA’s costs, terms and conditions meant that none of the eight other network operators invited to join the BDUK purchasing framework for next generation access in rural areas was able to make money in competition with BT.

We can be sure BT (and other incumbent telcos) will continue to fight for its monopoly while building its replacement network. But will it run out of customers and money before the new network is fit for purpose?


23 Responses

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  1. Shame there isn’t more competition. Shame the BDUK money didn’t go to altnets instead of protecting this obsolete monopoly.


    2013/02/18 at 20:49

    • It would help to know what, exactly, is this traditional telco model that is ending and what is the model of VM, Sky, and TalkTalk.

      ‘ the duopoly enjoyed by BT and Virgin Media should end at the kerb rather than at the wall plug inside your house’ Don’t understand. C&W and all the other licenced operators must surely have this as well.


      2013/02/18 at 22:42

      • So what is ‘obsolete’ and what’s the kerb thing about?


        2013/02/22 at 12:22

      • What is obsolete is a business model based primarily on voice. The ‘kerb thing’ is related to the increasing use of mobile for the final drop and consequent relevance of the final drop for service delivery rather than backhaul.


        2013/02/22 at 14:15

      • Do any telcos have a business model based primarily on voice? Could be increasing use of wireless and mobile means that maybe FTTP will become less important for many. But, above you said ‘kerb’ related to digging to the pavement and not mobile, which is it?


        2013/02/22 at 14:57

      • Or is it actually to do with line rental which includes voice via a white socket and then the addition of broadband. Many people just use mobiles for voice. BT Smart Talk uses a mobile connecting via wifi to the internet link but bills to the home number so in the future all is needed is a broadband line over copper or fibre. Discuss.


        2013/02/25 at 14:24

      • Why restrict local access media to copper or fibre now that BT has 2x15MHz plus 1x20MHz of 2.6GHz spectrum. What about coax, come to think of it…


        2013/02/25 at 16:51

  2. Is there a BT monopoly in the 50% of UK properties where VM passes or where wireless or a FTTP supplier is available? How much would a B4RN connection and rental be if the labour etc. was only available at commercial rates?

    Yet again we have to ask Chris why she says BT is ‘obsolete;. It would help to know how much an altnet would need from BDUK to roll out FTTP in a typical white area of the UK. Good though the B4RN project is with community involvement it’s likely that in a great many places unfortunately this would not be forthcoming and in built up areas, even villages, with roads and pavements what could a community do other than, possibly, dig across their garden.

    It would help to have an intelligent detailed discussion without soundbites…!


    2013/02/18 at 21:05

    • Hello,
      I love how you string these unrelated things together! it’s quite amusing!

      oh and I think I have proved already that Barn is an up to 1G solution can we please please refer to it properly!

      MSE is a key pillar in BT’s network strategy that we are driving through, and its all about quality of experience and it links to many things in our network strategy. (PS the link above in your amusing post doesn’t seem to go anywhere a but like the pretext to your conclusion!)

      NFV is a technology idea Don and co are researching. The genesis of it dates back to pre 1995 were we ran routers on UNIX boxes.

      It will be a long time (if ever) before it replaces core components for transmission and packet exchange, NFV is great for caching, DNS and other network support functions such as load balancing, firewall etc. But it won’t replace routers, or optical technology. One should also be cautious that the challenges of virtualisation might even make this not work. Today we can have tens of thousands of VMs in a datacentre, how do you manage this? hôw do you manage the network that links all these VMs? how do you find one faulty vm? Today you can buy virtual routers and run them as VMs but they all run the same software that normal routers use so I doubt there will be a large speed advantage. And Cisco no longer dominates this market.

      Many network companies offer their appliances as virtual machines, BigIP for example. NFV programme at ETSI is focused on those issues but it will be the traditional router manufacturers and perhaps some new challengers that drive this space.

      Whilst I am glad of the work going on at ETSI I think the pace of development in this space will mean standards bodies like this follow rather than lead. I am in Israel right now where I’ve seen some very exciting future virtualisation technologies that are already overtaking the speed that NFV is working at.

      In order to route at 100G you need custom silicon, regular servers even high end ones are well off this, and we already see 400G and 1T routing in trials.You will never see a server doing the computational requirements of a DSP on coherent optical platform.

      Beware though NFV is +not+ SDN. SDN I currently sit on the fence waiting for the use cases that really show me the benefit of it. Today SDN feels like ATM and SDH all over again. It feels like trying to make something like IP that is dynamic into something that is static. Do we need evolution in how we manage networks, yes, is this the answer? I am not convinced – yet.

      Also remember that other CP’s use Openreach for most of their network without Openreach and LLU they wouldn’t exist today but the infrastructure they consume is the same copper infrastructure you seem to think is obsolete despite G.Fast delivering up to 1G! Not sure what the 800MHz reference but then again mis-information seems to be a key theme of this blog.


      2013/02/18 at 22:07

      • Sorry about the broken link to the Multiservice Edge document. Try Googling “ISP_Forum_4th_October_slides_FINAL_SHOW_for_website_loading”, but I imagine you can get it on the BT intranet.
        Please do tell us more about MSE, what it entails and what we can look forward to.


        2013/02/19 at 00:21

    • Still on the properties/area confusion, eh, Peter? Give it a rest.
      You should ask how incumbent telcos, most of them former state-owned monopolies, have managed to alienate customers to the point where they are prepared to invest their own time and money building alternative systems.


      2013/02/19 at 00:31

      • Let’s all be clear that it’s properties that matter, not geographical coverage for homes and businesses. As a state owned monopoly those telcos would probably have covered every property, but should any commercial company have to? Maybe the answer is to revise the all can have fibre broadband for £13.25/month from Talktalk.


        2013/02/19 at 20:05

      • Let’s be clear that it’s people, not properties, that matter. People, not buildings, pay bills. Telcos seem to have forgotten this. So when folks come along with cheaper, more interesting offers (VoIP rather than POTS voice), traditional telcos lose out. (See note on Skype and international voice traffic.) The problem for telcos is that they don’t make anywhere near as much money from VoIP calls as they do from POTS calls. As you point out, they are not averse to taking advantage of those economics themselves. I agree that the USO needs to be reviewed to see if it is still fit for purpose when as we speak BT is doing its best to build its IP-based Multiservice Edge network as fast as possible. I’m guessing, but I would think that BT would want to pipe voice calls into that network as early as possible to save costs. Will any of that saving be passed back to subscribers? Neil, perhaps you have a comment on this? .


        2013/02/19 at 23:20

  3. sorry but the evidence doesn’t support you – There are a handful of people that are doing their own digs. The majority are leveraging the infrastructure that Openreach and others are building. Openreach makes this available to all operators – Over 13 million homes are on FTTC footprint and many network operators are leveraging this capability more are connected every day. Openreach is recognised across the industry at having built one of the fasted and most aggressive FTTC roll outs (their words not mine) in the world.

    BT has over a million subscribers on Infinity…



    2013/02/19 at 09:46

    • hmm Infinity.. that BT retail product that was promoted by all levels of council/LA, In West Sussex at least. The “race to infinity” marketing via public bodies could have been seen as a remarkable achievement for BT retail if it was not for the fact it was more down to political and public ignorance.

      Bill Lewis

      2013/02/19 at 18:33

  4. one thing i will pull you up on in the main article here, you refer to Skype.. But fail miserably to point out the huge benefits of proper VoIP over B4RN and fixed wireless for that matter. Businesses use VoIP , Skype is viewed as a best efforts system for home use mainly.. which of course it is..

    Bill Lewis

    2013/02/19 at 18:35

    • And huge amounts of VOIP running over networks provided by many telcos across the world (including BT Ian!). When you talk to a call centre in India it will be VOIP over fibre.


      2013/02/19 at 19:55

    • Skype is a bit more that home use, Bill. TeleGeography says its now the biggest international voice ‘carrier’, and it is responsible for whatever growth there is in international voice calls.


      2013/02/19 at 22:58

      • MSEs are for BT Wholesale customers, so no monopoly issues there.


        2013/02/21 at 19:56

      • So anyone can sell MSE access, products and services in competition to BT Wholesale. Is that what you are saying?


        2013/02/21 at 20:19

      • If you buy Ethernet from wholesale you use an MSE. if you buy WBC/WBMC you will use a. MSE in the future.


        2013/02/22 at 07:32

      • OK. What’s the difference between the current BRAS and the new MSEs?


        2013/02/22 at 14:10

    • Skype is used by many businesses and more often than not is a better service owing to the way they contract with their termination partners. I’d put money on it Skype’s MOS rating is better than most VoIP providers.


      2013/03/03 at 21:42

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