Archive for the ‘Uncategorized’ Category
The Welsh government and BT have promised to start work on delivering fibre to the cabinet in every Welsh exchange by this time next year, but it may be too late to meet its deadlines.
Today’s official statement by deputy minister for skills and technology Julie James says “Work is planned to start in every telephone exchange in Wales by the end of September 2015 bringing superfast internet speeds to even more villages and towns across the country.” The finish date is Spring 2016. That gives BT, the sole contractor, six to nine months to fibre up some of the most difficult terrain in the UK.
The statement goes on to say “approximately 400 engineers (have) worked more than 400,000 hours on the project”. That’s about 25 weeks each to pass 230,000 homes and businesses. According to Welsh government statistics, there are about 1.3 million homes in Wales. Assuming that the initial 230,000 are the “low-hanging fruit”, the rest should take them at least 120 weeks. Starting this month, that makes the finish date early 2017, assuming the squad stays the same.
The £425m Superfast Cymru project, which will see 17,500km of fibre installed to connect around 3,000 new green roadside cabinets, is already under government scrutiny over value for money. The Auditor General for Wales is expected to deliver his report by the end of the year.
According to the statement, £205m of funding has been provided by the Welsh government, the UK government and the European Regional Development Fund, with BT contributing £220m via its commercial roll out and the Superfast Cymru programme.
Even if BT his its deadline, there are likely to be questions over the broadband speeds delivered. The contract (obtained under a Freedom of Information request by broadband consultant Richard Brown) commits BT to the following targets by 30 June 2016 or at the latest by the ‘Drop Dead Date’, which was redacted:
1. 90% coverage of all premises in the ‘intervention area’ at >30Mbps PPiR and a minimum of 2Mbps CIR (committed information rate)
2. 95% at >24Mbps with a minimum of 0.5Mbps CIR
3. 40% coverage with >100Mbps with a minimum of 10Mbps CIR.
Whether this will ignite the white-hot digital inferno that the government hopes for remains to be seen.
Communities scheduled where work is set to begin by the end of September 2015 are:
Conwy: Capel Curig, Dolgarrog, Dolwen, Llanfairtalhaiarn, Llangernyw, Penmachno, Pentrefoelas
Denbighshire:, Llannefydd, Nantglyn,
Carmarthenshire: Brechfa, Dryslwyn, Gwynfe, Madox, Rhandirmwyn
Monmouthshire: Crucorney, Dingestow, Ponrilas, Shirenewton, Skenfrith, Tintern, Trelleck, Wolvesnewton
Pembrokeshire: Angle, Castle Martin, Clarbeston, Cynghordy, Llanteg, Llawhaden, Maenclochog, Martletwy, Puncheston, Rhos, St Nicholas
Powys: Beguildy, Llananno, Llangunllo, Llanwddyn, Painscastle, Pantydwr
Wrexham: Llanarmon Dyffryn-Ceiriog
The present high speed broadband roll-out will see the UK lose its status as a first world economy, contends Wispa CEO Richard Brown.
Brown plans to challenge the Broadband Stakeholders’ Group conclusion that the average UK broadband user will not need more than 19Mbps download speed by 2023.
His talk to the Chartered Institute for IT (formerly the British Computer Society) in Wales will be webcast on Wednesday, 29 January at 18.00 on YouTube, while his presentation is available without commentary on Prezi.
Brown plans to examine the effect the BSG’s endorsement of BT’s fibre to the cabinet (FTTC) strategy in the light of competitive ubiquitous broadband roll-outs and historical UK investments in ubiquitous infrastructures.
Brown has been a vociferous critic of the government’s broadband contracts, arguing that done differently, it would be possible to deliver 100Mbps to all for less than the £1.4bn of taxpayers’ money that governments are giving BT.
“Predicting usage is pointless; enabling usage is essential,” he says. “Does it really matter how? No, but it really matters if.”
One of the killer apps is ultrahigh definition TV or 4k TV. Exactly two years ago BT was telling housing developers in-home networks would need to run at around 250Mbps to support 4k content cached in a local recorder. At this month’s CES International show, Netflix boss Reed Hastings suggested that a new codec, HEVC, would allow 4k to be streamed over a 15Mbps in-home such as Wi-Fi.
But getting the content into the house is going to be the problem, something content distribution network operator Akamai is looking at. Basically it means caching content closer to the end user, and that might mean giving Akamai access to your various devices so that it can pre-load content for you.
But what about live streaming the Olympics in 4k? That’s when the copper and air links between you and the core network are going to resemble a human trying to pass a kidney stone. And as painful.
A reader has kindly sent BrokenTelephone the transcript of a recent radio interview with the CEO of British Towpaths.
Listeners may perhaps have noticed that it is now 200 years from the introduction of railways.
But maybe you weren’t aware of that.
Maybe your mind was distracted by all the recent ballyhoo about Doctor Who and the anniversary of the Time Lord beginning his journey.
And other journeys seem to have come full circle – the Monty Python team is reportedly going to revisit their sketches of past.
So we set the Time Lord off to go visit 1813.
Things seem to have gotten a bit confused onboard the Tardis with his future fragment of times passed.
– – – – – –
My Friday Boss today is someone who has been in the spotlight recently on account of the growing disquiet over plans for Steam Railways.
He has certainly not been shy about voicing his view. He acts as the voice of our country’s slow movement arguing that investors willing to sink money into iron tracks have not thought the ideas through.
During the debate for the Act of Parliament designed to make Steam Railway Planning possible he pointed out the vast investment already employing thousands in digging new and vital transport routes for the UK economy – and, of course, the headline writers have dubbed him Sir William OpenDitch – and he joins me now today.
Good morning William.
Morning John – delighted to be here and thanks so much for having me on. This is a debate that the country badly needs.
Well I think we can understand why you might think that, Bill. Is it not the case that if Steam Railways went ahead your business might be, how can I put it, somewhat diminished?
In a theoretical sense I guess you might be right, John. That of course depends on whether those crazy Steam Dreams actually have any real substance, but I’m not here to protect narrow interests – I speak for the nation when I say that we should stick to tried and tested infrastructure.
But hang on Bill; are you saying that your canals really have enough capacity for the future?
John, there’s a great deal of muddled thinking going on here and the great British public needs to be better informed. Just think about it for a few minutes – these Steam Railway people seem to think that you can make a great heavy iron machine and all its fuel and all the heavy wagons carry goods cheaper than what is essentially a box floating on water and pulled by a horse. Do you think we don’t have enough horses?
I take your point, Bill, but what about speed – would the Steam Railway not deliver goods faster?
Ah, the argument about speed – that’s another of those notions that needs better understanding. It’s really quite simple John. The amount of stuff that gets delivered depends very much on what is sent – there’s perhaps a small loss on the way – but unless anyone’s expecting a vast increase in what needs to be sent then surely delivering stuff faster makes no difference at all to the great British economy – it would just make more people idle. Most likely they’d need to rest anyway after rushing about like that.
So what’s the alternative?
Well I’m glad you’ve asked me that. You see we at British Towpaths have a plan. It’s a plan that needs regulatory certainty and it’s far less disruptive and less costly than installing iron tracks for those Steam Railways. We are going to do four things – and John I’m delighted to say that the canal regulator Ofcan is with us on this. Firstly, starting soon, and this is the big news this morning, we are going to widen the towpaths – making more room for more horses so that if demand ever rises we will never have capacity problems.
Hang on Bill, sorry to interrupt, but what about the narrow tunnels?
Ah, I was coming to that. There are I agree some bottlenecks but our engineers have looked at those steam engines and come up with a far better idea. What we will do is sit them still – not have them moving – and use them with wheels and long wires on a continuous loop to pull the barges through a little quicker. That way, if there really does turn out to be more demand we will not have to rebuild the tunnels.
Bill, sorry to interrupt again, but isn’t that going to be difficult to organise between one end of the tunnel and the other?
A good question John, but one that our brilliant British Towpath engineers have anticipated. They have come up with a very clever system with a tight string between two cans so that the bargeman can speak to the Steam Engine operative at the other end of the tunnel. We’ve been testing it with Ofcan and it works really well.
You say, Bill, that Ofcan are in agreement with your plans but are they not also worried about that lack of competition?
Well, you might think that but working together we’ve come up with a plan – and it’s possible, John, because of the towpath widening scheme that we’ll be rolling out across the network over the next few years.
I think I’d better explain the background. British Towpaths already sees itself as very different to the old Canal & Water company – you can see that we have a much more enlightened view on Towpaths – it’s in our name, our very being.
So now we are going to push that concept further – and today, on your programme John, I am announcing that we are setting up British Towpaths Wholesale and it will be their job to allow other horses to pull barges on our towpaths – for a fee of course – but this, as I say, is in complete agreement with the regulator Ofcan who very much agree with me that the great British Economy needs to prosper by doing what it has always done brilliantly.
We have a network that is the envy of the world.
Well, thanks Bill, that’s all we have time for today, but I’m sure the entire Empire has much to thank your team at British Towpaths.
Thanks John – and I’ll forgive you for describing me as William OpenDitch –but, if you must, I’d rather be described as Sir William SuperPath. Let’s not forget that British Towpaths is here today and British Towpaths will be here tomorrow. You can certainly rely on that.
A happy festive season to you all.
In The Art of War Sun Tzu wrote, “If you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle.”
“Enemy” is far too strong a word in this context, but sometimes there are “hostilities” between the media and the spin doctors at BT. So BrokenTelephone read with considerable interest the job ad for a head spin doctor for internal communications & employee engagement at BT’s consumer division.
It’s a nice little earner, which is no doubt why it attracted 112 replies on LinkedIn before the computer said “No.” And there are lots of recent and not so recent redundant journalists who could do with the “up to” £75,000 base (depending on experience) / £6,000 car allowance, pension, medical cover, 27.5 days leave, employee phone, broadband TV & BT Sport package / 15% bonus.
In return you’ll have to “provide strategic counsel and coaching to the business unit and stakeholders you support: operating with flexibility in this fast paced dynamic environment to deal with a variety of stakeholders and projects, and cope with ambiguity.”
BrokenTelephone will give a £10 Amazon voucher for the story that in the editor’s sole judgment, best shows BT “coping with ambiguity”. Simply use the comment box below to tell your story. Deadline is 5pm on 23 December 2013. If the winner decides to be anonymous, we can exchange details under separate cover.
BT’s competitors may be paying nearly 20 times more in taxes to light fibre networks than the incumbent operator, but the politicians who make competition policy and the civil servants responsible for setting tax rates and regulating competition are turning a blind eye.
The calculations are based on official published figures. They were prepared by an Other Operator, to use the jargon, who prefers to remain anonymous. They are based on figures that BT is required to submit to Ofcom. The picture they present is supported by a detailed assessment of BT and Ofcom’s use of the business rate tax prepared by a specialist market research firm.
In the past, Ofcom and the Valuation Office Agency (VOA), which sets business tax rates, have said BT’s network is too complicated to work out what business tax the incumbent should pay. The calculations below shows that this isn’t necessarily the case. This view is backed by an exhaustive critique of the so-called cumulo rates (business rate taxes) by market research firm Analysys Mason in 2011.
Asked to comment on the accuracy of the calculations, Ofcom referred queries to the VOA, now part of HMRC.
A VOA spokesman said the VOA’s method for setting the taxes had been tested in the courts. It did not respond to queries about the accuracy of the calculations.
According to the Other Operator’s calculations, BT pays the so-called fibre tax at a rate of £1.04 per fibre-kilometre on a Long Run Incremental Cost (LRIC) basis. Other operators (except Virgin Media) pay a rate of £51.98 per fibre-kilometre.
Analysys Mason used a different basis for calculating the tax rate. It found that the rateable value (RV) of a line rented under WLR (Wire Line Rental) is £5.34. This gave rise to a per line tax bill of £2.21 for 2010/11, and £2.45 in 2013/14. Ofcom estimated the tax due at £3.03, the researcher found.
One of Ofcom’s Statutory Duties under the Communications Act 2003 is 3(1)b: “It shall be the principal duty of Ofcom, in carrying out their functions…to further the interests of consumers in relevant markets, where appropriate by promoting competition.” Ofcom declined to comment on the effect the difference in tax rates might have on the competitiveness of the fibre market.
Politicians who were asked for comment did not respond. To be fair, parliament was in recess as this story was being developed.
The government collects “business rates” taxes on all non-domestic properties. It is a highly regressive tax paid before the business earns an income, let alone a profit. No other country in the EU has this tax, except Ireland.
The VOA calculates rates on the nominal rental or rateable value (RV) of the property, which is revalued every five years. VOA considers all passive communications infrastructure as rateable, including buildings. It believes BT’s “hereditament” or rateable items are too complex to value individually, so it uses a methodology called receipts and expenditure, which is basically a tax on profits, and so payable in arrears. VM pays the tax on “homes passed”. Everyone else pays per lit fibre-kilometre.
This system favours operators with large networks. BT’s rateable value mysteriously decreases even though the incumbent has installed thousands of kilometres of fibre in the past decade.
The VOA also appears to have protected BT by over-taxing competitors for so-called next generation access networks. In its 2011 critique of cumulo (tax) rates, Analysys Mason said “The VOA seems to take the view that NGA lines are more profitable than those based on copper access lines. The VOA probably knew that BT estimated a cumulo cost per line in 2009/10 of approximately £5.50 for services based on copper access lines. At the same time, the VOA proposed to assess NGA operators (other than BT) for cumulo using an RV of £20 per home connected, equivalent to an annual charge of £9.70 (after multiplying by the rates multiplier of 48.5% in 2009/10).
“This implies that the profit potential of a non-BT NGA line is higher than that of a BT copper-based line, by a factor of 1.76 (£9.70 divided by £5.50, that is 76% higher), in the opinion of the VOA.”
The incoming coalition government promised then scrapped a review of the fibre tax in 2010. This left BT and VM with an enormous tax advantage over would-be competitors.
The damage the tax does to the competitive environment was raised recently in a paper commissioned and then apparently ignored by Ofcom.
As to the calculation itself, please follow carefully:
BT’s regulatory accounts for 2013 are at http://www.btplc.com/Thegroup/RegulatoryandPublicaffairs/Financialstatements/2013/CurrentCostFinancialStatements2013.pdf
BT’s treatment of the “cumulo rates” or tax on its “hereditament” or taxable properties is outlined in a presentation, reference 1 below, from the Ofcom web site. This attributes some 79% of BT’s tax charge to its network division, Openreach. Some 24% is allocated to cable (fibre and copper), 54% to duct, and 1% to exchanges. This allocation is therefore distance-weighted.
BT uses a made-up figure called “profit weighted net replacement cost” or PWNRC to attribute its tax charges to the assets used in its services. Analysys Mason said of PWNRC “BT’s method…appears flawed. …the fact that ‘Openreach owns’ certain assets is not relevant to the allocation. The VOA methodology … suggests that RV (and hence cumulo cost) is a function of forecast profit, not asset ownership. If profits cause cumulo via the RV (as seems to be the case) then a causal allocation key would be profits, not “profit weighted NRC”.”
BT Openreach’s regulatory accounts show at page 68 revenues for the AISBO (Alternative Interface Symmetric Broadband Origination) fibre Ethernet-based group of regulated services, which Other Operators use and against which Other Operators compete. This comes to some £802m, of which £185m is attributable to link fibre (i.e. between exchanges). The table for link fibre shows revenues, fully-loaded costs (FAC), long run incremental costs (LRIC), and fibre-kilometres used.
On Page 134 of the Regulatory Accounts, BT provides a reconciliation between BT Openreach statutory accounts, and Regulatory accounts. This gives total costs (including 79% of the BT cumulo charges) for BT Openreach in 2013 as £3,763m.
BT’s total rateable value for England is shown in the Central Rating List as £172.15m and for Wales it is £7.85m, both effective from 1 January 2013, for a total of £180.00m.
In earlier litigation in the Lands Tribunal, it was accepted that approximately 80% of BT’s total rateable value is represented by its RV in England, giving at that time a total RV of £215.19m. At the 2012 multiplier of 45.2% this represents a tax charge of £97.27m.
The portion of business rates attributable to Openreach is thus 79% of £97.27m, or £76.84m. If this was spread evenly over all Openreach costs, this would result in business rate tax of £76.84/3,793 or 2.03% of costs.
The AISBO table at Page 71 gives a breakdown of the BT Openreach link lengths in fibre-kilometres. Link lengths are the closest comparable Ofcom fibre products to those sold by Other Operators. It is not clear whether or not the table refers to pairs or single fibres, so for the sake of these calculations, the Other Operator assumed the link lengths are based on a single fibre and not a pair.
It is therefore possible from the calculations of allocation above to estimate the tax rates per fibre-kilometre on both a FAC and LRIC basis.
From Page 71 (see table below), the FAC per km is £138.76. A calculated tax rate of 2.03% of costs therefore results in a tax rate of £2.82 per fibre-kilometre on a FAC basis. Using the BT-calculated figure of £51.37 per km results in a tax rate of £1.04 per fibre-kilometre on a LRIC basis.
The Other Operator said, “The difference is, we believe, due to the fact that additional fibre links would not, on average, use the same quantity of duct resources. This is indicated in the split of allocation between duct and fibre in Ref 1 below.”
The current rateable value applied to Other Operators is £230 per fibre pair-kilometre. On a multiplier of 45.2% for 2012/3, this gives rise to a tax charge of £103.96 per pair, or £51.98 per fibre.
Other Operators therefore pay some 18.43 times the rate paid by Openreach for link fibre on a FAC, and some 49.98 times that on a LRIC basis. If BT’s measure of link fibre was per fibre pair, then the difference would be 37 times and 100 times respectively.
If anyone would like to dispute the figures, please show your workings below.
1. BT’s view of its treatment of cumulo rates is dealt with at http://stakeholders.ofcom.org.uk/binaries/consultations/wlr-cc-2011/clarifications/BT_Cumulo_Rates.pdf
This attributes some 79% of BT’s cumulo charge to Openreach, with a split of 24% attributable to cable (fibre and copper), 54% to duct, and 1% to exchanges. This attribution is therefore predominantly distance dependent.
2. BT’s CCA Regulatory Accounts 2013 http://www.btplc.com/Thegroup/RegulatoryandPublicaffairs/Financialstatements/2013/CurrentCostFinancialStatements2013.pdf
3. Central Rating List, England and Wales http://www.voa.gov.uk/rli/static/HelpPages/Documents/central_rating_list_for_england_2010.pdf
3. BT Presentation on Regulatory environment and objectives http://www.btplc.com/Sharesandperformance/Presentations/downloads/Regulatoryteach-inJun12.pdf
4. Ofcom’s 2008 BCMR is at http://stakeholders.ofcom.org.uk/binaries/consultations/bcmr08/summary/bcmr08.pdf
Part 4 can be found at http://stakeholders.ofcom.org.uk/binaries/consultations/bcmr/summary/bcmr_pt4.pdf
Ofcom believes BT’s link costs to be 26p per metre. “Our calculations of the cost per metre of backhaul indicate that (Openreach’s) price is roughly double the underlying fully allocated cost (circa 50p per metre versus circa 26p).”
It went on to add, “There do appear to be significant issues with how BT currently prices its wholesale Ethernet services. The most significant issue appears to be that the elements of service that comprise a complete circuit do not appear individually closely related to FAC cost.”
ECTA, the altnets’ organisation, today accused Digital Agenda champion Neelie Kroes of turning her back on a competitive market in telecommunications in Europe.
This raises the question of whether she has abandoned her targets of universals access to a 30Mbps broadband service, with half the population using a >100Mbps service by 2020.
ECTA, which represents more than 100 non-incumbent telcos (as well as BT), said Kroes’s attitude to pricing of copper access and ‘regulatory holidays’ for next generation fibre networks would harm competition in broadband markets and would eventually harm consumer interests without fostering investment.
ECTA chairman Tom Ruhan welcomed Kroes’s approach to non-discrimination. “Abusive and discriminatory conducts of incumbent operators have a direct impact on consumers’ services and wallets,” he said.
He regretted her ideas about pricing. “Incumbents will not only be allowed to regain full monopolies on future networks, they will also be allowed to continue overcharging consumers and starving competitors on existing networks,” he said in a statement.
This could take Europe back to the pre-liberalised era, he said. If he’s right this could follow the US, where AT&T and Verizon have carved up the broadband market between them.
Researchers estimate that consumer prices are too high by €25bn because of “abusive behaviours of incumbents in wholesale markets”, he said.
“Hard-core pricing abuses and discriminatory behaviours of incumbent operators have been punished recently by the Commission. However, this happened years after the abusive conduct started. The non-recoverable harm to the market and to competitiveness makes strong ex-ante intervention necessary.
Ruhan welcomed the new “margin squeeze” test and the move towards Equivalence of Inputs on pricing. But Kroes’s approach to asset pricing policy is “catastrophic for competitors, for consumers and for the competitiveness of our economy”, he said.
In a policy statement that follows two consultations, Kroes said today the most reliable “buy or build” signals for investing in efficient alternative infrastructure come from a long-run incremental costing method, including an appropriate amount for common costs.
“The appropriate ‘modern equivalent asset’ for calculating copper access costs seems to be a fibre network: after all, no operator would today build a copper network,” she said.
She added that consumers will come to place greater value on what they can get from (fibre) networks; copper prices should adapt then on the basis that ‘you pay for what you get’.
“Where NGA networks are price-regulated, regulation should address investment risks by aiming at full cost recovery in such infrastructure even if future costs decline,” she said.
Ruhan said that incumbents had had access to fibre and “regulatory holidays” for years but they had still not invested in fibre to the home, and kept asking for more taxpayers’ money. “Incumbents have been only partially upgrading their networks (VDSL) and re-building their monopolies on future broadband,” he said.
“The incumbent retail broadband market share of VDSL lines in the EU is close to 100%. There is no reason to believe that, without competitive pressure, incumbents will give up their goldmine legacy network to invest in Europe.
“Investments will take place in more attractive emerging economies and short-term, yield-hungry banking investors will continue to be rewarded with more than half of incumbents’ cash-flow,” Ruhan said.
He said altnets, which are currently the major investors in fibre to the home (FTTH) networks, will have to keep paying nearly all their cashflows to incumbents. Many will be simply forced out of the market, he said.
“The proposal on pricing is a U-turn on the pro-competitive approach previously taken by Mrs Kroes and risks setting Europe back to ‘last in class’ in high speed broadband by undermining competition without incentivising more investment,” he said.
Kroes has a lot on her plate. Yesterday she proposed a multi-country copyright licensing programme for music. This is a first step to a more general review of how European copyright rules work in the digital age.
“We already have ambitious legislative proposals on data protection, online dispute resolution, online sales contract terms and electronic ID, and will soon adopt a strategy for cloud computing, initiatives on online payments and the eCommerce Directive, policy work on Connected TV, guidance on net neutrality, legislation on network security and much more,” she said.