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Posted on March 29th, 2012 by Barry Collins

Why BT should have been handed Britain’s fibre fund

BT engineer fibre

So here we are, almost two years after the Government set aside £530 million to help British broadband, and not one citizen has had their broadband access improved as a result of that public money.

We’re three years away from the Government’s target of universal 2Mbits/sec broadband – a target so appallingly unambitious that a former chief technologist of BT recently told a Lords committee that “you might as well not bother” – and you’d do well to find anyone who even thinks even that is achievable.

Earlier this month the Government published a progress report on how the broadband money was being allocated. “We set a demanding timetable and I’m pleased that we are making such fast progress,” culture minister Jeremy Hunt crowed. Of the 44 local authorities listed, only six had even entered the procurement phase. If that’s what Hunt calls fast progress, let’s hope he’s never put in charge of NHS waiting lists.

The reason why so few companies are willing to bid against BT is that the company has a massive competitive advantage

Still, at least the money is finally set to be spent. Although few think the half a billion pounds on the table is anywhere near enough to get the job done. “The £560 million being talked about [it’s actually £530 million], I have to tell you, is petty cash in this game,” said Dr Peter Cochrane, the former BT technologist who was giving evidence to the Lords.

He suggested the Government should hand that money to “small players”, who could light up the fibre in their own regions. Yet, Broadband Delivery UK’s rules specifically preclude such small players – only companies with a turnover of £20 million for the past two years can be considered for the tendering process.

That’s partly why, according to reports, there are now only two companies left who are prepared to bid for BDUK money: BT and Fujitsu. And Fujitsu has repeatedly stated that it will only proceed with its fibre rollout if it wins enough contracts to make the deal commercially viable. There is every chance that BT could become the last man standing, making the past two years a complete waste of everyone’s time and money.

Economies of scale

The reason why so few companies are willing to bid against BT is that the company has a massive competitive advantage. BT already has an established broadband network in each of the 44 local authorities. When it’s bidding for money, it’s often only to extend the reach of the fibre broadband network that it already plans to rollout. Take the case of Iwade in Kent, in which a modest investment of £13,000 from the local council was enough to unlock £62,000 of investment from BT and bring fibre to the entire village. It’s highly unlikely that £13,000 of public money would be enough to tempt a third party to lay its own fibre, it simply doesn’t add up. BT told me recently that it will take around 14 years to recoup its investment in fibre – how long would it take a much smaller rival?

There are other reasons why Dr Cochrane’s vision of dozens of local fibre projects doesn’t make sense. For one, you end up with a mish-mash national network, built on different technologies, all running at different speeds. Even if these local fibre projects are willing to offer wholesale access to to their network, major ISPs such as TalkTalk and Sky don’t want to deal with a different provider in each region, each with different routing equipment, billing systems and prices for end users. They want three or four different broadband packages that they can sell on a national, not a regional, scale.

The danger of funding dozens of different regional fibre projects is that you create dozens of mini-monopolies, where one network becomes the sole provider for that area. That might work well initially – 10 years ago the residents of Kingston in Hull had a bleeding-edge broadband network supplied by just such a local monopoly – but within three or four years those residents were complaining about relatively slow speeds and no access to much more competitively priced products from other broadband providers. And what happens when that tiny regional project runs out money, as some inevitably will?

Controlling BT

As unpalatable as it may sound, the best way to eke value out of that meagre £530 million pot would have been to hand the lot to BT two years ago. It will probably end up getting the lion’s share – if not all – of the BDUK cash anyway. Except now it’s going to get the money on its own terms, and not the Government’s.

Ofcom waived many of the controls it imposed on the wholesale price of BT’s broadband as a condition of BT embarking on its fibre rollout two years ago. If the Government had offered BT the £530 million, but imposed conditions such as a guaranteed level of coverage, open access to anyone who wants it at a regulated price, and a minimum speed guarantee, Britain’s broadband network would probably already be in a much healthier state than it is now. Which, I grant you, isn’t saying much…

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20 Responses to “ Why BT should have been handed Britain’s fibre fund ”

  1. Mike Halsey Says:
    March 29th, 2012 at 12:07 pm

    But what about the “Digital Region” project in South Yorkshire where councils and the RDA built a fibre-optic network together? This network can only be resold by small local companies, helping the economy and they’re very reasonably priced.

    This scheme installed FTTB across the whole county so that every home and business could get access to the network. It took only a few short years to complete and now it’s up and running.

    I’m having my fibre connection installed next month and I’m really looking forward to getting it.

    Surely this is proof that there are other ways to provide fibre-broadband across the UK.

  2. Barry Collins Says:
    March 29th, 2012 at 12:24 pm

    Digital Region is interesting (and not BDUK funded), but has many of the potential problems I outline above.

    Firstly, it seems none of the big ISPs are currently buying wholesale access to the network, which means customers could miss out on the cheapest deals, as well as bundled services (such as Sky’s TV/broadband bundles, for example).

    Second, what happens when the regional funding runs out? Who’s going to upgrade the network in 5/10/15 years’ time? I know fibre is future-proofed to some degree, but will it keep pace with the likes of Virgin and BT? I’m not convinced.

    Barry Collins

  3. Wayne Bloore Says:
    March 29th, 2012 at 12:33 pm

    As a Digital Region user, I can see many problems with the DR rollout, and any rollout not run by BT.

    Firstly, as Barry says, there are no major ISPs – only 4 very small, local ISPs. One the participants ISPs went bust several months ago.

    There is no news on speed upgrades. BT have announced a doubling of FTTC speeds next month, but DR hasn’t.

    Lack of revenues at Digital Region indicates that upgrades won’t be forthcoming. Indeed, the remaining 17% expansion of the network (from 80 to 97% of the county) looks unlikely to go ahead, as this was to be funded from revenues.

    BT have rolled out Inifity across large parts of the county, and they do a far better job of marketing. The downside to having BT and DR is that we now have 3 cabinets located close to each other, rather than the 2 that BT would have on their own.

    I will be moving over to BT when my contract is up with the DR ISP, mainly for the speed upgrade.

  4. Mike Halsey Says:
    March 29th, 2012 at 12:55 pm

    @Barry, I’m not greedy but the Internet provides much in my life. I think though I could probably get dual-stream HiDef-IPTV, do some online gaming and still check my email perfectly well all at the same time on a 40Mbps connection. It might be tight but it’s at the maximum of what we’ll be doing for the next ten years. :)

  5. TiredGeek Says:
    March 29th, 2012 at 9:08 pm

    I think though I could probably get dual-stream HiDef-IPTV, do some online gaming and still check my email perfectly well all at the same time on a 40Mbps connection. It might be tight but it’s at the maximum of what we’ll be doing for the next ten years.

    You sure about that? I think 10 years ago we were pretty happy to get 512k and it did enough.
    When the fridge and toaster etc is all connected, and everything is in ultra HD format, 40Mbps may well feel like the 512k again….

  6. Lee Grant Says:
    March 29th, 2012 at 10:13 pm

    Great article Barry.

    Here in sunny Huddersfield we have a very quick Virgin network where I use a nice 50mbps at my shop but the many places in the town that don’t have fibre are left to fight with speeds that are usually below 1mbps.

    Any small commercial entity that tries to take on the problem doesn’t stand a chance.

    I cannot help but feel that if Ofcom was fit-for-purpose and not being bankrolled by ISPs (prove to me that it’s not happened & I still won’t believe you!), the Britain’s broadband wouldn’t be such a shambles.

    How can we get rid of Ofcom?

  7. Pinero Says:
    March 30th, 2012 at 6:47 am

    You’re probably right about just handing the money to BT 2 years ago, but can you imagine the outcry that would have brought? The press would have had a field day and the political fallout would have been bad.. hence we fall even further behind in the broadband stakes.

  8. jontym123 Says:
    March 30th, 2012 at 6:52 am

    Come on. Be charitable. There are only two things wrong with Britain’s broadband strategy:-

    1) The roll out programme is far too slow; by the time it is finished it will be ready for total upgrade.

    2) The targets are too low; (up to 40Mbps and a universal service obligation of 2Mbps is a sick joke).

    Oh, and FTTC should be FTTP from the outset.

    World class my a**e!

  9. dubiou Says:
    March 30th, 2012 at 10:41 am

    I agree that BT might as well have just had the money handed to them – it always seemed the most likely outcome anyway.
    The fragmentation of services is due to blind adherence to deregulated free market doctrine. The network should always have been run in a similar fashion to Network Rail – one body deals with all the infrastructure (banned from providing service which is where BT’s conflicts of interest arise) and ISPs rent bandwidth.

  10. wittgenfrog Says:
    March 30th, 2012 at 2:20 pm

    BT should never have been allowed monopoly status when privatised. I know its a bit late to complain, but all the chickens (eggs then, of course) from that era have been coming home to roost for many years.

    BT didn’t even want to supply ADSL until bullied into it. It was happily flogging crap ISDN services until 10 years ago, to avoid the investment neded for ADSL.

    BT will take the money happily, but the rollout will be painfully slow, cost consumers more than they want to pay, and make LOTS of profit for BT. You heard it here first! :-)

  11. Fred Says:
    March 30th, 2012 at 5:28 pm


    BT wanted to provide the country with a fibre system way back when it was first privatised. But to make it commercially viable they needed to be able to provide TV services over this network.
    Unfortunately, that mad old bitch thatcher would not allow this and instead allowed murdoch to build his monopoly.
    If anyone has to take the underlying blame for our woeful internet connectivity (and lack of meaningful competition in the satellite pay TV sector) it is her.

  12. Tony Says:
    March 31st, 2012 at 12:22 pm

    I agree absolutely with Fred (11). If the government of the day had not been so greedy in selling off a national asset we would all have fast broadband years ago.

  13. jontym123 Says:
    April 1st, 2012 at 6:25 am

    @tony (12).

    I would paraphrase your point:

    “…If the government of the day had not been so greedy in selling off a national asset then we MIGHT all have had fast broadband years ago.”

  14. Francis King Says:
    April 4th, 2012 at 8:23 pm

    The article contains “had a bleeding-edge”. I think the author meant “had a cutting edge”.

  15. Mark Says:
    April 5th, 2012 at 9:42 am

    The problems about getting fast broadband are:
    * implementers expect a quick return on their buck rather than taking the long term approach. BT and others this is you.

    * Successive governments have no idea. I fully expect they are suitably advised but obviously are too basically dim to understand. They play with the subject and thats Thatcher, Blair, Brown, and Cameron.
    Particuarly to Fred. whether you like someone or not you need the manners to discuss things without being abusive. Pity the moderator of this site does not feel the same.
    In two years time we should have 95 % of poulation at 20Mb at least. If you want to reduce traffic, empower business, reduce CO2 etc allow people to do things from home.

    The internet revolution has only just started … get with the program

  16. Paul Says:
    April 8th, 2012 at 8:17 pm

    I moved to Hong Kong recently. My internet connection here is 18Mb and is considered SLOW. The price is the same as that of the “Up to 8Mb” ADSL service I had in the UK (whose actual speed varied wildly between 0.2Mb and 1.5Mb depending on the time of day).

    The UK has some serious catching up to do…

  17. Peter Says:
    April 10th, 2012 at 1:39 pm

    I think it is appalling that users on the Up To services all pay the same price regardless of the actual speeds that they receive.

    My Internet seems to get slower every year. I used to get 4.5MB out of it however I keep getting “Loss of Synch”, and now its around 2-2.5.

    The rest of the family all get 5MB and over for the same price.

  18. Andrew Ferguson Says:
    April 10th, 2012 at 4:05 pm

    @17 Peter:

    If you kept losing sync, look at downstream noise margin, probably around 12 to 15dB.

    Did you test from the test socket to see if more stable. Speed may not improve immediately, but router stats should show if there is an improvement to be had.

  19. Mike Says:
    April 17th, 2012 at 11:39 am

    Am I missing something here? 2Mbit Broadband? Is this a joke?.. Why has no one mentioned Virgin cable? I’ve been on it since the NTL days and it has ALWAYS blown BT out of the water. Give the money to Richard Branson’s mob, because at least he seems to give a shit about price, speed and reliability.

  20. Mike Says:
    April 17th, 2012 at 11:42 am

    Oh, and I’ve been on FIFTY megabit broadband for at least a couple of years now and it all gets upgraded to 100Mbit for free soon.

    BT is a joke and it’s stupid that they are competing against the existing fibre optic network.

    But hey, someone is getting their pockets filled over this. When the government spends our cash, someone always does.

    (I’ll get off my soapbox now)


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