BT to Invest 1.5bn UKP in Fibre - 1st take

IanFogg | July 15, 2008, 09:44 AM

This is massive news: BT has finally announced its fibre plans.

Key points:

- Availability to 10 million homes by 2012. This is fast.
- Mix of fibre to the home (FTTH) for new builds with peak 100Mbps speeds, and FTTC/VDSL2 for existing homes (peak speed of 40Mbps). Exact split between the technologies has not been announced.
- Dependent on regulatory response from Ofcom.
- BT will offer its fibre on a wholesale basis to other operators and ISPs.
- High definition TV cited as one of the key drivers.
- "Demand led" rollout indicates BT plans to revive the success of the community-led broadband campaigns of the DSL roll out to prioritise locations that receive fibre first.

Initial thoughts, ahead of the analyst briefing in five minutes time:

This is a game changer for the UK broadband market. The larger ISPs that have unbundled local loop networks (O2, Sky, Carphone Warehouse, Be, Tiscali) suddenly face the prospect of their copper DSL services becoming obsolete in just a few years. The small niche ISPs that have struggled to remain in business in the face of higher speeds and thin margins offered by the LLU players, now have a lifeline with BT's proposal to wholesale fibre.

However, there will be devils in the detail. 1.5 billion pounds is a suspiciously small sum to reach 10 million homes if BT were to achieve a high proportion of consumer uptake in the areas passed by fibre. I suspect the higher wholesale prices that BT plans for fibre, compared with DSL, will slow the uptake of fibre and so help BT save capex. Also, this announcement appears to be led by BT Wholesale, its uncertain how Ofcom will react given the division of the copper telephone line network into semi-independent Openreach. Ofcom may also choose to intervene to protect the copper/LLU investments of other operators, which could raise BT's costs and slow their roll out (for example by continuing to insist that new build developments receive copper as well as fibre). It's going to be extremely interesting to see if the LLU players choose to invest in fibre themselves.

More to follow.