As the government declared success for the Broadband Delivery UK programme in providing ‘superfast’ broadband to 95% of the UK (see separate report), Openreach trumpeted its unilateral decision to raise its target for fibre-to-the-premises (FTTP) rollout by 2020.
- 50% increase in existing (modest) FTTP commitments suggests a gathering momentum for FTTP within Openreach. G
- Government underwhelmed and apparently frustrated, with pressure building to make BT to go further, faster.
- Openreach calculations hint at FTTP affordability, with CityFibre residential roll estimates underlining the value of existing fibre infrastructure.
- TalkTalk getting in on the game too, and millions of homes expected to see fibre in mid-term, but signs of significant overbuild.
- G.fast plans cut back by a tenth, and at risk of becoming the ultrafast poor relation. A role as a defensive technology may be its saving grace.
Describing the ‘superfast’ progress as a “stepping stone to something much bigger”, Openreach Chief Executive (CEO) Clive Selley said the access services business now aims to reach three million homes with FTTP over the next three years, as part of its larger goal of taking ‘ultrafast’ services past twelve million sites by 2020. The elevation of the FTTP target is accompanied by a corresponding drop in the number of homes expected to be passed by G.fast technology.
Openreach suggested that the revised targets put the business on the right trajectory to take FTTP past ten million sites by the mid-2020s, and proposed it could move even more quickly “if the conditions are right”.
Fibre First not just a build, it’s a way of life
As well as upping the fibre target, Openreach is attempting to embrace a new approach to its network development, which appears aimed at improving the wider perception of the incumbent network business. The new framing of Openreach strategy is encapsulated in the programme name, Fibre First.
The Fibre First message was described by the Openreach CEO as “much more than just a programme”, but rather an attitude that Selley aims to infuse throughout Openreach.
“ That means wherever we can in the future, we will build ‘fibre first’ — including in rural areas. ” – Selley.
In Selley’s typically pragmatic manner, the Openreach CEO talked of “getting the job done”. However, in the manner typical of the Group that retains control of the Openreach business, there are caveats linked to the aspirations, with BT demanding greater support from government, regulatory, and commercial sectors to make the plan viable.
… eight cities named, more to follow
Openreach named eight cities that will be the focus of the expanded FTTP rollout (see below). An additional as-yet-unnamed 32 towns, cities, and boroughs will be included in the Fibre First programme as it progresses over the next two years.
The identity of the additional areas to be included in the process appear to be no more than pencilled in at the moment, with Openreach saying it needs to work with government and its communication provider (CP) customers to identify the most appropriate locations.
BT strikes back against altnets and Lightning
All eight cities in the Fibre First initial wave are already served, at least in part, by Virgin Media. BTwatch notes, however, that the rollout also looks set to cross paths with fibre altnets in all of these locations.
The cities announced have substantial populations, and it may be that on a local level there is little crossover between the footprints, but the plans could be unnerving for alternative fibre investors. Strikingly, Openreach appears poised to see the highest level of crossover with Hyperoptic, rather than its bolshier peer CityFibre, which is planning a drive into the residential market through a partnership with Vodafone UK (BTwatch, #290).
Rural areas not entirely forgotten
Rural areas are still expected to feature in the Fibre Future rollout, and Openreach anticipates that 800, 000 of the first three million premises passed by the FTTP network will be in less built-up areas.
The current rural fibre footprint is said to cover more than 250, 000 premises, suggesting that in the region of half a million additional rural sites are anticipated being passed between now and the end of 2020.
New plans suggest a modest uplift on infrastructure investment
Openreach’s estimate of an aggregate £300-£400 cost per site to pass all the locations covered in its 2020 Fibre First plans suggests it will cost the access services division £750m-£1bn to pass the remaining 2.5 million premises over the next three years.
The cost of connecting an individual site to the rest of the network is expected to be £150-£175 per premise. Therefore, the cost of connecting all the premises – which could happen quickly if Openreach gets its wish in requiring a wholesale switch from copper to fibre as soon as possible after the connections are available – would be an additional £375m-£437.5m.
In a subsequent results presentation (see separate report), BT Group Chief Financial Officer Simon Lowth indicated that, while adding one million premises to the fibre rollout plans could add around £100m-£120m to annual network investment, a proportion of this increase would be mitigated by savings from not introducing G.fast in those areas.
Openreach certainly appears to be securing good value for money in its early FTTP rollout efforts. The per-home-passed estimates from the business substantially undercut aggregated build estimates from its rivals (see separate table), perhaps underlining the value of investment in earlier rounds of network upgrade, taking fibre to the UK at street level.
- The Openreach estimates do not include the cost of providing battery back-up capabilities for fibre lines. Any customer premise installation is likely to require inclusion of a unit that can ensure fixed-line connectivity can be maintained in the event of a household power cut. Openreach considers battery back-up plans should be managed by CPs, although it is probable that the regulator will seek to ensure that a requirement to deliver back-up is in place to ensure a line of communication to the emergency services remains open should a power source by disrupted.
Openreach with little to lose and much to gain?
Although the planned increase in spending for the expanded fibre rollout is relatively modest, finding the extra cash does create a degree of dissonance with the underlying BT assertion that extensive fibre deployment is not currently economically justifiable.
Openreach only recently indicated that a commercially viable model for extensive fibre rollout does not exist, and, in the mid-term, regulatory and government support will be needed to create the right environment to nudge the market towards adopting the technology before there is an existing pressing need.
It does not appear that anything significant has occurred in the market to change this view, and there have been no public moves by Ofcom or government that suggest with any certainty that Openreach requirements will be accommodated. With this in mind, the access services business is continuing to stress the need for key fibre enablers to be in place to make continued investment sustainable (see below).
In the meantime, Openreach and BT are framing the decision to raise targets as a leap of faith and a commitment to taking a risk in the best interests of the market long term. Perhaps, though, it could be considered a feint, intended to unnerve both established and upstart rivals, and nudge government and Ofcom to reveal their hand.
Gov’t not blown away by Openreach ambition
While Openreach’s renewed fibre commitment initially received modest support from government, the official response was far from euphoric. Subsequent press reports in the weekend newspapers following the announcement suggested that senior ministers were in reality highly disappointed that Openreach was not doing more to expand fibre.
The prospect of the government pursuing full Openreach separation is being revisited, according to the anonymously sourced reports, although there was no indication of how anyone in power envisages such separation happening.
While no names were mentioned in the media, it certainly appears to suggest that Matt Hancock, Secretary of State in the Department for Digital, Culture, Media & Sport, is strengthening, rather than diluting, his ‘full-fibre’ enthusiasm now that he is in a more senior role with Cabinet responsibilities. It also insinuates there may be some buyer’s remorse in official circles on the settlement reached with BT Group on Openreach’s future in 2017, which has created a tricky conundrum.
The government and Ofcom want there to be infrastructure-level competition for fibre services – a target of 40% of the UK being served by three or more networks by the mid-late-2020s has been floated since the start of Ofcom’s Digital Communications Review. The government also wants Openreach to be more ambitious in supporting a fast fibre rollout. Within these two wishes, there appears to be potential for clear conflict. Ofcom and the government are being called on to recognise altnet concerns that Openreach could swoop in and overbuild fibre in areas in which they plan to invest, destroying their case for investment. However, they also have to recognise that imposing regulatory restrictions on Openreach is likely to inhibit the pace of the BT-owned business’s network development.
Getting tough with BT, accommodating fibre altnets, and progressing evolution of the UK’s fibre infrastructure currently looks likely to result in a messy, imbalanced patchwork network that could see the re-creation of the digital divide that programmes such as Broadband Delivery UK were intended to eliminate.
Fibre future in the Sky?
BTwatch notes that Digital Secretary Hancock will also have the final say on the decision as to whether Rupert Murdoch’s 21st Century Fox is cleared to take full ownership of Sky plc.
While, currently, the main sticking point to the deal surrounds media plurality and the future of Sky News, it does not appear beyond the bounds of political manoeuvring to suggest that a Sky commitment to supporting Openreach’s Fibre First programme might be a useful bargaining chip.
Sky Broadband joining BT Consumer as a co-anchor tenant could enable Hancock to reach his full-fibre objectives at a faster pace, while showing Openreach legal separation is enabling wider wholesale industry cooperation with the access services business.
A Fox/Sky compromise on other media concerns is still likely necessary to make the proposed acquisition palatable, but a quick win for Hancock on national infrastructure could be a helpful sweetener as negotiations continue.
Image: BTwatch / Market Mettle.
Table of Contents
- Huawei commits another £3bn to UK investment
BT takes it on the chin with another tough quarter [p6]
- BT taking a flurry of shots, but is Patterson playing rope-a-dope?
- Table 1: BT Group, financial highlights, Q3 FY17-18
Q3 FY17-18 by the numbers: decline and fall [p8]
- Table 2: BT Group, performance by unit, Q3 FY17-18 (adjusted) *
The divisions: mobile propping up traditional BT [p9]
- Table 3: People movement highlights
BT preps for 5G with new Nokia chipset [p13]
- Table 4: 5G Momentum Index: BT/EE ecosystem, to January 2018
- Nokia ready for 5G NR with new gear
- Nokia vies with Huawei on 5G collaboration
BT pays more for less, as Sky scores Premier rights [p15]
- Figure 1: Premier League auction, price paid per match, 2019-22 first phase
- More rights up for grabs, but broadcasters wary of spending
- Back to square one with Sky’s Saturday lunchtime leftovers
- Figure 2: BT programme rights charges, 2015-2017
- Beginning of the end for BT’s sporting adventure?
- Crystal ball watching: could BT Sport be transferred out?
Products and services
New 4G router-antenna to tackle broadband ‘not-spots’ [p18]
- A commercial solution to universal service challenges
Legal and regulatory
EE could face £120m cost from Phones 4u collapse [p21]
- Spectrum auction edges forward as Three appeal dismissed
- ASA also finds Three misled public with spectrum campaign
BUSINESS AND PUBLIC SECTOR
BT warns of HSCN challenges [p24]
- BT keeps heading down the comeback trail
BT bigs up “critical” partner Cisco [p27]
- SD-WAN leading the way in BT’s new world
- Cisco presence within BT base underpinning importance of relationship
- BT focused on five major virtualisation use-cases
BT to share malware detection information with UK ISPs [p28]
Openreach takes a step forward with Fibre First declaration… [p31]
- Fibre First not just a build, it’s a way of life
- Table 5: Ultrafast network competitor presence in Openreach Fibre First locations
- Openreach looking for more partners
- Clive Selley’s fibre army
… eight cities named, more to follow [p32]
- BT strikes back against altnets and Lightning
- Turf wars and trench warfare
- The pace and price of deployments
- Figure 3: UK fibre operators FTTP rollout plans, 2018-25
- Figure 4: Estimated build costs per premise passed, UK fibre operators
- Rural areas not entirely forgotten
- New plans suggest a modest uplift on infrastructure investment
- Openreach with little to lose and much to gain?
- £7 value boost dependent on trinity of factors
….Openreach identifies the enabling conditions for fibre fruition [p35]
- Openreach can still walk away
Fibre enthusiasm raises questions on G.fast future [p36]
- Fibre up front, G.fast in defence
- Gov’t not blown away by Openreach ambition
- Fibre future in the Sky?
TalkTalk joins in with its own fibre plan [p38]
- TalkTalk anticipates turning off its copper
- Fibre bandwagon gets crowded
Openreach meets 95% ‘fibre’ coverage deadline in UK [p39]
- Clawback funding ensures work is ongoing
- Progress also made in devolved nations, but more work to be done
- Wales moving on as Openreach wraps up leftovers
- Key points of the renewed Welsh broadband strategy
21st Century Fox 37
– Sky Sports 18
Advertising Standards Authority 22
Apple 6, 9, 15
BG Group 10
British Broadcasting Corporation (BBC) 15, 18
Broadband Delivery UK (BDUK) 31, 36, 39
BT Group 6, 7, 8, 9, 10, 19, 22, 25, 34, 36, 37, 39
– BT Business & Public Sector 9, 24, 25
– BT Consumer 9, 13, 15, 37
– BT Infinity 19, 25
– – BT TV 9
– BT Global Services 7, 9, 10, 26, 27
– BT Connect 27
– – BT Germany 10
– – BT Italia 8
– – BT Security 6, 27, 28
– BT Technology, Service and Operations
– Infinity Lab 25
– BT Wholesale & Ventures 8, 9, 10
– BT Fleet 9
– EE 6, 8, 9, 10, 12, 13, 14, 15, 17, 18, 19, 21, 22, 24
– Emergency Services Network 19
– Allera, Marc 17
– – Amer, John 10
– – Hall, Jason 25
– – Hart, Michala 10
– – Hughes, Mark 6, 28
– – Hull, James 10
– – Langridge, Keith 27
– – Lidiard, Mark 10
– – Lowth, Simon 10, 17, 34
– – McRae, Neil 13
– – Mears, Kim 40
– – O’Neill, Colm 25
– – Patterson, Gavin 7
– – Selley, Clive 9, 31, 32, 40
– – Shihabi, Eyad 10
– – Smith, Martin 10
– – Willetts, Helen 10
– – Zekkou, Paola 10
– Dunne, Niall 10
– – Petter, John 17
– Openreach 6, 7, 9, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41
Cabinet Office (UK) 25
Cambridge University 6
– Carillion telent 41
China Telecom 15
– Meraki 27
Cisco Systems, Inc. 27
CityFibre 31, 32, 33, 38, 39
CK Hutchison 22
– Three Group
– Three UK 22
Colt Technology Services 8
Department for Digital, Culture, Media and Sport (DCMS, UK)
– Broadband Delivery UK (BDUK) 39, 40
– Hancock, Matt 36
Deutsche Telekom 14, 15
Digital Britain 39
Football Association 15
– Premier League 9, 15, 16, 17, 19
Hewlett Packard Enterprise 10
High Court 21, 22
HP Inc 10, 15
– Huawei Cyber Security Evaluation Centre 6
Huawei Technologies 6, 14
– Neul 6
Hyperoptic 32, 39
Kingston Communications (KCOM) 9
Korea Telecom 14
Liberty Global 39
– Virgin Media 7, 17, 22, 32, 39
Lite Access 41
M&G Prudential 38
National Health Service (NHS, UK) 24, 25
– N3 24
Nokia 13, 14, 38
– Nokia Bell 14
Ofcom 7, 19, 22, 33, 34, 35, 36, 37, 40
– White, Sharon 22, 35
Orange 10, 15
Orange Business Services 10
Panorama Antennas 18
Qualcomm 14, 15, 18
Royal Dutch Shell Group of Companies 10
SK Telecom 14
Superfast Cymru 40, 41
TalkTalk Telecom Group 10, 22, 31, 32, 36, 37, 38, 39
TechHub 19, 25
– 3D 19
– Broadband 7, 9, 18, 31, 32, 35, 36, 37, 39, 40, 41
– DSL 14
– Ethernet 8, 24
– Fibre 6, 7, 14, 24, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41
– Fibre-to-the-cabinet (FTTC) 37
– Fibre-to-the-premises (FTTP) 6, 7, 9, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40
– G.fast 31, 34, 36, 37, 39
– IP 9, 14
– LTE 14, 15
– OTT 15, 16
– Wi-Fi 13, 18, 24
Telecom Italia SpA 15
– Carillion telent 41
TeliaSonera AB 14
UEFA 15, 17
Verizon Communications 15
Vodafone 6, 14, 15, 21, 32, 36, 39
– UK 21, 32
Welsh Assembly 40
World Economic Forum 28
Published: February 2018
Next report: March 2018
For more information visit: BTwatch