BTwatch Report #220 Extract: BT opportunism backfires; Fujitsu plans wholesale fibre
18 April 2011
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BT opportunism backfires; Fujitsu plans wholesale fibre
Fujitsu UK announced plans for a new fibre infrastructure project, which it claims could bring fibre to the premises (FTTP) broadband connectivity to rural areas of the UK. The planned wholesale network, which will see Virgin Media as an anchor tenant, and TalkTalk as another potential key customer, is to bid for government funds to support the roll out of next-generation access in competition with BT. Cisco is to be the technology partner on the contract.
Fujitsu said its network would target five million homes in rural areas of the UK that would otherwise not be commercially viable for FTTP. It is reported that Fujitsu would invest between £1.5bn and £2bn in the project. The vendor declared its proposed network would offer up to 1Gbps connectivity immediately, with potential to upgrade to 10Gbps. The project is dependent on public funding and acceptable access pricing from BT, but the vendor anticipated retail customers using its fibre infrastructure by the end of 2012, as part of a three- to five-year project.
The announcement was welcomed by Ed Vaizey, the UK’s Communication Minister.
BT wrong footed by unexpected announcement
The move by Fujitsu came as a surprise to the industry, and likely a shock to BT Group.
The incumbent telco has in recent years made much of its commitment to taking fibre to more remote areas, while bemoaning many local authorities’ inability to move quickly enough (see separate report). The telco has also trumpeted willingness to cooperate with the regulator on opening its network, and expressed enthusiasm for competing for state funded projects (when no viable rival bidder was apparent). However, aside from a couple of headline-grabbing deals in Cornwall and Northern Ireland, it has done little. Now, it appears that Fujitsu, already a rival for larger government IT services contracts, is calling its bluff.
Fujitsu (and Cisco) are both major backers of bandwidth-hungry cloud computing, with Fujitsu (but not Cisco) notable among IT vendors that are competing with their traditional, service provider customers. Strategically, Fujitsu may now be looking to move beyond traditional telecoms infrastructure supply, and current generation outsourcing, to leapfrog competition from aggressive Chinese and reinvigorated European rivals, by building its own more defensible and long-term ‘utility’ business.
Worrying for BT, but opportunity for devilment in the detail…
The consequences immediately appear troubling for both BT’s Wholesale and Openreach divisions, and ultimately for its Retail arm. However, there are still roadblocks that could, at least, slow progress.
The Fujitsu project is to be built utilising core BT infrastructure assets — the poles and ducts that it has agreed to share with rivals as part of existing fibre rollout arrangements (BTwatch, #219). However, potential customers have already questioned whether prices BT plans to charge are commercially viable, and Fujitsu-partner Virgin previously said that building an entirely new network would be cheaper. As an experienced DSL infrastructure vendor, Fujitsu does, nevertheless, bring years of experience from working for BT and other telcos on local exchanges and access networks, so is not blind to the operational challenges.
While BT has maintained a more collaborative relationship with the regulator in recent years (on fibre, arguably a little too cozy), a campaign of resistance to any regulatory change should be expected from the incumbent.
…and time for pre-emptive strikes by BT
The potential positive for BT could be, if it can react quickly to what appears to be a genuine threat to its comfortable wholesale and access monopoly in a significant swathe of the country, the opportunity to tap this previously-overlooked (or sidelined) commercial opportunity before rivals become entrenched.
If Fujitsu is right in assumptions that there is demand and profit to be made by moving faster on fibre than BT currently deems practical — and BTwatch is of the view that investment by a newcomer could be reasonably quickly rewarded for an infrastructure project of this ambition — then BT could counter the inevitable loss of business by shrugging off its tendency towards complacency and embracing a larger broadband market.
With the appointment of Garfield to head Openreach, BTwatch has already predicted a renewed focus on efficiencies and possible outsourcing, and the threat of competition could provide justification for management to drive through controversial plans.
[Further reference: Fujitsu unveils plans to bring fibre to 5 million homes and businesses in rural Britain -- Fujitsu, 13 April 2011; Fujitsu's move surprises UK telecoms industry -- Financial Times, 13 April 2011; Fujitsu offers UK fast rural broadband network -- BBC News, 13 April 2011.]
About BTwatch
Report: #220
Covering: March-April 2011
Published: April 2011
Next report: May 2011
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