A major consultation process by BT Group plc’s (LON:BT.A) network arm Openreach with broadband providers has elicited support for a large fibre-to-the-premises (FTTP) broadband network.
A FTTP network across the land would see households get the blazingly fast internet speeds currently only available to cable TV subscribers.
The digital economy
Openreach wants to build an FTTP network across the UK, and communications providers such as Sky, TalkTalk, Vodafone and Openreach’s parent company BT broadly agree that this would safeguard the UK’s position as a legal digital economy.
The catch is that Openreach would obviously want to make the proposition economically viable. To do so, it says a number of key enablers will need to be put in place through close co-operation among the communications industry, the industry’s watchdog Ofcom and the government.
These enablers include:
- A supportive policy and regulatory environment that encourages investment
- 'FTTP switchover' - to maximise the benefits for all parties, Openreach proposes that all customers should be migrated over to the new network as quickly as possible after it has been built in a given area
- Agreeing how investment costs can be fairly recovered
- Openreach proving that it can build FTTP at scale for a competitive cost
According to the communications providers (CPs), while customers are likely to be prepared to pay a premium for faster access speeds, they are unlikely to be prepared to pay enough of a premium to claw back the costs of the investment in an acceptable time-frame.
Cost considerations
Openreach estimates that building FTTP connections all the way to ten million front doors would cost in the region of £3bn to £6bn, so deciding how that investment can be recovered fairly through wholesale pricing will be critical to making a commercial case work, it said.
"We believe that under the right conditions, we could build FTTP connections to ten million homes and businesses by the mid-2020s. We want to do it, we think it's the right thing to do for the UK, but it's clear that we can't do it alone, so I'm encouraged to hear that our wholesale customers support our vision,” said Clive Selley, the chief executive officer of Openreach.
"Having said that, we're under no illusions about the challenges that lie ahead because we need to build a business case that's workable and fair for everyone. That means we need a regulatory environment that encourages investment, and we need to agree how the costs of such a huge engineering project can be recovered fairly from all those that stand to benefit.
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"Of course, that's going to be tough, but we need to get into the detail of that now with our customers, with Ofcom and with Government. I believe Openreach has a critical role to play in achieving such an ambitious goal, and the prize for our CP customers, their customers and the UK as a whole could be huge."
In afternoon trading, BT shares were 0.2%, or 0.6p lower at 261.5p.
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