Wednesday, 27 January 2016

Ofcom - hoist on their own petard

Ofcom are the 'independent regulator and competition authority for the UK communications industries'. They are indeed huge fans of competition. This quote from that article in particular is interesting.

We sometimes hear the simplistic view that more competition means less potential for investment. I don’t believe that such a trade-off is inevitable, or even necessary.

Insufficient competition can lead to insufficient investment; lack of investment can, in turn, undermine choice and quality. At Ofcom we have usually found that it is better to promote competition between providers, and rely on this to spur investment.

There’s no doubting the strength of competition in the UK: we have the most competitive fixed and mobile markets in the EU.

I have a few issues with this.

At Ofcom we have usually found that it is better to promote competition between providers, and rely on this to spur investment.

How, exactly, does having a wide variety of providers reselling the same Openreach and/or BT Wholesale products spur investment in infrastructure? The hundreds of retail operators have essentially two options: use products provided by BT Group or build their own networks. Building networks in the UK is extraordinarily expensive and out of reach for most leaving BT Group products as the only option.

Sure, they can tweak a little around the edges, they can purchase their own backhaul from BT's exchanges and use their own networks to reduce costs somewhat, they can install their own equipment in BT's exchanges and rent the copper loop between the customer and the exchange but it's essentially the same service.

That isn't competition at anything bar the most superficial level. It doesn't spur investment in infrastructure, as is evident by the lack of alternative networks built in the past 10 years. It does, however, spur pricing competition and some value added extras to broadband products such as TV.

The result of this aggressive price competition? Customers who are extremely intolerant of spending any more than they absolutely have to, service providers who are as a result extremely price sensitive, and an infrastructure provider that, having deployed FTTP, sees £7.40 in additional income per line per month on the most commonly purchased product.

Obviously the proof is in what's offered by the big players. So let's have a look at Virgin Media UK's broadband offerings. Top product is 200Mb downstream, 12Mb upstream, and comes in at nearly triple the performance of the competition's most widely available product. From there perhaps jump to the Republic of Ireland. Similar market, but no Ofcom devoted to introducing competition. Virgin Media Ireland must be miles behind, right? Oh. Their lower package appears to be 240Mb downstream, 20Mb upstream, with the higher package 360Mb downstream, 36Mb upstream.

On the upside of course Virgin Media UK do offer cracking deals, especially if you call up and haggle. Let's hear it for that competition Ofcom have brought us.

I've had conversations with people from both Virgin Media and BT. Both very much wish that they could start charging more for broadband services, however it's very difficult when large players either charge so little they're running themselves into the ground or throw the broadband in free of charge, with TV. In lieu of increases to broadband pricing line rental has been rising instead, both to cover loss of call charges, relied on by some to subsidise broadband pricing, and to cover increasing usage of broadband.

People are using the Internet more and more, making it ever more expensive to deliver services to them, but resent any kind of price increases on their broadband bills.

Consumers therefore benefit, but investment has also flourished, whether it is mobile operators each spending billions of pounds on their UK infrastructure, BT investing £2.5 billion in fibre broadband, or Virgin Media planning a five-year, £3 billion expansion of cable.

Looks more to me like investment is 'flourishing' despite Ofcom, not because of them. Openreach only invested when Ofcom agreed to keep out of trying to price control the new products for a period. VM's boss thinks Ofcom should do more to promote building of new infrastructure and doesn't agree with separation of Openreach.

I entirely agree with Ofcom that the status quo isn't good enough and can't remain. However this is the market Ofcom have created, and the market they are now trying to regulate their way out of, potentially by forcing divestiture of BT.

Perhaps if they are so concerned about consumer value they could take a moment to wonder how Sky can offer a TV bundle for £20 a month, with free broadband if you pay line rental of £17.40 a month, and throw in a free 32" TV or a £100 voucher or pre-paid Mastercard.

The joys of not having to build your own network to people's homes and getting access to someone else's investment at regulated rates. Great for the consumer in the short term, not so hot when it comes to return on investment in multi-billion pound network upgrades and what happens when what we all have now just isn't enough.

Either we as customers need to get used to paying more for broadband, hope that the government steps in with a whole bunch of cash to subsidise, or consider not complaining if we get left behind.

No-one has built consumer FTTP to scale in the UK in competition to BT for really good reasons. One attempt abruptly failed. I'd suggest that Ofcom are most directly to blame. An obsession with competition at the retail level making competition at the infrastructure level not feasible for a new entrant. Their regulatory effort would perhaps be far better spent working to lower barriers to entry for companies that want to invest and less on squeezing a pound or two a month more out of retail pricing.

Do I have vested interests / work for BT, etc?

Predictably my earlier writing has caused me to be on the receiving end of a few queries regarding my impartiality.

These are easily answered in one hit.

Do I work for BT?


Have I ever worked for BT?


Do I work for a competitor or partner of BT?


Have I had any involvement with BT?

Yes. As a customer, Openreach deliver the line to my home, and as part of the Fibre for Middleton superfast broadband campaign.

However I also did much the same with Virgin Media even though I personally couldn't benefit.

So what's in it for me?

More what's not in it for me. I am utterly convinced, and there is copious amounts of evidence, to suggest that if Ofcom decide BT Group should divest Openreach there will be a political and legal, err, 'excrement storm' which means the chances of us, our immediate community, and many others of getting ultrafast broadband this side of 2020 go from possible to zero.

I have no idea whether this area is on the list to receive the upgrade or even if there is a list yet, however structural separation ensures there won't be a list for years.

Platitudes about competition won't deliver smooth 4k video alongside other Internet usage simultaneously to this or any other household; and FoD 2 will.

Monday, 25 January 2016

How to encourage FTTP deployment

Okay it's fair to say I'm not a fan of the #Broadbad campaign and don't agree with its conclusions. So the question is what would I do to encourage FTTP deployment?

There is one obvious step that comes to mind. It would incentivise Openreach for sure. It would, however, be problematic for Sky, TalkTalk, Vodafone and a few others.

It's a simple change - allow Openreach to remove copper completely when they build fibre to premises.

At the moment Openreach cannot remove copper lines from homes that already have them when they build fibre to them. This means customers can purchase the cheap LLU-based deals from Sky, TalkTalk, etc where the ISP has full control of copper back to the exchange but also means that Openreach do not benefit from reduced maintenance costs of all-fibre networks. Verizon cited these savings as a major driver for their build of their FiOS FTTP service. Telefonica in Spain are taking advantage of it, too.

Could even allow Openreach to retire copper from homes not currently taking a fibre service as long as sufficient notice is given to their providers and appropriate transitional arrangements put in place.

All copper LLU services are obsolete. As long as reasonable replacement services are made available such as all-fibre basic voice services it would probably be a worthwhile enterprise.

Sky and TalkTalk have been on a high copper diet for too long. They, for obvious reasons, want to defend their investments in exchange-based equipment and maximise their control over their end users' services. I'm not a fan of BT but there I entirely agree with them. I strongly suspect it still remains the case - Sky and TalkTalk have a vested interest in sweating their own assets and for that they need Openreach copper. That said there's little choice from one of them - TalkTalk don't have the cash to invest in building their own networks to any scale. I should also note that they are very much onboard with Openreach's and FTTPoD 2 projects.

If they want full control over the service end to end there's a really simple solution. Costs £500-£750 per home in urban areas, though, and means taking the risk of the investment on themselves.
If the business case is so obvious and BT have no reason not to deploy beyond protecting their own assets there shouldn't be any real hesitation, should there?

I'd hope Ofcom would consider this the way forward. Their regulation, entirely preoccupied as it was with competition at the retail level, has improved choice at the lower end of the market at the expense of disincentives that deter companies from investing. Ofcom have brought the market down to a 'lowest common denominator' state where dozens of operators resell cheap copper services.

It's time Ofcom began to reverse this trend and pull the market away from pile high, sell cheap, and deliver the revenues providers need in order to make the investments in infrastructure we will all need to see in the future.

Saturday, 23 January 2016

Broadbad or just bad?

So let's dive into this work of research that is Broadbad. Quotes from the paper in italics.

Page 8:

Key Findings

• Openreach has so far received £1.7 billion in taxpayer subsidies to connect harder to reach areas of the UK to superfast services, but has repeatedly failed to deliver

Openreach have not received £1.7 billion in taxpayer subsidies and have not repeatedly failed to deliver. They have received approximately £700 million according to BT's accounts and projects are ongoing. Openreach have delivered the coverage agreed almost universally in the timescales agreed with local authorities, and will continue to increase coverage under the Superfast Extension Programme.

• Around 5.7 million people in the UK have internet connections that do not reach Ofcom’s ‘acceptable’ minimum speed of 10Mbit/s. 3.5 million of these people live in rural areas. 

Not the case. The source material data was collected during May and June of 2015 so is out of date, and that same Ofcom Connected Nations Report states:

'Government programmes, such as those administered by Broadband Delivery UK (BDUK), are helping to address the problem of poor broadband coverage, particularly in rural areas. We would expect to see further improvements in rural broadband availability over the coming 2 to 3 years.'

This is more accurate and up to date.

• Poor internet connections are costing the UK economy up to £11 billion per year

Based on research from March 2015. I have no idea how valid that figure is, however it's not the job of private companies to spend money to increase UK GDP. The Conservatives privatised BT. Private companies have a responsibility to operate in the best interests of their shareholders. I'm sure we can find other industries that have cost the UK economy more and don't have MPs having papers written demanding their reorganisation. A number centred around the Canary Wharf and City of London area come to mind immediately.

• 42% of SMEs report experiencing problems with their internet connectivity and 29% also report poor service reliability.

Yep. The exact quote from the source material is the following:

'Our research has found that 42% of SME internet users had experienced issues with their internet connectivity in the preceding 12 months. Poor service reliability was the biggest problem, with 29% citing it as an issue, followed by slow download (16%) and upload (13%) speeds.'

Of course what is ignored is that reliability problems can be caused by wholesale providers and service providers, not just Openreach, as can performance issues, and that these are subjective measures. At what point will an SME complain about reliability? An outage every day? Month? Year? How do we know these problems are all the fault of Openreach?

• Following the announcement that BT will be merging with EE it has been calculated that BT will have a 40% share of the retail telecoms market and a 70% share of the wholesale market.

Separating Openreach from the rest of BT Group, as the paper demands, will have no direct impact at all on BT's retail market share and will potentially have quite the opposite indirect impact from reducing it. Free of the regulatory burdens involved with having Openreach as part of the group BT's retail arm may be free to more aggressively pursue market share. It is unclear what is defined as their share of the wholesale market as the source for these numbers isn't an Ofcom research paper, it's a Guardian article discussing Sky's and especially TalkTalk's advocacy of separating Openreach from BT Group.

• The time has come for BT to be forced to sell off Openreach to encourage more competition and a better service for every internet user and for the benefit of the UK economy. 

Strangely given this is apparently so self-evident there are zero specifics given as to how this would encourage competition and improve services; in fact the expected impacts of separation are given 2 vague paragraphs in a 22 page report.

The introduction of the paper mentions Mr Shapps being alarmed by complaints about broadband in his constituency despite its close proximity to London, because London is the centre of everything and so proximity to it should be used as some kind of measure in these things. Alongside this comes confusion over what a natural monopoly is.

The following merits quotation. Page 9 paragraph 2:

This report contends that Britain, the birth place of the man who invented the World Wide Web, Tim Berners-Lee, should be leading the world in digital investment. The Government and local authorities have now generously granted a total of £1.7 billion in subsidies to BT to deliver broadband to the harder to reach areas of the UK.

A noble aim and with that in mind government and local authorities have provided a 'generous' subsidy. Except that subsidy, actually £332 million from central government matched by local authorities at the time of the numbers in the 'Key Findings' section, though higher now hence my mention of £700 million earlier, looks somewhat less than generous noting France's £17 billion public-private partnership, Germany's E2.7 billion for 50Mb+, or Australia's £14.9 billion to cover a population less than 40% of ours for the NBN project.

Singapore spent £639 per premises on broadband subsidy to deliver fibre to premises in a city-state. Our spending relative to that is hardly generous.

It's extremely disingenuous to quote total subsidies available and criticise based on results when a fraction of that subsidy has been used to date while also ignoring that all the subsidy isn't going to be used as Openreach have already returned some of it.

Page 9, paragraph 3:

Britain should have the most developed digital economy in the world but is instead lagging behind countries such as Japan, South Korea and others. 

I could discuss at length why this is a ridiculous statement but we'll stop with a few simple facts. A far greater proportion of the populations of Japan and South Korea live in apartment blocks. In addition utilities in Japan and South Korea tend to be on poles. Those things that are considered to make places look 'third world' or become 'nineteenth century landscapes with overhead cables and wires.' but are really handy to string fibre optic cabling onto rapidly and relatively cheaply. Lastly there are more people in heavily densely populated urban areas in Japan and South Korea and their population densities overall are higher than ours.

We could, of course, focus on urban areas and delivering ultrafast services to those at the expense of leaving rural areas underserved for sure, delivering 1000Mb to many urban areas costs less per home than delivering 10Mb to some rural ones, but that would make complaints about the digital divide all the louder.

The idea that we should be at parity with these nations given the different factors at play and the level of public subsidy supplied thusfar is delusional.

Page 10 I will not comment on beyond to note that premises, not people, are the usual metric with regards to broadband coverage. Other parts are already covered elsewhere.

Page 11, paragraph 7:

As fig 1 on page 5 shows, vast swathes of the nation suffer from slow or even non-existent broadband speeds. A look at the South West of England, huge areas in Scotland and Wales and also the North of England show a nation plagued by poor broadband service.

These are sparsely or even virtually unpopulated areas. As a general rule operators don't tend to deliver copper and optical lines to places where there are no people. These aren't wireless solutions where people roam into the coverage, they are called fixed line for a reason. There's no fixed line broadband because there are no fixed lines to carry the broadband.

Page 13, paragraph 9:

It famously claimed in 2009 that 2.5 million homes would be connected to ultra-fast Fibre to the Premises (FTTP) services by 2012, which is 25% of the country. Yet by September 2015 they had only managed to reach around 0.7% of homes.

Frustrating as it was that the FTTP was scaled back, and that same ISPR review notes that BT actually spent more than they planned to on greater coverage than originally mooted in 2009 alongside upgrading the FTTC from 40Mb to 80Mb, 2.5 million homes isn't 25% of the country. Believing this would explain much about Mr Shapps' rather unfortunate tenure as housing minister given that there aren't 10 million homes in the UK, but as of 2014 26.7 million.

Page 13, paragraph 10:

BT has also frequently been accused of abusing the natural monopoly it has over the nation’s network and not giving equal access to other internet providers

I can't comment on this as the link cited,, doesn't work.

I've had what looks like the correct link sent to me. Those making the accusations are Sky and TalkTalk, so obviously zero chance of a vested interest there. The link also makes clear where the 40% consumer and 70% wholesale market claim mentioned in the earlier Guardian article was sourced. In this article it's a direct quote from Dido Harding, TalkTalk Chief Executive.

Page 14, paragraph 11:

Competitors, like Sky and TalkTalk, argue that the relationship between BT and Openreach further exacerbate the problems brought about by the current situation already being a natural monopoly. These other providers have to pay a wholesale price to BT to make use of the network and they then charge their own customers for services.

It should be noted those guys pay Openreach for the most part. This comment muddies the water somewhat by being unclear. I'm unsure what alternative arrangements there could be. Separating Openreach doesn't alter the 'natural monopoly' point, it removes vertical integration which is a completely different concept.

They have consistently argued that Openreach has little incentive to invest in upgrading the network and in fixing faults quickly.

They have little incentive because no-one else is investing. This is a failure of the UK's broadband market and the the business case for building ultrafast broadband networks here. Separating Openreach isn't going to change this, they will still have no incentive to upgrade or fix faults more rapidly as it won't introduce competition to Openreach; they remain a natural monopoly until someone steps up with an open wallet and willingness to wholesale the network they build.

Page 14, paragraph 12:

Logically this means Openreach has little to gain from improving the network. At the moment the infrastructure is largely a copper network, meaning it is outdated. BT has made much about a new technology it is introducing,, that it claims will enhance the performance of the existing copper network, using better signalling kit to push more data into the wires. The obvious criticism to make of this approach is that BT are merely trying to eke out what life there is left in an outdated network system instead of planning for the future and upgrading to a fully fibre network

It's believed approximately 50% of BT's spend on will be re-usable for a 'fully fibre network', just as a proportion of their spend on FTTC is reusable on or a full fibre network. This is just-in-time capital expenditure. Virgin Media in common with other cable companies are doing the same.

Page 15, paragraph 13:

BT has so far received £1.7billion in taxpayer subsidies to roll out superfast broadband to harder to reach rural areas. Ministers have done the right thing by wanting to connect up these areas but were
badly let down by the regulator and BT. The push should be for stronger, more competitive networks. 

As mentioned above BT have not received £1.7 billion from the taxpayer. This was not specified to cover harder to reach rural areas, that was down to local authorities in co-operation with BT to decide. This programme was nothing to do with Ofcom. I have no idea what is meant by 'more competitive networks' that seems like a bit of 'buzzword bingo'.

Page 15, paragraph 14:

Openreach generates 50p in earnings before interest, tax, depreciation and amortisation for every £1 of revenue. No other telecoms companies, such as Virgin or sky, are in receipt of such generous subsidies. Yet 48% of rural homes still don’t have internet that Ofcom would describe as merely acceptable. To make matters worse, there are still large numbers of homes who cannot even reach speeds of 2Mbit/s. This means they are unable to make use of online services like music streaming or catch up TV sites. 

Use of EBITDA is a gross simplicity at best, it also ignores pension deficits and indeed that some of Openreach's pricing is intentionally held high by the regulator in order to try and encourage others to build competing networks. The performance figures are out of date as noted. To be quite frank it looks as though someone ran through the Digital Comms Review and picked out bits that were 'on message'.

Page 15, paragraph 15:

BT benefits hugely from these subsidies. They get to spend the money given to them and will own the newly created infrastructure afterward. This effectively means the UK taxpayer is subsidising BT owned infrastructure through Openreach that they will then profit from. BT have also recently been caught in a scandal where it was found that £1.7 million of Openreach revenues had been used to fund the recently approved merger deal with EE, leading to a censure from Ofcom. This raises renewed questions about the takeover and has caused further worries for competition, compounding the problems that already existed over Broadband. It means that BT now has a 40% share of the retail telecoms market and a 70% share of the wholesale market.

The funding is gap funding. It specifically provides the amount of money in between BT's normal 'commercial' spend and the actual amount required to service the subsidised properties. The above comment ignores that there are clawback clauses in the subsidy contracts, worth £129 million as of July 30th, where sales of the subsidised superfast broadband have meant a smaller subsidy than originally provided was actually needed.

Other than the governent going back into the telecomms industry what was the alternative?

As previously noted I have no idea what the retail numbers have to do with divestiture of Openreach, and no idea what the share of the wholesale market refers to given its source is a Guardian article.

Page 17, paragraph 16:

The UK broadband network is largely made up of incredibly outdated copper wires. This technology may have been cutting edge when it was first installed, but today it sees us lagging behind other leading economies, such as Germany, Japan and France. It is frankly alarming that London’s Tech City has some of the worst broadband speeds in the country.

The UK has higher availability of Superfast broadband than Germany or France.

BT are apparently addressing Tech City, however I would ask why BT are expected to service Tech City and no-one else? If the demand is there and it's a viable investment why hasn't anyone else stepped in to deliver the products? BT aren't the only company capable of delivering broadband. There is nothing beyond the UK's regulations, costs of deployment and the willingness of companies to pay stopping others.

Page 17, paragraph 17:

BT’s approach to the need for faster broadband is to resort to This technology makes use of more intelligent signalling kit to push more data through the existing copper wires allowing for the upgrade to ultrafast internet. This should allow for speeds of between 150Mbit/s and 1Gbit/s. However, it can only achieve speeds at the higher end of this scale in limited circumstances and that pure FTTP cables would be needed to guarantee these top speeds. Rather than acknowledging the need to comprehensively rethink their broadband investment strategy, they are instead effectively postponing the decision and trying to strain every last bit of profit they can from the outdated and struggling copper network. Whilst will increase speed for some it is a reactive measure, a short term fix that won’t address the long term need. 

Just-in-time CapEx is a legitimate strategy. as noted earlier will push fibre deeper into the Openreach network with approximately half of the spend being re-usable on deploying fibre to homes.

It is not considered a long term fix any more than FTTC was considered a long term fix. The range of speeds is considered ample for the foreseeable future. If BT offer the option of 1Gb via FTTP on Demand at more competitive prices as would be expected given pushes fibre much closer to customers that will serve 'power users'.

Page 18, paragraph 18

What is needed is the acknowledgement by BT that the network needs to be converted to all fibre throughout.

Openreach are aware of this, however they would disagree with the timescales posited.

Demand for broadband is forever increasing throughout the UK as more and more people rely on digital services for work, entertainment and day to day living.

Yes it is. This is actually showing signs of slowing down though as the major driver, video, becomes more efficient and reaches ubiquity. 

By making the jump to an all fibre network we will be following countries like Japan, South Korea and even Spain. Ofcom have shown that as consumers get better download speeds, they consume more data.

Virgin Media's experience indicates that the higher the speed before upgrade the lower this increase. Very much a case of diminishing returns as people do the same things but more quickly.

Incidentally what's the big driver of FTTP in Spain? Competition. Telefonica didn't need separation, just a third party to come in and invest rather than relying on them to deliver everything and complaining about the manner in which they do. That and of course that while Ofcom require BT to allow access to all their products on an equal footing, Telefonica didn't have to wholesale anything over 30Mb. If you wanted to sell >30Mb in Spain you had to build your own network. Perhaps a reason to blame Ofcom and the obsession with retail competition that has allowed ISPs to avoid investing in their own networks as they can compete just fine with BT's own retail operations while having BT bear the risks of investment.

Whilst in the short term most users could make do with speeds that is capable of providing, this is hardly a compelling argument for the status quo. Demand will keep increasing and it makes sense now to invest in future proofing the network, not papering over the worryingly large gaps.

Neither is it an argument for separation of BT Group, and it does not by default make sense to invest in future proofing the network as this assumes all cash is on-hand and the investment doesn't amortise, which is wrong. BT would have to borrow, have to pay interest on the borrowing, and be writing down the investment.

Paragraph 19 I'm not going into depth on. Business parks tend to be passed by because there are few premises there so harder to make the economics work to deliver broadband to them. Repair and install times are below par, no question, but hopefully improving. There's no reason to think separation will improve these factors as it doesn't address the natural monopoly scenario. I've discussed the dissatisfaction above.

Page 20 paragraph 20 has no real content to discuss.

Page 20 paragraph 21:

This report considers that there is only one real option that would satisfactorily address the Openreach question; the structural separation of BT and Openreach. This means BT would be forced sell off Openreach so it becomes entirely separate company. This would directly address the current reasons BT has to discriminate against competitors. As well as this it would also increase Openreach’s incentives to invest in the network and improve on their issues with performance and customer services. 

I do not see any explanation why such an action would increase Openreach's incentives to invest in the network or improve their issues with performance and customer service, They would remain the 'natural monopoly' discussed above, able to continue to behave in the manner of a monopoly.

BT Wholesale would remain their largest single customer, BT Retail the largest customer of BT Wholesale and hence there would remain a perfectly legitimate chain of influence between supplier and their largest customer. This report has presented no instances where Openreach are discriminating against other customers in favour of BT Wholesale. Openreach do not deal directly with BT Retail. There is no reason to believe Openreach's deficiencies are not affecting all customers equally.

Page 20 paragraph 22:

This report believes that formally separating BT and Openreach into two fully separate companies would be of immense value to the UK digital economy. The current model actually constrains BT. It makes perfect sense for BT to favour the status quo and underinvest across all the broadband services it provides through Openreach. It has a ‘natural monopoly’ and severely restricts proper competition. This hurts all internet users, as well as the wider UK economy. The current arrangement is a hangover from the days of nationalised businesses.

This reiterates paragraph 21 and is equally lacking in detail. As previously noted the report confuses natural monopoly and vertical integration.

I would suggest that, rather than freeing Openreach to invest separating them from the rest of the group leaves a for profit company directly at the behest of shareholders who will be wanting a return on their investments. For them spending as little as possible would likely present the best possibility of returns, as with the status quo. In the absence of commitments from third parties to invest, and I would point out that of the two loudest 'voices' in this discussion one doesn't have the funds to invest and the other has steadfastly avoiding committing to do so, I see no reason why separating Openreach from BT Group would have any short or medium term impact other than to ensure Openreach do not invest in their network.

Page 20 paragraph 23:

Under the proposal in this British infrastructure Group report, Openreach would operate as a totally independent company, no longer tied to BT.

By opening up to competition it would ensure that Openreach could turn to investing in the future and focus on digital innovation.

I am still completely unclear as to how separating Openreach would open anything up to competition. They remain a natural monopoly, they aren't going to be bidding against anyone else for use of their own copper and fibre assets. If suppliers wish to reach customers connected to Openreach's network they will have to pay Openreach to do so.

The only way to compete outside of some business areas with Openreach is to build a new network, and then allow wholesale access to that network. The only alternative network of any scale going to homes and businesses in the UK belongs to Virgin Media and is a closed network, no wholesale access.

BT's labs have a long history of innovation, and Openreach are at the forefront of, a technology that telecomms operators worldwide are planning to use in a variety of ways.

Rather than having to obey the orders of BT it could search out long term investment and partners for itself. It could seek this from all manner of sources, such as pension funds, and open up the market to greater competition. Meanwhile real competition would force the pace of investment to increase as companies would not be able to rest on their laurels and compete for custom by offering better speeds and cheaper deals.

Rather than having to obey the orders of BT it would have to obey the orders of profit-motivated shareholders.

Again what competition would force the pace of investment to increase? Openreach aren't going to compete against themselves and suppliers will only be able to offer the speeds the Openreach network delivers them at the prices that allow them to make a profit while paying fees to access the Openreach network.

The only way this could change would be for Openreach to allow access to all of their ducting so that others may place their own fibre in it and indeed for Openreach to replace the copper in there with fibre where others don't want to leaving suppliers to add the technology either side.

This would involve Openreach spending tens of billions over several years to make their current copper, FTTC and FTTP networks redundant and lose all of their current revenues in favour of becoming a dark fibre supplier to homes and businesses. Who is going to invest in that on a nationwide basis? The losses in ultra-rural areas would be immense.

The complication of deciding who has to fix what and who pays if there is, say, a fibre break affecting an Openreach owned duct with multiple suppliers' fibre inside it a genuine overhead. If in doubt are Openreach to pay for everything? Is this to be the attractive business case to institutional investors that will ensure money pours into Openreach or is it far more likely the business would end up run down, even more poorly performing, and potentially asset stripped where feasible?

To avoid all of this would require way more regulation than there is currently. A strange thing indeed for Conservative MPs to desire.

Page 21 paragraph 24

Unless BT and Openreach are formally separated to become two entirely independent companies little will change. They will continue to paper over gaping cracks. Whilst rural SMEs and consumers are left with dire speeds, or even no service at all, Openreach makes vast profits and finds little reason to invest in the network, install new lines or even fix faults in a properly timely manner. The time has come for a bold and comprehensive solution, full separation and deregulation will provide that solution. 

A lot has changed, some of it for the worse, some for the better. The only way to prevent extensive unintended consequences as a result of full separation and deregulation is to renationalise Openreach. Anything else leaves that company, and the UK's telecomms infrastructure, beholden directly to investors whose main concern will be profit and loss. Deregulation opens up another level of unintended consequences from preferential treatment for profitable urban areas while rural areas see poorer service as there is no profit in serving them equally through to predatory pricing in those areas where there are competing networks.

Does a Conservative, or any other, government have the appetite to renationalise Openreach, taking on the prodigious pension deficit, in order to spend tens of billion reducing its revenue stream?

Note: This article is copyright - if you want to use it please ask.


25th January 2016 - added new paragraph with apparently correct Reuters link; corrected typos, tidied up formatting issues.

Broadbad - Grant Shapps suddenly interested in broadband

Grant Shapps has led a group of 121 MPs in releasing a report called 'Broadbad' arguing for Openreach, the business unit of BT Group that manages the physical ducts in the ground, cables and exchanges, to be separated from the rest of the Group entirely.

It's discussed in this BBC article - BT should be forced to sell Openreach service, report says

The bottom of the article requests responses, and as a BT Openreach service user here's mine. This also outs me a bit but, hey, c'est la vie.

I have had other thoughts since about the impact this will have on the market, the unexpected side effects, BT's Retail arm being free to more aggressively pursue market share, and other things. The potential for unintended consequences is huge.

Follow the debate on ISPReview, ThinkBroadband and on Twitter via hashtag #Broadbad


I have profound doubts about the BIG report and what they think the results of separation of Openreach will achieve.

I am in no way biased towards or have any reason to be a huge 'fan' of BT or Openreach. I'm the Carl Thomas mentioned here:

You guys have featured me discussing broadband locally on Look North.

My wife has featured on national television.

[Removed link to video for copyright reasons. It's from Super Scrimpers and I'm sure can be found online somewhere :)]

Competition didn't resolve the issues - Openreach did. Due to the asinine way in which our planning and adoption systems run competition couldn't resolve the issues even if it wanted to. Per the below link the estate I reside on is the only one in the area not seeing any competition. illustrates some factual errors in the report. There are a number of others. This is not a serious report, it's politics to justify a pre-determined position. Using for example maps of amount of land mass covered by fixed line broadband is absurd. Obviously where there are no people there's no broadband. Using numbers of people not covered is also misleading. Broadband networks aren't provided to people they are built out to premises.

For all the talk of competition there is no clear indication of where it will come from, or why, apart from Virgin Media, no-one else has been investing.

Surely if Openreach were so poor, providing such abysmal services and failing their customers to such an extent, the door is more widely open to the competition, so where have they been? Mr Shapps is allegedly a huge fan of the open market and in his various online incarnations epitomises finding gaps in the market, regardless of whether they are providing legitimate value, and profiting from them.

TalkTalk don't have the money to invest - they are paying share dividends by borrowing.

Sky have had ample opportunity to invest but have only conducted small scale trials. They have made no commitments but deployed plenty of fibre to the press release.

Vodafone have run no trials to speak of, and again all fibre to the press release. Their work in the Republic of Ireland required co-operation with taxpayer funded electricity boards to use their infrastructure.

The one case I'm aware of where an infrastructure arm has been separated from the rest of the telecomms company there is indeed fibre to the premises being deployed, using taxpayer funding alongside a public private partnership. Such a thing cannot be done in the UK due to EU state aid regulations. Check out Chorus Ltd, New Zealand and their UFB network.

Lastly, a separation of Openreach from BT Group results in Openreach being directly answerable to shareholders. Shareholders are going to want financial returns. Without the rest of BT Group's revenues relying on Openreach network upgrades there is less of a case for them to acquiesce to Openreach investment in infrastructure. There will be less funding for network builds and more attempts to maximise returns on the existing infrastructure.

I am not entirely sure what the political game Mr Shapps is playing is, or how he or others will or think they will benefit, but I don't foresee any way in which the inevitable years of turmoil will achieve any kind of positive result in the short term or medium term.

You can reach me at [Number removed] or [Number removed] if you wish to discuss further.

Kindest regards,


Friday, 22 January 2016

Why the lack of FTTP?

I've seen a whole bunch on forums people wondering why the UK doesn't have as much fibre right to people's homes as a number of other countries, and has less of it planned.

I've learned a few bits from watching Virgin attempting to dig in South Leeds alongside other experiences that have educated me.

The obvious major reason is, of course, that actually getting it out there is expensive. Secondary to this comes that the UK has little appetite to spend more to pay for it. Following on though why is it so expensive to deploy in the UK?

We have fewer people living in flats/apartment than many other countries. People very much like their houses with garden, ideally detached if possible. Bringing up kids in flats is something that doesn't appeal to most, and the flats are built with that in mind. It's way more expensive per property to service a hundred houses than a hundred apartments in a building.

Our infrastructure has for quite a while now been almost universally underground. Digging is expensive. Despite poles being in use in North America, Japan, and other first world nations an apparently commonly held British attitude to them is that they make streets look 'like a third world country.'. There's also the concern that they lower property values and reduce the beauty of views.

Of course digging roads and pavements produces its own issues, as do the cabinets that accompany it. I'm aware of at least two instances in the South Leeds area where residents are demanding that Virgin Media completely relay pavements at a cost of thousands of pounds per home and another instance where a resident seeks any excuse to complain about the cabinet sited near their property. The demands for full relaying aren't due to safety concerns, but aesthetic ones.

In summary as far as building the infrastructure goes if you put it on poles you're making streets look like a third world country, if you put it underground you upset people by leaving tracks in pavements and street furniture on pavements and verges.

We've stronger health and safety requirements than many with a bunch of rules that must be complied with in order to carry out works. Watching videos of fibre deployment in Southern Europe the regulations there are either far less onerous or they are ignoring them. This isn't an option in the UK.

We have a system whereby it costs a company three figures before they put a single shovel into the ground in order to notify local authorities they intend to build, then after they build a bunch of complications and headaches.

Building to new estates of mixed status such as my own is extraordinarily problematic. I'll detail this separately in a different post.

That's the cost part. The benefits of building in terms of the money that can be made back are tricky, too. Virgin Media off customers 50Mb, 150Mb and 200Mb tiers. Less than 5% of the customer base take 200Mb.

Dozens of operators offer 38Mb and 76Mb via BT Openreach's FTTC product. The majority take 38Mb. Operators have been hiding price rises of broadband in line rental for years, because people are so reluctant to pay for it and know that a couple of low-end providers have heavily skewed the market.

With that in mind it's no surprise that catering for the highest end users who want the state of the art products and are prepared to pay for them is problematic. Many don't want to pay the list prices for the lowest end products. Who'd want to spend money building a network that delivers ultrafast speeds and a quality service experience to be faced with people trying to haggle because x operator delivering services on wafer thin margins over a network they didn't pay to build will give them y for z price?

Sunday, 17 January 2016

New build - new problems

This is a long story charting the woes of a new build estate and the pain that happens when the pace of building homes in the UK alongside the regulations that accompany the builds meets a lack of planning of broadband and telecomms infrastructure, with a few added bonuses.

New Forest Village in the Middleton suburb of South Leeds is an estate of approximately 1,300 properties. Permission was granted as part of efforts to try and regenerate this suburb, a suburb severely suffering from the decline of manufacturing in the north of England. Much of the surrounds are either former or current council / housing association housing. New Forest Village, in contrast, is nearly all private. It is a development built by a number of private builders as part of a consortium.

Ground was broken on the estate in 2005. It was completed and tools downed in 2014-15.

I've been involved with the estate in depth since 2012. At that time there were a couple of issues with the telecomms infrastructure.

Firstly residents were waiting months for phone lines. Openreach, the part of the BT Group tasked with installing lines to the estate, BT Group having struck an agreement with the consortium to do this, appeared unaware of how many premises their network would be required to serve. As a result there was a shortage of cables from parts of the estate back to the CO / exchange. This reached its zenith in 2013 when residents were waiting several months for basic telephone service, made all the more acute by a lack of quality mobile signal in a number of parts of the estate.

Secondly the only broadband service available was basic ADSL delivered from the Hunslet exchange. This exchange was 3.5km straight line distance and 6km+ of cable length from parts of the estate. ADSL is distance limited and residents were seeing speeds as slow as 0.5Mb/s. At that speed a 2 hour HD movie would take nearly 24 hours to download. It was faster to buy a Blu Ray from Amazon and use Prime. As far as streaming video goes - forget it at anything bar postage stamp size.

These issues were covered on local and national TV, and in online and offline press.

In my case I work from a home office. I was working regularly from the estate by 2013, and was on the brink of renting office space as I was simply unable to work as efficiently as I needed to on the broadband services available and we had no definitive date for when the services available would improve.

Eventually, in late 2012, a part of the estate received an upgrade in the form of Fibre to the Cabinet. A new street cabinet was erected and customers now connected to that drew their broadband signal from something that was a few hundred metres away, not 6km. Performance for some improved enormously. For others, however, the story was quite different and they were still stuck on ADSL.

I was focused on a specific area of the estate as that was where my now wife lived and where I thought there was the most chance of getting success. There were numerous hurdles in the way of getting the project done.

Firstly it took a while before Openreach updated their records. They took a snapshot of the estate from years before and used that information to make their decision as to whether or not to invest, the result being they thought there were a fraction of the homes connected that were actually there. When this was remedied Openreach confirmed, at the end of 2012, that they would be building fibre to the cabinet for the area I was focused on, dryly named Hunslet cabinet 82 after its designation within Openreach.

The decision was made but construction was a very slow process. Even by 2013, some 8 years after ground was broken, the road that the cabinet lay on, and where the newer cabinet needed to go, was still a private road, meaning that BT Group could not do any work on the roads or pavements there without the permission of the developers. This permission was not forthcoming as the developers feared that it would impact on their turning the road over to Leeds City Council. This is the adoption process, where after a period and upon agreement and subject to inspection the local authority take over maintenance of a road and pavements. Until this was done there was no way that Openreach could do their work. Even when the road did become public the costs to BT of building the cabinet were very high. As is customary and normal they were required to do full-width reinstatement on the pavements, not just filling in the holes they dug but completely resurfacing the pavements.

The completion of the project received considerable publicity from local and national television, print media, and indeed a press release on the Openreach website.

During 2013/14 Openreach also managed, at considerable cost, to bring enough copper from the exchange to deliver telephone and broadband services to all residents. The solution isn't the most elegant and lines will be both longer and lower quality than is ideal but the services are there. These exchange lines are required in order to purchase either ADSL broadband or the faster fibre to the cabinet solution.

By mid-2014 that first FTTC / fibre cabinet was completely full. All 288 connections were sold and a second one needed. This one was, perhaps somewhat bizarrely, far easier work. Openreach were able to build that second cabinet and reinstate just the pavement where they had excavated - no need to relay the entire pavement saving a considerable sum.

During 2012 BT Group weren't the only people our campaign was in discussion with. We approached other operators including Virgin Media. The entire Middleton and Belle Isle area was completely without any cable services, unusual given it's a residential suburb in the UK's 3rd most populous city. There were a few signs of cable services being a work in progress however it looked as though the money ran out literally overnight.

In early-mid 2015 Virgin Media began small-scale work at the west-most area of Middleton. This ramped up in scale as they went public with a plan to build to 4 million homes at a cost of £3 billion over the next 5 years. At one point there were nearly 40 simultaneous pieces of work going on in the Middleton and Belle Isle areas, and as of right now work is nearly complete on the project, after which time Virgin Media will move on to other parts of the city and other projects.

None of this work has happened in New Forest Village, and in the near future none will. An area with >65% take up of superfast broadband will have no ultrafast broadband options for the foreseeable future.

Virgin Media appreciated the high take up of Openreach services and were willing to spend half-again as much per property in New Forest Village as they would normally be prepared to to cater to the lay out of the estate, however the build is impossible. Many roads remain private on New Forest Village, perhaps 40% only are public roads. All of those private roads Leeds City Council would require to be in good repair when they take them over, meaning Virgin Media would be required to relay all pavements and roads they dig in full, dramatically increasing costs. Newly adopted roads, which would be a considerable proportion of that 40%, would also be required, as cabinet 82's road was, to be reinstated and relaid fully, not just the tracks they dig repaired.

Leeds City Council have every right to protect the public funds they manage and allowing streetworks on roads they have just adopted is perhaps a bridge too far.

Virgin Media have walked away. A considerable proportion of New Forest Village hasn't even begun the adoption process yet, and it will, best case, be at a guess 3 or more years before they can realistically return to the area. Their money is likely better spent building to 2,000 premises than New Forest Village's 1,300, and I have informed local residents that there's a pretty reasonable chance they simply won't come back, and no-one can blame them.New Forest Village is the only part of the Middleton Park ward that does not have access to ultrafast broadband. It is below average for urban areas and, at best, average across the UK, while having over three times the average level of demand.

For now, this isn't a deal breaker, however there are already some services that are out of reach for some on New Forest Village, and it's a complete unknown as to how long the existing services will be adequate for. The solution currently present is affected by distance from cabinet rather than exchange, and for those on the edges already some applications aren't an option.

Openreach probably cannot upgrade the estate for similar reasons to Virgin Media. Both of their solutions to higher speed broadband require construction work, none of which can feasibly be done to any scale within the estate.

The EU's digital agenda wants to see 50% of Europeans subscribed to a 100Mb or greater service by 2020. As of right now it's odds-on that a regeneration estate whose campaign helped bring ultrafast broadband throughout its local area will not have any such options. I guess it's one way the estate will have regenerated the area for sure.

The blame game is tempting, but who do you blame?

Virgin Media weren't in a position to bid on the initial telecomms infrastructure on the estate and even if they had been they may have been outbid.

Companies pay property developers for the right to supply to their estates.

Openreach were asked to produce an all-copper design and that is exactly what they have done. They cannot change the terms of that contract to replace copper with fibre.

Leeds City Council have a duty to council tax payers to spend their money as wisely as possible. As part of that it would be incredibly difficult for them to justify accepting roads under their maintenance that aren't in appropriate condition, or allowing them to be worked on shortly afterwards without full reinstatement. They need to invest in front-line services, not unnecessary road repair.

The developers cannot be held responsible for the original design either. It was done years ago, before superfast broadband was 'a thing'. They can, perhaps, be blamed to an extent for the time it has taken to construct the properties. It is not in their interests to bring too many properties up for sale at one time as it will affect their sale price. There was also an economic downturn part-way through that caused huge difficulties to housebuilding in the UK. The adoption process seems to have been extremely drawn out also, however I simply don't know enough about the facts to comment.

The 1,300 properties here seem to be victims mostly of timing.

Borrowing from a discussion with a journalist earlier today, the result of this will be that our household, as a 'top 1% user', will be dropping out of that 1% band simply because the services we need, and would pay for, to stay there aren't going to be available. As 4k video becomes more common people will see buffering, or be refused access to 4k services as their broadband is below the required level.

Most frustratingly: having played a part in bringing superfast broadband to hundreds and ultrafast to thousands, there is absolutely nothing I can do about it.