Updated at the bottom: Unless you’re using Enron math, BT’s new plan to connect 10 million homes — roughly 40 percent of the United Kingdom — with fiber networks at a cost of £1.5 billion doesn’t quite add up. At today’s conversion rate, that’s about $3 billion — or $300 to wire up each of these proposed 10 million homes.

BT hopes this will help it stave off competition from rivals who have started to use their new backbones and the latest technology to eat into its broadband business. Cable operator Virgin, for example, plans to use DOCSIS 3.0 to compete with BT. The incumbent has been reticent about upscaling its infrastructure over concerns that it would spend billions and then be forced to share with upstarts, the way it does now. By comparison, the new plan is closely tied to regulatory concessions and includes some sort of investment protection from Ofcom, the British regulator.

The Guardian writes:

Under the current regulatory regime, BT must allow rival service providers to use its network on the same terms as its own retail arm. There would be a huge outcry if that “equivalence” was lost, following the battles between BT, its rivals and the regulators at the start of this decade when Broadband Britain was just an ambition.

Nevertheless, BT’s announcement is full of more holes than a wheel of Swiss cheese. Lets look at the deal from a distance: 10 million homes for $3 billion. In comparison, Verizon is spending about $22 billion to fiber up some 18 million homes. That’s a cost improvement of 9x, which means BT’s plan just doesn’t make sense, even if you take into account that somehow it will get massive sops from Chinese equipment maker Huawei.

BT plans to sell 100-meg connections to homes it will connect with fiber (FTTP) using mostly G-PON technologies. Other homes, which will be connected to special cabinets on the curb (which are, in turn, connected to the Internet using fiber), will get a top speed of 40 Mbps. So in a sense, the plan is a blend of broadband strategies being used by Verizon (all fiber) and AT&T (combination of fiber and copper.)

Having followed this business for some time, I know that neither of their strategies are cheap. Verizon spends close to $1,400 per connected home (assuming that everyone is going to sign up for the service). AT&T’s numbers are also higher than $300 per home.

According to my sources, it costs just north of $500 to get the network ready to offer households super broadband, or what is generically known in the industry as homes passed. This doesn’t include laying fiber to the home, its associated labor costs and the on-the-premise gear. All that costs between $750 and $1,000. The on-the-premise ONTs cost between $150 and $200 alone.

Given that the network is scheduled to be rolled out in 2012, let’s assume that by then, prices decline by half — but the numbers still don’t add up. It could be that this $300-per-home-for-fiber is on top of the previously announced spending on BT’s broadband buildout as part of the 21CN. But even taking that into account, I’m not ready to buy BT’s splashy announcement. I would like to know from BT the exact breakdown of the cost structure of their network.

BT’s new CEO, Ian Livingston, whom I had a chance to meet back in 2006, is a sales maven, given his background with a high-street retailer and an upstart ISP. Some say he’s so good he could sell ice to Eskimos. Of course.

Update: My good pal, Dave Burstein, who writes the influential newsletter DSL Prime, wrote in to point out why the news is spin. “There is nothing in the announcement that wasn’t discussed by Christopher Bland with Andrew Parker a year ago,” he wrote. Dave tracks the industry closely, so I’m not surprised he found the “spin” in the news. He also pointed out that by 2012, less than 1 million will be on fiber, and mostly new fiber.

And Andrew Odlyzko, the authority on broadband and networks, in an email to me noted that the incremental 100 million pounds in capital expenditure increase for this promised network upgrade is a mere 3 percent, and even that is contingent on regulatory relief from Ofcom.

Q: Is this investment dependent on Ofcom creating a new regulatory framework?

A: Yes. The right regulatory environment is vital for anyone seeking to invest. The funds required are extremely large and companies need confidence that risk-taking can be appropriately rewarded.

Image courtesy of BT plc.

UK telco British Telecom has been working hard to reduce its carbon footprint: Last year the company said it would invest close to half a billion dollars in wind farms, and in February BT installed a solar system for its U.S. headquarters. This morning the company says it plans to reduce its carbon emissions 80 percent by 2020. Ah BT, you put our U.S. telcos to shame. Earth2Tech has the full story.

Updated: With the Microsoft-Yahoo battle fading from the dynamic random memories of our over stimulated brains, it is time to turn our attention to Hewlett-Packard’s $12 billion $13.9 billion deal to acquire EDS, a services giant in its own right. The news was announced this morning. HP will purchase EDS at a price of $25 per share.

This indeed is the real thing: both companies have confirmed their talks and perhaps their seriousness. HP-EDS pairing will go down as one of the more significant developments of 2008, and its impact will be felt for years to come.

“I see it as an attempt by HP to really go head-to-head with IBM in a much more meaningful way, especially in technology services and IT outsourcing,” Dana Stiffler, research director at AMR Research told Computerworld. I think there is more to this deal than just old-fashioned outsourcing, and competing with IBM.

Typically, such a major deal means two things: Either the buyer has some issues with his current business, or he wants to make a big bet on the future. In case of HP CEO Mark Hurd, it might be a bit of both. There is only so much market share HP can carve out when it comes to printers and computers. More importantly, HP seems to be realizing that the future is about on-demand infrastructure. EDS brings to the table about 100 data centers around the planet.

Not everyone agrees with HP’s decision to buy EDS and get big fast. Forrester analyst Paul Roehrig is in that camp. Vinnie “Deal Architect” Mirchandani is someone I immensely respect and he brings up a very valid point when he writes:

But EDS is not Accenture or PwC (which IBM acquired) or TCS or Infosys. Its major strength is still in infrastructure outsourcing (though it has been growing its application and BPO capabilities nicely). HP’s outsourcing is similarly more skewed towards infrastructure. So, it is a scale play. But the timing is risky because infrastructure outsourcing is being challenged by data center consolidations, a secular decline in processing, storage and network charges and emergence of utility and cloud computing models.

However, I am taking a slightly more optimistic view of this deal, pointing out that this is HP’s bet on those very same trends — utility and cloud computing. HP might have finally realized that the future is about offering hardware as a service. Lets look at some of the recent developments

• HP bought EYP Mission Critical Facilities. John McCain, senior vice president and general manager, HP Services, at the time of the deal remarked: “Acquiring EYP Mission Critical Facilities boosts HP’s ability to help customers transform their data centers and build dynamic computing environments from the ground up.” (via Rich Miller.)
• HP bought Opsware, a data center automation software company started by Marc Andreessen, for $1.6 billion in July 2007.
• In March 2008, HP announced its data center-as-a-service initiative, targeting large companies.
• Yesterday, The Times of London reported that HP is close to buying 24 data centers currently owned by British Telecom in Europe for about $3 billion. The Times report says BT will provide Internet bandwidth, networks and remote access to HP, an area where the Silicon Valley-based giant isn’t that strong.

If you plot the EDS bid against these four recent developments, it is not that difficult to postulate that HP is building its own cloud focused on large global companies. Going further, I would channel something Vinnie says in his post.

HP’s hardware business has seen significant success in a number of emerging economies — running that infrastructure as a service does offer some unique opportunities.

I think this is a good point: Even though it’s growing fast, BRIC Bloc remains reticent to spend big dollars on infrastructure. Offering infrastructure-as-a-service to Indian telecoms or Chinese automakers of Brazilian biofuel companies is a much easier proposition then making them spend millions of dollars on blade servers, storage systems and networking devices.

Update#2: My favorite writer/thinker/troublemaker Nick Carr disagrees with me thesis about HP & the Cloud. He believes that this is a backward looking move:

an acquisition aimed at boosting profitability through consolidation and cost reduction in a mature business. The transition to the cloud will, for big companies, be a slow one, and there will continue to be much money made in running client-server infrastructures for many years.

Nick might be right, but in reality as he argues in his book, Big Switch (have you read it yet?), the world is going the way of the cloud, and even a company as stodgy as HP realizes that it has to transition to the future.

Update #3 Our colleagues over at OStatic, all of whom are open-source experts, have taken a deeper look at the deal as well. Go here for the full analysis.

What do you guys think?

If this story interests you then you should definitely check out our upcoming conference, Structure 08.

In 2006 I had traveled to London to meet British Telecom (BT) CEO Ben Verwaayen and his team, hoping to get a first hand look at how Verwaayen and his team were trying to overhaul the company well known for its iconic phone booths.

They had put in place a strategy to diversify into IP services, build a brand-new 21st CN (UK broadband network) and, to cap it all, plans to become the carrier of choice for large multinationals. It ended up as a long feature in the August 2006 issue of Business 2.0.

The 56-year-old former Lucent executive Verwaayen resigned earlier this week after six years at the head of BT. He is being replaced by 43-year-old Ian Livingston, who until recently ran BT Retail and was seen as the maverick to make BT Retail a force to reckon with.

Livingston, before joining BT, was group finance director at electrical retailer Dixons and had helped set up Internet service provider Freeserve, now part of Orange. Livingston was part of Verwaayen’s attempt to hire folks from outside of telecom industry and bring some consumer-savvyness to a stodgy company struggling to stay competitive with pesky upstarts. He will have his work cut out for him — the company is still too big, too lumbering and too bureaucratic. The 21CN is still nowhere close to delivering its promise. At the same time, BT is facing increased competition from upstart broadband providers like Carphone Warehouse and Virgin. The company has no consumer mobile service, and it continues to lose consumer lines.

Those were the very same issues that put Verwaayen on the hot seat. On his watch, BT had a mixed record. A lot of promises were made, but never fully realized. The only stand out was the Global IT services business. It now accounts for about 40 percent of BT’s total revenue. But that’s about the end of it.

Fierce Telecom points out that “Verwaayen’s decision to leave comes not long after BT reported poor financial results for the fourth quarter and full year of 2007.” In recent months, several executives have left and there are questions about “execution and expense of its 21st Century Network project,” FT goes on to say.

So what’s next? Job cuts, according to some analysts who point to Livingston’s track record. I wonder if one of those will be company CTO Matt Bross, who came to BT at the urging of Verwaayen.

What are your thoughts on BT and its future?

Additional reporting by Irina Haltsonen, who is spending the summer with the GigaOM team.