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Content Tagged with British + broadband
How Realistic Is BT’s Fiber Broadband Plan?
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.
BT to Cut Carbon Emissions by 80%
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.
Broken Promises Behind BT CEO Exit
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.
Competition, ain’t that a good thing
Competition in broadband - and I mean real competition not what passes for competition in the US - is such a beautiful thing. It works so well for the consumers. UK broadband is a perfect example.
A few months ago, NTL and Virgin merged to become Virgin Media, the largest broadband provider in the British Isles. They didn’t do such a good job of keeping their customers happy, and British Telecom surged ahead, leading to speculation that some private equity guys are going to buy out Virgin Media.
And while these two are jostling for the top spot, the little players are trying to do their best to lure customers, and offering all sorts of interesting combinations. Pipex, has started offering six months of 8 Mbps broadband (though with 2GB transfer cap) for free, as long as folks sign up for $25-a-month voice plan (unlimited local and national calls). Of course there is Carphone Warehouse with its Free Talk Talk offering.
(I wonder if any of our readers are tracking the broadband prices in UK and if they are really heading south.)
Telco dogs need to learn software tricks
Last year, after visiting British Telecom (BT) and meeting with their executives, I left London with one key take away: BT was one telco that completely understood that it was facing uncertain times, and had no choice but to reinvent itself to survive.
The senior BT management understood that while broadband was a start point for its reinvention, it had to boldly go where no telecom had gone before, if they wanted to survive. They had to behave and think like an Internet-based software company.
Ben Verwaayen, BT chief executive, when talking about BT’s transformation remarked :
“This is the second phase of BT’s transformation. The first phase saw BT shift its focus from narrowband to broadband. This next stage will see BT advance from a 20th century hardware-based company to a 21st century software-based services company.”
Though it may sound like a hookey statement by a telco chief, it is actually quite true. According to McKinsey nearly 60% of CIOs are currently considering software-as-a-service model. If you factor in the lag-factor typical of McKinsey reports (aka a year after the fact), the SAAS movement is well under way.
“There are more than 1,000 SaaS vendors in existence today, although 90% have less than $15 million in annual revenue, but are growing 4x faster than licensed software,” notes Colby Synesael, analyst with Merriman Curhan Ford.
The weak link, however, for SaaS, is the reliability of these services over an IP connection. Synesael, makes a good point when he argues that SaaS needs to overcome bandwidth constraints, packet loss, jitter and latency. These are issues that telcos can address with their network capabilities, and they can start to learn the ways of the software world, and work with SaaS vendors.
“In a software driven world, services will be available in real time and around the globe, harnessing the potential of BT’s 21st Century Network,” Verwaayen recently said.
That holds true for any telecom operator. The old AT&T CTO Hossein Eslambolchi used to talk about software-expertise-as-a-way out from telecom commoditization.
I wonder if this is a wiser, albeit less sexy way for telecoms to bolster their business. Instead of spending $6 billion on IPTV projects, AT&T could say buy a Salesforce.com (have some money left over for satellite-based triple play) and ensure a few hundred thousand folks paying $60-odd dollars a month for the CRM as a service. It be a nice way to fight off the cable companies who are now gearing up to go after the small and medium sized businesses.