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BT makes offer than could speed up access to over 10 Mbps broadband for UK

Posturing over the Universal Service Obligation is set to replace the previous calls for full seperation of Openreach from the BT Group and thus form the PR battle lines for the next couple of years. The latest shot in the way is a proposal that BT has made to the Government where Openreach would use a combination of technologies including fixed wireless, VDSL2 variants and FTTH to deliver the 10 Mbps minimum speed that the Universal Service Obligation would require. The proposal is potentially attractive to the Government since it is envisaged it would not require any public money, but appears to rely on a regulatory holiday whereby proposals to force down the price of some Openreach products would be put on hold or simply not implemented, there is also the possibility that overall wholesale prices may increase to pay for the extra investment.

Getting a reversal of what Ofcom is proposing in terms of price reductions for the GEA-FTTC 40/10 service in 2018 will be hard sell as we are sure TalkTalk and Sky were hopeful that this price drop would help to increase their margins, while passing on some reductions with a big fanfare. Openreach/BT are suggesting that they believe their technology mix would reach 99% of UK premises, but worries of the BT proposal being a watering down of the USO abound but the Government appears to be saying at this early stage that if the proposal was accepted it would be legally binding. Some of the 1% remaining will be the KCom/Hull area.

The key to the puzzle is exactly how many premises will be left at sub 10 Mbps once the superfast roll-outs complete, if the 95% superfast by end of 2017 is reached then the figure MUST be less than 5% and our data indicates this is already the case since FTTC services don’t drop from superfast to sub 10 Mbps in a distance of 50 cm but over a longer distance so there are a number who can get FTTC above the 10 Mbps level but below the superfast levels. In the BBC coverage there is a somewhat odd comment by Labour’s shadow culture secretary Tom Watson that the public should not be made to pay more for a service that reaches the 10 Mbps target or better and will upset those that have upgraded to a superfast service and are paying more per month and have stumped up the install fee for the better service. Rolling out new services does cost money, and with slow ADSL/ADSL2+ services ranging from paying just paying for voice line rental (free broadband component) through to sometimes costing more than a superfast product does the reality of implementing a no extra cost would be complex.

Then there is the issue that services from Sky and TalkTalk and others are not universally available, and they may decide to do similar with a 10 Mbps USO product and thus people would need to migrate to get the USO service – remember that migration for those millions who rely on an email address from their provider is a big problem. Making the public pay a price of say ?70/m for a USO service and/or an install fee of ?500 would be grossly unfair, but we see no problem if the pricing is somewhere between the basic ADSL services and superfast services, but introducing a mid tier service if available to all could decimate superfast take-up figures until such time as 10 Mbps is not suitable for streaming video.[1] Or put another way the complexity and success of multiple provider choice and competition from the past couple of decades of regulation in the UK is what makes the superfast roll-outs and delivering the USO somewhat harder than other countries.

Predicting how many premises will vanish from the existing 904,000 premises under 10 Mbps (93.2% of UK premises have a superfast option) once the 95% roll-out is reached is not straightforward as issues around infill cabinets make prediction harder than a few years ago, and if extension projects deliver such that the superfast coverage does reach 97% in the 2018 to 2019 period, it may be that the number of the USO target at that point is in the 1% to 2% region. We have done predictions in the past and given a couple of days work can do similar again, but other than making for a short news point it may not be worth the effort if widely ignored. This all raises an interesting point, what does BT think the actual number will be that it will actually deliver its mixed technology USO option too and who are those expected to be in the remaining 1%, or with the cynical hat on is this just a good way of getting the Ofcom wholesale price cuts postponed.

The devil is as always the detail and the battle is likely to rage on for some time.

The BT Group CEO is talking of spending ?450m to ?600m.

For those reading in Government can we be plain that while a 100GB monthly usage cap may sound like a massive amount of data, with the increasing digital delivery of content this is not enough for the largest console games today and as file sizes keep growing a USO solution with a data cap or charging per GB of usage is not something that should be considered.

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References

  1. ^ BBC coverage (www.bbc.co.uk)
  2. ^ Login (www.thinkbroadband.com)
  3. ^ Register (www.thinkbroadband.com)

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