British Telecom on Tueday in the UK announced plans to roll out fibre connectivity to millions of UK homes, in an initiative worth £1.5bn.
The move ends the long-running debate over who would be first to make a major investment in 'next-generation access' (NGA) in the UK. BT, which has already been trialling fibre to the home (FTTH) at a new development in Ebbsfleet, Kent, has said the new programme will cost £1.5bn. It has also warned that the new services are likely to be more expensive at the wholesale level than its existing copper-based connectivity.
According to BT, the programme will see "as many as 10 million homes" hooked up to fibre-based broadband by 2012. However, the company has said the scheme depends on regulator Ofcom establishing a new regulatory framework.
It is likely that Ofcom and BT have already worked out some of the details of this framework, as the regulator's chief executive, Ed Richards, hinted earlier this month that Ofcom favoured "a regulatory environment for the next generation of networks and access that both allows and encourages operators to make risky investments".
Richards said on Tuesday that Ofcom welcomed BT's announcement. "This is a clear sign that the UK market is moving in the right direction, with a growing number of plans to deliver super-fast broadband services to consumers," he said. "These new networks will be a critical part of the UK's infrastructure and will change our experience of communications. They will support and deliver innovative applications and services, as well as helping create new opportunities for businesses of all kinds."
"Ofcom has led the way in prompting a debate about the regulatory environment for super-fast broadband deployment," Richards said. "With this announcement, industry will need further regulatory detail and that is exactly what Ofcom will provide." He added that "further detailed proposals" for NGA regulation would be published in September.
BT's fibre rollout will be a mix of FTTH and fibre to the cabinet (FTTC), with the former taking place at new-build developments such as Ebbsfleet and the Olympic Village, and the latter being used primarily for existing residential developments. Homes benefiting from FTTH will get top speeds of up to 100Mbps, while those using a copper connection to their fibre-equipped street cabinet will get speeds of up to 40Mbps. BT said this will make it possible for households to run multiple high-bandwidth applications, such as high-definition TV, simultaneously.
"BT is committed to wholesaling its new services - unlike many other companies and countries - thereby ensuring Britain remains the most competitive broadband market in the world," the company said in its Tuesday statement. "BT will also be pressing for any other next-generation access network in the UK to be open to other companies."
The company stressed that the rollout was not going to be just for major cities, but that it would be working with local authorities to see how rural areas could also benefit. It was acknowledged that the fibre rollout was necessary to alleviate the broadband congestion caused by high-bandwidth services such as the BBC's iPlayer.
Analysts were quick to respond to Tuesday's announcement. Dean Bubley, of Disruptive Analysis, noted that the £1.5bn figure was around a tenth of the amount many were claiming would need to be invested in a nationwide fibre deployment. "To me, this compromise looks like a fairly prudent risk-management approach on BT's part, given the current economic situation," he wrote on his blog. "[It is] sufficiently aggressive to catalyse some regulatory change - and maintain clear water between fixed and mobile broadband - but not large enough to act as a boat anchor on the company as the UK [economy] falters."
Bubley also said BT's move would give it the backhaul infrastructure to roll out mobile WiMax in the UK, should it gain spectrum in the upcoming 2.6GHz auction.
JupiterResearch's Ian Fogg also noted the "suspiciously small sum" of £1.5bn. "I suspect the higher wholesale prices that BT plans for fibre, compared with DSL, will slow the uptake of fibre and so help BT save [capital expenditure]," he wrote on his blog.
"This is a game changer for the UK broadband market," wrote Fogg. "The larger ISPs that have unbundled local loop networks (O2, Sky, Carphone Warehouse, Be, Tiscali) suddenly face the prospect of their copper DSL services becoming obsolete in just a few years. The small, niche ISPs that have struggled to remain in business in the face of higher speeds and thin margins offered by the [unbundled local loop] players, now have a lifeline with BT's proposal to wholesale fibre."