Tuesday, July 15, 2008

BT's fibre-based broadband

BT announced today that it is spending £1.5bn (initially around £100m of incremental CAPEX in each of 2008-09 and 2009-10) to build out its fibre access network to serve 10 million homes by 2012. This is somewhat under half the households in the UK.

Most of this will be fibre to the curb, where it will drive VDSL giving 50-100 Mbps in principle. New builds may get fibre to the home. Most likely, BT will use GPON technology and real sustained data rates will be dialled far lower.

In exchange for this CAPEX spend, BT wants regulatory relief. By this they mean no unbundling (difficult anyway with GPON) which will give them an access fibre monopoly for enough years to guarantee a return on their investment.

They should probably get it. The business case for FTTH remains shaky, and the externalities are such that the real benefits may well accrue to other economic entities (retailers, providers of IPTV channel content, etc).

Rather than subsidising BT's fibre roll-out, letting them make monopoly profits for a while seems on balance to make overall economic sense.