back to article UK superfast broadband crew: EC competition bods are holding us up

The UK is accusing the European Commission of holding up its superfast broadband programme with pesky concerns about free market competition. The government has been trying to get its hands on state aid to build the infrastructure necessary to get better broadband to everyone, but unfortunately, with state telco BT pretty much …

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Meh

Find an excuse, shout loudly enough and someone might believe you.

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Anonymous Coward

Only BT was left in the running

LarsG, Absolute agree.

The government oversaw this whole process, knew that EU rules required the contracts to be bid on by multiple providers. Yet they have squeezed everybody else out of process, its almost as-if BT slid a few back-handers, but they wouldn't do that (lol). Now the EU are asking WTF is going on and the goverment are kicking and screaming like a toddler, blaming the faults on the grownups!

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Anonymous Coward

The problem is not so much competition, there are others out there that would love to give it a go. It is the way BT have a stranglehold on the infrastructure that keeps others out.

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WTF?

Oh for the love of...

So BT working with the EU in Cornwall can roll-out ahead of schedule but the UK government has to fight with the EU when their open bidding results in only BT winning the contracts.

Someone, somewhere, is being an ass. Or several someones :-/

This is good.

This is bad.

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Only three infrastructure providers in the UK

The single biggest issue which the EU competition bods and UK govt fail to realise is that the three primary infrastructure providers for public telecommunications are BT together with Virgin and KC. Of these three only BT actually has a network that is capable of being used by all the piggyback providers such as TalkTalk, O2 and Plusnet. Therefore the reality is that if you are going to use state funds to build,extend or upgrade a telecomms network then BT is the company you have to go to.

It is entirely feasible for others to have a go, for example Virgin could extend their networks into new areas or even in to areas where they have the main channel but have never connected the actual houses (and there are a few places like this). KC could look to push out from Kingston Upon Hull and in to the Eastern parts of the UK, but in both cases why bother? Having to open their network infrastructure up in the same way as BT is not in their competitive interest.

Unlike AC I don't believe that there are others out there who want to give it a go. Outsourcing the expensive part of a network (the wires and cabinets) to someone else at a state controlled price is much easier than actually going out and building a new network in a city never mind the whole country. It is therefore time for the EU to face reality, unless national governments can be persuaded to break up existing national telecom infrastructures in to multiple companies (unlikely due to the massive increase in costs that would result from more interconnection charges and traffic routing costs) then we all have to accept that when it comes to a national telecommunications infrastructure the best we can do is negotiate good terms for access with our monopoly providers.

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Re: Only three infrastructure providers in the UK

Upvote for putting forward a logical argument on a monday morning

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Re: Only three infrastructure providers in the UK

I agree with your logic, but that doesn't make it any less frustrating for those of us whom BT simply refuses to provide a service to.

This is supposed to be critical national infrastructure, more and more council and government services are being moved online, BT has the advantage of being a monopoly that is fully protected against failure by the Government (no way can BT be allowed to go under) and yet at a whim they can deny anyone access to this national infrastructure.

There is no responsibility on them to provide universal access, and that is ridiculous.

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@feanor

I assume your talking about Broadband for those out in the sticks....

I thought there was funding for that...

Really we need ONE network, not two, not three.... So I think BT (wholesale/openreach) should be state owned as even now BT Business/BT Residential still have to buy their service from BT Wholesale before selling it!!!!!

uk gov should buy up all the shares in wholesale and push out the upgrade... this whole competition bull just slows us down.... our rail network would be tiny if it had been 100% private... our road network would be worse than it is with only toll roads between major cities if it was private... Would everyone be on mains electric if the government had not built the national grid in the 30's?

Private does not work for critical utilities and public services...

It should always be a national state venture to get it going, but a state owned business rather than a state department works best....

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Re: @feanor

Erm, the rail network was 99% built with private money and was privately owned until surprisingly recently. All the companies went bust and the government stepped in and brought them under public ownership.

Almost all utilities started as private enterprises - it's only when they've reached a certain size that they become nationally important. What tends to happen is that investment becomes necessary but can't be found because of long payback times or that price falls and the business can no longer service the debt it incurred building infrastructure. At that point another business buys all the assets in a fire sale - as Virgin's predecessors did with the cable companies - or government steps in as it did with the railways.

Public investment is sometimes required, I'm not sure that public ownership always is. The arguments that then arise around those two statements are as much ideological as economic.

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Anonymous Coward

Re: Only three infrastructure providers in the UK

Universal access means people in cities and towns subsidising people in rural areas. BT's monthly phone line rental charge is higher than the underlying cost in big cities, it's a fraction of the real cost in rural areas. Universal access doesn't mean 'make a loss', it means serve everyone and charge them all the same rate.

Do you think people who live in cities with high speed broadband today would be happy to see their broadband bill double? You'd have to build out all the fibre to the wotsit infrastructure just for one customer up the side of a mountain in a remote part of Scotland. And wouldn't applying it just to BT give Virgin a giant advantage? My crystal ball is hazy but I suspect that would result in a big migration of BT customers (and people who buy broadband from people who resell BT services) to Virgin. There'd be far fewer people left in cities to subsidise rural connections and so the price would increase again - repeating the process until BT has no urban customers left and even with the universal obligation rural broadband costs £500 a month. Net result would be still no affordable rural broadband and Virgin becoming very wealthy.

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Anonymous Coward

Re: Only three infrastructure providers in the UK

Why should those of us living in cities subsidize those who live in rural areas so much? We pay considerably more council tax here in town than our friends who live 10 miles away in the sticks. Who in turn pay far more than friends in rural Northern Ireland. I don't have much sympathy for people who grumble about rural connections while this anomaly persists.

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Re: Only three infrastructure providers in the UK

Why should those of us living in cities subsidize those who live in rural areas so much? We pay considerably more council tax here in town than our friends who live 10 miles away in the sticks. Who in turn pay far more than friends in rural Northern Ireland. I don't have much sympathy for people who grumble about rural connections while this anomaly persists.

Why should I subsidise those living in cities? I pay and I get less services, much less.

Stop being an idiot. People in "Cities" and those in villages and small towns are no different. Neither could survive without the other (OK in reality those in the countryside could live very easily without those in the town as that is where your food comes from) so lets all get along. Phone lines are pretty much universal so what is the difference with fibre?

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Anonymous Coward

Re: Only three infrastructure providers in the UK

"We pay considerably more council tax here in town than our friends who live 10 miles away in the stick"

Yeah the blighters, why should rural people pay a subsidy for street lighting and the high levels of policing just cause you townies cant walk in the dark without raping each other, or cant stop fighting after a few drinks or burglaring each other for your drug habit.

I'll let you ponder that while you take a few lengths in the swimming pool in the centre of town, or peruse the shelves of the "local" library based in town, all kindly subsidized by Rural Inc.

How about we call it quits, you run a little part of fibre 1/2 mile down the road and I'll pay towards the street cleaner and skate board park as well?

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Anonymous Coward

What has the EU do do with it anyway?

This is British state aid paid for by British taxpayers being offered to British companies to provide a British service available only to people who live in Britain. It's not like it will be competing unfairly with a French or German internet provider.

Isn't it about time the government took a leaf out of the French book for such situations, and firmly presented an erect British finger to the EU department in question?

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Re: What has the EU do do with it anyway?

Because it suits the Government not to do that.

On the one hand they can say, we are playing by the rules but the awkward people in Europe wont allow us to get things done.

And if the EU do come through, they can say; we worked hard to persuadethe EU that this was the best deal fro the UK, aren't we great?!

We are not as forceful and stubborn as the French workers, we tried to be once, we didn't like it and put Charles II back on the throne.

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Re: What has the EU do do with it anyway?

"a British service available only to some of the people who live in Britain. "

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Re: What has the EU do do with it anyway?

I agree, just tell Europe to piss off, we're doing it anyway....

(I am not anti-EU, the EU is not a bad thing, just a bit of a mess right now)

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FAIL

Re: What has the EU do do with it anyway?

The only problem the EU has is with the work not being put out to competitive tender as all government contracts in the EU have to. It's not a market if there is no competition.

Britain, despite being a pioneer in privatising telecommunications, has consistently failed to create a competitive market. There are parallels with the power generation market which has also failed to attract investment. Customers, including businesses, are the ones who lose out over time by paying more for poorer services (than their European competitors).

It doesn't have to be like that. My cable provider wrote last week to tell me that they have recently upgraded the local loop to fibre. No subsidy involved although I think they will have used the holes dug by the council for the new underground (paid for by the state so put out to tender) to install the cable. Apparently speeds of up to 150 Mb/s are possible. Which is nice, though I'm more than happy with my puny 50 Mb/s.

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Anonymous Coward

Re: What has the EU do do with it anyway?

BT is a big player in EU telecoms. It competes with Deutsche Telekom and France Telecom and Telefonica and all the European telcos in their own markets. BT is the 2nd largest telco, certainly for business users, in a number of EU countries. Part of the 'deal' for being allowed free access to those markets is that the Europeans get to play in ours - hence Telefonica owning O2, Orange being part of France Telecom etc..

Non-EU companies don't have quite the same ease of access and thus find it harder to be competitive operating in Europe, usually only serving the remote outposts of their domestic customer bases. To be part of the club, you have to play nice.

The Brits complain heartily when France Telecom is able to get investment loans from the French government at preferential rates or when Deutsche Telecom lobby to have their own staff sitting on the board of the German regulator. Broadband competition comes not only from fixed line xDSL type services but 3&4G as well along with a number of fixed wireless access methods.

So - in answer to your question - it has quite a lot to do with the EU. Unfair state aid in Britain would hamper other European companies who wanted to go for the same business and it would tend to weaken any arguments against any unfair behaviour in other countries.

None of that is to say that this is unfair - but it doesn't seem unreasonable that a process be followed to determine that all is OK.

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Anonymous Coward

Re: What has the EU do do with it anyway?

The underlying issue that exists is that it's much safer and cheaper for a new telco to resell something they buy wholesale from BT than it is to build something themselves. Pricing to end users is low and continues to fall. Take up of high speed broadband is rather low - 15% of houses passed is the figure I've seen quoted and the investment payback is ten years, assuming prices don't drop even faster during that decade.

Who would throw money at building a business based on those kinds of numbers? I doubt it's much more attractive as an investment that just sticking the money in the bank for ten years. And that, I think, is why there aren't more businesses clamouring to have a go - there's barely any money in it. Possible remedies are increased pricing - which seems unlikely given the existing low take-up and a recession - or some form of government backed utility subsidy model. That in itself is probably difficult because of that 15% take-up figure - it hardly smacks of being essential. Heck, mains gas and sewers are fairly essential and we've not found a financially viable way to extend those to rural communities in over a hundred years.

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Re: What has the EU do do with it anyway?

Because BT also bids on contracts in Europe and now because it has just been given a 300M quid subsidy (assuming typical 1005 cost overruns) it can go out and underbid on every other contract in Europe.

Suppose Germany decided it was going to subside the cost of manufacturing every car so they could be given away free - but the deal only applied to companies whose intials were V and W - would a worker in a Nissan plant in Sunderland have any reason to object?

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FAIL

So *thirty* years after "privatization" BT still has an effective infrastructure monopoly.

Oh gosh who could have predicted that.

public monopoly -> private monopoly.

cash flow -> Treasury (with some possibly paid back to BT becomes

cash flow -> Fat pay rises to executives (doing the same job) + dividends to share holders (mainly pension funds, like every other major company in the UK)

Bottom line

Public investment -> private profits.

The BT of the early 80s was a very different beast from now but it's debatable if the improvements (and there have been some) could have been produced by civil servants with a clear mandate and a bigger set of b**ls.

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Re: So *thirty* years after "privatization" BT still has an effective infrastructure monopoly.

Pretty much spot on but I have to take issue with.

cash flow -> Fat pay rises to executives (doing the same job) + dividends to share holders (mainly pension funds, like every other major company in the UK)

Pension funds are interested in long term returns, hence the current trend towards getting them to fund long term infrastructure projects. Short-term returns such as higher dividends don't suit that. If the pension funds really are in control then you would expect more investment to encourage future returns.

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Anonymous Coward

Re: So *thirty* years after "privatization" BT still has an effective infrastructure monopoly.

The lack of infrastructure competition is largely due to the way regulation evolved. Wholesale rates were set low to encourage new entrants, but also had the effect of pushing new telcos toward just reselling BT stuff instead of building their own networks out. If the largest and thus most cost efficient network in the country is making tiny margins what chance did someone starting from scratch have?

I worked on the network of a long-ago failed competitor to BT who did build instead of resell. The choices were to start small and keep network growth in step with revenue, or build big and hope they came. Neither choice was a good one. Starting small meant being more expensive than BT, starting big meant having roughly the same price as BT but not enough revenue to service the loans required to build the network. The company chose the latter and ran at an increasing loss (remember Ofcom were making BT reduce their wholesale rates all the while, forcing everyone else to reduce prices) despite growth in customers and usage until the banks' patience ran out.

I digrerss - Companies that did make big capital investments - the cable companies largely - went bust. There is lots of competition in telecoms in the UK, but not much of it takes place at the infrastructure level unless you count the mobile companies in the mix.

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Re: So *thirty* years after "privatization" BT still has an effective infrastructure monopoly.

Wholesale rates were set low to encourage new entrants, but also had the effect of pushing new telcos toward just reselling BT stuff instead of building their own networks out.

Wholesale prices in Britain are not, AFAIK, significantly different to those in other countries. Specifically France has benefited from cheap rates and rigorous unbundling: France Telecom still owns the vast majority of the infrastructure, is required to invest in its upgrading and provide full access to competitors.

In Germany private utility companies were early investors in capacity which meant a lot more backhaul capacity was available along with access to the home. But it is also true that cable capacity was initially (ill-advisedly using coax and not fibre) built out by the government before privatisation. Deutsche Telekom struck some kind of deal for higher wholesale pricing on the fibre network it is now building out.

So, if other countries with similar wholesale pricing can still encourage investment, why isn't it happening in Britain? If BT thinks it is being paid too little for wholesale connections then it hasn't made its case properly.

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Anonymous Coward

Re: So *thirty* years after "privatization" BT still has an effective infrastructure monopoly.

"So, if other countries with similar wholesale pricing can still encourage investment, why isn't it happening in Britain? If BT thinks it is being paid too little for wholesale connections then it hasn't made its case properly."

I doubt BT does think it's being underpaid for wholesale connections. The problem affects potential competitors to BT, it doesn't harm BT. What I'm saying is that the wholesale rate is, relatively, low - and in many cases lower than the cost I could achieve if I built something out myself. How then do I convince an investor to give me millions to build something when I can just resell a BT thing at lower risk and better cost?

If I use a dreadful car analogy - if the government told BMW that they must sell me Minis at a wholesale rate that's only £10 more than they cost to build, and I can resell those at a lower retail price than BMW do, why would I want to risk millions building my own factory and doing my own R&D and employing all those manufacturing workers? I might design a better car and make a ton of money and get to bathe in champagne, but it's much riskier than reselling and I'll need bankrolling until I can achieve an economy of scale that matches BMW.

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look decades ahead

This is merely British gov. trying to ignore sensible rules it signed up to yonks ago. All the governments do this trying to avoid open competiton, keep murky deals with national champions - aka directorships for politicans and bureaucrats - etc.

The Brussels strategy is long term - knowing relevant minister (British, French, Polish) is frightened of losing votes from Nimbies, numpties, Neofascists, they propose he very quietly sign up to reforms in ten or more years time. This dumps the vote problem neatly on his successor while he later claims the glory in his memoirs for a wise, statesmanlike decision. Eventually after about twenty years the reform starts to arrive - as with catalytic convertors, railway signals, passports ...

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Break up BT

Split infrastructure from services but they wont because BT has many billions pension deficit which if it goes bust sits with the Government due to the contract when privatised. I love bailing out unionised pensions.

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Unhappy

No Surprise

So once again we find the EU is protecting us from our own government. No wonder they are trying to persuade the country to pull out.

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Re: No Surprise

"So once again we find the EU is protecting us from our own government. No wonder they are trying to persuade the country to pull out."

A very good point that should be made over and over again.

IMHO a lot of the cruft the EU issues (like IDK the EU Data Retention Directive) originated in the UK to begin with.

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Facepalm

let's all slag off BT

LOL BT

Jesus I'm a comedy genius. The wit and intellect required to laugh at BT for nothing more than them simply being BT is beyond most of you lot I'm afraid.

look i'll do it again: BT - HA HA HA HA!

i kill myself i really do.

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Anonymous Coward

"The UK is accusing the European Commission of holding up its superfast broadband programme with pesky concerns about free market competition."

The EU should realise that no one else is bidding for fund to build the network!

How can they're be competition when no one else is building the network?

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WTF?

State Aid not a problem - it's all political

There are loads of other schemes that overcome State Aid easily. As long as every SME (they'll be the "beneficiaries")hooking up to superfastaccleratedinterwebnettubes signs a 'de minimis' confirming that they haven't received more than €200,000 over three years (that's a shed load of connectivity) then you can shovel State Aid as much as you like. Secondly, there's a State Aid test: "Could the measure affect trade between one or more Member States within the European Union?". Actually, it can't cos those fat pipes don't stretch outside of the UK. Do what you like inside your borders, as long as it doesn't get out. Lastly, you can push State Aid on individuals as much as you like: State Aid is only considered naughty if it goes to enterprises.

But supporting these arguments is beyond most of the Guvmint.

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Unhappy

"As long as every SME (they'll be the "beneficiaries")hooking up to superfastaccleratedinterwebnettubes signs a 'de minimis' confirming that they haven't received more than €200,000 over three years (that's a shed load of connectivity) then you can shovel State Aid as much as you like. Secondly, there's a State Aid test: "Could the measure affect trade between one or more Member States within the European Union?". Actually, it can't cos those fat pipes don't stretch outside of the UK. Do what you like inside your borders, as long as it doesn't get out. Lastly, you can push State Aid on individuals as much as you like: State Aid is only considered naughty if it goes to enterprises.

But supporting these arguments is beyond most of the Guvmint."

Really? I found your explanation fairly easy to understand.

Clearly I lack the skills for a career in politics.

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