back to article David Cameron defends BT's taxpayer-funded broadband 'monopoly': It's a 'success story'

Prime Minister David Cameron has defended BT's command of the £1.2bn taxpayer-funded deployment of faster broadband access, claiming the one-time national telco had worked hard to make the two-year-late, competition-stifled scheme "a success story". He said during PMQs in Parliament on Wednesday that while it was right that BT …

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Gaps?

Would those be the same gaps that companies have been spotting for years? That as soon as a company establishes that there is a worthwhile market in such a gap, BT decides it's actually going to rollout into the same area.

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Re: Gaps?

To be fair, BT at least have the capability to make it work, despite the cost.

15 years ago, the government was trying to "boost" the digital economy by paying vast subsidies to big technology companies with no Internet knowledge so they could undercut the small businesses (who inevitably at the time were the only people who knew what they were doing) that were not growing fast enough for the government's taste (largely because of a lack of genuine demand). The result then was to suck the life out of the whole market as small suppliers failed and businesses were put off the whole idea of the Internet by oversold and underdelivered, subsidised hype.

In my, inner urban, area, there is one of these large "assisted" fibre rollouts going on, despite the fact that most of the people who could demonstrate a need for FTTC already have access to it, or to Virgin cable. So there's not even a "gap". Not only are BT being subsidised to install more kit, but end users are being subsidised to subscribe to it. So, yes, it's silly, yes, it's a grotesque waste of money, but at least this time it's only undermining the opportunity for new service development and not actually closing down existing provision. I think that counts as progress when you're dealing with Whitehall.

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Re: Gaps?

Exactly those gaps. Why waste time researching them yourself when you know someone else will do all the leg work and you can jump in at the last second?

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Re: Gaps?

@ Warm Braw

EU state assistance rules do not allow any substantial overbuild of any comparable existing privately-funded system. In the case of the BDUK funded scheme, that included VM broadband as that is capable of exceeding the chose NGA standards for "superspeed". Indeed, VM keep a close eye on this for obvious reasons and would object to any state funded competitor encroaching on their "patch" to any significant extent.

The BDUK process includes an open market survey asking for any (credible) privately-funded schemes before the intervention areas were defined. The length of time required to gain EU approval was responsible for a considerable part of the delay in the scheme as, not surprisingly, politicians tend not to consider such issues before making their announcement.

So, I can't be sure in your area, if there is a "legal" overlap with the VM network. If there is, most probably it was part of the commercial roll-out. It's extremely common (almost the norm) for some cabinets on an exchange to be part of commercial roll-out and others to be on the BDUK scheme as they were not considered to be commercially viable. It can be very difficult to tell the difference. Some authorities (like the Bucks & Herts schemes) actually publish which cabinets are to be enabled as part of the BDUK scheme, but that's far from universal.

nb. my cabinet is similarly in a VM area and was enabled three months ago, but it was part of the commercial roll-out, whilst I expect others on the same exchange (serving smaller communities) to be BDUK enabled.

That doesn't mean there won't be a small amount of overlap, as inevitably the footprint of a

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Re: Gaps?

>"The BDUK process includes an open market survey asking for any (credible) privately-funded schemes before the intervention areas were defined."

Yes that was a joke!

In my area, firstly no one actually knew which areas would be in the BDUK area, because BT were the only one's who knew where they were/weren't going to commercially deploy broadband, so first obstacle to overcome. Secondly, the open market survey was quietly publicised on the County Council's BDUK micro-site which also was quietly launched. Yes the local BDUK group communicated with local councils, however, to many of these the communication was of little value unless a councillor had a personal interest in the matter, so nothing was communicated beyond the council... Also having registered with the local BDUK group (both as a resident and as someone with an interest in operating a privately-funded system), I've yet (and we're talking since 2011) to receive any communication from them...

As I've mentioned elsewhere, BT have in the last few months installed an FTTC cabinet next to my street cabinet and I've still not received any proactive communication and all information I have obtained has been because I've forced the issue.

No from what I have seen, the BDUK process was and is all about providing a veneer of respectability over the obvious allocation of government monies to BT.

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Re: Gaps?

It was each of the local authorities that carried out the Open Market Reviews under the BDUK framework, and they would have treated all the telecommunication suppliers in that respect (although clearly that means VM or BT for the vast majority), and they that drew up the intervention areas. Of course it's always going to be difficult for small companies with limited finances to commit expenditure, but frankly that's because in the world of major infrastructure projects the capital requirements are high, as are the risks. If they weren't, there wouldd be hundreds of local companies doing it, and frankly there aren't. It's a game for companies with deep pockets who can absorb risks. (Like Google - who can afford a large scale commercial experiment with Google Fibre).

What you appear to be requiring is that a commercial company releases its investment plans to competitors, and I really don't see that happening, especially in an area of investment like telecommunications, where there can be rapid take-up and change.

I suspect that the tendency in fixed line telecommunications is very similar to that for electricity, water and gas. The economies of scale are with large operators and that's a natural state of the market. What that means of course is we end up with a highly interventionist regulated environment (which is what we have), with more competition at the higher and added value levels. There will be specific areas were smaller companies will make an impact - industrial estates, new apartment blocks and so on (there have been some developments recently), but I don't think we are going to see the country somehow covered by a patchwork of small, local network suppliers. That's how both electricity and telephone provision started out, and it ended up being consolidated into national networks in virtually every country you care to name (usually nationalised, as in the UK, but privately in places like the US). By a quirk of history, Hull & Kingston retained it's own local telephone network, but that's highly unusual.

One other point. It's rather unfortunate that public money is required at all to subsidise rural roll-out. In the case of the telephone (and other utilities), that subsidy was achieved via a cross-subsidy system. That continues to this day in that the copper loops in rural areas are cross-subsidised from revenues in urban areas. That can be done, as there is a regulatory regime that is enforced via a USC, but that's not the route that Ofcom (or government policy) favours. What they went for is a highly competitive market as deep into the network as technology allows, which with ADSL was essentially from the DSLAM onwards. As penetration goes deeper into the network, then costs become prohibitive and you end up with a de-facto monopoly on FTTC solutions. However, the structure of the market - with very low cost competition via LLU operators means that there isn't the potential to cross-subsides roll-out.

Perhaps if Ofcom had adopted a model which actually represented the differences in cost structures between urban and rural, such that customers in those areas bore the real cost of provision, then subsidies wouldn't have been required (cross or otherwise), the market would have provided. However, I rather suspect that rural dwellers wouldn't much appreciate paying the full commercial costs involved, but as the market was structured, they didn't have the choice.

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Facepalm

Re: Gaps?

Monopolistic behaviour is exactly what you would expect from a monopoly. Don't blame BT, blame the people that allowed a monopoly to be established.

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This is a real success story for our country

10,000 homes and businesses are being connected every week. yeh - from ADSL BB to FTTC!

Whooopie! Any more successes like this and I'll be such a rich citizen I will be pissing champagne!

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Re: This is a real success story for our country

If you think you can connect more than a small minority of properties to fibre with a budget of £1.2bn, you are living in fantasy land.

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Re: This is a real success story for our country

If you expect to see FTTH (other than as a special deal at a sizeable cost) in a country like the UK, where 90% of the population live in individual dwellings, dream on! If 50Mbps isn't enough for you (and, if it isn't, WTF are you doing with it?), move to a giant apartment block in Seoul or Tokyo, where you can get 1Gbps (albeit shared with hundreds of others).

This is not an attempt to justify BT's position, merely management of expectations.

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Re: This is a real success story for our country

That's the real genius of BT - only they have the infrastructure investment and technical knowledge to achieve ADSL speeds over fibre.

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fudging numbers

I hazard a guess that they are fudging the numbers, when an exchange is connected they will use the number of houses connected to the exchange not the actual FTTC connections.

Exchange only lines are ignored with no timescale.

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Headmaster

Re: fudging numbers

As an exchange-only subscriber, the "Superfast Cymru" BB project has assured me that they WILL be connecting EO lines in a timely manner.

They have described 3 ways to do this:-

1: Install new street or pole cabinet on my street

2: Install new street cabinet in exchange car park

3: FTTH

I'd like 3, but my money is on 2

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Re: fudging numbers

They've done 2 at the Machynlleth telephone exchange

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Meh

Re: fudging numbers

Exchange only lines are ignored with no timescale.

Mostly ignored. Some have had cabs installed but yes, EO lines are falling through the gaps. Still in terms of coverage EO lines are a small minority and most are short lines so already have over 15Mb/s.

No the sneaky bit of BT's figures is whether they include cabinets for outlying villages that haven't been enabled in their figures. In the more rural areas that could amount to a sizeable proportion of an Exchange's claimed 'footprint'.

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Re: fudging numbers

In urban areas EOs might be a minority, but in rural areas 90% of lines are EO. My local village exchange doesn't have a single cabinet.

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Re: fudging numbers

You are just plain wrong - the percentage of EO lines in rural areas is nothing like 90% (although it could be for individual exchanges). Among other things, relatively few village exchanges serve just one village, and all the others will have cabinets. There are solutions for EO lines, but I rather suspect that they aren't priorities as other lines can be covered at lower costs.

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Re: fudging numbers

I suggest you come and have a nose at Corris (WNCRR) and Llanuwchllyn (WNLU) exchanges in North Wales. Both are small village exchanges and as far as I can tell neither has any cabinets.

Corris exchange also supplies the Village of Aberllefenni around two miles away and there's no cabinet between the two (having grown up there I did a lot of looking).

I do know there are villages are wired in the way you describe (usually around market towns with lines going back to that exchange), but in my experience very rural areas are still supplied overhead over long distances with no cabinets, meaning FTTC will require pretty serious rewiring.

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I don't think that Prime Minister David Cameron knows what he's defending.

But he's just gone an squandered a ton of public money, so he's got to say something.

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Boffin

Re: I don't think that Prime Minister David Cameron knows what he's defending.

Translation of Cameronspeak:-

"I don't know what the suppliers have done; I don't understand what they're trying to do and even if I had a glimmer, I wouldn't understand what was involved; but I do know that I've spent absolutely oodles of your hard-earned on it. That, naturally, makes it a huge success."

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Re: I don't think that Prime Minister David Cameron knows what he's defending.

He's reading a brief prepared for him on the basis of guesses of what questions will be coming up.

IIRC the call goes out across Whitehall from No10 on a Monday lunchtime for briefs by the end of the day, giving the squirrels in No10 time to package it all up for Wednesday morning when the PM starts his prep. It's a well oiled machine, only punctured by your cynicism :)

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21CN ...the waste

The UK could have already done most of the fiber to the home roll-out with the money which was spend on 21CN.

Add to that the continued incremental upgrades for DSL, "polishing the copper", which nicely keeps BT OpenReach going...ops I mean OpenReach a BT Group company...they get pissy about the name. ;)

Anyone from the old G-CTO Group at BT care to comment on their lack of extraordinary lack of foresight and wastefulness? Come to think of it anyone in the recent BT Design group wanna pitch in also?

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Anonymous Coward

The same kind of 'success story' as when you flogged off the Royal Mail for half the going rate to all your city chums, because a few of the big banks said (presumably while holding back tears of laughter) that it'd be risky to raise the price for a 20 times oversubscribed share issue? I guess in his alternate world, that is a success. Big business gets a handout, the ordinary taxpayers get screwed. Trebles all 'round.

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10,000 a week

or 5 million a year, to give all 20 million homes and who knows how many businesses, its going to take some time

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Re: 10,000 a week

Dear 27 Escape,

I count *a lot of* weeks in your year... some 520... :)

10,000 a week is 520,000 a year... so 20,000,000 homes is a project of 40-ish years. I want the PM role on that for a meager £200,000 a year contractor rate.

30M£ a year is not a huge sum of money... nor is the nigh-on £58 per home connection...

Put it this way, it is no wonder that BT's services are so crappy...

Also worth noting is that BT would get that investment 4 times over back inside the first year, from each home, so what are they doing with the money we are paying them??? Obviously maintaining infrastructure is not part of it...

Best regards,

Guus

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Re: 10,000 a week

Also worth noting is that BT would get that investment 4 times over back inside the first year, from each home

Really, based on what exactly? We have the cheapest broadband in the country and profit margins are wafer thin. When you factor in the pressure Ofcom puts on BTw (and BTor) to provide facilities for other CPs I doubt they are 'raking it in'. No-one in the industry is. That's why usage limits, traffic shaping and lousy customer service are rife.

Frankly most of us that follow this stuff are amazed BT could justify doing any kind of national roll-out. They must have negotiated some really long term, low cost loans off the banks. Another factor is that it prolongs the life of BT's copper local loop which is their biggest asset. That may be the only thing that makes it worth their while.

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Re: 10,000 a week

Hi Andrue,

The classic broadband package is not overly expensive, I agree. The required telephone line (which is really the infrastructure), is expensive: £50 each 3 months...

Still, on the pure broadband, many many companies out there do it cheaper than BT. O2 did it for £12 a month... More bandwidth than BT as well...

I have nothing against BT as a company, but the organisation seems to profit from things that other telco's just can't lay their hands on, and making the tax payer pay twice for infrastructure upkeep is just one of those things...

Regards,

Guus

Regards,

Guus

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Re: 10,000 a week

Still, on the pure broadband, many many companies out there do it cheaper than BT. O2 did it for £12 a month... More bandwidth than BT as well...

Yeah, I muddied the waters a bit in my last reply :(

We have to be a bit careful there. 'BT' in the context of broadband pricing and profitability is three separate divisions each of which often feels the heavy hand of Ofcom. You can compare the costs and service levels of Orange and Infinity but that ought to be kept separate from the profitability of FTTC.

The company that is rolling out FTTC is BTopenreach. They provide a product called GEA (Generic Ethernet Access) that provides an Ethernet connection in the exchange with data from all the cabinets. Another division called BT Wholesale purchase this product and have used it to create a wholesale product. ISPs (including a third BT division called BT Retail) then purchase this and market it as their consumer/business offering.

The amount you or I would pay to buy 'broadband from BT' has no direct bearing on the profitability of rolling out FTTC. So in that sense I shouldn't have mentioned the allowances really as it's two separate issues. BTr's profit margins have nothing to do with BTo or BTw's.

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If you're going to plow billions into telecoms infrastructure...

...then why not do it properly - throw £30bn at the telecoms network as a PPP and replace every duct and run with something more accessible, resite the cabs so that no-one has more than a mile of post-cab cabling, and then you are set to roll out whatever cable-based connectivity you want.

Hmm. I think I just made a case for renationalising the physical telecoms infrastructure.

That makes me feel sad.

Steven R

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Re: If you're going to plow billions into telecoms infrastructure...

I'm not sure what country you are from, but it's spelt plough in the UK.

As for spending £30bn on an FTTH network (which is a credible figure and about what the equivalent island of Jersey is spending per property), then you'll need to find a legal way of doing it. Overbuilding the VM and BT NGA networks would fall foul of EU laws on state assistance, so you have to factor in re-nationalising their access networks, which will wipe out half or more of your budget. So now your down (optimistically) to £15bn, which is nothing like enough. So let's make your budget £45bn. Also, how are you going to get people off of the copper network? The evidence is that the majority of folk stick to the copper as it's cheap (being a sunk cost) and meets most of their needs. Withdraw it, and you've got a whole bunch of LLU operators who'll want compensation for the investments they've made in kit. In reality, any government would be stuck with running both fibre and copper in parallel for many years, and wholesale charges will be forced up to recover the costs.

What you are describing is exactly what the Labour government decided to do in Australia with the National Broadband Network. That was aimed at delivering fibre to 93% of properties (so didn't covered the remote areas) and, on the latest review, was costed at $72bn (AUS), or £40bn albeit about 40% of the properties. It's since been downgraded to a mixture of FTTP and FTTC, but it still going to cost £24bn (that's assuming it actually delivers).

Against that, the public expenditure on broadband infrastructure in the UK is very low. In fact, many might argue that there is something wrong with the regulatory and commercial structure if the government is spending public money anyway. The problem is the path that Ofcom (and most EU regulators) have gone down. They've forced down the price of copper to the point where it's very difficult to justify investment in NGAs outside "prime" areas as a mechanism for minimising retail pricing. There is precious little incentive for private investors to put money into infrastructure.

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Re: If you're going to plow billions into telecoms infrastructure...

Just for reference, Pedanto The Wonder Horse, I was typing (and spelling) that as I was working on three PCs and a server, and I may, just may, have pulled that figure out of my capacious backside for the sake of an example of a very large number. ;-)

I don't disagree with any of your particular points, however - it's just that at some point, the copper network will have to be pulled if we want more than 100mb/sec to the home at an average level. How that is going to be done is going to be....well, it'll be an interesting day when they announce the hows (and how much's) of that little trick.

Steven R

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Shame

It's a shame that the infrastructure that results from this won't end up being owned by the taxpayer. A government funded proper FTTP roll-out, fair enough BT doing the build, then any from a wide range of comms provider can pay to provide service to customers.

It's not like trains where privatisation just results in local monopolies rather than national monopolies. With this there would be no physical or technical barrier preventing a whole host of comms providers from running services to customers in the same town/street. Plus the taxpayer gets to make money back over the long-term and ends up owning a decent blob of national infrastructure. Plus it would give Ofcom something to do.

It seems like a bunch of public money given to a private company to build themselves a nice expensive train set that we'll only be allowed to play with at weekends. And at a price we're powerless to ever argue against.

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Yet there are still many places where carrier pigeons are still faster at transferring data.

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Happy

seed comms

We have always found that attaching two DVDs to the feet of our birds (symmetry gives stability) a great boon. SSDs next, it's all a matter of delivery success - damn hawks....

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Success Story Eh?

Like the big six energy cartel is a success story or perhaps Murdoch's News International? The government is propping up monopolies left, right, and centre.

I'm sorry to say, but at least if BT were still nationalised, all money earned from this tax payer funded infrastructure would go back into the system instead of lining the pockets of fat cat bosses and shareholders.

Wouldn't it be interesting if we had non-profit companies running our utilities whose only mandate is to keep the lowest price possible while continuous improving infrastructure for everyone. It will never happen of course, because Cameron loves to waste other people's money (tax payers) on helping his corporate fat cat friends in banking, energy, and other sectors.

This is the reason I don't vote. I don't support the currently representational paradigm. Get all these career politicians out of decision making.

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Re: Success Story Eh?

Yes, that model worked very well for British Leyland, didn't it? Clearly you weren't around in the 1970s to see how that principle worked out last time around

Ok, they weren't set up as a not-for-profit organisation, but they lost money for the taxpayers at such a rate under public ownership they were forced to sell the remnants to British Aerospace for a pittance, so the dilemma of what to do with the profits never really arose. The Post Office was hardly a beacon of shining excellence in telecoms service delivery and innovation either. In fact which nationalised industries are still with us?.

There are far too many ways to avoid making a profit that don't involve delivering either an excellent service or value for money for customers and consumers. At least a profit motive drives innovation and an interest in launching revenue earning services that PAY for evolution of national infrastructure.

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Re: Success Story Eh?

Dear Tyrion,

"This is the reason I don't vote. I don't support the currently representational paradigm. Get all these career politicians out of decision making."

It would be better to actually protest and vote blank...

Just saying,

Guus

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BT. The same BT who took over 3 months to deliver a working connection to my friend's home, *despite the home being already wired with fibre and multiple engineers confirming that it was a 5' job*. The same BT who forced him to pay over £900 in mobile broadband because he depends on the Internet for his job.

A *success* story?

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Maybe I am the only one......but

Other companies had a chance to bid.

Other companies decided not to.

BT became pretty much sole supplier.

Therefore it must be BT's fault.

Hmm - dammed if they do, dammed if they don't.

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Accepting Orders

According to the Infinity superfast broadband checker, our local exchange has been "Accepting Orders" for about a year. I hope they're not waiting for orders before doing the work. I'd want to see at least a date before I'd even think about it.

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Paris Hilton

Shock! Horror! Ka-Pow?

Didn't Russia manage to get Siberia online quicker and more cost effectively?

ps: about 10 years ago it would take about 6 weeks of waiting to get a BT engineer in to connect a phoneline (one that already existed but was disconnected).

About 2 years before that you could double the waiting time.

ntl started and said things like "Would next Saturday be okay?"

That was the lived through experiential existential state of affairs - trouble is younger ones might not appreciate how widespread that practicalities of nationalised services were compared to the theoretical benefits that mainly remained theoretical. Then there are salary, leave arrangements and pensions to consider?

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4 months for them to connect a new line, with us chasing them hard…

0.25 mbits/sec broadband…

@ the standard broadband monthly fee…

No prospect of any improvement (according to BT)...

Lousy in the extreme.

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Unhappy

BT ... GCGQ's silent partner

BT is a good buddy to GCHQ, making all those party lines to Gloucestershire work so well.

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WTF?

Farting thru silk and pissing champagne, oh my I thought only American politicos fed crap like this.

Cheerio chaps eh what

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Anonymous Coward

Of course Cameron is defending BT.... he gave ex-CEO Livingston a job !

Remember, back last june ?

Livingston left BT and was given a cushy peerage by Cameron to be trade minister for the coalition.

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