Tuesday, June 28, 2011

 

Digging further into "Propel Northants"


Trying to untangle the loss making assumptions behind the DCF analysis of the "Propel Northants" project I have observed the following questionable assumptions :-

  1. Take-up aspiration is very low - "a total connection rate of 30% of the total private sector premises passed in year 2026"
  2. Rate of take-up growth is abysmal - "2% of all existing Private Sector premises (B Type and non B type) passed are connected each year"
  3. A wholesale only "Open Access" model is used, with a modest proportion of revenue captured as a result - "it is assumed that the wholesale network operator takes 50% of the total retail revenues achievable"
  4. Retail pricing model is unambitious, matching first generation broadband pricing with a SOHO office internet / telephony bundle at £35 per month
  5. Large parts of potential market are excluded - "Other Public Sector premises (i.e. Education and Health) do not connect to the network and procure their telecom services via an alternative route"
The network is a substantial investment and isn't going to be achieved by community activists digging trenches - 110 km in 10 distribution rings are proposed, connecting to 224km of core fibre ring with 8 points of presence.

Capital costing is in line with corporate civil engineering costs, as one would expect from a report prepared by Atkins and The University of Northampton. The figure of £1,309 per business and public sector premise passed is perhaps not unreasonable, but escalates to an eye-watering £7,644 per premise connected when the low takeup assumptions are factored in.

"Propel Northants" could represent a good launch platform for further growth of FttH services in Northamptonshire, but its current economics leave it stillborn.

Can the above weaknesses be realistically addressed to make the project an attractive investment ?

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Friday, February 11, 2011

 

Upgrading infrastructure

Neelie Kroes, Vice-President of the European Commission responsible for the Digital Agenda, recently called for more action to deliver access to superfast broadband in pursuit of that Agenda.

Bemoaning the decline in rate of new connections she said that "Maximising broadband access obviously takes a mix of players and a mix of technologies, and the role of fibre is central."

It is good to see both mix of players and mix of technologies given prominence. The UK's current public sector broadband procurement process seems to be working against the former, and if your tender results in a choice between hammer providers you're going to get a solution involving only nails which works against the latter.

Personally I would like to see more diversity at the heart the BDUK pilots and funded projects. It should be a specific objective to try at least 5 different approaches in both technology and delivery organisation - otherwise BDUK and the County Councils are left trying to predict the best medium to long term solution without giving the other solutions a decent run for the money.

It would also be good to see more tolerance and acceptance in the debate around broadband delivery. If fibre to the cabinet is adequate for 10 years in appropriate areas then should we not welcome the provision of extra bandwidth as part of Neelie's Digital Agenda and the economic hopes riding on it ? Why do we spend so much time decrying solutions other than our own favourite - a sales tactic I have never liked. Can we not celebrate any increase in bandwidth or coverage if it helps someone in some way, especially if it pays its own way ?

The last twenty years has seen bandwidth grow in steps by changing the technology at each end of existing copper infrastructure. From 9600 baud modems through to 56k modems, then ADSL from exchanges, ADSL2+ and now VDSL2 from cabinets. All have been relatively low cost stepwise upgrades that have seen us get 18 million broadband users in the UK. The money spent on this has not been wasted, and investing in FTTC is not a waste of money if it pays off the investor within the useful life of the assets.

If universal FTTH will cost £5, 10 or £30 billion then the interest we save by deferring that investment by a year is a very substantial amount of money. So it makes sense to me to upgrade the infrastructure as and when it ceases to deliver adequate services to a location, and not get in a huge rush to spend money we don't have to meet a demand that maybe isn't actually here yet.

For some locations the time for an upgrade was 8 years ago. 10km of twisted pair copper isn't going to deliver an ADSL broadband service of any speed so there is a case to re-engineer such locations with either fibre optic connections, wireless or other solution that provides the needs of the user economically. These locations may be predominantly "rural"but some will be in built up areas and "electrically remote from the exchange" is probably the guiding principle.

If we draw an 800m radius around a BT cabinet the area covered is 2 sq.km which with 80,000 cabinets gives us a coverage of 160,000 sq.km. That's 66% of the UK land area, but only if we're lucky to have no overlaps and an even distribution of cabinets across the land - which clearly isn't the case. We are still left with at least a "final third" that is out of range of the "cabinet circles", plus a good number of customers that aren't connected to a cabinet at all. Even adding in VDSL2 from the exchange only adds another 5500 circles so less than 7% extra.

Where I'm heading with this is that there are places which have had no broadband for 8 years, like Ashby-de-la-Launde, and we do not appear to be addressing them as a specific target. Rolling them up into a county wide scheme may still see them left out as "the uneconomic part" as councillors seek to deliver maximum connections per public expenditure. Should we not identify them and have a specific plan to solve their problem ?

Do we need a BT Openreach product that is a single run fibre optic upgrade from exchange to premise that could be ordered in the same way as a new telephone line, perhaps. This would start the incremental upgrade to our telecoms infrastructure in the areas that are currently the least well served.

If we don't have a plan for BT to upgrade its infrastructure, or for Virgin Media to expand its, then we need a plan for an alternative infrastructure in areas where the existing services are inadequate. This probably means a plan to specifically not spend public money within 2 or 3km of a BT telephone exchange, other than in exceptional cases with demonstrable infrastructure problems.

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