Regulate it our way, OK?

UK’s BT lays out gigabit broadband plans with a hint of a threat

BT is stepping up its superlatives. “Superfast” broadband speeds are so 2014 – now the British telecoms giant is planning a shift to “ultrafast” broadband of up to 500 megabits per second (Mbps) or, for those willing to pay a premium, a whole gigabit per second.

All this is based on G.fast technology, which delivers fiber-like speeds despite using an older copper connection into the home. Pilots of the technology will take place this summer in Gosforth, Newcastle, and Huntingdon, Cambridgeshire, taking in up to 4,000 premises.

Hello, G.fast

G.fast uses more spectrum than previous fiber-to-the-cabinet (FTTC) techniques, but it needs the fiber-copper connection point to be closer to the premises than many street cabinets are, probably meaning the addition of new boxes on telephone poles and the like (a technique known as fiber-to-the-distribution-point, or FTTdp.) This is still likely to be cheaper than running fiber into the premises.

In BT’s trials, G.fast achieved speeds of 700 Mbps on the downlink, and 200 Mbps on the uplink. BT Retail’s current FTTC product, BT Infinity, runs at up to 76 Mbps, while its pricier fiber-to-the-home option reaches a theoretical 300 Mbps.

The headline figures BT quoted in its Friday announcement were not, it should be noted, what everyone should expect once deployment begins in 2016 or 2017. As the speeds depend greatly on line length, the company said “millions of homes and businesses” can expect a few hundred megabits per second by 2020, with network upgrades subsequently taking that up to 500 Mbps. It’s not clear how many premises will have access to the 1 Gbps premium option.

BT’s network passes 22 million premises or thereabouts, and rivals can also use it thanks to the functional separation of the former state monopoly a decade ago — the network is run by an entity called Openreach, and BT’s retail business has to get access on the same terms as other ISPs. With fiber, this separation is maintained through a wholesaling process called virtual unbundled local access, or VULA. Openreach is currently providing fiber connectivity to over 3.7 million premises, BT’s new results showed, over 2.7 million of which are BT Retail customers.

Regulatory clash

However, there was a word of warning in BT CEO Gavin Patterson’s Friday statement:

We believe G.fast is the key to unlocking ultrafast speeds and we are prepared to upgrade large parts of our network should the pilots prove successful. That upgrade will depend however on there continuing to be a stable regulatory environment that supports investment.

This suggests that the timing of the “ultrafast broadband” announcement may have something to do with Ofcom’s recent statement to the European Commission about BT’s VULA pricing. The U.K. telecoms regulator wants to regulate the margin between BT’s wholesale and retail prices, and here’s why:

We are concerned that BT could distort the development of competition in superfast broadband by setting an insufficient margin between its wholesale VULA and retail superfast broadband prices. Therefore, this statement sets out detailed requirements on the minimum margin that BT must maintain. Our approach is designed to ensure that other communication providers have sufficient margin to be able to compete with BT in the provision of superfast broadband packages to consumers.

A couple weeks ago, BT responded to that missive by calling it “misconceived.” Patterson’s statement Friday talked about keeping the U.K. ahead of its European neighbors – in the context of the VULA pricing spat, that statement may be as much a veiled political threat as it was an invitation.

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