My review of Building a Full-Fibre Future

Today Ofcom hosted a forum for industry leaders to address the future of ultrafast, fibre broadband in the UK.

Matt Hancock told us what the Government hoped to achieve from the event

As part of our goal of building a #fullfibrefuture, we want the telecoms market to be both competitive and collegiate. Our review into the future of telecoms investment here https://t.co/Wx0YAxtCEw pic.twitter.com/IaB1ZPZxe1

— Matt Hancock (@MattHancock) April 26, 2018

The FttH Council Europe didn't answer the exam question but shared some data from a study they conducted 

Why do consumers choose fibre? In our study we found 3 main reasons: 1/higher speeds 2/access to a much wider variety of services 3/better value for money says @efitori #fullfibrefuture with @DCMS & @Ofcom pic.twitter.com/9wv6NeKiZf

— FTTH Council Europe (@FTTHCouncilEU) April 26, 2018

A man from Virgin Media turned up and said something interesting and not related to being bought by Vodafone

More action required from Ofcom & Govt: greater consistency of local authority behaviour; scalable duct&pole access model; urgent need for wayleave reform says Rob Evans, MD Lightning @virginmedia #FullFibreFuture pic.twitter.com/Un9oAJCkyc

— Erzsebet Fitori (@efitori) April 26, 2018

 

The price of setting Britain on the right path has gone up a lot since Steven Carter's Digital Britain Report got kicked into the longer grass

Yes, rolling-out fibre is a significant investment but we think this is an achievable investment. Taking into account the cost-saving opportunities, we estimate the cost of rolling fibre to €137B says @efitori #fullfibrefuture pic.twitter.com/3QXdQEtoq4

— FTTH Council Europe (@FTTHCouncilEU) April 26, 2018

 

Ofcom close with the Chief Executive saying that things need to change but it is the market rather than stakeholders that need to deliver

Closing comments from Sharon White, Ofcom's Chief Executive, at #fullfibrefuture. pic.twitter.com/m4dAcx1qKF

— Ofcom (@Ofcom) April 26, 2018

 

This man has a plan, but it needs your money, lots of your money. But he is wise and knows how to spend it on good things...

🗣️ Our CEO Gavin Patterson at #fullfibrefuture

“We need a world-leading network combining fibre, WiFi and 5G. But this
is a very significant investment, and it needs to be made ahead of demand.” pic.twitter.com/954BcfCFMB

— BT Group (@BTGroup) April 26, 2018

 

Lots of talking, so top quality graphics but no firm plan on how to move forward as it's complex stuff! 

What is full-fibre broadband? What benefits could it bring to people in the UK? Find out here: https://t.co/FMefqkuoKF #fullfibrefuture pic.twitter.com/Ti1zMNHzux

— Ofcom (@Ofcom) April 26, 2018

 

Don't cry for Charles Dunstone...

Yesterday TalkTalk reported it's results to the City and people were not happy with what they were telling them.

The once wonder of the telecoms industry is turning into his idol Richard Branson, but not in the way he dreamed. It's only a question of time when TalkTalk is no more rather than one of if.

Dunstone has built his fortune on the spin that with him you get the best price be it Mobile phones, fixed line telephony or broadband like some spiv working the crowd in Romford Market. The problem with TalkTalk is that the customers are now not prepared to pay the actual cost of delivering fibre broadband and having seen an exodus of customers because of poor service and hacking it has had to offer contracts at below cost to keep the numbers respectable.  The perfect storm has also seen it now having to fix the holes in its finances with a cash injection almost equal to 12 months income.

Since the days of FreeServe I have said that the issue with UK Broadband investment that needed to be addressed was that the Retail Price never reflected the cost of the service or offered a Return on Investment that justified major spending. The TalkTalk partners in a project to bring superfast fibre to York have got their fingers burned from working with Dunstone to the extent that don't wish to undertake anymore work with him.  Dunstone thinks that because he has a large customer base someone else will provide the money. that might have worked 20 years ago but not today.

As others invest in the building of Superfast Broadband Dunstone will be on the sidelines shouting that its a rigged market and BT has failed to invest in Wholesale services that would allow him to stay in business. TalkTalk's strategy in terms of maintaining it's customer numbers means that he will invest in marketing and promotions at the expense of infrastructure and customer service which means that he will have difficulty in get those customers to pay more. Thus we are looking at decline to the point of bankruptcy nobody will buy them out of the hole they have dug for themselves.

Virgin Media investment plans

Over the weekend Virgin Media revealed it's latest investment plans to The Telegraph. It is seeking to expand it's network asking Liberty Global to increase it's investment to grow the footprint of it's Fibre network a £3bn plan to grow from 50% of households covered to almost 66%.   

Given that interest rates are at all time lows and Virgin have said that the investment has a good return in growing the customers base in areas where they are new entrants rather than established provider why are they not seeking to be aggressive and double the investment? The reports on broadband coverage in Britain say that the costs are not commercial for just the last 10% of households and so the capacity is there to almost double what Virgin already has. 

We could say that Liberty Global is being cautious given the uncertainty around Brexit and its economic impact or as a Global player the upside of investment outside of the UK is greater than inside.  One option would be for Virgin to become more of a player within the Business market which its brand does not speak to other than in the small business sector, some players are realising that BT is providing a very poor quality service.   

Is Virgin gaming the market to such an extent that it knows that investment is infrastructure is like betting on England's football team? It needs to stay in the game and the cost of new customers is lower in areas that it is an entrant to rather than established in that they are likely to buy a bundled service bigger than that established customers.

Is it possible to fix BT?

Ofcom has started another review into how BT effects the UK telecoms market, so 10 years after the first review. At the same time the CMA are looking at it's plans to buy EE.

This regulatory overview gives a chance to review how BT operates in the UK and what could be done to improve things.  Since the Privatisation of British Telecom the market has failed to offer an effective competitor rather it has seen a race to the bottom.  

Consumers in the UK have been very poorly served when it comes to keep up with Continental rivals when it comes to Infrastructure.  Whilst the cable industry did attempt to build out an alternative network it failed to do so with a sustainable business model and so we are faced with the situation that more households are not pasted by Virgin Media than are. The provider of the last resort is thus BT and as such is highly regulated with an obligation to wholesale network access to rivals.

Thirty years ago Britain got its first mobile networks, one of those had access to enough rooftops to build infrastructure needed up until 2000 thanks to it's only property portfolio and captive business accounts.  The other was Vodafone, a small start up based at the end of the Thames Valley with a sleepy parent focused on the defence industry.  Yet because BT focused on doing things that impeded its rival rather than do what was needed they failed so sceptically that they were forced to divest the Mobile business.

When it comes to the Broadband business it has repeated the same mistakes, rather than invest in the Network so that it was the best possible it has played games with rivals seeking to do just enough to avoid sanction.  We thus find ourselves in the UK operating behind the curve when it comes to digital services because of slow speeds and over capacity.

The last review took Ofcom two years to complete and saw the creation of Openreach as an effective remedy. Hindsight has proved that the actions have not worked and BT rivals are now asking for the business to be spun off from it's parent in an effort to improve capital investment. Such a option will not solve the investment lag rather it will make it worse.

I saw recent analysis of the performance of BT shares over the last fifteen years which highlight that the Management had managed to offer a negative return of some 20+% one of the worse performance with the FTSE 100. Thus shareholder seem just as ineffectual as regulators to force the Executives to run the business.    

Will the real BT stand up?

Over the weekend I read three stories about BT which paint a confused view of just what it's future might be. On Saturday the Guardian reported that thanks to BT TV complaints have shoot up. The Yesterday's Sunday Times had two stories in the Business Section about the return of BT Mobile and a feature on NEW CEO Gavin Patterson's £2bn bet on sports TV.

If you read on paper you get the view that BT's retail strategy is in need of a major review. The customers are unhappy with the failings of not just it's TV product but also it's Broadband product. The only provider that gets more complaints for it's Broadband is EE.

Read the Sunday Times and all is good for BT it's about to get back in the Mobile Phone business after leaving in 2001 and BT TV has seen 3M on Virgin and Sky take the service. Then a full page feature on new CEO Gavin Paterson and his £2bn bet on sports TV is a bold gamble that aims to grow the business after a period of cost cutting. He will use a Quad Play offer to drive up incomes having bought some 4G spectrum and struct an MVNO deal with EE.

The problem is that Simon Duke in the Sunday Times does not seem to understand that BT has had MVNO agreements with O2 and Vodafone ever since it sold of it's mobile arm after over paying for 3G spectrum in 2000. He also does not seem to understand that since 2008 BT has failed to invest the money need to provide the long term upgrade in super-fast fibre to the curb rather than cabinet just as it failed to match European spending in ADSL deployment ten years previously.

When you start to understand that last week OFCOM reported that the UK has the lowest consumer prices for Mobile services in Europe you start to ask it's not just Duke that fails to understand the realities of a very competitive telecoms market but BT also.  For too long the Company thinks that one of its prime roles is to defend itself against the regulator rather than invest in it's Network so that it survives long term.  

An act of stupidity by a desperate Prime Minister

I picked up my morning paper and almost tore it in two reading the latest stupid PR stunt from David Cameron. When Ed Miliband made his Conference Speech this September we were told that price controls could not work and were wrong. Yet with his back to the wall Dave has decided that all utility companies need to be told that his government will not accept price rises in the run up to the 2015 election.

This is an act akin to King Canute except the Prime Minister does not understand that he cannot turn back the tide of price increases.

An analysis of the players in the market will show that many are subsidiaries of  overseas businesses rather than British and thus have little loyalty to local politicians. They are in the majority investing in significant infrastructure programs that mean that rather than pay taxes they have losses to cover.

What the Prime Minister should be doing via the offices of the Department of Culture Media and Sport and Ofcom is making sure that telecoms networks are able to deploy high speed broadband to the majority of the population in the majority of places. It is with such a network that the economy will grow and income rise at such a level that people do not feel price rises.

Rememberance of things past

So following my lunch this week I set about trying to find the 2001 Keynote by Douglas Adams. I start off by using Google to seek out the GSMNewsReel video I remember watching on my return from Cannes six years ago - and get no joy. However I do get the opportunity to read a number of posts that talk about what the Mobile world will look like once we go 3G; also I get to see that Douglas Adams not only invented Babblefish but he could also have claimed to be a key driver in the development of User Generated Content and Wiki's thanks to H2G2.

The I use Ask and it does better than Google in that it locates a transcript of Douglas Adams address and a review from the GSMNewsReel of all those that spoke in 2001. Still no joy finding the video, have asked if a contact at the GSMA can find the footage in their archieve and send me a copy, if get lucky I will post it up so that you can all see what he is said at the time.

Looking back at the past I got a number of snipets which with hindsight can be seen with a different light. Branson spoke before Adams at Cannes and he "put forward a convincing argument in favour of MVNOs, explaining that they can enhance revenue streams, they're cheap to establish and that they offer solid risk diversification. In the never-ending search for the winning data strategy, an extra operator on your satisfactory discovery, he said. He called forth examples from the motor industry and the music industry where the virtual model has proven success. His words of advice in this area were clear. Shareholder buy-in from the host, decent distribution, a general rather than niche approach to the market and access to the meaningful content are all pivotal elements of success, he said."

I wonder if Virgin Media are following the same Strategy today as part of the Quad Play we see today, heck I wonder if they have a strategy that allows them to compete with Tesco Mobile. As an MVNO we see in Tesco an excellent example of Consumer choice, some 1.8M subscribers have opted to get their mobile with their milk. Not for them some fast moving world of Mobile Data, just basic voice and text thanks along side a value handset - all of which ties in with what Douglas Adams told those in Cannes back in 2001.