Analysis & Opinion

Better the devil they know? BT and UK cities’ £114 million superfast-broadband fund

Rob Gallagher, Informa Telecoms & Media

Rob Gallagher, Informa Telecoms & Media

The most interesting question looming over the UK government’s latest broadband funding announcement is whether each of the 10 cities chosen spend their portion of the £114 million (US$185 million) with BT or with the former state-owned monopoly’s existing competitors and new entrants.

During the first wave of broadband rollouts, much of the government and EU funding to aid the spread of coverage ended up one way or another in the pockets of BT.

Many local authorities and community bodies that choose alternative options ended up with networks based on technologies that failed to keep pace with the wider market or devoid of popular service providers, such as Talk Talk and Sky.

The question for the cities is whether they want to take a similar risk on alternative players this time round or go for the safe bet of BT.

Alternative players are likely to bid with business models and technologies that promise consumers, businesses and service providers more flexibility in speeds, costs and other features than BT.

But many alternative superfast broadband network operators elsewhere in the world have struggled to attract major service providers, which see working with these outfits as an unnecessary source of cost and complexity compared to working with incumbents like BT.

One of the main reasons BT cites for winning a major project to rollout superfast broadband infrastructure in Cornwall, for example, is its ability to bring a tried and tested wholesale platform and “ecosystem” of major service providers to the game.

Indeed, some UK service providers have warned that local bodies that back alternative networks risk turning their areas into the “new Hull”, referring to the UK city which languished as a “digital island” with its telecoms network owner KCOM (formerly Kingston Communications) the sole service provider, despite coverage of 600,000 homes and businesses.

That said, the likes of Sky and Talk Talk are not exactly over the moon about the limitations and compromises that BT’s next-generation access network will impose on their costs and features they can offer, especially compared to those of the current-generation broadband infrastructures they have spent millions of pounds building, but will ultimately be forced to abandon. Alternative models promise to restore these capabilities and more.

Such interest can be seen in last year’s commitment by Talk Talk and Virgin Media to act as a wholesale customers for a venture that would see IT firm Fujitsu use public funding to roll out a network capable of providing up to 1Gbps speeds to 5 million homes in rural areas of the UK.

Perhaps tellingly, however, Fujitsu abandoned the plans earlier this year because it could not “currently see a path towards a mass market that is required to attract leading retail service providers”.

And with £114 million at stake, you can bet BT will be mobilising its lobbying efforts to make sure similar efforts don’t win the backing of the 10 cities covered by this latest scheme.

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