Monday, September 08, 2008

New BSG report on costs of fiber deployments

The UK Broadband Stakeholder Group (BSG) has just this morning released a report from Analysys Mason on the likely costs of fiber access in the UK. I've only had a chance to read the summary conclusions so far, but it all seems pretty consistent with what we've seen elsewhere:

  • FTTC is likely to dominate at least initially
  • FTTH will initially probably only be deployed in areas of new build
  • infrastructure sharing with other utilities (ahem) may materially reduce civil costs
  • OFCOM should consider the long-term implications of "stranded" investment by multiple operators at street cabinet level
  • 1/3 of the UK population may not be economically viable to cover without some creative public/private coordination.

More comments as I wade through this beast.

UPDATE: Very interesting "geotype"-based cost analysis contained here, which seems to bear out what I've heard anecdotally from a number of people actively involved in fiber deployments - namely that the cost differential between PON and P2P is on the order of only 10 - 15%, at least in high density areas. That's the good news. The bad news is that someone is going to have to come up with £25 - 30bn for universal national PON/P2P coverage - that's the equivalent of 8 - 10 years of capex for BT at the current run-rate. On the positive side, 2/3 of the country could be covered for a more modest £10 - 12bn (for perspective, BT's market cap is currently £13.5bn). Obviously, FTTC/VDSL is dramatically cheaper, apparently allowing coverage of 60% of the country for £2bn, which puts it within BT's capex envelope and unsurprisingly is the direction the company has taken so far.

For the remaining 1/3 of the country which I assume will be left out in the near term, in more normal economic conditions, I would assume that local initiatives and entrepreneurial capital could fill the gaps (we have seen it before and there are other examples taking shape elsewhere) to some extent, but I'm struggling to see that happening in the UK in the current climate. Nor do I envisage much political vision given the current Punch-n-Judy state of UK politics. My initial sense is that, in the absence of the kind of partial mutualization of infrastructure between BT and Virgin envisaged as one scenario in the report, what we are likely to end up with for the foreseeable future is an urban-focused battle between FTTC and DOCSIS 3.0, with BT opportunistically cherry-picking desirable areas with FTTH, and Virgin, carrying four turns of leverage, having not a lot of scope to respond. I hope I'm wrong...

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