Memorandum submitted by BT
1. BT is pleased to provide these comments
on the questions raised by the Committee around the topic of broadband
speed and related matters. There is no doubt that the communications
sector has a vital role to play in helping the UK sustain its
position as a leading digital economy and society.
2. The Government's Digital Britain Report
of 16 June sets out a broad range of proposals related to
the future development of the digital economy. BT is supportive
of the Government's plans in the area of fixed network developments
and is keen to work with others in pursuit of them.
3. This paper focuses on the questions the
Committee has asked around the topic of broadband speed. In doing
so we touch on some of the related issues covered in the Digital
Britain report itself, but this input does not constitute a response
to that report. We would, of course, be happy to elaborate on
any of the topics if the Committee wishes.
Question 1: Is the target for universal access
to broadband at a speed of 2Mbs by 2012 ambitious enough?
4. Achieving universal access to broadband
at 2Mbs by 2012 will require significant investment using
a mix of technologies and a considerable planning effort. The
role of the proposed Network Design and Procurement Group will
clearly be a key factor in achieving the most efficient use of
the planned £200 million in public funds to support the commitment
and we await further details of how this new body will operate.
5. When achieved, this availability of a
2Mbs service would represent a threshold minimum access entry
to enable people in some two million households that are currently
unable to achieve broadband at such speeds to benefit from a full
range of services beyond general internet browsing and email,
such as faster music downloads, BBC i-Player, and real time standard
definition TV streaming (eg BT Vision on demand and the proposed
Canvas joint venture involving BT, BBC, ITV and Five). These are
the services that will drive demand and are all made possible
with a 2Mbs link provided it is stable, consistent and uncontended.[39]
Of course, many customers already enjoy speeds much greater than
this and consumer behaviour and demands will change over time.
Expectation over what constitutes an essential minimum speed is
likely to evolve.
6. BT is continuing to develop the technology
that lies behind existing broadband, and has recently announced
details of a trial at eight locations across the country of its
Broadband Enabling Technology (BET), which delivers broadband
(with a minimum downstream speed of 1Mbs) over much longer distances
than has been possible previously. This could play a major role
in delivering broadband to current "not spots"—ie
homes that are currently too far away from their local exchange
to receive a broadband service. The cost of providing 2Mbs service
to the last few customers would be prohibitive and make the achievement
of 100% coverage highly unlikely. However, if there is funding
to help meet the additional costs involved in deploying the technology,
BET could offer a reliable and cost-effective solution to assist
the Government's ambition of delivering a minimum 2Mbs service
to virtually all UK homes by bonding two copper lines over BET
wherever possible.
7. This Universal Service Commitment forms
part of an ambitious set of measures to improve digital inclusion
and participation across the UK. It compares favourably with initiatives
elsewhere in Europe.
Question 2: Is the Government right to propose
a levy on copper lines to fund next generation access?
8. The move to next generation access, which
in practice means the move to the installation of fibre, as a
means of providing for even faster broadband speeds in the future,
is now generally seen as a critical part of the UK's future economic
and social well-being. In 2008, before the Digital Britain process
itself started, BT committed to investing £1.5 billion
to make super-fast broadband available to around 40% of the UK
(10 million homes and businesses) by 2012. This is the UK's
biggest single investment in fibre broadband and BT will offer
access to service providers on an open, wholesale basis thereby
supporting a competitive market in consumer services. Virgin Media
have also committed to upgrade parts of their network to provide
significantly faster speeds to households within their network
footprint.
9. The Government concluded in the Digital
Britain Report that there is a case for public investment to ensure
that super-fast broadband is rolled out further and faster than
would be feasible purely on commercial grounds. We applaud this
policy ambition since it is likely that such investment will be
good for the economy as a whole, including stimulation of the
creative industries.
10. Most countries that have deployed fibre
networks have either benefited from direct government intervention
in the form of loans and/or tax breaks or a very different regulatory
philosophy that recognises platform based competition and the
realities of wider converged communications and TV market. We
have always made clear that we believe in a pro-competitive approach
and we are committed to offering fibre access on an open, wholesale
basis, whilst acknowledging that this approach can make the business
case for rolling out fibre more challenging.
11. As with all revenue raising measures,
there are always alternatives and this case is no exception. If
the policy ambition is for the UK to have fibre deployed further
and faster than current commercial models allow, then some form
of catalyst funding from Government is necessary. We believe the
policy ambition is the right one, given the significance of high
speed networks to economic and competitive growth and strength.
Question 3: Will the Government's plans for
next generation access work?
12. The UK must have a world-class communications
network in order for the economy to remain competitive and succeed
in the challenging environment that will follow the current financial
difficulties. It is essential for the UK to have appropriate regulatory
conditions if companies are to be encouraged to commit to the
significant investment in next generation access that is needed.
13. We have already announced that we will
invest £1.5 billion in rolling out super-fast broadband
to around 40% of the homes and businesses in the UK by 2012. This
does not represent the limit of our ambitions in this area, but
it does show the extent to which there is a major gap to be bridged
between our aspiration to go further and commercial realities.
Whilst we would expect to see the gap close over time and more
investment made, experience elsewhere suggests that significant
public funding can be a helpful and in some areas a necessary
stimulus to infrastructure investment and associated economic
development and growth. We cannot be sure that the Government's
plans will be 100% effective in delivering the outcomes being
sought but they are surely worth pursuing given the UK's strong
established position on broadband investment and take-up.
14. NGA infrastructure requires significant
investment and the returns are as yet uncertain. Some have suggested
that there should be a requirement to provide so-called "passive"
services, whereby the wholesale service takes the form of access
to a network element such as duct, or dark fibre ie without any
enabling electronics attached. A requirement to provide "passive"
services would make it more difficult for any existing network
operator to justify the investment case. This could jeopardise
the Government's hopes for Digital Britain. Instead, we believe
that whoever deploys an NGA infrastructure should make available
from it appropriately priced wholesale active line access services
on a non-discriminatory basis, using industry standard interfaces.
In this way the Government can ensure the continuation of the
competitive landscape that has made the UK a world leader in broadband
availability today.
Question 4: Are companies providing the speed
of access which they promise to consumers?
15. Ofcom has recently published a report
on its research into broadband speeds for the six months to April
2009. This shows that on average customers are receiving 4.1Mbs
as against an average headline speed of 7.1Mbs. BT's standard
offering currently is of up to 8Mbs and we are making even higher
speed broadband available over copper using ADSL2+ technology.
This new service, which will increase average speeds by up to
three times what is possible now over copper, is currently available
to 40% of the UK. By the spring of 2010, this availability will
rise to 55% and, subject to market demand, to around 75% of the
UK by the spring of 2011.
16. BT believes that customers should know
what they are getting when they sign up for broadband. We believe
in total transparency for the customer and, therefore, provide
a customised speed estimate on their lines to consumer customers
before they sign up for broadband from us. It is, of course, impossible
for BT or any other ISP to guarantee speeds since these will depend
on a number of factors, including home wiring, the number of customers
accessing broadband at the same time, etc. All networks operate
on the basis of shared resource amongst customers and at peak
times speeds will be slower than at quieter periods. A simple
analogy is that the average speeds possible to achieve when driving
on motorways reduces during "rush hour" as the motorway
lanes become congested.
17. It is also important to remember that
speed using DSL technology is a function of line length and line
quality. BT has been at the forefront of technological improvements
over many years that have seen broadband extended to ever greater
distances from exchanges, bearing in mind also that the key measurement
is line length and not distance from the exchange as the crow
flies. The new trials of BET (see para 6 above) are but the
latest manifestation of this technical evolution.
Question 5: To what extent does current regulation
strike the right balance between ensuring fair competition and
encouraging investment in next generation networks?
18. A regulatory regime to reflect the dynamic
competitive market we have in the UK, to provide the right framework
for that competition to flourish, and to encourage the level of
investment needed to keep the UK as a leading digital economy,
should embrace some basic principles:-
— wholesale access to enduring bottleneck
facilities, focussing on the deepest levels of network infrastructure
where competition is economic and sustainable
— a level playing field between market
participants
— technological neutrality
— rates of return that reflect the investment
risk involved
19. Regulation must be forward-looking and
should reflect the reality of the wider converged communications
market rather than a narrower focus on traditional telecommunications.
To do anything else would be to misunderstand the way that technology
and markets have changed and will continue to evolve. The UK has
led the way in developing competition between service providers,
who vie with each other to offer consumers innovative, value for
money packages. But we have reached the stage now where this needs
to embrace the convergence of fixed, mobile and broadcasting markets,
rather than treating each of them individually. Technology now
allows, and customers demand, a new way of consuming services
that does not recognise these outdated market distinctions, and
the regulatory environment needs to keep pace with this fundamental
change.
20. >As an example, we are, therefore,
encouraged that Ofcom's long drawn-out investigation into the
pay TV market has concluded that competition and innovation have
suffered as a result of Sky's monopoly and has published its proposed
remedies for this distortion, requiring Sky to offer its premium
channels in the wholesale market. The outcome of this consultation
will impact on every consumer who would like a choice of suppliers,
lower prices and access to premium sports or movie channels.
21. However, it is very important that Ofcom
stands by its plan to make a full set of channels available and
to set clear prices for them: competition will not be enabled
if only a few channels are made available. A successful conclusion
to this consultation will send a very clear message to the industry
and to users about the way in which the markets have changed and
about how things will develop in the future. In doing so, they
would provide a stimulus to innovation in applications and services
and help to support the vision for next generation access investment.
In other countries, pay TV and access to attractive content have
been important drivers to facilitate investment in next generation
access. At the moment, the UK is disadvantaged in this respect
by Sky's continuing monopoly of such content. For example, Verizon
in the US deploy their FiOS fibre to the home service primarily
to deliver their vertically integrated TV channels, with 80% of
the bandwidth on the resulting fibre service reserved for this
video distribution service. Similarly in Norway, the deployment
of FTTH by local/regional electricity companies is largely funded
by additional revenues from the premium TV content packages offered
over the resulting service.
Question 6: Are there any other views stakeholders
think the Committee should be aware of?
22. In all the talk about broadband speed
and where the UK lies in comparison with other countries, the
underlying truth is that modern communications networks are vital
to the economic and social well-being of nations in the 21st century.
They provide the conditions for countries to be competitive in
the global economy and they provide the framework within which
competition and innovation can provide customers, both businesses
and consumers, with real benefit in terms of new services and
value for money. This is not, therefore, an academic issue for
the UK and it is important for the current debate to focus on
the facts about the current situation as well as considering the
more uncertain issues around how the future might unfold.
23. Operators around the world are investing
in "super-fast broadband"—usually fibre—to
provide speeds in tens or even hundreds of Megabits per second.
As mentioned earlier, BT plans to invest £1.5 billion
in fibre-based, super-fast broadband to as many as 10 million
homes and businesses by 2012, and this will deliver services with
top speeds ranging from 40-100Mbs with the potential for even
higher speeds in the future. BT wants to extend this coverage
as far and as fast as possible, but the commercial case for doing
so at present is difficult to make.
24. Identifying the services that will drive
demand for super-fast broadband is, therefore, important and as
these develop then the commercial case will become easier. People
have, for some time, talked about and been searching for, the
"killer application"—so far without success. But
we can summarise some important principles:-
— super-fast broadband and the increasing
number of network-connected devices will move the internet beyond
the bedroom or study and into the main living spaces;
— modern communications are vital for economic
and social reasons;
— video, in particular HD video, is a key
application, requiring increased bandwidth for multiple, concurrent
users in the home to simultaneously see, hear, and share high
quality content;
— community and social networking will
become quicker, richer and more inclusive;
— there is already good social acceptance
of new media and communications;
— IPTV (streaming and on-demand) will also
be a primary application driver.
29 September 2009
39 Contention in the access layer, where multiple customers
share an access link resulting in lower speeds at busy times,
is generally a feature of the cable and mobile access technology.
ADSL is typically un-contended at the access layer, whereas cable
TV is contended within the local access link and mobile and satellite
access services are contended across all customers within the
given mobile footprint. Back
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