Regulators feel increased pressure from BT over fibre broadband

Following a recent newspaper article, where it was admitted that some of the shareholders of BT had been questioning spending on fibre optic broadband, the UK telecom regulator has found itself under increased pressure over fibre deployment in the UK from the head of BT.

With an announcement made in July this year by the UK operation that 10 million (or 40 percent) of businesses and homes in the UK would have high-speed broadband deployed by 2012 at a cost of £1.5bn pounds ($2.25 billion). With premises and existing households getting fibre to the cabinet (FTTC) and fibre to the premises (FTTP) would by given to new builds like Ebbsfleet in Kent for example.

For BT to invest Ofcom would need to ensure that there was ‘proper regulatory framework in place’ to allow it to obtain and good investment return said a spokesman for BT at the time. There was a 10% return allowed for Openreach but “something more than that” would be required for fibre as BT considered any investment to be more risky, the spokesman advised.

Ian Livingston, the chief executive of BT elaborated in a interview with the Guardian recently advising that shareholders at BT had contacted him to say that they felt that rather than spend money laying fibre-optic cable in the ground, holding on to the money would be better for the telecoms carrier.

The fact that BT considered it uneconomical to roll out fibre channeling unless BT were allowed by Ofcom to get a return on their investment was something Livingston pointed out again.

In the newspaper interview Livingston said “But I have to tell you there are some shareholders who say ‘you know something, don’t do that, don’t do a whole lot of other things. That leaves you with a lot more cash and cash today is worth a lot more than cash in a few years’ time’.”

As long as the long term economics were okay BT Broadband would still be happy to invest he said.
“I personally believe if it is the right thing to do as a 20-year decision it is the right thing to do. But we need to have the environment in which our shareholders feel there is a good chance of us making a return. If we cannot have that environment this is not the time to be taking on sure-fire losses,” he said.