BT falling behind - Virgin offering 300meg by end of year

BT seems to have been a bit short sighted in my mind. While I do think FTTC was a prudent choice a while back, they've been too slow to deploy faster solutions.

I read the article about Virgin's new double speed which will put even the most basic package up to 100meg. Admittedly the uploads are very poor which would put me off.

However, I think they might have made a serious strategic error here. Yes, they have good coverage of FTTC over most of the country (albeit with government subsidy in many). But:

1) Virgin is starting to aggressively rolling out to more of the country and will take customers from BT with better speeds I think, especially people further from cabinets

2) Small niche players are destroying BT in new build apartment blocks (and new build housing estates). Where I live in E20 there is both Hyperoptic and BT FTTP. However, the developers have done a deal with Hyperoptic where you get free broadband as a sweetner. Result: I haven't seen a single BT SSID walking round yet. Despite the probably very expensive BT FTTP rollout which is now going to waste. BT can't compete with that either on a regulatory level nor do I think they can be 'on the ground' enough to actually pen these deals if they could.

3) Sky and TalkTalks FTTH in York is further pushing them. If that took off to more cities, BT is going to have to maintain a local loop that virtually noone uses and isn't competitive, pushing up their cost base and reducing profits they can reinvest.

I'm not sure how they can come back from all this. I think they'll be left to run the last 20% or so of areas which are rural and by the nature are not profitable. They won't have the very profitable suburban/urban business to cross subsidise it with, as altnets, VM and sky/talktalk like rollouts will take all of the revenue here. They will have a USO to maintain all the [censored] copper loop though.

This leads me to two thoughts: BT know all this and are planning on giving up on it all and looking at other options which are less hassle. Like reselling football or mobile networks. Spin out openreach with all its pension liabilities, regulatory headaches and USO to curl up and slowly die.

or, BT will do a u-turn on GFast and start a much more aggressive FTTH rollout. However, from the FTTH we've seen in the past it doesn't look like the last mile infrastructure is in any kind of state to be able to do that.

Thoughts?

Edited by mr_mojo (Mon 17-Aug-15 19:35:36)

I don't see BT dropping G.fast unless something happens that really,really, scares them. There would have to be a serious competitor offering to roll out FTTP across much of the country. Having said that, copper is yesterday's technology and surely it has to die in the long run.

Edited by Spud2003 (Mon 17-Aug-15 19:51:55)

Or alternatively BT carry on with the usual plan - do virtually nothing until they absolutely have to.

There are still plenty of people happy with ADSL and it seems abundantly clear that BT are more interested in content than investing in their network to match the cable company's speeds.

All around me in the local area Virgin have been building but they cannot do so here, so I would very much enjoy seeing BT deliver genuine next generation access, however I don't see the business case.

Ahh the headline speeds, as if that is all that matters.

BTO are trying to build a national network and are being assisted by BDUK funding to do so. VM, and others, can cherry pick the locations they decide to invest in. There are many locations, small villages, where VM would just never touch.

That's what I'm saying though. How is BT going to make a profit on consumer/small business broadband when very high density areas are with hyperoptic and the like, many other areas are with VM/TT/Skys own last mile? These areas cross subsidise the rural areas.

I do get your point, from a business point of view what kind of foot hold do you think Hyperoptic/Gigaclear will be able to achieve and how fast. And to your example, I would take a wild guess and say that 0.1% of the total number of homes are new builds or about to be built in the next 5 years.

So I still say, in those cherry picked areas, those headline speeds are attention grabbing.

In reply to a post by mr_mojo:

BT seems to have been a bit short sighted in my mind. While I do think FTTC was a prudent choice a while back, they've been too slow to deploy faster solutions.

Do have VM have market dominance in any of the areas within their footprint yet? Last I heard they didn't.

Anyway there's not much appetite for the kinds of speeds VM are offering. You'll notice that they keep having to force people to upgrade. Left to their own devices most of them would probably still be on a 10Mb/s or 20Mb/s service. There doesn't seem to be a huge demand for high speed broadband yet, let alone 'ultra fast' broadband.

Traffic shaping - check.
Upstream throttling - check.

BT and later Openreach have been competing with Cable and other Altcos for decades. It's actually Cable and Altcos that are scared of competing with Openreach nowadays. The most highly anti-competitive practice in Telecoms today is the Openreach lockout of new developments.

I don't think Hyperoptic et al will really get a huge marketshare, but they do cover 100k properties so far.

What I do think are bigger problems for BT are TalkTalk and Sky building their own altnet, and VM expansion.