4G licences only raise £2.34 billion in auction

It beggars belief that the UK Government has only managed to raise just £2.34 bn in licence fees for the the 4G licences.  It really does suggest that both the UK Government and Ofcom are totally disconnected either from the potential of the mobile internet market or they are totally incompetent at running an auction.  Whilst it was clear from the start that the market would not pay the astronomical figures paid for the original 3G licences of £21 billion raised by Gordon Brown,  the value of these licences should have achieved far beyond the Office of Budget Responsibilities own projection of £3.5bn, let alone the £2,34bn delivered.  Everything Everywhere, Hutchison 3G UK, Telefonica (O2), Vodafone (VOD) and BT (BT.A)'s Niche Spectrum Ventures secured the 4G licences.  It is a little disappointing that the winning bids all came from the usual suspects and that we will not see any new entrant to spice up the cosy market carve up between the major mobile networks and BT.


Given that the UK is one the largest mobile internet markets and combined with the superior quality of coverage and speed of performance offered by 4G’s 800 MHz network, the winning network providers and service providers stand to make significant revenue.  The mobile broadband should provide smartphone and tablet computer users with "superfast" download speeds, and will provide £20 billion of benefits for UK consumers over the next ten years, Ofcom said. 

However, when mobile operator EE, a joint venture between T-Mobile and Orange, became the first to launch a 4G service in October 2012 in a brief monopoly, it struggled to attract users. It was forced to cut its prices in January, lowering its entry price to £31 from £36 a month.

Despite this slow take up, I still believe that 4G has the power to become the de facto communications network for Internet access in the UK - a view clearly shared by BT - which is why they entered the auction to secure 4G capacity which they are using to extend their WiFi network.  4G has the capacity to be a game changer in technology terms and could change the local access in remote locations of 100 MHz Ethernet speed access reducing the need to take fibre to the home.

There may not be champagne corks popping in No 11 tonight, but I am sure they will be in the HQs of our major mobile providers.

New Local Government service – FTTH?

Recent developments in Dundee and Bournemouth have suggested that soon you will be able to source your 100 Mbps FTTH along with rubbish collections.  Bournemouth Borough Council is using technology from i3 Group Ltd (formerly H20networks) to build out their new Ethernet speed network throughout the district.  What started as a project to deliver a new network to interconnect all their 5,000 staff is rapidly growing to a plan to deliver FTTH to 88,000 of the Borough’s households.

Bob Rhodes, IT Project Manager, Bournemouth Borough Council comments: “In partnership with H20 Networks we are making tremendous cost savings, meaning that we can put Council Tax payers’ money to better use”.  One of those better uses seems to be to deliver FTTH capability to the all homes and businesses within the Bournemouth Borough Boundary.  The residents of Bournemouth have been receiving letters asking them to grant permission for a free connection.  i3 Group are using Bournemouth's network of underground sewers to deploy its fibre optic cabling.  The entire project will cost in the region of £30m and ultimately connect 88,000 homes and is to be designated as the first Fibrecity.

The Fibrecity project of i3 Group officially connected the first 50 homes in Bournemouth to its next generation network FTTH broadband network, with speeds of up to 100 Mbps. The group is now known to be targeting a nationwide rollout figure of 2,000 homes per week and more once additional fibre cities come on tap. Bournemouth is the first of 15 town and city-wide fibre networks being built across the UK by Fibrecity over the next 10 years.  Work has also started in Dundee to reach 55,000 homes. 

This true FTTH infrastructure sees two fibres installed to each property that connects to the Fibrecity network using underground sewers, which is cheaper than digging up the road to lay new cable. One fibre enables homeowners to benefit from paid for services such as IPTV, telephony and super fast 100 Mbps broadband connectivity. A separate 40 Mbps fibre is dedicated to the council and will be used to deliver local services such as community TV and health services.

Cable broadband provider Virgin Media recently launched a 50Mbps broadband service which, while not a true FTTH deployment, is currently the fastest consumer broadband service in the UK. Virgin aims to have the service available to all its customers by the end of this summer. Meanwhile telco BT has also unveiled fibre-based plans, announcing a £1.5bn investment to bring fibre to 10 million UK homes by 2012.  Neither of these two initiatives will offer the fully duplex services that FTTH can deliver.

The creation of these Fibrecity projects is an extremely interesting development of it may lead to the first direct local authority delivered network to be established since Kingston Telecom remained independent of the GPO National Telephone service when the rest of the country’s telephone exchanges where rolled into the forerunner of BT back in 1914.

The entry of Local Authorities into the ISP business could significantly accelerate the access of the public to the new super fast FTTH services. Equally it could lead to the increased “politicalisation” of service provision and control.  Either way it is an exciting development.  With the UK not even in the top 100 countries with these super fast services of FTTH and FTTB, the Fibrecity initiative is a welcome step in the right direction.

BT takes aim at Virgin’s territory.

BT revealed the list of exchanges that will get the 40Mbs fibre technology upgrade today. Twenty seven of the 29 sites are urban areas, with BT trying out just two rollouts in rural areas to "learn lessons from deploying fibre in such environments".

However, Virgin Media claims every one of the 29 sites selected for BT's initial fibre rollout is already covered by its high-speed cable network - meaning BT's initial rollout may do nothing to improve Britain's overall broadband speeds.

A Virgin spokesperson stated , "We already have 50 meg in four areas - Belfast, Watford, Halifax and Oldham”.  Furthermore it would appear that all the other BT designated areas are in Virgin cable areas which are due to be upgraded to the 50Mbs network over the coming year.

While BT's fibre will provide some much needed competition for Virgin, the overlap means Britain as a whole may not see any speed increase as a result of the initial BT rollout, which will cover 500,000 premises by 2010.  The decision to focus almost exclusively on urban areas will increase the “broadband apartheid” between urban and rural areas.  This disparity in service provision is becoming an increasing issue for rural communities, which are suffering disproportionately in the recession.  Access to broadband is being positioned as a right of all not just those who live in our cities.

Ofcom needs to ensure that every UK citizen has equal access to the new fast broadband services and that BT doesn't just use it's power to compete with Virgin at the expense of the whole UK community.

Fibre Taxation slowing the UK's broadband future.

The Government is in danger of creating a digital divide by discouraging investment in superfast connectivity unless it reviews the issue of fibre taxation. Despite Government backing next generation Internet applications and the use of fibre optic cable, it has continued to tax the rateable value of the basic infrastructure.

Elfed Thomas, CEO and founder of i3 Group, is calling on the Government to review the issue of fibre taxation ahead of the Digital Britain report expected later this month. He fears the imposition of the tax will create a digital divide between those companies able to afford the rate, and so benefit from superfast connectivity and those unable to offset the tax and thereby relying on the traditional copper networks.

He said: "Now is not the time for the Government to impose this tax. Fibre taxation is an issue which has been around for almost a decade but never before has it been such a potentially hot topic. Its resurgence comes as the Government is expected to back recommendations for the national deployment of dark fibre - to meet the requirement for universal Internet access to at least 2Mbps broadband speeds by 2012 in the Digital Britain report.

Given the Governments expressed commitment to ensure that the entire population has access to a less than ambitious 2Mbs, this is tax is clearly out of step with this aim.  It seems that the Treasury is still unaware of what is meant by “joined-up Government”.  With one branch of Government committed to improving Internet access for all whilst the Treasury tie the hands of industry behind its back by demanding an income from the means to deliver it!

Japan, Singapore, China, Sweden, Denmark and even Italy are rather more enlightened than the UK Government’s piece meal approach.  As I wrote last November in “When will the next generation broadband start to deliver for the UK”, our Government’s current approach and that of BT lacks the vision to deliver genuine advantage for UK plc in this crucial infrastructure.  Gordon Brown needs to get Lord Mandelson and Alastair Darling talking about something other than bonuses for failure in our Banks.

Further information @ H2O Networks site.

When will Next Generation Broadband start to deliver for the UK?

If we are to enjoy the plethora of digital services such as IPTV in a quality comparable to HD delivered via the internet we will need the bandwidth that only the Next Generation Broadband known as Fibre to the home (FTTH) can offer. FTTH projects are being rolled out around the world it seems the UK is lagging far behind our developed world competitors. Except for a small trail announced by BT Openreach in Kent which will target up to 9,500 new homes and offices in an area of 1,000 acres. This at a time in Japan where FTTH installations are poised to pass a now declining ADSL userbase. FTTH is a form of fibre-optic communication delivery in which an optical fibre is run directly onto the customers' premises. Traditionally only the network to the local exchange was fibre and methods such as copper wires or coaxial cable for "last mile" delivery.

The advantages of FTTH are huge.

For customers, it offers virtually unlimited bandwidth capacity and truly integrated voice, data, and video.

For providers, the ability to offer integrated services could mean higher profits and no electronics in the field means less maintenance. In addition, the costs of implementing technology are dropping and are similar to costs of deploying copper, but the payoff is much larger.

So how does FTTH work?

The Internet "backbone" is made up of fibre optic cables (very thin glass filaments) that have enormous bandwidth and use light pulses to carry information. Most customers, however, connect to the backbone through copper-based technologies like twisted pair and DSL or Hybrid Fibre Coax cable, which have limited bandwidth and limited capacity to carry integrated voice, video, and data services. This creates a speed and service bottleneck in the "last mile," the distance between the fibre optic backbone and customers.

Providers primarily offer FTTH through two types of architectures, point-to-point and passive optical network (PON). Point-to-point requires providers to install an optical transceiver in the provider's central office for each customer. PON uses a single transceiver with a splitter to serve up to 32 businesses and residential customers who share the bandwidth. The splitter is located up to 9km from the exchange, and a single strand of fibre can carry the signal another 1km to the customer. Once the fibre reaches the customer's home or business, an optical electrical converter (OEC) on the side of the building converts the optical signal to an electrical signal that can interface with existing copper wiring.

Some providers are also using Gigabit Ethernet over fibre to provide customers with broadband access.

Fibre optic cables can currently carry information at speeds greater than 2.5 gigabits per second. Residential/business FTTH typically offers speeds from 10 mbps to over 100 mbps, which is a hundred times faster than most cable or DSL service and over twice as fast as a T3 connection.

What is happening elsewhere?

In Europe, the majority of live fibre customers are in Italy, Sweden and Denmark. While a number of incumbents have announced plans fibre deployments, these have generally been for their backbone infrastructure rather than direct to the consumer - e.g. Deutsche Telekom's (DT) rollout of a €3.3bn fibre/VDSL network offers uses fibre for the back end and VDSL for the final connection to the home. DT expects the service to be live in 50 cities by year-end 2007. Many fibre rollouts in Europe are also still only in Greenfield and pilot stages like BT. Moreover, the majority of projects involving fibre are developed by utility and municipal organisations rather than the incumbents themselves.

Comparing Europe with the Japan shows how pathetic our efforts in the UK really are. By the middle of 2008, Japan’s MultiMedia Research Institute forecasts that FTTH installations are forecasted to surpass traditional ADSL reaching 19 million lines by 2009 out of a total instaled broadband base of 35 million. This suggests that by 2009, that the majority of the Japanese population will be accessing the new range of high definition IPTV, real-time video phone and a huge range of fast integrated services making the UK look like we are still using Prestel for our on-line service!

So What?

Ten years ago I wrote my Masters’ dissertation on the need to create a national fibre infrastructure taking fibre to the doorstep of every home and business in the UK. At the time I estimated the cost to be in the region of £24bn and that given the local loop or last mile to be considered a natural monopoly we should seek to establish a common business, such as BT Openreach is today, to set-up and run the infrastructure allowing for commercial organisations to deliver the range of new and exciting services. This network would form the basis of a new “Information Society”. Looking back at my cost estimate, this now seems to pale into insignificance given the money that government seems prepared to waste on supporting inefficient banks such as Northern Rock.

We never seem to have the will to take the risk of investing in infrastructure that are key to our economic wellbeing until we get to the point that we face the collapse of key services. Just look at our railways, The London Underground, even our airports and compare them to what you find in Europe and the Far East. The UK seems content to operate on a piecemeal second rate basis.

If the UK is to prosper in the 21^st Century, we will need to start to work in a strategic manner and not rely on the occasional prestige project such as the Channel Tunnel Rail Link to demonstrate our commitment to the future delivered ten years late and for twice the original projected cost.