Market Insight

BT-owned Openreach announces plan to accelerate FTTP deployment

February 05, 2018

James Joiner James Joiner Senior Research Analyst, Service Providers & Platforms
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Less than three months after Vodafone and CityFibre revealed plans to deploy a fibre-to-the-premise (FTTP) network to 1 million UK premises by 2021, BT’s infrastructure arm, Openreach, has announced plans to accelerate its FTTP deployment. Openreach intends to rollout FTTP networks to 3 million UK premises by 2020 – a 50% increase on the company’s previous rollout target. As of February 2018, Openreach passed 500,000 UK premises with FTTP services.

As part of Openreach’s revised FTTP plans, the company will hire 3,000 engineers in 2018/2019 in order to commence the rollout at scale. Openreach estimate that the cost involved in the construction of the FTTP network will be £300-400 per premise passed. In comparison, Vodafone and CityFibre estimate their build cost to be in the region of £350-£480 per premise passed.

Openreach’s FTTP rollout will focus on some of the UK’s largest cities: Birmingham, Bristol, Cardiff, Edinburgh, Leeds, Liverpool, London and Manchester. In contrast, Vodafone and CityFibre’s FTTP rollout is expected to focus on smaller UK cities and towns, with Milton Keynes announced as the first deployment area.

Our Analysis

While operators in other major European countries, such as France and Spain, have been deploying FTTP networks at scale for several years, rollout of the technology has been slow in the UK. Whereas incumbents in France and Spain moved directly to FTTP, UK incumbent BT, via its infrastructure division, Openreach, concentrated on incremental upgrades to its legacy copper-based network via fibre-to-the-cabinet (FTTC) deployments. This focus on incremental upgrades has led to superfast broadband speeds (24 Mbps+) being available to 95% of the UK, according to a Government announcement in January 2018. However, the move to delay FTTP investment has meant that availability of ultrafast broadband, which the UK telecoms regulator, Ofcom, defines as capable of speeds of at least 300 Mbps, remains limited in the UK.

Nevertheless, recent announcements indicate there is increased momentum behind FTTP in the UK. Assuming there is no network overlap, the deployments of Openreach and Vodafone/ CityFibre will connect an additional 4 million premises to FTTP networks, equivalent to around 14% of the UK population. IHS Markit’s Broadband Coverage in Europe 2016 study, conducted on behalf of the European Commission, demonstrates that this is still considerably below the FTTP availability levels recorded in Spain (62.8%) and France (20.8%), but marks a considerable uplift compared with the current availability of FTTP services in the UK (1.8%).

Looking beyond 2020, the UK could see further deployments of FTTP networks. Vodafone and CityFibre state they could pass up to 5 million UK premises with FTTP networks by 2025, depending upon the success of the initial deployment to 1 million premises. Likewise, Openreach may also increase its FTTP rollout target after 2020, with its management stating it could connect up to 10 million UK premises by 2025. This is likely to rest on the outcome of Ofcom’s Wholesale Local Access Market Review, which determines the wholesale price Openreach can charge broadband retailers for access to its network. Openreach voiced concerns that a significant reduction in the amount it can charge for access would restrict its ability to invest in FTTP infrastructure. In such a scenario, Openreach could change its ultrafast technology mix to include a higher proportion of G.fast, which is cheaper to deploy than FTTP, but offers less certainty regarding attainable speeds. G.fast promises to deliver up to 1 Gbps aggregate (sum of downstream and upstream speeds) on very short loops of 50 metres, and 500 Mbps and 200 Mbps at 100 metres and 200 metres, respectively.

Openreach’s FTTP deployment beyond 2020 will also be influenced by demand from broadband retailers for the FTTP product. Openreach revealed that only BT retail and some small business-only fixed broadband providers have signed up as retail partners for its FTTP product. The UK’s second largest fixed broadband retailer, Sky, has been non-committal on the use of Openreach’s FTTP product, but IHS Markit expects the number of retail partners to increase as Openreach deploys FTTP networks at scale. Given it already resells Openreach’s G.fast service, TalkTalk can be expected to become a retailer for Openreach’s FTTP product. Moreover, despite plans to deploy its own FTTP network in the UK, Vodafone may also look to retail Openreach’s FTTP product. Vodafone has used a mix of methods, including access to wholesale networks as well as self-build and acquisitions, to increase the FTTP footprint of its operations in countries such as Spain and Portugal.

Geography
UK Western Europe
Organization
BT BT Group BT Openreach
Research by Market
Mobile & Telecom
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