Startling BT FTTH Trial

BT is installing what amounts to a test fiber-to-the-home network at Ebbsfleet, Kent, U.K. What's interesting about the 10,000-home network is the early announcement of prices.

Because U.K. broadband access operates under the wholesale Openreach model, the first thing BT is doing is announcing wholesale prices to be charged to competing service providers and BT itself to use each of the lines. Retail pricing will be set by each of the wholesale partners.

Rates range form £100 a year ($195) for a basic line to £530 ($1,038) a year for the fastest connection, at 100 Mbps.

BT still is wranging with U.K. regulators about the ultimate shape of regulations surrounding widespread fiber-to-customer networks. BT wants more freedom to use its own assets, of course, including freedom from mandatory wholesale regimes of the current sort, in the best case scenario.

From a U.S. perspective, it is striking that the first pricing information is about wholesale rates rather than retail pricing, a measure of how different the regulatory frameworks now are.

Verizon Fiber Gamble Pays Off?

As this Wall Street Journal graphic illustrates, shares of Verizon and at&t have outperformed the shares of leading U.S. cable companies over the past year. One suspects that a changed investor understanding of the value of broadband access is at least partly the reason.

Verizon executives, in particular, took lots of heat from the investment community for embarking on what was seen as an expensive and unproven fiber-to-home upgrade. Verizon's compatriots at at&t essentially were rewarded, at least in part, for taking a less-ambitious, less-costly upgrade tack.

The cable companies have been saying for decades that all telco fiber-to-home networks were uneconomic compared to cable's hybrid fiber coax alternative.

And though other forces are at work, investors seem to have warmed to the idea that the upgrades are value-producing, after all. If we have learned anything over the last decade or so, it is that bandwidth demand can change quite sharply, quite quickly, and always, so far, in the direction of more demand.

Getting caught shorthanded could be quite destabilizing.

Also, Verizon has shown that it is able to compete effectively for consumer dollars in the video entertainment area, while the FiOS service has drawn raves from users who have access to it. There might be nothing so churn-reducing as knowing there is one provider of fiber-to-the-home in one's service area.

The point is that Verizon executives were right to stick to their guns, despite the avalanche of criticism they received for building the FiOS network. In the competitive race with cable operators, Verizon might be positioned quite well.

It isn't that cable operators cannot push their upgrades further, by pushing fiber closer to customers. It is that they will face opposition from their investors for the same reasons Verizon got slammed. Investors get nervous every time the cable industry starts talking about the need to increase leverage to upgrade the networks in some serious way. And it wasn't so long ago that the HFC 750 MHz networks were described as "the last upgrade" cable ever would have to make.

It no longer looks that way.

Broadband Access Revenue: Bad News

Broadband access penetration might be climbing just about everywhere. Unfortunately, it looks like revenue is going to fall significantly, if Yankee Group analyst Vince Vittore is right. He projects Digital Subscriber Line revenue, which represents the overwhelming share of global revenue, is set to fall precipitously.

You might think fiber-to-home (OLT)revenue or cable modem revenue (CMTS) is poised to take up the slack. Vittore doesn't think so.

It looks like broadband access is turning out to be a product just like the Internet: useful, ubiquitous, necessary and something service providers can't make much money on.