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Tuesday, 22 November 2011

How low can we go, CEO of Geo?

Can you limbo? It is beginning to feel as if the bar is now perilously low to the ground and there are few sane folk left willing to sink to the depths of our apparently less than meagre national ambition to have the "best broadband infrastructure in Europe". (Yes, yes, hollow laughs all round at this seemingly ludicrous (cl)aim that is still being made in the face of so much fact-based evidence to the contrary).

Chris Smedley, CEO of Geo last week answered a few questions for 5tth about PIA, BDUK and the future, after the announcement that Geo were, sadly, dropping out of the BDUK process.

This blog post can be read at

There is not a single factor that is seeing off the valuable players in this game, nor is there out and out disagreement with PIA as a concept, rather it is the pricing and terms that are the issue. But the truth is that if you wanted to blame a single issue then PIA in its current form would be it. PIA has little to offer as a solution as it stands, and it is blowing business plans out of the water for UK broadband for our next generations. PIA needs serious work, or scrapping, so it seemed appropriate with all that is going on, or rather not going on, for a ditty to mark the occasion.

There has already been much said about Geo's departure, BDUK, the wisdom of the current approach of spending the money, PIA etc. For many, this departure by Geo feels like a tipping point. No longer is it just community folk, tech journos, and small players making a noise and querying what is actually being done in our name and with our money. Now the big guys are dropping out of BDUK, rural broadband, national and regional solutions etc and making it quite clear why.

LA: Is the BDUK process rescuable, or are we too far down the line of handing the money to BT?

Chris Smedley: That’s for Government and Ofcom (and maybe even BT) to decide. If BT voluntarily dropped the restrictions on PIA and BDUK quickly developed an alternative to the gap funding model then things could be turned round quite quickly. However, as we have asked for all these things already and been denied them on the basis that there is no demand from industry then I wouldn’t hold out too much hope. That means the much slower process of getting Ofcom to intervene on PIA and fibre leasing which will probably take two years to get clear pricing and fair terms for something we could all use as BT will when they deploy new fibre cables. I have no idea whether DCMS will ask BDUK to develop an alternative to the gap funding model. I think they should. I do find it difficult to see anyone other than BT winning the current pilots or the Next Generation Broadband Wales procurement as things stand.

LA: Chris, you must have done the numbers - what figures make it impossible for GEO? What is the gap?

Chris Smedley: Too difficult to generalise as each procurement was different. The simple facts are that using existing poles and ducts is about 5% of the cost of building a new network. Where they exist, other players simply have to be able to use them or it is impossible to compete against BT. If you can’t do so for the long distances to get to remote rural communities as the current PIA stops us from doing then we end up with a proportionately higher cost base than our main competitor for the longest parts of the network. If you then can’t use the new fibre cable to serve local businesses, the public sector, the mobile and wireless industries or other ISPs for backhaul then somewhere between 50-70% of the potential revenues in your business case are zeroed out. BT suffers from none of these restrictions (and has the lion’s share of the current market anyway) so it is easily going to be able to offer more “gap funding” than anyone else.

LA: What have BDUK said to you to make the decision to give up?

Chris Smedley: They have told us that they cannot address any of these concerns about PIA as they are the responsibility of the regulator, Ofcom. Ofcom have told us they are being considered within the Business Connectivity Market Review. This is currently due to conclude at the end of next year and then we will have to negotiate with BT a new contract – assume two years from now at current rate of progress – well after BDUK’s procurements will have concluded. They have told us that there is no demand (presumably other than us) for a non gap funded framework for bidders. Between them, they made our decision pretty easy in the end!

LA: Do you believe that councils could be illegally funding a furthering of a monopoly in 7-10 years' time through the BDUK procurement process?

Chris Smedley: I doubt it is illegal for them to choose BT through the BDUK procurement process – although if the European Commission do apply their state aid guidelines as they have said they will then you would expect no project to become operational unless it offers a fully unbundled dark fibre product to the rest of the market. BT won’t do this at the moment. The sad precedent is that when this got explored after the award to BT of the Cornwall project, Ofcom and Government supported a push back against the EU on this point, arguing (successfully) that this was a matter for the national regulator and that the chosen UK remedies were not unbundled fibre but PIA (!) and VULA (BT’s “virtually” unbundled service – whatever that means). We hear worrying noises from Ofcom that they are considering meeting the EU’s requirements for unbundling in the future with “wavelength unbundling”. For us, as a dark fibre operator, this is all nonsense. Optical fibre cables have lots of fibre in them. Unbundling is a simple lease of the sub-divided elements the market likes to buy (usually a pair).

(I'll put an intro to this next question as I have not blogged this yet. During our meeting with Jeremy Hunt recently here in Cumbria, John Colton of FibreGarden, one of the BDUK Technical Trials Pilots, raised the issue for consideration of a State Aid "premium". This would be for those going straight for the jugular and doing FTTH rather than interim solutions.

The BDUK money is currently being divvied up on a technology neutral basis with all solutions receiving the same per household however long the likely lifespan or suitability of the product, but this fails to appreciate that FTTH will need no further investment. The argument for a premium being that none of those communities/providers doing fibre with this round of money will require any upgrade dosh in the future, whereas all other solutions will be doing an Arnold Schwarzenegger impression. If we are to spend this money, surely we should spend it wisely?)

LA: Do you feel that fibre to the home is being penalised more than, say FTTC, BET, wireless?

Chris Smedley: Yes.

LA: On top of PIA costs, there is also fibre tax, and no premium is being paid to those willing to invest in the longer term rather than stop gap/interim solutions. Can this be rectified?

Chris Smedley: Easily by a determined government which REALLY wants to see fibre deployed across the UK.

LA: After Fujitsu making all the noise earlier this year, how do you feel about them being the first to work with BT on PIA? Stitched up?

Chris Smedley: We are still a PIA trialist and will remain so if possible as we are keen in the long-term to make PIA work. I have no idea why they think it is a good tactic to ignore the deficiencies in the current product and praise BT for launching the current limited product. You will have to ask them! [I will!]

LA: How can Geo now help communities (including councils) to ensure that the gap funding generates local profits as well as /instead of those for a private company?

Chris Smedley: We would have been happy to help by developing viable schemes for councils based on an alternative model to gap funding (like FibreSpeed). We wouldn’t ever have accepted the gap funding model. Going forward, we are going to be focusing on our core business and leaving this task to others (if there are any other than BT).

LA: Where do we go from here?

Chris Smedley: That’s now a question for Ofcom and Government, I’m afraid. Look at New Zealand would be my advice.

Many thanks to Chris for taking time out to answer my questions. It is undoubtedly way past time now for a long hard look at what route we are taking to achieve the goals required in this country. When such exciting companies as Geo and Vtesse are no longer available to innovate, inspire and connect the communities who so need the type of solutions that the agile, generous-spirited, imaginative yet profitable telcos (rather than the oil tanker behemoths) could deliver, summat 'as garn wrang, as they say round here.

Fujitsu & Friends, please stick it out. You are pretty much our only hope now to save this country from yet more global humiliation.

1 comment:

chris said...

I think the song says it all. And it sounds like everyone is singing from the same sheet now. Wonder if government can hear it? Pia Pia PaiNo...
Cornwall was the first warning, and they ignored that. They ignored what vitesse said, if they ignore what Geo says too then history will judge them.