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BT pressures Ofcom on 100Mbps fibre broadband

Ofcom asked to guarentee a return on investment

BT is putting pressure on telecoms regulator Ofcom to make guarentees over returns if the company decides to invest in rolling out a super-fast fibre network across the UK.

Yesterday it emerged that BT shareholders had raised concerns over the returns on the £1.5bn investment that will see 10m UK homes and businesses provided with 100Mbps broadband access by 2012.

At the time a BT spokesman told PC Advisor's sister publication Techworld that the investment would depend on Ofcom ensuring that there was a "proper regulatory framework in place" that allowed it to get a decent return on the investment. He pointed out that Openreach was allowed to make a 10 percent return, but as BT deemed fibre a more risky investment, it would want "something more than that".

In an interview with the Guardian last week, chief executive Ian Livingstone reiterated the call that Ofcom must allow BT to make a return on its investment, or it would not be economic to carry it out.

"I personally believe if it is the right thing to do as a 20-year decision it is the right thing to do," he said. "But we need to have the environment in which our shareholders feel there is a good chance of us making a return. If we cannot have that environment this is not the time to be taking on sure-fire losses."

In reality though, BT's £1.5bn fibre investment is actually pretty modest, considering that it had already earmarked £500m for the fibre investment, and the July announcement only committed an additional £1bn on top of that.

"It is clear that what BT wants is some form of guarantee that if they invest this money, they will get some return," said Michael Philpott, principal analyst at Ovum.

"Ofcom will have to be careful what assurances it gives BT, bearing in mind what has happened in other countries, such as Germany, where the regulator was forced by the EU to go back on some of its guarantees to Deutsche Telekom."

"It is all about trying to find the common ground so that BT is going invest and get a fair deal, but that doesn't kill off competition in the broadband market," he added.

"Long term fibre is needed at some point in the future, but it is a chicken and egg scenario, as it is hard to see the benefits that superfast broadband offers until we get there."

"A lot of people say build it and the benefits (from fibre) will come, but this a risky proposition, especially explaining it to shareholders," said Philpott. "Indeed, there is a feeling out of there of a certain sympathy for BT shareholders, especially considering its latest financial results."

Philpott believes that a fibre deployment in the UK will provide obvious benefits to businesses, with the better infrastructure allowing them to take advantage of these technologies.


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