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BT puts cash into broadband upgrade



Simon Craven

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Recent articles in Computer Weekly have implied that BT's moves towards broadband are done without investment....

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Simon Craven

Soapbox

Recent articles in Computer Weekly have implied that BT's moves towards broadband are done without investment. This may reflect a misconception that transforming the local loop requires investment only in the loop itself.

In engineering, you cannot necessarily change one element of a system, such as the last mile of a network, and ignore the impact elsewhere.

The average telephone line generates a narrow stream of voice data for several minutes a day. Convert it to DSL and it generates a stream of data for hours. The impact on long distance traffic volumes, even at DSL speeds, is colossal.

The idea that BT shareholders don't know that it needs to invest must bemuse them. In the past three years, they have seen £10bn invested (far more than BT's profits). Much was for enhancements in the core network. In the next three years, the company expects to spend about £4bn on the IP backbone network alone. The continuing investment in the local loop, DSL upgrades and providing connections to new homes and businesses is on top of all that.

No-one attracts investment without the prospect of a profit (certainly now that the dotcom bubble has burst). To attract this kind of investment, you need a business plan showing 10 times the revenue. Getting households to spend 10 times more is a neat trick in any market, let alone one as price-sensitive as telecoms.

Are investors gasping to put tens of billions of pounds into experimental services for which there may not be a market, and at prices that users don't want to pay?

Simon Craven is head of issues management at BT

This was first published in November 2000

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