At a recent event on European Communications policy, held under the Chatham House rule, the audience was told that revenues and investment across the European telecoms markets, both fixed and mobile, are now stagnant or falling. This was blamed on incoherant over-regulation which is about to be exacerbated, not alleviated, by the Telecoms, Data Protection and Security packages currently being discussed. The overall effect is to weaken investor confidence in the telecoms markets at the same time as giving competitive advantage to those syphoning intra-EU on-line business across the Atlantic. The collective message was about the need for a much sharper approach to regulatory reform.
Prices were said to have fallen faster than volumes were rising, although I note prices are now rising again, sometimes very sharply, e.g. 50 – 200% for BT Fibre to the premises. Price comparisons with the US, where spend per customer is said to be double that in the UK/EU, were said to be seriously misleading because usage per customer was also double ours for data and six time more for voice. I was surprised at the “authority” with which such figures were quoted until I looked at Ofcom’s recent Consumer Experience report , This shows how UK consumer spend on fixed and mobile communications services peaked in 2006 and has yet to recover, albeit it has been rising as services extend to cover more of those parts of the UK previously on crapband: bandwidth that is not fit for purpose – whether purpose is doing homework, a DEFRA return or watching football.
I also looked at BT’s reported Financial Results as opposed to its press releases.
During the year to March 31st 2013 the capital spend by Openreach in fibre roll-out was said to have accelerated by 5% (to £1,144 million), despite one of the wettest years on record and the consequent demand on engineeering resources. However, by Quarter 3 of the current year it was down, by £38 million (13%) over the previous 3rd Quarter. The reason given in the accounts is “reflecting £42 million of grant income relating to our investment in the regional broadband programme”. This appears to mean that BT’s own investment is going down, not up, in response to the contributions from BDUK.
The overall trends in BT capital spend over recent years, despite the surge in investment to handle the Olympics, is down. Overall capex was £2.6 billion in the year to March 2011, £2.6 billion in the year to March 2012, £2.4 billion in the year March 2013. It is currently running just below the level last year, with investment falling in Openreach (local utility infrastructure) and rising in Global (overseas) and Wholesale (bulk connections). Capital investment into BT Retail, despite the need to handle the demand being hopefully generated by the foray into Sport, appears to be the same.
BT’s has indeed said to investors that its current strategy is to focus on using the entry into Sport to build up consumer demand to make better use of its past investments. BT Retail is having its best year for some time, attributed to the growth of its Sports TV serves. However, the increase in revenue in BT Retail is less than the drops in revenue from BT Wholesale and Openreac. It also appears to be less than the increase claimed by Sky during a similar period. Might BT not have done better for shareholders by selling utility infrastructure to Sky and its competitors? Or is the investment really just a large scale negotiating ploy to bring about a series of cross licensing deals for content?
Such analyses and speculations help put BT’s infrastructure investment into perpective.
This appears to be running at about £1,15 billion a year – approximately the same as Vodafone’s annual spend on upgrading its networks to meet its past obligations , prepare for 4G and renovate the networks it acquired from Cable & Wireless. When I last blogged on the scale of UK communications infrastructure investment figures I thought that BT’s broadband investment was running at “£billions a year”. It seems it is actually “£billions over the life of a programme”: no more than that of its largest intra-UK competitor and barely a quarter of the industry total.
Meanwhile we have the Broadband Stakeholder Group saying it cannot understand why anyone needs more that the current average UK speed, while consumers across much of the country complain that “when the football comes on, everything else goes off”.
I have been taking a look at why so many experience poor quality of service despite the nominal speeds claimed by their suppliers. The reasons are many and varied: from problems with old PCs or wiring to responses times from the servers they visit. Perhaps the most common problem is, however, is the incomprehensible and patronising answer they get when they ask the question: if they can get any answer at all.
Looking at why my own system regularly slows and hangs, I have come to suspect that is usually waiting: while Firefox, McAfee and others fight their various filtering battles with each other and with the surveillance bloatware attached to the newspaper and other sites that I visit in order to collect material for posts like this.
Hence my growing view that we need a revision of RIPA designed to better enable us all to chose to block surveillance other than by law enforcement or our own choice of ISP. I expect to hear squawks from all sorts of Angry Birds and their allies but this is a debate that needs to be had. I therefore plan to make this point at the forthcoming Real Time Club Debate on which I recently blogged.
In the mean time I would be interested to see who has done what research into why it is that customer experience appears to becoming increasingly adrift from expectations.
I would also like to know why it is that the UK and EU are so unattractive for infrastructure investment on the part of those who are supposedly sitting on $hundreds of billions of cash reserves made from those going on-line. Is it that the incumbents, regulators and politicians are standing in the way? Or are there other reasons?