BT in the FT: Paul Reynolds & the 21CN
This morning, Paul Reynolds attempted to explain to the average Financial Times reader (subscription site) the benefits of the 21CN and all that seemed to be spelt out was the headline annual cost savings of £1bn per annum on a £10bn investment. For sure there was the usual statistics to illustrate how large and complex the project is, but personally I feel that your average investor has no idea what it means to collapse 17 networks into 1, laying tens of thousands of fibre optic or even replacing kit in 5000 exchanges.
I can understand why Paul Reynolds didn't go down the route Matt Bross, the BT CTO, took in a key note address to a conference on Milan where he explained how the BT network would drive innovation through the opening up of the network to third parties and this was as important as the actual physical architecture.
I think this is perhaps a because opening up of the network is very much less tangible than cost savings (just because you open the door to an exciting new playground doesn't mean that anyone will come to play) and also because the benefits are a lot less certain (anyone involved in telecoms over the 20 years has a certain amount of blood on their hands from trying to implement intelligent networks)
Personally, I think this openness and scale is a key differentiator for BT and something that the altnets should be very scared of. Altnets in the UK such as Thus and Easynet (Sky) claim to have a Next Generation Network (NGN) and to a certain degree if someone builds a new network today, it will be by its very definition a Next Generation Network; mainly because they have bought the latest kit from the vendors and more importantly they don't have the legacy network and customers that BT and on a smaller scale C&W have to support today.
However, if BT manage to open the network to allow easier configuration, provisioning and accounting for third parties - it will have an unique advantage over not only the altnets, resellers and convergent players, but also the internet players. This is big news for investors but a difficult concept to explain. In fact, Reynolds hinted at this in the interview by saying that part of the equation in maximising returns from the 21CN is in convincing third parties not to build their own networks and instead piggy back on the new improved and open BT network.
I believe BT is in effect accidentally(?) adding a new barrier to entry for the industry - a software based middleware layer which is owned by BT. No longer will it be suffice for altnets to lease some dark fibre, buy some sexy kit from a network vendor and employ a dynamic sales force - they will need to replicate middleware created by millions of manhours programming efforts, continually being updated, owned by their main competitor and not appreciated by the regulator.
The last quarter of the interview was spent by Reynolds trying to address the achilles heel of the 21CN - the piss poor access speeds - and here I feel BT is general and Reynolds in particular is guilty of deliberate obfuscation.
For a start, he mentions that UK punters will not be getting a worse experience than Paris or Germany. I find it extremely interesting that he has cherry picked these examples. I can counter with the consumer experience right now in South Korea, Japan or in the lucky parts of the USA which are connected to the Verizon FIOS network. Closer to home in Europe, I can point to the community networks in Scandinavia and Holland and even the grand plans to Fibre large euro-cities such as Vienna and Amsterdam. In my cherry picked areas, the citizens of the UK currently do and in the future will have a much, much worse communications experience.
Next is the dishonesty about the 24meg ADSL2+ experience - this is just as bad as the current myth that people are actually experiencing 8meg with the radsl solution. The regulator, OFCON, should get tough here and force the broadband suppliers to produce actually distribution graphs showing the day-to-day speeds that their customers are achieving. BT knows that only a small proportion of customers will ever get 20meg+ and they should be honest in this.
The problem is depending upon your point of view either the limitations of the BT last mile copper network or the economics of replacing it with its far superior competitor, fibre. Reynolds is also being slightly disingenuous with the claim that BT is introducing fibre on new sites. I know of one announced project which is for thousands of homes, whereas the vast majority of new homes being built in the UK still have copper being laid to them - BT aren't even bothering putting in a spare duct for the fibre future.
I firmly believe that BT think there is a need for public funds to assist with the fibre economics - I suspect they know the UK is falling behind globally and also know there is currently no political appetite to publicly finance the building of the next generation of access networks. I would counter that the public isn't aware of the pressing need to start building the next generation access networks so how can we possibly get public funds - if public funds are even required? I feel we should be more honest and at least have a public debate of what is required to take the UK to the next level.
I can understand why Paul Reynolds didn't go down the route Matt Bross, the BT CTO, took in a key note address to a conference on Milan where he explained how the BT network would drive innovation through the opening up of the network to third parties and this was as important as the actual physical architecture.
I think this is perhaps a because opening up of the network is very much less tangible than cost savings (just because you open the door to an exciting new playground doesn't mean that anyone will come to play) and also because the benefits are a lot less certain (anyone involved in telecoms over the 20 years has a certain amount of blood on their hands from trying to implement intelligent networks)
Personally, I think this openness and scale is a key differentiator for BT and something that the altnets should be very scared of. Altnets in the UK such as Thus and Easynet (Sky) claim to have a Next Generation Network (NGN) and to a certain degree if someone builds a new network today, it will be by its very definition a Next Generation Network; mainly because they have bought the latest kit from the vendors and more importantly they don't have the legacy network and customers that BT and on a smaller scale C&W have to support today.
However, if BT manage to open the network to allow easier configuration, provisioning and accounting for third parties - it will have an unique advantage over not only the altnets, resellers and convergent players, but also the internet players. This is big news for investors but a difficult concept to explain. In fact, Reynolds hinted at this in the interview by saying that part of the equation in maximising returns from the 21CN is in convincing third parties not to build their own networks and instead piggy back on the new improved and open BT network.
I believe BT is in effect accidentally(?) adding a new barrier to entry for the industry - a software based middleware layer which is owned by BT. No longer will it be suffice for altnets to lease some dark fibre, buy some sexy kit from a network vendor and employ a dynamic sales force - they will need to replicate middleware created by millions of manhours programming efforts, continually being updated, owned by their main competitor and not appreciated by the regulator.
The last quarter of the interview was spent by Reynolds trying to address the achilles heel of the 21CN - the piss poor access speeds - and here I feel BT is general and Reynolds in particular is guilty of deliberate obfuscation.
For a start, he mentions that UK punters will not be getting a worse experience than Paris or Germany. I find it extremely interesting that he has cherry picked these examples. I can counter with the consumer experience right now in South Korea, Japan or in the lucky parts of the USA which are connected to the Verizon FIOS network. Closer to home in Europe, I can point to the community networks in Scandinavia and Holland and even the grand plans to Fibre large euro-cities such as Vienna and Amsterdam. In my cherry picked areas, the citizens of the UK currently do and in the future will have a much, much worse communications experience.
Next is the dishonesty about the 24meg ADSL2+ experience - this is just as bad as the current myth that people are actually experiencing 8meg with the radsl solution. The regulator, OFCON, should get tough here and force the broadband suppliers to produce actually distribution graphs showing the day-to-day speeds that their customers are achieving. BT knows that only a small proportion of customers will ever get 20meg+ and they should be honest in this.
The problem is depending upon your point of view either the limitations of the BT last mile copper network or the economics of replacing it with its far superior competitor, fibre. Reynolds is also being slightly disingenuous with the claim that BT is introducing fibre on new sites. I know of one announced project which is for thousands of homes, whereas the vast majority of new homes being built in the UK still have copper being laid to them - BT aren't even bothering putting in a spare duct for the fibre future.
I firmly believe that BT think there is a need for public funds to assist with the fibre economics - I suspect they know the UK is falling behind globally and also know there is currently no political appetite to publicly finance the building of the next generation of access networks. I would counter that the public isn't aware of the pressing need to start building the next generation access networks so how can we possibly get public funds - if public funds are even required? I feel we should be more honest and at least have a public debate of what is required to take the UK to the next level.
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