BT opens wallet to send fibre to the home

BT will spend some £1.5bn on fibre optic cables to bring decent broadband to British homes and offices, provided Ofcom acts to protect its juicy margins.

Regulator Ofcom made noises earlier this month suggesting it would move to protect BT if the telco did invest in a fibre network.

A couple of weeks on, and hey presto, BT is pledging both fibre-to-the-premises and "fibre to the cabinet" - faster links to street cabinets which would then use existing copper lines to link to homes and offices. FTTP is likely to be favoured for new builds - like the Olympic village - while the rest of us will make do with FTTC.

But Ofcom will have to tread carefully - EU competition authorities have already objected to how Germany's Deutsche Telekom is blocking rivals from using the new network.

The new fibre network should provide speeds of up to 100Mb, and would reach 10 million people by 2012. BT insisted that it would not be cherrypicking urban areas, but that the 100Mb network would be "widely available".

It thoughtfully set up some Aunt Sallies for anyone unlucky enough to have to settle for 24Mb ADSL2+, saying "precise deployment will depend on the engagement of government and regional and local authorities but there is no reason why it should not be available in a variety of environments."

BT explained the investment in a statement: "BT expects its initial investment in the programme will result in around £100m of incremental capital expenditure in each of the 2008-09 and 2009-10 financial years, taking the total expected capital expenditure in those years to around £3.2bn and £3.1bn, respectively."

The telco is pushing Ofcom for support in protecting its own investment and in getting access to any new networks built by other companies. Part of BT's interest is in wholesaling services to other providers.

Because of this spending BT is suspending a proposed share buyback scheme planned from 31 July 2008.

Regulator Ofcom said today it welcomed the investment and would work to support it. The UK watchdog said regulators need to provide the right incentives for investors, to promote a competitive environment and to work with companies to support investment and competition.

Ofcom will publish more detailed proposals for future regulation in September.