BT & NTL to offer ADSL2 in the UK

mr_angry

Article on The Register today:

NTL hits copper trail to ADSL2+

It turns out that the crazy idea that NTL had all those years ago when it bundled a twisted pair copper wire into its home connections, alongside co-ax, is going to give it a fantastic advantage in the UK triple play market.

Back then Voice over IP was a distant dream so NTL decided to install its own telephone lines, because the UK offered the first international regulator experiment to its cable TV franchises, saying that from the 1990 Duopoly Telecoms Review they could offer telephony as well as TV.

Now NTL has decided that these very short twisted pair loops, which are for the most part just 1,000 feet from fiber, can carry ADSL2+ to good effect, giving the company a new dedicated 24 Mbps route to each of the eight million homes its cable passes, for a total investment of just £50m ($96m). Currently it counts just over three million of these homes as customers.

NTL recently announced that it would put DSLAMs, which will also be ADSL2+ enabled, into 300 of the 5500 or so telephone exchanges owned by British Telecom, spending £65m ($117m) in the process, which is a separate initiative and which means that new customers, which are NOT currently passed by NTL cable, can eventually be added to the mix.

Although this strange double barreled ADSL2+ approach cannot be copied by many other cable companies, except perhaps Telewest which also operates solely in the UK, it shows definitively that ADSL2+ DSLAMs are the cheapest way to reach a mass of consumers if you haven’t got infrastructure already built out.

After all NTL can choose either to extend its co-ax loops, or drop a twisted pair from a cross connect box, and it is choosing the latter.

For a company that two years ago was still trading under Chapter XI bankruptcy and which spent £9bn ($17bn by today’s currency exchange) on building out a fiber co-ax network, it is unlikely it would choose anything but the cheapest way to go.

There are issues with ADSL2+, including the fact that under real world conditions it doesn’t always achieve the speeds and distances that it promises in the labs, for various reasons usually relating to the quality of copper, but it is supposed to give something over 24 Mbps downstream over 1,000 meters of copper, using a 2.2 MHz signal. The topology of the NTL network however means that the ADSL2+ link doesn’t have far to go far and its recent financial presentation suggests that 95 per cent of it is under 1,000 meters.

“We want to be able to offer HDTV,” said a spokesman from NTL this week and he clarified: “This is a separate initiative from our local loop unbundling at British Telecom Exchanges, these ADSL2+ connections are part of our own existing network.”

NTL is currently offering a 3 Mbps internet service, and getting away with charging £37.99 ($73) a month for it. But there is downward pricing pressure on this service and leading competitor BT has recently made the dramatic move of unblocking its DSLAMs. That will mean that for a flat fee BT will allow a DSL connection to go “best effort", as fast as the wire will allow, given its distance from the public switch, rather than drop everything to a unified 500 Kbps.

BT has also said that it will offer ADSL2+ services, beginning later this year, but says that they will be at 18 Mbps, and that trials are going on right now. Broadband lines of that speed would enable triple play and video delivery over BT broadband lines, including High Definition TV services, the company said.

The incumbent UK telco also said that it would make further cuts to the price of unbundled broadband and set up a new division to provide transparent and equal access to BT’s local loop. For now BT is trying to up the speeds on its existing lines to between 2Mbit/s and 8Mbit/s depending upon line characteristics.

All of this creates downwards pressure on the price of broadband in the UK, and it is likely that NTL could offer concurrently to one home something like a single High Definition TV channel, taking up 10Mbps, 2 standard TV signals at around 5 to 7 Mbps, with any one of these lines being used for Video on Demand, and that would still leave room for up to an 8 Mbps high speed internet line.

This whole set-up also sets a huge precedent for cable TV companies that operate within a liberal local loop unbundling region, which is most of Europe. Cable companies can keep an eye on the economics of using ADSL2+ through the local telcos public exchanges, as a way of extending their networks.

Of course the idea of trying this in the US is virtually impossible, given that the Telcos have such a stranglehold now over the FCC, and that unbundling is no longer price controlled, making it extremely difficult to set up a long term economic unbundled broadband line, or to get investment for it. There cable companies are aiming to take away Telco business to such an extent that the Telcos would never agree to partner them.

But that’s not the case in Europe or most of the rest of the world, where it will take off rapidly as long as unbundling price controls remain in place.

One question that this NTL development leads to is “Why not VDSL?”

VDSL can deliver even more bandwidth over shorter distances. We think that VDSL and VDSL2 could both be used over the distances that NTL is connecting, but it is less clear when a VDSL2 standard will be ready and whether or not the standard will get installed in very many places. It is volume production that drives the cost of the chipsets down and given that all DSLAMs that have been put on for the past year or so have been using ADSL2+ compatible chips, it is these that are likely to yield lower prices in the Customer Premises Equipment, only $10 higher than existing ADSL modems.

In January this year NTL and Telewest set up a Video on Demand service offering a 24-hour viewing window, mimicking most of the US cable operated VoD services.

Seachange International got the server contract by dint of the fact that it has invested in a joint venture company that provides the VoD content. This company is going to market as FilmFlex but is none other than the renamed Sony and Disney owned company that received European Commission approval in the UK. The two studio giants were given leave to start their own film services due to the fact that BSkyB holds too great a grip on UK film channels.

This is an effective beachhead for Sony and Disney and we expect it to emerge elsewhere in Europe, as other cable companies take it on board. The service includes content from the BBC, Nickelodeon, Jetix, Warner Music, Entertainment Rights, VPL, Hollywood Pictures, Touchstone Pictures, Miramax Film Corporation, Pathé, Icon Films and Playboy TV, now with more to come.

NTL announced revenues of £2,073.6m for its full year this week ($3.97bn) and losses of £495.4m ($949m), but this included amortization of £709.9m ($1,359m),which means that with low capex, it had free cash flow of £61m ($117m).

NTL reduced headcount by 1,200 during 2004, had a churn of 1.5 per cent per month and added 34,200 net new customers.

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Might be interesting to bring this up the next time Eircom start banging on about them delivering a network comparable to the best in Europe... :rolleyes: