BT ups pressure on regulator over fibre rollout

The boss of BT has ratcheted up the pressure on the UK telecoms regulator over the rollout of fibre in the UK, after admitting in a newspaper article that its spending on fibre is being questioned by some of the carrier's shareholders.

Back in July, the UK carrier announced it would spend £1.5bn pounds ($2.25 billion) rolling out super fast broadband to 10 million (or 40 percent) of UK homes and businesses by 2012. BT said at the time that new builds would get fibre to the premise or FTTP (such as in Ebbsfleet in Kent), while existing homes and premises would get fibre to the cabinet (FTTC).

At the time a BT spokesman told Techworld that the investment would depend on Ofcom ensuring that there was a 'proper regulatory framework in place' that allowed it to get a decent return on the investment. He pointed out that Openreach was allowed to make a 10 percent return, but as BT deemed fibre a more risky investment, it would want "something more than that."

Now, in a recent interview with the Guardian, chief executive Ian Livingston went further after saying that he had been contacted by BT shareholders, who believed the telecoms carrier would be better off holding onto its cash, instead of spending the money on putting fibre-optic cable in the ground.

Livingstone reiterated the call that Ofcom must allow BT to make a return on its investment, or it would not be economic to carry it out.

"But I have to tell you there are some shareholders who say 'you know something, don't do that, don't do a whole lot of other things. That leaves you with a lot more cash and cash today is worth a lot more than cash in a few years' time'," Livingston told the newspaper.

He did say BT would still invest if the economics were right for the long term.

"I personally believe if it is the right thing to do as a 20-year decision it is the right thing to do," he said. "But we need to have the environment in which our shareholders feel there is a good chance of us making a return. If we cannot have that environment this is not the time to be taking on sure-fire losses."

There is little doubt that BT is feeling the effects of the economic downturn. Last week, it announced that would axe 10,000 staff, in an effort to cut costs and improve profitability at its IT services division.

In reality though, BT's £1.5 billion fibre investment is actually pretty modest, considering that it had already earmarked £500 million ($750 million) for the fibre investment, and the July announcement only committed an additional £1 billion ($1.5 billion) on top of that.

"It is clear that what BT wants is some form of guarantee that if they invest this money, they will get some return," said Michael Philpott, principal analyst at Ovum. "Ofcom will have to careful what assurances it gives BT, bearing in mind what has happened in other countries, such as Germany, where the regulator was forced by the EU to go back on some of its guarantees to Deutsche Telekom.