Respons from OFTEL 25 February 2003

From David Edmonds, Director General of Telecommunications
25th February 2003

Dear George

BROADBAND PLANNING FOR RURAL COMMUNITIES

Thank you for your letter of 30 January 2003 about broadband planning for rural communities, in which you raise issues on the availability of information on the footprint for ADSL reach at each exchange and the costs of providing ADSL services from those exchanges that BT does not consider commercially viable to enable. I will address these points below.

As I assume that you are aware, ADSL is a distance dependant technology with availability based on the length of the telephone line running from the local exchange to the consumer's premises, ADSL is normally only available to those living within 3.5km of an exchange, but this can be extended to 5.5km by the use of rate adaption technology covering around 95% of households in an exchange area. This is available on BT’s IPStream Home and Office wholesale products, which most residential and business retail ADSL products are based on, These figures are for absolute line length and it should be borne in mind that telephone lines do not run straight from the exchange to a consumer's premises but tend rather to follow roads.

BT does not collect data on the exact footprint for ADSL reach in each exchange area but an estimate of those premises that are likely to be out of reach for ADSL can be obtained by plotting a circle of radius 4km, using the exchange as the centre point. Most of the premises within the circle will be able to get ADSL, while most of those outside it will not be able to do so. This estimate is based on the current limits of ADSL technology. BT continues to look at ways to increase the range of ADSL and is currently looking into whether a lower bandwidth, 250kbit/s product would enable it to extend reach. This product has not been properly trialed yet and no indicative pricing is currently available.

The only way to be certain as to which premises will be within range of ADSL is to carry out tests on each line and then plot this on a map of each area. Given the number of BT lines (approximately 29 million), this would clearly be an expensive task to carry out and I do not believe that it would be justified to require BT to carry out such a task when the benefits of doing so do not appear to outweigh the costs. This is particularly the case when reasonably accurate estimates can be made using information that is currently available.

The costs of fully enabling an exchange to offer ADSL service will vary from exchange to exchange, depending on the existing infrastructure and distance of the exchange from BT's core network. Where BT believes that it may be commercially viable to enable an exchange if demand levels are high enough, it has set trigger levels. Where no trigger levels have been set, BT does not believe it to be commercially viable to fully enable the exchange using current cost information and its existing business model.

BT is however in the process of trialing a scheme that would allow an ADSL service to be made available from any exchange in the UK where BT has not deployed ADSL nor announced specific plans to do so. This proposed scheme, known as Exchange Activate, involves a new business model and the use of smaller equipment and is currently limited to the provision of the standard BT IPStream Home 500 product that is used to provide ADSL service to most residential customers. BT has published indicative prices for this Exchange Activate scheme and is currently consulting on these with the industry.

Rather than requiring the full enabling of an exchange, Exchange Activate is based on the use of smaller exchange equipment (known as mini-DSLAMs) that allow the provision of ADSL service in blocks of 30 end users. Because smaller DSLAMs are used, BT is able to make use of existing network connections to link the exchange to its IP network. In order to keep costs down, only one service provider will be able to provide service from each mini-DSLAM, though multiple mini-DSLAMs can be installed at any exchange.

The proposed business model for Exchange Activate requires a sponsoring body, such as a local authority or business consortium, to provide up-front funding of £55,000. This funding covers the cost of installing and running the mini-DSLAM for a period of three years. During this three-year period no rental charges would be levied by BT, though standard end-user activation charges would apply. At the end of the three-year period the standard IPStream Home 500 rental charges would apply. The sponsoring body would be responsible for selecting which ISP it wanted to provide ADSL service to end users on the mini-DSLAM and what charges the ISP would face or how much the ISP could charge end users.

The Exchange Activate scheme contains a 'buy-out' proposal that helps reduce the risk to the sponsoring body of BT fully enabling the exchange. This proposal would involve BT offering a full rebate of the £55,000 if it fully enabled the exchange in the first 12 months. Rebates of 50% would be available for the second 12 months and of 20% for the third 12 months. No rebate would be paid if BT fully enabled the exchange after 36 months of Exchange Activate being deployed.

BT's new Exchange Activate proposals should help local authorities and communities assess the costs of installing and maintaining an ADSL service for a three year period and allow them to obtain such a service where the necessary funding is made available.

I have just returned from Canada where I saw several remarkable examples - just outside Ottawa - of the local community in the shape of business, the municipality, schools and consumers, getting its act together and providing not just the infrastructure, but real content and connectivity - without any of the discount schemes offered by BT - in fact, using radio fixed access, not ADSL. I think that there is a real chance - especially in communities with the skill sets, resources, and imagination that exist in your constituency - of some trend-setting self-help!

Yours,

David

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