BT's recent announcement to provide fibre to the home for around 10m UK homes by 2012 is a necessity, despite concerns over return on investment, according to analyst firm Point Topic.
The researchers have countered other 'predictable' city and analyst comment, which has been 'sceptical' and 'damning about its modest objectives'.
"I believe investment Next Generation Access (NGA) is essential for BT and it should generate a good return for decades to come," said Tim Johnson, chief analyst at Point Topic.
"On the other hand, if BT doesn't renew its local loop infrastructure its existing copper network will be worth only scrap value within 10 years."
Johnson reckons that, while he understands BT's focus on consumer broadband as the driver for NGA, it is misleading as an upgraded network will provide much wider benefits and revenues than just better broadband services.
"Fibre in the local loop, combined with BT’s 21CN [twenty-first century network] project, allows BT to provide a complete IP [internet protocol]-based telecoms environment to the end user. Customers should get more flexibility for less cost and dreams like seamless fixed-mobile convergence will become reality," says Johnson.
Considering return on investment, Johnson reckons that "by offering new and better services, saving on operating costs and having a relatively low capital cost to recover, BT stands to make good margins on this first phase of its next-generation investment."
Johnson points out that if BT can make its target of covering 40 per cent of the homes in the UK for £1.5bn, the cost would be approximately £150 per household.
"We estimate they would need to earn only about £3 per month per household for a good return," he said.
"Of course, even £3 a month would be a heavy extra burden to put on the price of broadband services. But the £3 is for the partial replacement of what broadband customers are already buying, not for something additional."
Furthermore, BT will reap a host of other benefits and cost savings to help offset these costs, therefore the investment shouldn't have to increase the cost of broadband overall and people will get a lot more for their money.
Although there are regulatory concerns, these seem to be based not so much on current regulation, but rather on the fear that the rules will be changed to undermine the business case for fibre.
Johnson reckons that BT is using the call for faster broadband as a way of ensuring NGA roll out is not hampered by excessive legislation, it will be just like any other cycle of renewal in a utility network.
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