BT to put Next-Generation Network on Hold

The Guardian has reported an interview with BT Chief Executive Ian Livingston in which it claims the economic recession has called into question BT’s plans to spend £1.5bn bringing the next generation of super-fast broadband services to 10m British households within the next four years.

The reports says that Livingston admitted last week that he had been contacted by company shareholders who believed BT would be better off holding onto its cash, instead of spending it installing fibre-optic networks across the country.

Livingston said the recession meant that regulator Ofcom must allow BT to make a return on its investment in the new service — which will see broadband speeds increase to up to 40 megabits a second, more than twice the theoretical maximum of BT’s current network — or it will not be economic to carry 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’,” said Livingston.

In July, BT announced it would spend £1.5bn putting fibre to the streetside cabinets that connect with the copper phone lines that go into 10m UK homes. At a time when the success of the BBC iPlayer is putting pressure on internet service providers (ISPs), fibre to the cabinet could allow families to watch high-definition movies over the web and play bandwidth-hungry interactive online games at the same time.

BT said at the time that the plan would go ahead only if Ofcom agreed to allow the company to make a proper return when it lets other ISPs use this new network.

Ofcom and the government’s adviser on next generation access networks, former Cable & Wireless boss Francesco Caio, have since said that industry, not the government, will have to pick up the tag for the installation of super-fast broadband networks. Ofcom is still deciding what the regulatory framework around next-generation networks will look like.

Livingston, who announced the £1.5bn investment as one of his first moves when he took over, said that if the economics were right for the long term then he would still invest.

“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.”

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