BT rules out spending pounds 15bn on cable network

Heritage minister's hopes for fibre- optic superhighway overtaken by events, says telecom giant
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British Telecom yesterday ruled out investing pounds 15bn to build a national information superhighway if the Government announced an early end to restrictions banning the phones giant from broadcasting entertainment down its local network.

The comments came after the new National Heritage Secretary, Chris Smith, insisted that Labour was as committed as ever to its controversial "deal" with BT, where it would consider an early end to the broadcasting ban if the company fulfilled its pledge to provide schools, hospitals and libraries with free high-capacity fibre-optic cable connections.

Mr Smith also said he expected BT to move to extend the information superhighway across the UK. In an interview earlier this week with The Independent he clearly signalled he anticipated BT developing "a broadband communications network throughout the country" going far beyond the original pledge to lay cables to schools. BT has previously claimed it would cost pounds 15bn to extend the superhighway to homes.

The company said yesterday it was no longer considering extending its fibre network beyond local telephone exchanges to homes, where low capacity copper wire was mostly used, claiming the issue had been transformed by new technology.

"The idea of suddenly laying fibre across the whole country, which would mean going back to the pounds 15bn investment concept, just ain't on any more. No one expects the development to be a single superhighway," said a spokesman.

Under the present rules BT is prevented from broadcasting live entertainment down its core phone network until at least 2001, when the ban would be reviewed. Labour's policy, modelled on recommendations from a Commons select committee report three years ago, said the ban could disappear from 1998, seven years after the start of each cable franchise.

Several cable operators were yesterday disappointed, though not surprised, by Mr Smith's latest overture. Steve Wagner, group managing director of NTL said he had already written to Mr Smith and hoped to be involved in the any discussions with BT. "Chris Smith's proposed talks would, I hope, also include members of the cable industry."

Other cable groups also doubted BT's commitment to extend its fibre network. Graham Wallace, chief executive of Cable & Wireless Communications, accused BT of wanting to destabilise the cable companies. "It's an enormous threat if BT were to talk to customers about delivering broadcast services but they haven't got close to doing that. They are making a lot of noise about it though."

Analysts said removing the broadcasting ban early could prejudice the cable company's investment plans. Mathew Horsman, from stockbrokers Henderson Crossthwaite, said the move would be ill-advised: "It would clearly be unfair to the cable operators who based their business plans on the assumption that BT would be kept out of the market until 2001. Any earlier date would jeopardise the build-out of cable."

BT can point with some justification to technological changes which have dramatically increased the amount of information it can send down its local copper wire network, a form of technology which dates back to the turn of the century. An interactive trial in Colchester and Ipswich last year, involving 2,500 homes, offered feature films and home shopping services by compressing television signals into digital information. The picture quality was similar to the VHS video standard.

Since the trial more advanced forms of digital compression have emerged, though BT would still need to spend billions of pounds to provide a national service. The investment would upgrade part of the local network, extending fibre to the street corner but leaving the final copper element undisturbed.