BT vows to spend extra £1bn bringing super-fast broadband to UK homes

Telecoms giant pledges that two-thirds of the country will have fibre-based internet access by 2015
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The Independent Online

Britain's digital economy was given a boost yesterday after BT pledged to bring high-speed broadband to two-thirds of households by 2015. Yet analysts said the move also reignited the debate over how to bring the service to the disenfranchised "final third".

The telecoms giant announced strong full-year results with pre-tax profits up 13 per cent to £1.8bn. Its chief executive Ian Livingston chose the moment to unveil a series of initiatives as part of a three-year plan for growth.

The most significant was its increase in fibre investment, to bring super-fast broadband to a wider audience. BT said the programme will "make the UK one of the best-connected countries in the world for next-generation broadband".

The definition of "super-fast broadband" is woolly, but it offers speeds that easily outstrip the Mb universal government guarantee as outlined in last year's Digital Britain report. The two largest providers of high-speed services to consumers are Virgin Media, which offers 50Mb, while BT provides customers with up to 40Mb.

Last year, BT announced that it was to spend £1.5bn on its fibre-optic network, which would give 40 per cent of UK homes access to ultra-fast broadband by 2012. Four million homes are due to have access to BT Infinity (its super-fast service), which was launched in January, by the end of this year.

Yesterday, the group confirmed that it was to spend an additional £1bn on expanding that reach to 66 per cent of the UK by 2015. It will call on 3,000 employees to work on the roll-out. Mr Livingston said BT's new investment "is one of the largest in the world that doesn't rely on public sector funding and where the network is open to all service providers on an equal basis".

BT has slashed its costs in the past two years, in order to free up enough money for the project. It said the total £2.5bn investment will be managed within the company's current spending, although analysts from HSBC and Credit Suisse have both predicted that the costs will come in higher.

Virgin Media's fibre-optic network covers 50 per cent of the country's homes and is being expanded. The company is looking at initiatives such as running the cables over telegraph poles in areas where it is easier than digging up roads. Virgin is set to start introducing speeds of 100Mb by the end of the year and is trialling speeds that are even faster.

Matt Yardley, a partner at research group Analysys Mason, said: "Virgin's roll-out of super-fast broadband has had a huge impact on how BT sees the market developing. Just two years ago there was no talk of its large-scale fibre deployment, and now it is going further than expected."

BT's network will be open, which will allow rivals to wholesale the service to offer to clients. "Such competition is beneficial for consumers and businesses as it helps to ensure that prices are kept as low as possible," BT said.

The network will cover and extend beyond the same area as Virgin. The cable operator covers mainly metropolitan areas, while BT, with its 66 per cent coverage, will move it "more into suburbia and beyond", Mr Yardley said.

The "final third" of the population live in little villages in the most rural areas of Britain. "Geography is the big driver. Given the distribution of the population in the UK, you can cover a fair amount, although after 66 per cent of the population, it starts getting really expensive," Mr Yardley said.

"This coverage limit highlights the problem of bringing fibre to the final third of the country. There is probably a political aspect here, as something needs to be done. This announcement should reenergise the debate," he added.

BT's plan to extend the programme to the final third suffered after a controversial 50p-a-month tax on phone lines – to help fund the plan – was shelved. However, Mr Livingston is hoping for support to bring high-speed internet to rural areas. Jeremy Hunt, the new minister for the Department of Culture, Media and Sport, previously backing a move to top-slice the license fee.

The increased fibre-optic network roll-out was just one part of the three-year strategy, which also included expansion plans for television and BT's global services division. Investors reacted well to the plans and results, with shares closing up nearly 10 per cent.

"The full-year results were well above market expectations," Mr Livingston said yesterday, adding: "We've got a hell of a lot more to do, we know that, but we're building stronger financials."

BT's next big things

* The telecoms group is looking to reinvent the home phone, with the launch of a device that is somewhere in between an iPad and an iPhone "for the kitchen," according to chief executive Ian Livingston. BT is likely to sell the gadget as part of a package when they are made available later this year. "The house phone hasn't really developed in recent years," BT Retail head Gavin Patterson said. "There's a lot that can be done with it."

* BT is moving into video games after taking a stake in OnLive, a US cloud computing gaming business. The partnership will allow users to download games and play them without the need for a console. The move will put it in competition with game retailers and maybe even the companies that make the consoles such as Nintendo and Sony. OnLive launches in the US this summer and will come to the UK during BT's financial year. The games will be streamed instantly over the internet.