Analysis: ntl's 50MB broadband adventure

On 8 November 2006, ntl announced its launch of a commercial trial of a 50Mbit/s broadband service in the UK. The timing of such news is almost as interesting as the trial itself.

This service promises to break the apparent stalemate in the next generation access debate. How the industry moves forward from the unbundlers’ technology of choice, ADSL2+ and its 10-20Mbit/s capability, to the next level in broadband service provision has been the subject of much discussion.

ntl’s announcement also takes some of the shine off the recent headline of over 1 million LLU lines in the UK. Furthermore, Analysys expects BT to announce modifications to the pricing of its IPStream product (as used by most ISPs in the UK, including unbundlers outside their unbundled areas) when the LLU line total reaches 1.5 million lines in early 2007. Surely BT’s strategic decision must be influenced by its own TV over DSL service, BT Vision, due for soft launch in November of this year.

ntl’s press release does not mention what technology is being used to deliver 50Mbit/s, although it is likely that it will be VDSL2, especially as ntl has been trialling a pre-standardised DOCSIS3 100Mbit/s service in Asford, Kent, for some time. Given that 95% of ntl’s customers are within 1km of its fibre core network, VDSL2 would make a lot of sense. Nevertheless, all high-speed, copper-based broadband technologies are affected by line length, noise and interference, the last of which gets worse when penetration increases.

The only other player who could easily provide VDSL2 is BT through its access service division, BT Openreach. As yet, BT has not many any public announcements to suggest a large-scale VDSL2 deployment is imminent. Its strategy may now need to change.

For the unbundlers, who share much of their footprint with ntl, this news will come as a jolt. Until the regulatory issues surrounding wholesale VDSL services are resolved (for example, sub-loop unbundling backhaul), their future competitive positioning looks less clear than it did a week ago.

Many operators argue that broadband demand is not sufficient to justify large-scale capital investment programmes. However, ntl evidently sees some benefit in providing 50Mbit/s today, even though demand is nowhere near the 50Mbit/s level. Remember, it was only 3-4 years ago that tens of millions of pounds of private and public sector money was spent explaining the virtues of always-on 512 kbit/s `broadband’ services. Broadband access speeds are now typically 10-20 times this level for many users.

ntl will need to deal with complex issues if it decides to move ahead with a full-scale commercial roll-out. The ongoing integration of Telewest and Virgin Mobile is clearly a massive undertaking, as is churn management, but it also it begs the question about ntl’s longer-term plans for national coverage and the associated challenges marketing challenges of large geographical variations in their product offering.

Nevertheless, ntl has now seriously stepped up the game in the UK broadband market. BT and the unbundlers will need to think long and hard about their response.