BT recently announced a £340m exceptional charge for BT Global Services, its underperforming corporate IT business, which resulted in it releasing its second profit warning in 3 months.
As a result BT shares are now at a level last seen at its flotation in 1984 and there are questions as to whether it will cut its dividend payment this year.
So time are clearly exceptionally tough for BT and shareholders are now putting pressure on BT not to commit £1.5bn to invest in a next-generation, fibre-optic broadband network that would connect 40% of UK homes and could deliver ultra fast broadband services of up to 100 Mb/sec.
The company has also made it clear to Lord Carter, the communications minister, that if he wants broadband access for all within the next three years, BT cannot now be expected to shoulder the entire cost itself.
This could be very bad news for UK broadband consumers, and comes hot on the heels of Ofcom’s latest research which shows that UK consumers receive an average of only 3.5Mb/sec broadband speed (relative to an average of over 90 Mb/sec in Japan for example).
Indeed the push for the provision of ultra-fast broadband may be left to Virgin Media. It is currently the only UK broadband supplier capable of offering ultra-fast broadband services on a large scale, but its ultra fast 50 Mb/s broadband service is only available to 50% of UK homes.
Other solutions to providing widely available ultra-fast broadband are also possible, via DSL. Be Broadband recently completed a limited trial using a “bonding” technology which effectively combines two copper telephone lines to double the available broadband speed to up to 48 Mb/sec (though on average people received between 30 and 40 Mb/sec).
But we think that if you are to lay a foundation for broadband service provision for the next 20 or so years, then a fibre to the cabinet (FTTC) solution has huge advantages over a DSL enhanced solution. This is certainly the route that the Aussies have taken for example, as the Australian government, recently pledged to put A$4.7bn (£2.2bn) into the creation of a fibre optic network.