BT Eyes Fibre Lines As Copper Prices Soar
By Aiko Wakao | 12 Apr 2007
[FAC: See Precious metal: Where is copper market headed tinyurl.com , for an earlier story I posted on the subject; thanks go to Dirk van der Woude for the pointer to this story. ]
business.scotsman.com
TOKYO (Reuters) - BT Group's network unit said on Thursday fibre-based infrastructure could become a more attractive alternative to conventional metal wires because of rising copper prices.
"The most significant change in the last 12 months has been the price of copper on the world market," Bob Cowie, chief engineer of BT's Openreach unit told reporters in Tokyo. "It genuinely is now a cheaper option for new sites to build fibre networks from scratch" than copper-based lines.
Rising copper futures, which jumped to a new seven-month high in London on Thursday, may become a major concern for BT, which manages about 120 million km of copper access network, and only 2 million km of optical fibre, which can provide faster Internet access.
Copper for delivery in three months on the London Metal Exchange touched $7,970 a tonne, the highest since early September, before easing to $7,845 by 11:43 a.m. (British Time), against its Wednesday close of $7,830.
But a push towards fibre may pose a challenge to Openreach, whose products geared to fibre networks require regulatory approval.
Openreach was set up by BT as part of a 2005 deal with regulators to grant rivals equal access to its network in a bid to foster competition. The unit's assets are worth 8 billion pounds, and it expects 4 billion pounds in revenue, Cowie said.
"The U.K. consumers were the real big winners, which is reflected in more aggressive pricing, stable network, less churn and higher value-added services" since the launch of Openreach, said Richard Thorpe, the head of industry analysis at the unit.
Increased competition is also accelerating the pace of consolidation in Britain's telecom market.
"It's not a stable market," Cowie told Reuters. "I think the number of significant players will come down to a single-digit figure, and the rest will be like a long-tail of small, niche players. At the moment, there is a huge over capacity."
WORLD GOING FIBRE?
The roll-out of fibre in the United Kingdom has lagged behind markets such as the United States and Japan because of a lack of incentive on the part of the operators to spend billions of dollars on a new network.
"If you look at North America, there's considerable tap from cable companies, Cowie said. "In other countries, you'd find a favourable regulatory regime, where the creation of fibre networks have been backed by the government as a strategic investment."
Japan's former phone monopoly, Nippon Telegraph & Telephone Corp. <9432.T>, is spending 5 trillion yen ($41.88 billion) to link 30 million users to its nationwide fibre network by 2010.
In France, operators like Neuf Cegetel and Iliad have set out large-scale investment plans for fibre to the home (FTTH). But investors remain worried about the impact on the firms' cashflow and prospects of a decent return.
Cowie said any decision to build a fibre network in the United Kingdom would have to be done purely on commercial terms.
"We find it extremely difficult to understand what those commercial terms are going to be," he said.
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