In the SME sector we are seeing unprecedented demand for faster, more reliable connectivity.
My colleagues and I have spent a lot of time recently talking and writing about Ethernet, the challenges and opportunities. It is absolutely true that SMEs’ appetite for more and better quality bandwidth is insatiable. It stands to reason that when an organisation starts to consume more and more mission-critical services from the cloud that they will be more receptive to spending more on connecting to the cloud.
The inherent commercial weakness that EFM faces is its reliance on multiple copper pairs. The more bandwidth you want the more copper pairs you need. This has a consequential increase in carrier capital expenditure due to each copper pair needing to be plugged into equipment both in the exchange and on the customer premises. There are also significant installation and rental costs from Openreach that scale up linearly with the number of pairs required for a customer. There is a finite amount of copper pairs in any given area, with not much of a business case for investing in delivering more copper capacity.
From BT Openreach’s perspective the commercial model for FTTC is more compelling. A single fibre connects the cabinet with the exchange and this can serve hundreds of nearby premises with a single copper pair rather than the multiple pairs needed for EFM. Also because of the shorter copper run the average speeds achieved by FTTC are better than those over EFM.
Wherever a fibred cabinet is within reach the customer can choose to connect either to the carrier’s broadband network (BT call Infinity) or to their leased line Ethernet network (less elegantly named EoFTTC). However because BT Openreach only make money out of the tail they are bound to target residential areas first where they can go for volume. Also BT want to protect their legacy base of business leased line customers and so they deliberately avoid ‘lighting up’ cabinets in business areas. Consequently only around 40% of SMEs can get FTTC.
The good news is that due to the need for speed from SMEs there are many new business networks available and some are now building out to be closer to their businesses customers. Most of the 400,000 UK SMEs are still using ADSL and there has never been a better time for the channel to sell their customers connectivity.
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