Expensive Reality of UK FTTP on Demand Broadband Hits Home

Customers who last year delayed ordering one of Openreach’s (BT) up to 1000Mbps capable FTTP on Demand (FoD) ultrafast broadband products, perhaps in the hope that the new UK wholesale ISP costs might result in a price cut, have been left surprised by the large build quotes.

The FoD or FTTPoD service is designed to be requested (‘on demand‘) in slower FTTC capable areas where Openreach’s pure fibre optic cables usually only go so far as your local street cabinet. Essentially it enables you to get an ultrafast Fibre-to-the-Premises (FTTP) line built right to your property (e.g. business or home), even if FTTP wasn’t planned for the area, albeit with the customer having to pay the significant build costs involved.

It’s important to point out that FoD is a completely different ball game to a native FTTP deployment. In a native rollout Openreach cover the cost of deploying their fibre directly to your property as part of their self-funded or state aid supported rollout and then the property owner only needs to pay a small setup fee to get connected (i.e. they don’t have to cover the civil engineering costs).

The issue of FoD pricing has always been a contentious one due to the high costs involved with building such a network and the fact that it’s targeted more at businesses (SME) than homes, although residential people with very deep pockets could still order it; Openreach’s previous price hike in May 2014 appeared to put the service increasingly out of reach as an option for domestic use (here).

Today very few ISPs offer the service (e.g. Cerberus Networks, Syscomm, Amvia, Specrum Internet [South Wales] and FluidOne), not least because it sits so close to leased line / Ethernet pricing and yet lacks some of the advantages of those products. The 36 month contract terms were also a turn-off for some.

The New Model (2018)

Openreach’s decision to overhaul FoD pricing at the end of 2017 generated a rush of optimism (here) by introducing cheaper rentals and connection fees, as well as a 12 month contract term, support for faster FTTP tiers and withdrawal of the distance-based charging method (no more cost per metre approach). The latter was replaced by a FoD build charge that would be established through a planning/survey phase.

In addition, Openreach pledged to reduce the estimated build charge for any additional premises that would be passed by its deployment (especially if those premises agreed to aggregate their orders to help bring the overall deployment cost down). Suffice to say that the initial reactions were positive and many people liked the simplified approach.

Any quotes would naturally still be subject to survey, with Openreach providing an initial, non-binding estimate of the level of build costs. Upon confirmation by the ISP, they would then proceed with the planning phase, and establish a final firm price which is valid for a period of 30 days. At this stage, if the ISP did not want to proceed then it is liable to pay the survey and design fee of £245.14.

At the time we warned that there was still a big question mark over the new build charge, which also made it harder for people to do their own estimate of potential costs. Similarly the idea of aggregating multiple orders to help bring the cost down tends to be easy to propose but rather more complex for people to implement themselves (if doing this for homes then a Community Fibre Partnership might be better).

Revised Quotes Head Skywards

The new pricing was finally introduced on 1st February 2018 (details) and many of those who had delayed their orders from last year (i.e. to see how it would impact their costs – both on the build and in terms of much lower rental) were suddenly given a shock. Over the past month we’ve received a number of emails about this and TBB’s Forum also carries some public examples.

Example Old vs New Build Costs (Estimated)

OLD: £2,000.00 +vat [Band B] in Merseyside
NEW: £9,800.00

OLD: £1,800 [Band B] in Brighton
NEW: £13,000+

OLD: £2,750
NEW: £18,100

OLD: £7,675 [Band G]
NEW: £13,700

NOTE: Only a Site Survey can determine if there may be any additional ECC’s (Excess Construction Charges) above the old charge band model. Likewise the cost under the new system might go up or down depending upon whether the customer chooses to proceed and take a full engineering survey (i.e. the first desktop survey is only a VERY rough estimate).

At the time of writing we haven’t seen anybody with an install quote of more than around £39K and it’s also very important to factor in the impact of cheaper service rental, which isn’t depicted above. For example, prior to the change FluidOne would charge a little over £300 +vat per month for one of their FoD tiers and after the change this dropped to about £100 (a sizeable saving when you also consider the old 36 vs 12 month terms).

However the rental drop is less dramatic with other ISPs. For example, Cerberus went from around £165 to £100 on the same tier (a big difference but nothing like the drop seen at FluidOne). On top of that the quotes included how many premises would be passed by FTTP as part of the FoD build, which added a cost reduction and if any of those premises joined the order (aggregating) then each would attract a £700 discount.

A Spokesperson for Cerberus Networks said:

“As people could only see the published Openreach pricing for the fixed price elements, the variable build charges were still an open question at the time of the announcement and resulted in people only looking at the recurring costs. This has perhaps given people an erroneous impression that the service was going to be significantly cheaper.

Although the overall build prices have increased, we do see considerable benefit for customers being able to group orders together and share costs. This is something that wasn’t possible under the previous system. With the forthcoming expansion of the DCMS Gigabit Voucher Scheme, for which FoD is a qualifying service, we also see considerable scope for businesses to be able to pool their funding to build out FTTP infrastructure and access ultrafast broadband rather than use the scheme to subsidise expensive leased line services.

We have taken orders under the new system and look forward to comparing the initial build estimates with the confirmed costs once the surveys take place. Where customers are seeing estimated build costs that don’t match their understanding of the local network infrastructure, we would encourage them to place an order to trigger a full Openreach survey. Desk surveys are conducted from network records and, in some cases, may not reflect recent changes.”

A few of those receiving the new quotes have also expressed surprise for other reasons. In a couple of cases people claimed that the cost should be far lower as they believed the local fibre aggregation node was only 200-300 metres from their property. Unfortunately ISPs can’t check this unless the customer proceeds to take a full survey at cost. Some people may also be confusing FTTC cabinets with agg nodes.

For it’s part Openreach informed us that it was always going to be the case that if they made rentals very cheap (like FTTP) and embed a discount (£700) on the build charge upfront, then the build charge would need to cover what was a distance based charge + higher rentals + ECCs (excess construction charge) from before.

A spokesperson for Openreach told ISPreview.co.uk:

“We do have some work to do on getting the estimates to be closer to the expected quote, as there are a number of situations where we know this generates high estimates. As a rule, above a certain limit, we no longer report the estimate as we believe a survey is needed.

The reality is that volumes have been stable on FOD for now – although it’s still early days as a cycle on FoD is long.”

We’ve long felt that Openreach may have underestimated the original costs for delivering FoD and their initial change in 2014 seemed to be an attempt to fix that. The latest refresh could perhaps be considered part of the same issue, albeit one that is very much rebalancing the costs around a simplified and more flexible model.

In theory the cheaper rental, Gigabit voucher support and 12 month contract term should eventually make up for the hefty installation costs (after 12 months customers could switch to an even cheaper FTTP ISP), although the question of how long you’d have to wait for those costs to balance out vs the old model will obviously depend upon the size of your revised build quote.

Naturally a huge build cost will always run the risk of discouraging adopters or perhaps even redirecting them back toward the realm of high capacity Ethernet leased lines, depending upon your requirements. Openreach would of course be more than happy to sell you a higher quality Ethernet connection.

In the meantime FoD continues to remain an extremely niche product and a strong reminder that building commercial fibre optic networks, on-demand or not, is rarely cheap.