Searching for the £100k VDSL2 Cabinet And £Million(s) investment per exchange. As per Openreach statement on rural Next Generation Access costs on Strike Up Broadband BBC Radio 4 – Dec 13th/16th 2012. Mike Kiely The Bit Commons mkiely@thebitcomms.com Date 27/03/2013

Scope, Purpose and Intent Seeking to provide communities and Local Authority NGA roll out managers details on the incremental costs of an FTTC rollout from publicly sourced data, costs derived from first principles and contributions from NGA suppliers . Encourage more openness and transparency on FTTC costs so UK public investment of c£1.4bn for rural areas can bring NGA services deep into the last 10% of premises. Seek peer review and encourage others to develop independently sourced costs, and contribute detail to assist state aid auditors. Put a body of evidence in a public space which can be added too and developed by those benchmarking costs and auditing state aid payments. The Numbers are not by their nature definitive, and exclude exceptional build costs for power, re-arranging copper and new duct. They are a guide only and are set out so they can be used and improved. This presentation is not saying there are not unique instances where £100k would be spent on a Cabinet/path, but they look to be the exception rather than the norm. Evidence may emerge to prove this assertion incorrect, at which time I will be happy to correct. Above all this is part of on-going plea for transparency in costs, so those with a passion for connectivity, can lobby for Government policy changes supporting additional investment in fibre transition activity. To lobby effectively, the rural programme must visibly deliver value for money. This is less than clear from the publicly available data as of March 2013 . It is appreciated that BT will have wholesale obligations to Fujitsu on the BDUK Framework so has some need to be cautious on these matters. Mike Kiely, Founder, The Bit Commons, March 2013. mkiely@thebitcommons.com Date 27/03/2013

Incremental Costs Versus Models based on Forward Looking Economic Costs This analysis sticks to incremental costs for; Simplicity State aid is dependent on calculations based on incremental capital. BT offer of ‘up to £1bn’ to match the rural investment for the final third does not appear to be a contractual offer. If it was you could minus c£125 (£1bn/8m premises) per premise past in a forward looking economic cost model to calculate the additional aid needed. This analysis while confidential could be viewed in the same manner US communities can engage with the Connect America Cost Model – (CQBAT for the Broadband element), managed by the FCC, where the contribution of the access companies is part of the aid calculation. In the UK the contractual announcements the question must be asked to who is gap funding whom? Without BT’s contractual commitment to invest it looks like BT is gap funding the government. If it is the Governments model being gap funded, then there is no particular reason for it not to be published and open to public scrutiny and value for money assessments. Date 27/03/2013

The components under Review source: BT presentation – no copyright. Date 27/03/2013

GEA - FTTC architecture -Source BT presentation – no copyright VDSL2 DSLAM Hand-Over Node PCP End User Premises GEA Data Port NTE 5 & SSFP VDSL2 modem CP1 HO Head End CPn Direct fibre Multiple GigE links Baseband Voice & Legacy Services 240Vac Existing Copper E-side Network from DLE D-Side Copper GEA Product Voice and Legacy services supplied from the exchange. Broadband product provided as GEA over FTTCab Date 27/03/2013

Network Engineering Journey (NEJ) - a key enabler for NGA Plan & Build Benefit examples: Planning efficiency Strategic and Detailed Planning process benefits Better Quality FTTC & FTTP network plans Engineering support e.g. reduced time for Line Loss calculations Reduced network costs Better cost estimates and reduced recording costs Improved support to targeted marketing Trouble-To-Resolve (T2R) benefit enablers P&B Activities Release 2 Physically Plan Racks, Frames and cable connectivity Publish planned network to logical inventory Update physical inventory with as-built changes P&B CTH, connectivity between CTH & L2S VLAN Creation of Management VLANs Cease of management VLANs Automate SVLAN creation VLAN connectivity between CTH & L2S, CTH & DSLAM Routing SVLAN over L2S and OLT Reserve SVLAN range for T&D operation Record Data SVLAN EMS and NEs Allocate NE to EMS Commission L2S, OLT & DSLAM Record power details at DSLAM Generate DSLAM Identifier and Cabinet Id Store DSLAM address location Reconciliation LAG Build and Manage LAGs LAG attributes Automate LAG Configuration Job Packs Compile and Issue Job packs Monitor job pack return Produce Bill of materials Benefit examples: Strategic planning efficiency (eg from NGA network design automation) Detailed planning efficiency (eg fewer hand-offs in process) Better FTTC & FTTP network plans (eg from use of more accurate records) Reduced recording costs (eg single recording system & automation) Reduced network costs (eg increased Met from Stock) Reduced time for Line Loss calculations (eg automation & more accurate record) Improved sales due to targeted marketing (eg use of inventory intelligence) Other enablers: NGA programme management benefits (eg more accurate cost estimates) Planning quality benefits (eg enforcement of NGA standards and policy) Planning process benefits (eg more effective field, planning, and recording) Centralised & structured evidence of investment (eg for RDAs and Ofcom) Comprehensive and centralised record (eg asset valuation, record visibility) Added : BT has a slick process and efficient Supply chain. Commercial roll out – 18 months ahead Comfortably under the £2.5bn budget. Source BT Slide –no copyright marking Date 27/03/2013 6

Cabinet arrival Huawei Smart AxM56xx ECI Hi-FOCuS 5 Date 27/03/2013

The Plynth Quotes ranging from £400 - £1200 Diary of FTTC installation – points to combined three hours work The cabinet was installed in 1 hour 9 minutes using Polybase Polylid has now been approved by Openreach for use on its network and is currently being installed nationally on the NGA, (Next Generation Access), programme – providing faster broadband across the UK. Date 27/03/2013

The Cabinet Xx48 Port cards - 1 port per connected customer (Ikanos or Broadcom (?)chip sets - VDSL) MSAN –electronics and 1Gbps (could be 10Gbps) connectivity back to handover point. IDC-Blocks to terminate copper. Fibre Termination Battery Power Supply Chassis with GPS locator In gathering data from VDSL suppliers and small operators, Calix/Zhone/Keymile/ECI/Huawei/Zylex Low volume estimate £12k-£16k High Volume estimate <£8k based on compilation of quotes for 600 units. Nation provider could negotiate <£6k Date 27/03/2013

Power Biggest variable, cost £300 (EON) to £3,000k but typically seeing £800. Exceptions at £25k cab be managed on that basis. Date 27/03/2013

The Handover Point c12-14 in county of 100 exchanges. Up to c25Km from cabinets In typical rural rollout estimated 45 cabinets glassing through native exchange through to handover point. Racking for fibre distribution to/from Metro nodes and to/from VDSL2 Street Cabinets. Layer 2 Ethernet Switches for layer 2 capability to VDSL cabs and routing back to Metro node. Optical Line termination (OLT) and WDM capability assumed to be at Metro node. Date 27/03/2013

Handover Point – common costs Status: for peer review Derived from EAD pricing /SLU pricing. SLU Costs in Rural areas average over c30 contractual quotes. Slu Providers using BT Wholesale prices for single Layer 2 HO service Estimated incremental BT Layer 2 costs to support 45 cabs Estimated BT incremental cost per VDSL Cabinet for illustrative purposes Handover Costs Capital (L2 , OLT ,routing and racking) £7,732 £20,876 £463.92 Connection Set UP £1,586.00 £4,282 £95.16 Enabling connectivity to Metro Node, includes some ECCs. £2,500.00 £6,750 £150.00 Sub Total £11,818 £31,909 £709 Assistance needed in reconciling to the £million(s) costs per exchange. Date 27/03/2013

Handover Point to VDSL Cabinet quantities BT Metro Node BT 21CN Exists In most cases fibre exists Avge 2.3Km/1.2km Significant numbers exist From commercial roll out. HO Point Exchange VDSL x9 In many cases fibre path exists Up to c20km fibre path 10 Hopa + 450 cabinets 780km Fibre paths Ratios average out so estimates are possible Exchange x4 Glassing Through Local exchanges. Avge 2.3/1.2Km VDSL Cabs x9 Date 27/03/2013

Openreach fibre network (Wales) source: BT Wales slide deck – no copyright marking. Date 27/03/2013

Connectivity to VDSL Cabinet/PCP HOP Exchange VDSL Derived using SLU costs PCP Handover to VDSL Cabinet/PCP SLU Provider Est. for BT Incremental Connectivity provision £1,950.00 £585.00 Extra construction charges £3,277.00 £983.10 PCP to Cab - connections £3,120.00 £936.00 Sub total £8,347.00 £2,504.10 Other checks BT NI reported about £4k worth of labour for each cab installed, this included all planning and sales time. (120k hours applied cost to 1100 cabinets) Cable/fibre and laying in existing duct has been reported at £1.20m at £1,500 per cabinet installed. This includes BT ‘up to’ investment. These estimates would include an allowance for duct repair, but not new duct. PCP re-shelling included where needed but not copper re-arrangement for new PCP No aluminium replacement costs included. Date 27/03/2013

What should the benchmark subsidy be for single Cabinet Fibre path What should the benchmark subsidy be for single Cabinet Fibre path? Subject to Peer Review. SLU Costs in Rural Areas anomyised over c50 contractual quotes. Slu Providers using BT Wholesale prices for single Layer 2 HO service Estimated incremental BT Layer 2 costs to support 45 cabs Estimated BT incremental cost per VDSL Cabinet for illustrative purposes Handover Costs Capital (L2 and racking) £7,732 £20,876 £463.92 Connection Set UP £1,586.00 £4,282 £95.16 Enabling connectivity to Metro Node, includes some ECCs. £2,500.00 £6,750 £150.00 Sub Total £11,818 £31,909 £709 Handover to VDSL Cabinet/PCP SLU Provider Est. for BT Incremental Connectivity provision £1,950.00 £585.00 Extra construction charges £3,277.00 £983.10 PCP to Cab - connections £3,120.00 £936.00 Sub total £8,347.00 £2,504.10 Cabinet Planning £350.00 Plynth £1,200.00 £400.00 Power £1,000.00 DSLAM/Chassis/battery £12,000.00 £5,320.00 Total cost for SLU Operator £34,715.00 Estimated Incremental Cost per cabinet and path for BT £10,283.18 BT Management fee 20% £2,056.64 Total cost £12,339.82 BT investment per home connected Y1+Y2 £100.00 £2,000.00 Example subsidy payable to BT per path and Cabinet install £10,339.82 Subsidy paid if 100 customers attached to PCP £103.40 Subsidy paid if 200 customers attached to PCP £51.70 Date 27/03/2013

Conclusion for peer review! For reaching 90%-95% it is difficult to reconcile the idea of a £100k VDSL path/cab with itemised incremental costs. Excluding exceptional costs point to < £15k of incremental costs which includes a contribution to establishing Handover Point costs, and completing duct repairs and linking to PCP cabinets. Most rural exchanges will be glassed through on route to handover point, little marginal costs, although very small exchanges will need access lines re-arranged for VDSL install. Where substantial costs emerge then comparison with Fixed Wireless access would be conducted on a case by case example. If verified, then this should leave LA substantial headroom to begin FTTP transition work, helping to reduce the long term costs of the access network. End. Date 27/03/2013