BT has moved to deny reports that its roll out of a next-generation fibre optic network has been put at risk by the economic downturn.
Last week reports surfaced claiming that BT shareholders have been lobbying the company to scale down its plans to roll out fibre-optic broadband on the grounds that it is an unjustifiable expense in the current financial climate.
In an interview with the Guardian, Ian Livingstone, chief executive officer of the telecommunications giant, revealed that pressure has been put on him by shareholders to maintain the company’s cash reserves, rather than press ahead with its £1.5 billion plan to roll out the service to ten million UK households.
However, a spokesman for the company has now claimed that although it would be wrong to assert that the scheme will be “completely unaffected by the recession” the project is not in jeopardy.
He told silicon.com: "The project isn't at risk because of the recession. There's nothing that is affecting that investment decision at this moment."
Mr Livingstone had also claimed that the telecommunications regulator must allow BT to benefit financially to a significant degree in order to justify expenditure on the roll-out. This gambit is in keeping with the firm’s lobbying of Ofcom to scrap restrictions on the prices BT charges to rival operators for wholesale access to its network.
“I personally believe if it is the right thing to do as a 20-year decision, it is the right thing to do. But we need to have the environment in which our shareholders feel there is a good chance of us making a return. If we cannot have that environment this is not the time,” he said.
The funding which had been committed to by BT thus far was earmarked for connecting 10 million homes with fibre-optic cable by 2012. This equates to around 40 per cent of the population. The company is presently embarking on a pilot scheme in Ebbsfleet in Kent, which will see 10,000 homes benefitting from next-generation connection speeds.
News of developments comes as BT’s CEO recently announced that he is planning to cut the company’s workforce by 10,000 over the course of 2008 and 2009. The job losses are a key component of Mr Livingstone’s stated aim to improve the company’s profit margins through cost-cutting measures.
A nationwide transition from the current copper wiring system to fibre-optic cables would boost current maximum connection speeds to 100Mbps, with the total cost of implementing the change expected to come in at around £29 billion.
Fears have been raised that failure to update the UK network could see businesses at a disadvantage when competing for global market share. A delay in roll-out could additionally impact heavily on the broadband service that the public can expect to receive, and in particular limit access to bandwidth-hungry applications such as live video streaming.
Dana Dunne, the chief executive of AOL Europe, echoed these fears in an interview with the Times, wherein he warned that the UK is at risk of having a second-class broadband network when compared with France and Japan.
Mr Dunne said: “Investment could take several years to reach the consumer. In the meantime, UK users will find they are not able to enjoy the highest quantity and quality of online video.”
Virgin Media has made much of its fibre-optic network in its advertising campaigns as it attempts to steal a march on its ISP rivals. The company is planning to roll out 50Mbps broadband to all its customers by the middle of 2009 and has outlined proposals to boost this further.