In the Oxfordshire village where I live there is no broadband service. One of the local residents is so incensed by this situation he has started a petition - Web-based, of course - with the aim of demonstrating that there is sufficient local demand for BT to add DSL equipment to the local exchange. This is an excellent idea and I wish him well, but it has left me pondering on his chances of success.
BT has made it plain that further expansion of its broadband network will be decided on the strength of the business case for each separate exchange, unless it receives additional funding from government or businesses.
Reading BT's corporate mind is never easy but, these days, financial considerations are more important than they were, so we may be able to make some forecasts by thinking in the same way.
Let's take our village as a typical case. The telephone exchange is centrally situated and covers three separate parishes. Almost all of the 1,500 local households would be in ADSL range. There are also a few traditional business customers and quite a lot of people running businesses from home, all of whom would jump at ADSL. The number of names on the petition has reached 50 so far.
BT does not say how much it costs to install ADSL in an exchange but a figure of about £100,000 has been mentioned. If 50 subscribers signed up to basic ADSL there would be a revenue stream of £8,700 a year to BT Wholesale. That represents about a 12-year breakeven point - ignoring installation fees and discounted cash flow, and such - and a very poor business case.
If we say that a three-year breakeven point would be acceptable to BT, then we need about 200 subscribers, or 12 percent of households to sign up for ADSL, which is entirely plausible during the lifetime of the equipment.
If this reasoning is correct, our size of exchange would be a borderline case for broadband.
BT would have to install at least one DSL access multiplexer (DSLAM) and an ATM switch to connect the exchange to the backbone. DSLAMs can handle up to about 200 subscribers per shelf and consist of modular units, each handling about a dozen lines. Once the initial investment is made, adding more lines is much cheaper. DSLAMs are now available that cost less and handle fewer lines; these could make the business case acceptable for exchanges even smaller than ours.
All this means that BT could add many more exchanges to its list and still make money from ADSL, albeit at diminishing margins. The economies of scale for newer equipment could extend the case to even the smallest exchanges.
Perhaps my neighbour's petition will succeed, after all. I hope so.
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