Voipfone - The Future Of Communication

G Wiz

UK phone boxes in LondonBT announced this week that it would be replacing the Chinese Huawei spyware equipment in its 5G network with Nokia’s following the UK government’s policy about-turn. This operation being carried out right now in the US is called rip and replace, though in fact it’s better described as replace and rip, because, of course, you can’t just rip stuff out of your network without it collapsing in a heap. Telecommunications has always been a core part in any country’s defence system, so why this weakness has been identified so late in the day is a bit of a mystery.

I’m pleased for Nokia, a company I often have in my mind alongside Lego for some reason, but baffled why the UK – including BT – hasn’t built its own. Ericsson, is another 5G manufacturer from a Scandinavian country – is it the long, dark winter nights? If small countries like Finland and Sweden can produce this gear and find a world market why can’t we?

I read that Japan, a renowned electronics manufacturing country, was approached by BT to produce 5G equipment but was not finally chosen and it’s really strange that American firms are not also firmly in the picture. Why not? But also why not the UK at all? Mobile telephony and data markets are global and growing, why so little competition to supply the equipment for it?

Donkey’s years ago – ie the late 70s – BT or at the time the Post Office, did develop its own core telephone switching equipment, System X being the gear. Using System X, the UK became the first national telephone network to be fully digital but even so failed to develop a world market for it. It’s another puzzle because System X was remarkably good gear:

“Many of the system X exchanges installed during the 1980s are over 30 years old and still in use, giving an idea of their good reliability. The system was originally designed for 15 years of service, and as such has long exceeded its expectations but in recent years has started to deteriorate, with the old plastic shelf runners becoming brittle due to heat exposure. Many exchanges have never been turned off in their entire life, and will only have had process restarts for software upgrades every couple of years or so to give in excess of 99.9998% reliability.”


The worlds telephone networks are switching (sic) from switching to routing now of course; going all IP – finally catching up with Voipfone. And all those digital exchanges will be gone by 2025. But those routers aren’t designed and built by BT or the UK either. Why not?

Selling Air

Last month Ofcom announced that it’s holding a 5G spectrum auction in January 2021 ie, the government is raising taxes by selling air to mobile operators.

Back when I was in BT I was involved in the 3G spectrum auctions. We worked for months to build financial and bidding models. I remember the term “Monte Carlo Simulation” being used a lot. The models produced cash flow and profitability forecasts at all bid points under various scenarios; we knew exactly how much we were prepared to bid in every round. We had a sophisticated game plan and the models told us when to stop bidding.

After the first couple of rounds of bidding we threw all the models away as all bids were higher than our highest modelled bid we analysed. At that point the BT politicians got involved and we basically bid to win at any price. Vodafone had said that’s what they’d do right from the beginning, presumably attempting to pre-empt usurpers. The final winner was, of course, only the UK Treasury, it expected to bag about £5bn in total from 5 licences. In fact, from one licence alone it won almost £6bn – Vodafone; their strategy obviously failed. BT spent £4bn and the treasury landed £22.5bn in total. For air!

Many, if not all, of the losing bidders thought themselves lucky and some of the winners wondered what on earth they’d done. In BT’s case it was so deep in debt caused by that and its ludicrous international ventures that it had to sell its mobile network – Cellnet/O2 – only a year later, leaving it the only incumbent telco in the world with no mobile product.
And no 3G.

Just how much BT overpaid for 3G was shown 5 years later when it bought EE for £12.5bn. For this they got the 3G licence, the national built network, a profitable business and 24.5m new customers. Oh, and it got the latest 4G licence thrown in as a freebie.

This time around the mobile operators attempted to persuade Ofcom that they should allocate the spectrum ‘administratively’ ie prorate it to existing operators based on some fabricated mechanism to avoid another financial catastrophe, but Ofcom declined.

So it’s another bidding war. I don’t expect the same cavalier approach this time around as the world is not as frantic as then and maybe all concerned are a little wiser – there maybe something of the “we don’t want to hurt each other do we” about this one. Maybe a few meetings in motorway service stations…

The 3G auction was quite a thing; whilst trying to remember it, I found a really good history here. Written by a loser.


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