Openreach is to press ahead with plans to connect 20 million UK properties to full fibre networks by the end of the decade after an Ofcom review indicated it would not impose price caps on its fastest wholesale products for a decade.
The vast majority of the UK’s broadband infrastructure is delivered by fibre the cabinet (FTTC) technology that uses copper for the final few metres of a connection, but the industry and the government are now shifting towards a ‘fibre-by-default’ approach.
Openreach had said it was willing to make the necessary investment in full fibre infrastructure but only if there was a favourable regulatory environment that allowed it to make a fair return.
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Ofcom fibre regulation
The need for such a framework has been increased by the government’s decision to reduce its target of 100% coverage to 85% and to only make a fifth of the earmarked £5 billion public funding available during this parliament.
As the dominant player in the wholesale FTTC market, Openreach is subject to price controls that regulate the prices it can charge third parties such as Sky and TalkTalk. This is designed to promote competition and therefore adoption of superfast broadband.
Ofcom’s Wholesale Fixed Telecoms Market Review states that although entry-level broadband products will continue to be subject to price caps, other services will not be. The hope is that this will protect consumers from high charges for connectivity while also improving the long term investment case.
The new regulations also state that once Openreach has connected an area to full fibre, it will be able to switch off the existing copper network to reduce costs.
“Over the past year, being connected has never mattered more. But millions of homes are still using the copper lines that were first laid over 100 years ago,” said Dame Melanie Dawes, Ofcom CEO. “Now it’s time to ramp up the rollout of better broadband across the UK. We’re playing our part – setting the right conditions for companies to step up and invest in the country’s full-fibre future. This is a once-in-a-century chance to help make the UK a world-leading digital economy.”
“This is good news for all fibre providers in the UK. For us, it is the greenlight we’ve been waiting for to get on and build like fury,” added BT CEO Philip Jansen. “Full fibre broadband will be the foundation of a strong BT for decades to come and a shot in the arm for the UK as we build back better from this pandemic. Connecting the country has never been more vital.”
Virgin Media is also rolling out fibre across its network, while several ‘altnets’ like CityFibre, Hyperoptic and Gigaclear are building networks that will directly compete with Openreach. In order to prevent any anti-competitive behaviour that will undermine the economic case for these builds, Openreach will be prevented from offering geographic and long-term discount agreements.
Although the framework covers a five-year period, Ofcom has said it doesn’t expect to impose cost-based prices for fibre for ten years, a move that will benefit all infrastructure builders and reward them for their investments.
“It’s quite something for Ofcom to have gone from regulating for a 3 year period, to offering this level of certainty,” said Matthew Howett, Principal Analyst & Founder at Assembly.
“Access seekers may be less thrilled. While they will be sympathetic to Ofcom needing to do something about the UK’s languishing full fibre position, they might feel Ofcom has gone too far in deregulating Openreach. But with the Government having scaled back on its full fibre target, hesitant to address business rates for fibre, and only drip feeding public funding for the final third, the pressure was on Ofcom to put in place the enablers. It’s fair to say they've stepped up.”
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