Ofcom proposes regulatory changes to support broadband investment

Telecoms regulator Ofcom has announced a package of proposed measures that it hopes will support long-term private investment in fibre-to-the-premises (FTTP) – also known as full-fibre – broadband networks and services in line with the recommendations set out in the government’s Future Telecoms Infrastructure Review (FTIR).

In the highly anticipated report, which was published in full on 23 July 2018, the government laid out a detailed plan designed to ease the path towards national full-fibre connectivity, which it hopes to achieve by the year 2033, at an estimated cost of £30bn.

Among the recommendations made by the FTIR were to work with Ofcom on a number of policy areas, including managing the national switchover from copper to full-fibre, standardising deployment frameworks, improving access to 5G mobile spectrum, and making it easier to run fibre networks through existing infrastructure owned by utilities or Openreach.

In response to the review, Ofcom CEO Sharon White said: “We welcome the government’s review, and share its ambition for full-fibre and 5G networks to be rolled out right across the UK. The government and Ofcom are working together and with industry to help ensure people and businesses get the broadband and mobile they need for the 21^st century.”

Ofcom said consistent and predictable regulation would help industry build on the recent shift towards full-fibre as the delivery mechanism of choice.

This shift has seen the likes of CityFibre and TalkTalk commit to massive roll outs targeting millions of potential customers, and even forced Openreach – which has long been a hold-out in favour of slower fibre-to-the-cabinet (FTTC) networks – to change its tune.

The regulator has now detailed a number of changes it is proposing to make.

Firstly, it will look to regulate business and residential markets in the same way as full-fibre network builders increasingly look to offer services to both over a common, underlying network.

Secondly, it will consult on plans to make access to Openreach’s ducts and poles unrestricted. Currently, these are mostly used by suppliers targeting residential and small-business users, but a future consultation will look to extend this to enterprise providers offering high-speed lines, and even mobile network operators (MNOs).

Thirdly, in recognition that different parts of the country have different needs and different market dynamics, it will begin to consider different regulatory approaches in different regions, adopting a more flexible approach to how it applies the rules that reflects, for example, how many competing fibre network builders are present in a particular area.

Finally, to bring more long-term certainty to the investment environment, it will extend the duration of regulation, as laid down in its market reviews, from three to five years and beyond.

“These plans follow the direction set by Ofcom in our 2016 Strategic review of digital communications, which focused on boosting investment in full fibre,” said the regulator in a statement.

“Today’s proposals represent the next step on that path, creating the conditions for companies to invest in modern networks.”

Berkeley Research Group managing director Mark Williams, who also leads its telecommunications, media and technology practice, said Ofcom’s proposals were a welcome implicit recognition of the need for a more coherent strategy following the completion of its most recent market review, which concluded in 2016 and led directly to the legal split of BT and Openreach.

“Over the past few years, Ofcom has gradually adopted the growth of full-fibre networks as a policy objective,” said Williams. “At the same time, it has taken regulatory decisions which have dis-incentivised Openreach and other providers to build such networks. The result has been a degree of confusion among network builders and very limited investment into full-fibre networks.  

“This strategy document indicates that Ofcom intends to take some significant regulatory steps with the intention of incentivising such investment. One of these could mark a sea-change in the way the market is regulated. Ofcom has indicated that it intends to lift wholesale regulatory obligations on Openreach in areas which are competitive.

“This could be a very significant lifting of regulatory obligations on BT and would go a long way towards incentivising investment. Going forward, the effect of this strategy will be determined largely by the way in which these areas are defined and the speed and certainty with which Ofcom deregulates.

“Similar approaches have been controversial in other segments of the market in the past so the market will be watching this closely to see how Ofcom brings this into effect.”