Ofcom revamps wholesale broadband rules to ramp up full-fibre roll-out

UK comms regulator announces new guidelines for the UK wholesale telecoms market, with the principal aim to drive investment in fibre gigabit services and support the closure of the UK’s copper network

Few could argue that the UK gigabit broadband roll-out has gathered enormous pace since the beginning of 2020, and to build on this momentum, UK comms regulator Ofcom has announced guidelines designed to further accelerate take-up, in particular that of fibre services.

In framing the publication of its latest guidelines, the regulator said the coronavirus pandemic had underlined the importance of a reliable internet connection and noted that the country’s traditional copper telephone network had helped deliver superfast broadband to 96% of homes, with services improving in recent years.

It also accepted, however, that the legacy network was no way fit for future purpose, and that the UK’s infrastructure was in urgent need of an upgrade, especially as demand for data continues to accelerate, an issue made even more pressing by the need for mass remote working.

To address these needs will require significant private investment in full-fibre broadband, said Ofcom, which noted that network competition had helped full-fibre coverage increase at its fastest ever rate over the past year – and that momentum had continued throughout the pandemic.

Following public consultation, the regulator confirmed how it would regulate the wholesale telecoms markets used to deliver broadband, mobile and business connections in the UK, for the next five years and beyond. The new regulations are fundamentally designed to drive competitive commercial investment and support the closure of the UK’s copper network, while also protecting consumers from high prices.

The regulations are intended to lead to properties in around 70% of the UK having a choice of networks, with a wholesale price regulation designed to encourage investment and promote competition. After bringing down the price that BT’s broadband provision division Openreach charges internet service providers (ISPs) – such as BT, Sky and TalkTalk – to use its infrastructure to deliver entry-level (40Mbps) superfast copper broadband services, Ofcom is mandating that this price is kept flat in real terms, along with the prices of slower copper broadband packages.

Yet when it comes to ultra-high-speed fibre services, Ofcom confirmed these would continue to be free from pricing regulation. The rationale for this decision is that people can choose the entry-level service as an alternative. Moreover, Ofcom added that Openreach could also “charge a bit more” for regulated products delivered over full-fibre instead of copper, because it regards full-fibre as consistently faster and much more reliable.

Ofcom claimed such an approach would encourage investment by providing BT and its rivals with a margin to build the new fibre networks and would also help to make sure people can still access affordable broadband. Ofcom stressed that it aimed to allow all companies the opportunity to achieve a fair return over their whole investment period and that it did not expect to introduce cost-based prices for fibre services for at least 10 years.

To drive fibre roll-out, Ofcom rules will now progressively remove regulation on Openreach copper products once it has rolled out full-fibre in a particular area. Ofcom said that once it lays new fibre to replace ageing copper lines, Openreach shouldn’t have the unnecessary costs of running two parallel networks.

However, to allay fears of Openreach harming competition, Ofcom said it would review discounts it offers its wholesale customers and would restrict them if they could stifle investment by its rivals. Furthermore, Openreach will continue to be prohibited from offering geographic discounts on its superfast broadband wholesale services and this has been extended to full-fibre.

“This is good news for all fibre providers in the UK. For us, it is the green light we’ve been waiting for to get on and build like fury. Full-fibre broadband will be a shot in the arm for the UK as we build back better from this pandemic”
Philip Jansen, BT Group

“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. Now it’s time to ramp up the roll-out of better broadband across the UK,” said Ofcom chief executive Melanie Dawes, commenting on the new guidelines. “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.”

Naturally, BT and its Openreach division were hugely enthusiastic about the new regulations. “This is good news for all fibre providers in the UK. For us, it is the green light we’ve been waiting for to get on and build like fury,” said BT Group chief executive 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,” he added.

“We’ve now passed almost 4.5 million premises and are building faster, at a lower cost and higher quality than anyone else in the UK,” added Openreach CEO Clive Selley. “Today’s regulation will allow us to ramp up to three million premises per year, providing vital next-generation connectivity for homes and business right across the UK.”

Yet there are fears in the industry that the new regulations won’t be so well-received by rival ISPs to BT.

“This crucial ruling is a huge boost for the deployment of full-fibre broadband that will benefit millions of UK homes and businesses for years to come. It comes at a time when the value of connectivity has never been more appreciated as the pandemic triggers a major change in how people live and work,” said Kester Mann, director of consumer and connectivity at analyst CCS Insight.

“After a turbulent recent period, the news caps a great week for BT, following a successful outcome in the 5G spectrum auction... Rolling out fibre infrastructure is a costly and time-consuming venture with a pay-back measured in decades. The news may not be so appreciated among service providers that rely on Openreach and other infrastructure. But this was always a delicate decision for the regulator, which had to tread a fine line between encouraging long-term investment and maintaining fair competition. It may have got it about right.”

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