Ofcom Moves to Cut Fibre Costs

Peter Boyland, Telecoms Analyst, at IHS Electronics & Media shares his views below.

“Ofcom is looking at ways to encourage competition in the fibre broadband sector, where BT is looking to increase its lead in the market, offering download speeds of up to 100-Mbps via its fibre-to-the-home (FTTH) and fibre-to-the-curb (FTTC) offerings. BT has invested more than GBP2.5 billion in its fibre network, which has now passed over 15 million homes and businesses in the UK as it aims to reach two-thirds of properties in the country by the end of 2014.

BT’s wholesale division Openreach has seen wholesale access prices for its copper (PSTN) mandated by the regulator since the functional separation of the former British Telecom in 2005. However, this regulation has yet to be extended to its fibre networks – despite protestations from rivals including BSkyB and TalkTalk that its current wholesale fees are anticompetitive. Ofcom has so far declined to regulate BT’s fibre wholesale pricing, accepting that the former incumbent is entitled to gain a fair reward for its substantial investment. BT also defended its fibre wholesale prices, saying it charges the same for access to some 70 operators, including TalkTalk and Sky, as it does to its own BT Retail division.

However, the regulator has pledged to continue to ensure that BT’s fibre access prices continue to be “fair and reasonable” – a description which is somewhat ambivalent, and open to interpretation depending on the eye of the beholder. The fibre access market in the UK is still in its infancy, with BSkyB’s Sky and TalkTalk (BT’s key xDSL rivals) only launching serious fibre-based broadband offerings in the past 12 months. However, as BT continues to dominate the sector and demand for high speed broadband continues to grow, fibre-based broadband will inevitably face further pricing regulation in the coming years.

BT currently leads the UK broadband market, with a share of 31% at the end of 2012, followed by cable operator Virgin Media on 21%, and BSkyB and TalkTalk, both with roughly 19%. The number of subscribers on BT’s fibre network has grown to 1.4 million by the end of last year – equalling the number of customers taking fibre broadband services from BT’s rivals using virtual unbundled local access (VULA), with the latter number expected to grow rapidly during 2013. Competition in the UK broadband sector has never been fiercer, with large discounts being offered to customers taking up multiplay bundles as the pay-TV sector explodes. BT recently grabbed a number of lucrative sport broadcasting rights in the UK ahead of the launch of its BT Sport channels – playing key multiplay rival BSkyB at its own game – while Virgin is pushing its own cable-based triple- and quad-play offerings, which they claim offer superior broadband speeds to xDSL.

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David Dungay

Editor - Comms Business Magazine
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