Ofcom sets out new proposals to drive fibre investment

Ofcom has set out new proposals today which aim to drive investment in the fibre roll out, particularly in rural areas. Ofcom says the flexible regulation will help fuel a full-fibre future for the whole of the UK.

Having a choice of networks has delivered significant benefits to people, such as innovation, better services and competitive prices. In 2017, Ofcom set out a range of pro-investment measures that kickstarted full fibre rollout by a range of broadband companies. Since then, full fibre coverage has trebled.

Next year, Ofcom plans to vary the regulations for different parts of the country, which – combined with the Government’s planned £5bn funding for rural areas – will help ensure nobody gets left behind.

The proposals are part of the review of wholesale telecoms used for residential and business services in the UK. This maps out how Ofcom will regulate BT for the period from April 2021 to March 2026.

Driving competition and investment

Ofcom is proposing to supercharge the strategy with a four-point plan to support competitive investment in fibre networks.

1. Improving the business case for fibre investment. In more urban areas, where there is likely to be a choice of networks, they will set Openreach’s wholesale prices in a way that encourages competition from new networks, as well as investment by Openreach – by giving it the opportunity to make a fair return.

In these areas, Ofcom is proposing that the wholesale price Openreach charges retail providers for its entry-level (40 Mbit/s) superfast broadband service is capped to inflation. This follows a significant cut Ofcom made to this product in our 2018 review, and still provides for a margin on fibre investment, as build costs fall.

Full fibre is consistently faster, and much more reliable, than copper-based broadband. So they are proposing that Openreach can charge a small premium for regulated products if they are delivered over full fibre, to help the business case. Its fastest fibre services would remain free from pricing regulation, to support the investment race between network builders.

2. Protecting customers and driving competition. Ofcom will ensure people can still access affordable broadband by capping Openreach’s wholesale charges on its slower copper broadband services. To prevent Openreach from harming competition, it would be restricted from being able to offer discounts that could stifle investment by its rivals.

3. Taking rural areas into the fast lane. In more sparsely-populated rural areas, where there is no prospect of multiple networks being built, Ofcom plan to support investment by Openreach – the only operator with a large-scale rural network.

They would allow Openreach to recover investment costs across the wholesale prices of a wider range of services, reducing the risk of its investment. If BT provides a firm commitment to build fibre in these parts of the country, we can include these costs in its prices upfront. If not, we would only allow it to recover these costs after it lays new fibre.

Public funding will also be vital in connecting rural areas. The UK Government is planning to invest £5bn to reach the most challenging 20% of the UK and we are working closely with Government on its plans for this.

4. Closing the copper network. Openreach needs to retire its ageing copper wires so it does not have the unnecessary costs of running two parallel networks. Ofcom plans to remove regulation on Openreach’s copper products in areas where full fibre is built. This will support Openreach in switching customers over to the new fibre network.

Customers will be protected during this transition, by transferring regulation – including price protections – from copper to new fibre services.

Jonathan Oxley, Ofcom Interim Chief Executive, said: “These plans will help fuel a full-fibre future for the whole country. We’re removing the remaining roadblocks to investment and supporting competition, so companies can build the networks that will drive the UK into the digital fast lane.

“Full-fibre broadband is much faster and more reliable. It’s vital that people and businesses everywhere – whether in rural areas, smaller towns or cities – can enjoy these benefits. So we’re making sure companies have the right incentives to accelerate full fibre to every part of the UK.”

An Openreach spokesperson responded to the proposals, “Today’s proposals appear to be a big step in the right direction to give clarity and investment certainty.

“Like the Government and Ofcom, we want to upgrade the UK to faster, more reliable full fibre broadband. We’re getting on with the job, building to 26,000 premises each week and we remain on track to reach 4m homes and businesses by the end of March 2021.”

“We’ll consider the range of proposals carefully and will continue to work with Ofcom and industry on getting the conditions right to help achieve the Government’s ambition of rolling out gigabit capable broadband across the UK as soon as possible.”

The following two tabs change content below.

David Dungay

Editor - Comms Business Magazine