In a statement issued today Ofcom sets out its approach to future regulation for the next generation of super-fast broadband networks to deliver consumer benefits from both investment and competition.
The statement builds on the competition overseen by Ofcom in the current copper phone networks. Under the current regulatory regime, the number of customers taking broadband services from providers other than BT has grown by more than five million in fewer than four years.
Next generation broadband can deliver speeds of up to 10 times the level of today's broadband services.
In the home, it will allow different members of a household to access a variety of high-bandwidth services simultaneously. This could include watching high-definition TV, playing interactive online games and streaming or downloading music, TV programmes and films over the internet.
For businesses, it will enable simultaneous services such as two-way video calls, improved data retrieval and provide more opportunities for home working.
Super-fast broadband can be delivered in a number of ways, with fibre, cable, copper wires, mobile, fixed wireless and satellite each having a role to play.
A number of companies have already announced plans to invest in and roll out super-fast broadband in the UK over these networks. These include Virgin Media, which already offers super-fast broadband and plans to extend this offer across its entire network, and BT, which plans to upgrade its copper access network with fibre-optic cable.
The main focus of Ofcom's statement is on the upgrade of the copper access network - which connects most homes and businesses in the UK - to fibre.
There are two ways that companies will be able to provide super-fast broadband over a fibre access network:
* Communication providers could access BT's new fibre access network on a wholesale basis by buying products from Openreach, BT's operationally separate business unit responsible for its access network. This is known in the industry as active access.
* Communication providers could combine their own electronics with physical infrastructure rented from BT to deliver services. This is known as passive access.
Ofcom's statement sets out the overall approach on future regulation of super-fast broadband services. The five main elements to promote private sector investment and competition are:
Promoting investment
1. Pricing freedom. Communication providers such as BT will have the freedom to price wholesale super-fast broadband products themselves without any regulatory intervention. This will allow investors to make an appropriate return on their investment, based on the risk they are taking but pricing at a level that the market will bear, given the ready availability of alternative broadband services.
2. Risk reflective rate of return. In the event of further competition emerging upstream - by companies offering super-fast broadband through passive access - investors will have the opportunity to earn a rate of return that genuinely reflects their costs and the associated level of risk.
3. Efficient networks. Ensuring that inefficiencies are not built into the deployment of super-fast broadband that could result in a barrier to investment. For example, ensuring that two sets of engineers are not required to service the same request and avoiding excessive complexity of business systems needed to support the network.
Securing competition
4. Wholesale access for all. Ofcom will support new active fibre-based wholesale products offered by BT. This will require Openreach to offer fibre-based broadband services to other providers - including BT Retail - on equal terms and without favour.
5. Encouraging future competition. Allowing companies to invest alongside BT when networks are built, or ensuring that new infrastructure will support further future competitive investment should demand arise.
This will only be the first phase of the development of super-fast broadband. Ofcom will work with all stakeholders to understand how far private sector investment will take the UK and whether there is a need for further action to bring the benefits of super-fast broadband to a wider group of UK consumers, citizens and businesses.
NEXT STEPS
To promote efficient investment and secure competition in super-fast broadband, Ofcom is consulting on a variation to BT's legally-binding Undertakings agreed with Ofcom in 2005.
The consultation runs until 14 April 2009. If Ofcom accepts BT's proposal after assessing the consultation responses, it will aim to publish a new consolidated set of Undertakings.
In addition, Ofcom will:
* work closely with the European Commission on its recommendations on next generation access;
* work with industry on developing a standard active wholesale product;
* consider how further work on underground duct infrastructure could further the understanding of this as an option for building super-fast broadband; and
* contribute to the Government's Digital Britain work on super-fast broadband.
MAKING THE BEST USE OF EXISTING NETWORKS
One way of building fibre-optic networks is by using the existing network of underground pipes that carry telecoms infrastructure.
To determine whether there is space in the pipes for fibre-optic cables, Ofcom commissioned a survey of BT's underground telecoms ducts. The survey, also published today, reveals that there is a significant amount of unoccupied space, with between 40% and 50% having room for new cables in the cable ducts surveyed. However, the amount of space is highly variable and there remain some potentially significant hurdles to using existing ducts to deliver competition to the majority of locations.
Ed Richards, Ofcom Chief Executive, said: "Super-fast broadband represents one of the most important developments in modern communications for many decades. It will deliver significant benefits to consumers and businesses with the prospect of new digital services delivered over the internet at high speed.
"Our message today is clear: there are no regulatory barriers in the way of investment in super-fast broadband; we want to promote investment but also ensure that there is fair and effective competition for the future."