Ofcom Deal To Increase Fibre To The Premise Deployments

The British communications regulator Ofcom has reached a deal with former telecoms incumbent BT, which will have a significant impact on the deployment of full fibre broadband in the UK.

Ofcom’s deal with BT allows it some flexibility on the pricing needed to underpin the £12 billion cost of the plan.

BT said this agreement was the green light it was waiting for, and it would roll out fibre to the premise (FTTP) to 20 million homes and businesses this decade.

Openreach agreement

Ofcom said that the coronavirus pandemic has underlined the importance of a reliable internet connection, and that the UK’s copper telephone network – some of which was laid over 100 years ago – has helped deliver superfast broadband to 96 percent of homes.

“But as demand for data continues to accelerate, the UK’s infrastructure urgently needs an upgrade,” said the regulator. “This will require significant private investment in full-fibre broadband, which is much faster and more reliable than the networks most people use today.”

It should be noted that Openreach previously planned to reach 12 million homes by the end of the decade using a combination of fibre to the premise (FTTP) and G.Fast, which speeds up copper connections.

Ofcom said that following public consultation, it has confirmed how it will regulate the wholesale telecoms markets used to deliver broadband, mobile and business connections in the UK, for the next five years and beyond.

It reckons its approach will lead to properties in around 70 percent of the UK having a choice of networks from competitive commercial rollout.

Openreach has committed to deploy full fibre to a further 3.2 million properties (10 percent) in more rural areas.

And the Government plans to cover the remaining 20 percent of the country through public funding, to help ensure nobody gets left behind.

In August 2019, Openreach suggested it could cost £4,000 per premise to provide full fibre for the final 10 percent (or hardest to wire up parts of the UK).

Deal conditions

In order to achieve this Ofcom has firstly agreed to keep the wholesale price Openreach charges retail providers for its entry-level (40 Mbps) superfast copper broadband service flat.

Secondly it has allowed Openreach’s fastest fibre services to continue to be free from pricing regulation.

Thirdly, Ofcom has allowed Openreach to charge a bit more for regulated products that are delivered over full fibre instead of copper.

Ofcom said this approach improves the investment case for BT and its rivals by providing them with a margin to build the new networks.

It also helps make sure people can still access affordable broadband.

Copper closure

Ofcom is also allow BT to close the old copper network, so that Openreach should not have the unnecessary costs of running two parallel networks.

So when Openreach has rolled out full fibre in a particular area, Ofcom progressively remove regulation on its copper products over a number of years.

This has already been done for example when the Wiltshire city of Salisbury in December 2020 became the first to switch to a full fibre network, with no more access to the copper network.

Incidentally, it should be noted that the material cost of all the copper buried under the ground in the BT network is said to be valued at many billions of pounds, so it could generate a financial return for BT if it can extract all the old copper lines.

Another important agreement with BT centres around duct (i.e. the piles under the ground through which copper and fibre cables are run) and pole (telegraph poles) access.

Ofcom already gave rivals access to these ducts and poles, and Ofcom said that last year order volumes to use this infrastructure covered over 23,000km of duct and over 140,000 poles, up from 2,500km and 12,000 respectively the previous year.

Ofcom said it would ensure that Openreach cannot harm competition, by reviewing all long-term discount agreements it offers its wholesale customers, and restricting them if they could stifle investment by its rivals.

Openreach will also continue to be prohibited from offering geographic discounts on its superfast broadband wholesale services and Ofcom has decided to extend this to full fibre.

Build like fury

“Over the past year, being connected has never mattered more,” said Dame Melanie Dawes, Ofcom chief executive. “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 rollout of better broadband across the UK,” said Dame Dawes. “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.”

Ofcom said its new regulations will apply to BT from April 2021 until March 2026.

BT chief executive Philip Jansen said on Thursday it was “the greenlight we’ve been waiting for to get on and build like fury”.

It plans to connect 20 million homes and premises to FTTP by the mid to late 2020s.

See separate article for BT’s FTTP pledge, as well as analyst comment.