Ofcom consults on promoting investment and competition in fibre networks

January 10, 2020

Ofcom has launched a consultation setting out its proposals to increase investment in fibre broadband. The consultation ends on 1 April 2020 and the new rules will take effect in 2021.

Ofcom’s proposals aim to ensure that homes and businesses benefit from faster and more reliable fibre broadband. From next year, Ofcom plans to vary its regulation for different parts of the country. It has 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, Ofcom 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 proposes that the wholesale price Openreach charges retail providers for its entry-level superfast broadband service is capped to inflation. Ofcom is 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 aims to 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. Improving broadband speeds in rural areas

In more sparsely-populated rural areas, where there is no prospect of multiple networks being built, Ofcom plans to support investment by Openreach, as it is the only operator with a large-scale rural network. Ofcom proposes to 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, Ofcom can include these costs in its prices upfront. If not, Ofcom would only allow BT to recover these costs after it lays new fibre.

4. Closing the copper network

Ofcom recognises that Openreach needs to retire its ageing copper wires so it does not have the unnecessary costs of running two parallel networks. Therefore, Ofcom plans to remove regulation on Openreach’s copper products in areas where full fibre is built. This aims to support Openreach in switching customers over to the new fibre network. Ofcom says that it will protect customers during this transition, by transferring its regulation, including price protections, from copper to new fibre services.

Supporting 5G and business

Ofcom has also set out how it intends to regulate Openreach’s ‘leased lines’, high-speed connections used by large organisations, which also form the data highways of the UK’s mobile and broadband networks. It also plans to vary its regulation depending on the level of current or potential competition in a given area. This would involve Openreach having to provide companies with access to its ‘dark fibre’ – cables that are ‘lit’ by competitors – in non-competitive areas, at a price that reflects its costs. This aims to significantly reduce the cost for mobile operators to roll out their new 5G networks.