The UK Government has committed GBP 5 billion to have Gigabit broadband to every home by the end of 2025. Ofcom’s role (as the UK's telecoms regulator) is to create attractive market conditions to incentivise widespread investment in full-fibre, broadband, 5G mobile, cable and other high speed communication services. It does this by ensuring the right investment incentives are in place for network competition thus creating the business case for investment. This article looks at Ofcom’s recent review of the fixed telecoms market and the implications on fibre investment of its proposals.
Landmark consultation
It Ofcom has issued a landmark consultation on physical telecoms infrastructure for broadband, i.e. wholesale local access (WLA) and leased line services. It is the first time that Ofcom has combined residential and business services into a single consultation. Further, the five year review period is a departure from the standard three year review period in previous consultations perhaps reflective of the longer term outlook required on fibre, cable and 5G investments.
The consultation is part of Ofcom’s regular market review process to ensure the UK telecoms market is competitive. The review process identifies relevant markets where any operator (in this case Openreach) has significant market power (SMP) and proposes regulatory ‘remedies’ to stimulate competition where SMP has been identified.
There’s a lot to summarise but here’s just a snippet
In areas of established competition (i.e. at least two existing networks in addition to Openreach) Ofcom has proposed to not regulate Openreach’s broadband products making it harder for new entrants to become established as competition drives prices down. Great news for consumers !
In non-competitive and potentially competitive areas (where non-BT fibre networks are being built, or where there are reasonable prospects of them being built) Ofcom’s proposals should encourage full fibre investment. For example, Ofcom has proposed very limited price controls for Openreach’s premium high speed FTTP or G.fast services. Not limiting wholesale prices allows Openreach and alternative network to charge more allowing them to make a higher return to justify their investment in fibre.
Ofcom has also set out plans for the eventual retirement of its copper access network by removing regulation on Openreach’s copper products (ADSL, FTTC etc.) in areas where full fibre (FTTP) is built. It is expected that this will allow Openreach to switch customers over to fibre.
Ofcom will move regulation from copper to fibre once Openreach has deployed ultrafast services to 75% of the premises within an exchange area and the obligation to provide new copper services will be removed. Charge controls on copper services will be removed once complete ultrafast coverage has been reached in any exchange area.
How to respond
The implications of the proposals upon CSP strategies will need to be understood when formulating a response and consideration given to how these proposals will influence CSP’s current market and future network roll out strategy and geographical expansion.
Communications Service Provider (CSPs) have until 01 April 2020 to submit their responses to the proposals based on 29 questions identified by Ofcom in the consultation document.
However, CSPs do not have to answer all the questions in the consultation; a short response on just one point that may be relevant is acceptable. In doing so CSPs should consider how competitive conditions may change in the future (to March 2026) and influence their competitive development. Ofcom also welcomes joint responses from groups of ISPs.
Intelligens Consulting is a boutique telecoms advisory offering investors, local authorities, operators and policy makers with technical, strategic and commercial advice, globally. If you want to discuss anything discussed in this article then you can contact telecoms expert, Iqbal Singh Bedi using info@IntelligensConsulting.com.
This article was first published in January 2020.