Ofcom, the telecoms regulator, has released details of how the UK intends to catch-up with international rivals and roll out full-fibre broadband nationwide.
The watchdog has issued a document on how it will regulate the wholesale telecoms markets, addressing the dominant position BT Group PLC (LON:BT.A) has in the provision of physical telecoms infrastructure and the wholesale markets through its Openreach arm.
Ofcom pledged there will be pricing flexibility for Openreach’s fastest services while entry-level superfast broadband prices will be kept flat in real terms.
Openreach’s fastest fibre services will continue to be free from pricing regulation, but Ofcom argued that the ability of networks to raise wholesale prices significantly for the faster, unregulated products will be constrained by the fact that people can choose the entry-level service as an alternative.
Openreach will be allowed to charge “a bit more” for regulated products that are delivered over full-fibre instead of copper, essentially charging more for a faster, more reliable product.
Ofcom said this approach would improve the investment case for BT and its rivals, such as Sky, Virgin Media, Talktalk Telecom Group PLC (LON:TALK), Vodafone PLC (LON:VOD) and CityFibre.
The intention is to enable network companies to achieve a fair return over the whole investment period required to upgrade to full-fibre, with Ofcom holding off from introducing cost-based prices for fibre services for at least 10 years.
There will be more support for the initiative to phase out the UK’s ancient copper-wire network and replace it with fibre-optic broadband.
Ofcom said that once BT has rolled out a fibre-optic network in a particular area, the regulator will progressively remove regulation on its copper products over several years, allowing the company to retire the copper network.
New Ofcom regulations determining broadband run to about 1600 pages. Makes the Brexit deal look like light reading. https://t.co/jt2fJ8fV1Z
— Thomas Seal (@TW_Seal) March 18, 2021
“Network competition has helped full-fibre coverage increase at its fastest ever rate over the last year – and that momentum has continued throughout the pandemic. Our regulations build on this momentum – driving competitive commercial investment and supporting the closure of the country’s 100-year-old copper network; while ensuring consumers are protected from high prices,” Ofcom’s statement said.
“We believe this approach will lead to properties in around 70% 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%) in more rural areas and the government plans to cover the remaining 20% of the country through public funding, to help ensure nobody gets left behind,” it added.
Dame Melanie Dawes, the chief executive of Ofcom, said the regulator is playing its part in “setting the right conditions for companies to step up and invest in the country’s full-fibre future”.
The new regulations announced today will apply to BT from April 2021 until March 2026.