Ofcom presents new policy to boost fibre investment, BT to feel the heat

Corning fiberOfcom announced new telecom regulatory policy as part of its strategy to enhance fibre broadband investment and coverage in the U.K.

Ofcom said its new rules will reduce the Capex related upfront spending for building fibre broadband networks by 50 percent. Main benefit will go to broadband operators including BT. But Openreach, a BT group company, will report lower revenue and profit.

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Full-fibre broadband, which is faster and around 5-times more reliable than today’s superfast internet services, is available to 3 percent of UK homes and offices. The new guideline will assist telcos to expand broadband reach quickly.

BT said it will continue with its job of making fibre-to-the-premises broadband available to three million homes and business by the end of 2020.

UK-based broadband companies are aiming to cover up to 6 million buildings by full fibre by 2020.

Ofcom said BT should share its telegraph poles and underground tunnels with rival broadband operators. Virgin Media and CityFibre have already started working on this.

Sharing of network could cut the upfront costs of laying fibre cables by around 50 percent – to £250 from £500 per home. Engineers will take less time for digging works and installation of fibre will be done in some streets in hours.

Broadband investment

# Virgin Media has made progress on its commitment to reach a further four million premises, half of which will be full-fibre.

# Gigaclear to reach 150,000 rural properties by 2020

# Hyperoptic to cover five million premises with full fibre by 2025

# KCOM to have full-fibre coverage across all of its network by March 2019, covering 200,000 premises in the Hull area

# CityFibre, in partnership with Vodafone, to roll out full fibre to up to five million homes by 2025

# Openreach to connect three million homes and businesses to full fibre by 2020

# TalkTalk to cover three million premises with full fibre

Openreach, BT’s network division, will have to repair faulty infrastructure and clear blocked tunnels where necessary for providers to access them.

Openreach must ensure there is space on its telegraph poles for extra fibre cables connecting homes to a competitor’s network. It must release a ‘digital map’ of its duct and pole network, so competitors can plan where to lay fibre.

Competing providers will invest in building their own networks only if this is more attractive than buying wholesale services from BT.

“Our decision not to regulate the prices of Openreach’s fastest wholesale superfast broadband products, including its new full-fibre services, supports the incentives for operators to build full-fibre networks,” Ofcom said.

BT will not be allowed to make targeted wholesale price reductions in areas where rivals are starting to build new networks to prevent BT from stifling new investment by rivals as network competition emerges.

Ofcom will be cutting the wholesale price that Openreach can charge telecoms companies for its basic superfast broadband service, which has a download speed of up to 40 Mbit/s, and an upload speed of 10 Mbit/s.

Regulating this price will also help BT’s rivals to compete for customers, while several build out their own full-fibre networks, as well as protect consumers from high prices during this period.

Ofcom said the monthly charge for Openreach’s 40/10 Mbit/s broadband package will be £11.92 by 2021.

Ofcom said these plans could take coverage of full fibre in the UK from 3 percent to up to 20 percent by 2020.

BT responds

BT said Ofcom’s Wholesale Local Access review (WLA) draft statement gives certainty on the pricing of key products for the next three years.

BT estimates that the price changes will have adverse impact on Openreach’s revenue and profit in 2018-19 in the range £80 million – £120 million. There will be further impacts on Openreach — in the range of low to mid tens of millions of pounds, resulting from price reductions to the directly charge controlled products.

Openreach’s cost base will increase as a result of meeting the more demanding minimum service levels required in WLA markets.

BT said there will be further adverse financial impact on Openreach’s revenue and profit due to market pressure on the wholesale prices of other products not directly charge controlled in the WLA draft statement.

“We are considering the implications for full and fair competition of the restriction on BT’s ability to vary its FTTC and G.fast wholesale rental charges between different geographic areas,” BT said.