Ofcom to open up BT poles, ban regional pricing in push for 'full fibre'

Full-fibre broadband, which involves the connection of glass fibre-optic cables right to a customer's premises - is many times faster, and around five times more reliable, than the existing ‘fibre’ internet services offered by service providers.

However, it is only available to just 3% of UK homes and offices.

The regulator, Ofcom, published a package of measures to further increase investment in what it called the “future-proof” form of broadband, following a range of recent commitments by broadband companies that could see up to six million premises covered by full fibre by 2020.

It said BT must make its telegraph poles and underground tunnels open to rival providers, making it quicker and easier for them to build their own full-fibre networks directly to households around the UK.

The measure, which was already being used by providers such as Virgin Media and CityFibre, would “fundamentally change” the business case for building new networks, Ofcom said.

It could cut the upfront costs of laying fibre cables by around 50%, from £500 per home to £250.

The measure could also reduce the time required for digging works, enabling fibre to be installed in some streets in a matter of hours, where it would have taken days.

Openreach - BT’s network division - would be required to repair faulty infrastructure and clear blocked tunnels where necessary for providers to access them.

It would also need to ensure there was space on its telegraph poles for extra fibre cables connecting homes to a competitor’s network, as well as 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,” Ofcom said in its statement.

“These companies also need confidence that, in return for investing in full fibre, they will be able to recoup some of the costs through future prices on their network.”

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

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

At the same time, Ofcom said it wanted to ensure affordable access to superfast broadband for all people and businesses, and protect against high prices - particularly in places that were unlikely to benefit from competitive investment, such as rural areas.

“We will do this by 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.”

In March 2017, the regulator proposed to set the monthly charge for Openreach’s ‘40/10’ Mbit/s broadband package by 2021 at £11.23.

Following its consultation, it was adjusting the figure to £11.92.

“Today’s draft decisions confirm pro-investment measures set out by Ofcom in 2017,” Ofcom explained.

“Since we put these forward, strong momentum has built towards full-fibre broadband in the UK.”

That momentum included hybrid fibre-coaxial operator Virgin Media - owned by Liberty Global - which has made progress on its previous commitment to reach a further four million premises, half of which will be full-fibre.

Gigaclear was also set to reach 150,000 rural properties by 2020, while Hyperoptic was set to cover five million premises with full fibre by 2025.

Hull telecoms monopoly KCOM was set 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, was rolling out full fibre to up to five million homes by 2025, and Openreach itself was connecting three million homes and businesses to full fibre by 2020.

TalkTalk was also planning to cover three million premises with full fibre.

“These plans could take coverage of full fibre in the UK from 3% today to up to 20% by 2020,” Ofcom noted.

“Today’s measures are designed to help deliver this and promote further investment beyond these ambitions.”

Changes to Openreach repair rules

Ofcom also made changes to the way repairs are carried out on the existing network, as moving customers to full-fibre broadband would be a gradual process

In the meantime, it said it wanted to ensure that Openreach installed new lines on its existing network, and fixed faults, more quickly.

It said that in the future, Openreach would be required to complete at least 88% of fault repairs within one or two working days of being notified, up from 80% today.

The infrastructure operator would also be required complete at least 97% of repairs within seven working days; provide an appointment for 90% of new line installations within 10 working days of being notified, compared to 80% within 12 days currently; and install 95% of connections on the date agreed between Openreach and the telecoms provider, up from 90% today.

The new requirements must be met by 2020/21.

Ofcom also set out interim targets to ensure progressive improvements in its service before then.

“We will monitor Openreach’s performance closely and step in if these mandated standards are not met.”

BT considering pricing implications

BT was quick to respond to the announcements, saying it gave the company certainty on the pricing of key products for the next three years.

It estimated that the price changes in the draft statement, for the directly charge controlled products, would have a year on year adverse financial impact on Openreach's revenue and profit in 2018/19 of between £80m and £120m.

“There will be further year on year impacts on Openreach, resulting from price reductions to the directly charge controlled products, in each of the successive two financial years in the range of low to mid tens of millions of pounds,” it explained.

“Additionally, Openreach's cost base will increase as a result of meeting the more demanding minimum service levels required in WLA markets.”

BT said it anticipated a further adverse financial impact on Openreach's revenue and profit as a result of market pressure on the wholesale prices of other products not directly charge controlled in the WLA draft statement.

“The net impact at the group level will depend on the retail market dynamics.

“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 it could now look forward and “get on with the job” of making fibre-to-the-premises broadband available to three million homes and business by the end of 2020.

Businesses still left out in the cold, says EEF

While the announcement contained much good news for households, it was criticised by manufacturing lobby group EEF said it was a continuation of a trend, which saw the needs of businesses being relegated to an afterthought.

“This helps to explain why after over a 90% rollout of superfast broadband across the UK, 16% of small businesses still do not have superfast access compared to 9% of premises as a whole,” said Chris Richards, head of business environment policy at EEF.

“Ministers need to take charge and ensure the recently created Business Connectivity Forum delivers tangible progress on full-fibre rollout to businesses as a priority, otherwise in five years the UK may find itself the best place to watch Netflix at home, but the worst place for businesses to take advantage of the 4th industrial revolution with all the productivity benefits that offers.”