Tuesday, 11 May 2021

All systems go: Ofcom says no price caps for Openreach

by Harry Baldock, Total Telecom
Thursday 18 March 21

Openreach has the go ahead to charge companies using its fibre network whatever it likes as the UK’s regulator tries to incentivise BT to plug £12 billion into infrastructure rollout

Today, Ofcom has published the results of their Wholesale Fixed Telecoms Market Review 2021-26 and with it a raft of changes to the broadband industry. Perhaps the most transformative and potentially divisive change is the decision that, for the coming decade, price caps will not be imposed on Openreach for their full fibre connections.  This decision has been a long time coming and exemplifies the pros and cons that make the regulators job so difficult…

Today, Ofcom has published the results of their Wholesale Fixed Telecoms Market Review 2021-26 and with it a raft of changes to the broadband industry. Perhaps the most transformative and potentially divisive change is the decision that, for the coming decade, price caps will not be imposed on Openreach for their full fibre connections. 

This decision has been a long time coming and exemplifies the pros and cons that make the regulators job so difficult. On the one hand, no price caps mean that Openreach has far more certainty about their financial future, helping incentivise the country’s largest fibre operator to drive harder in pursuit of the government’s goal of 85% of premises gigabit-capable by 2025.

Indeed, back in February BT’s CEO Philip Jansen said that the company would “build like fury” if conditions were right, with the company immediately announcing that it would confirm its new goal of reaching 20 million premises by the mid-to-late 2020s.

"Today's regulation will allow us to ramp up to three million premises per year providing vital next generation connectivity for homes and business right across the UK," said Openreach CEO Clive Selley. 

The regulator said that they recognised that BT needed a “fair bet” on what is potentially a £12 billion investment that would take over a decade to pay back.

“We aim to allow all companies the opportunity to achieve a fair return over their whole investment period, and do not expect to introduce cost-based prices for fibre services for at least 10 years,” said Ofcom.

On the other hand, this news will ruffle the feathers of mobile virtual network operators, who argue that the move is overly favourable for Openreach and will force them to pass on increasing costs to their customers.  

Ofcom always had a fine line to tread with this decision. Capping wholesale prices could have represented a major obstacle to the vast amount of investment needed to fibre up the UK, while the alternative course of action will almost inevitably see the UK consumer paying more for their broadband. Ultimately, however, Ofcom insists that the decision was based, first and foremost, on ensuring a rapid rollout of fibre and increasing competition.

“At the core of our approach is that we are trying to get competition into the wholesale network layer, of broadband for the future, really for the first time in quite a new way," head of Ofcom, Dame Melanie Dawes told the BBC, noting that around 70% of the UK would still have access to two or more providers. 

“The news may not be so appreciated among service providers that rely on Openreach and other infrastructure,” said Kester Mann, director, consumer and connectivity, CCS Insight. “But this was always a delicate decision for the regulator which had to tread a fine line between encouraging long-term investment and maintaining fair competition. It may have got it about right.”

 

How will the new regulations drive the future of UK full fibre? Find out from the experts themselves in discussion today at this year’s virtual Project Rollout. It’s not too late to book your place! Register here

Also in the news:
MWC 2021: Who’s in and who’s out?
Loophole could see Chinese firms sidestep Apple’s new privacy policy
So far so good: UK fibre sector optimistic about broadband goals

 

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