Ofcom aims at ‘flexible regulation’ for UK post-Brexit fibre broadband
- Tricky balancing act coming up
- It’s produced plans and a consultation is now under way
- Final proposals to be implemented in 2021
UK regulator Ofcom has today published proposals and announced a consultation on how it and the government should go about encouraging investment in fibre broadband infrastructure. The consultation is to close on April 1 and Ofcom is aiming to formulate a long-term policy in early 2021. (see Ofcom’s proposal - Ofcom proposes improved fibre business case with customer protection).
As Ofcom already knew - and as the new Conservative government is now finding out in the wake of its promises to fully fibre up Britain - fibre acceleration plans using public money are all very well and good... as political clickbait in an election season.
It’s when you start trying to balance the interests of the public and its desire for broadband and subsidy, against the interests of the companies you’ve lured into broadband infrastructure on the promise of fair competition, that the arguments are likely to break out.
And indeed the proposals look like they’ve been specially formulated to tiptoe around the inevitable competition bear-traps.
Ofcom says its aim is ‘flexible regulation’ to support competitive investment in fibre networks and it hopes to marry up multiple objectives: to improve the business case for fibre investment; to cap Openreach’s wholesale charges on its slower copper broadband services while at the same time preventing it from offering users discounts that could stifle investment by rivals. And to protect customers while driving the optimum amount of competition: too much price competition, remember, sometimes tempts companies to deceive customers over pricing, contract terms and so on.
Ofcom also plans to work on getting fibre broadband out to rural areas (a seemingly perennial problem). Plus, to relieve the extra costs borne by the incumbent, it says it hopes to see the copper network closed.
Getting the balance right
There are many problems in regulating network build and pricing, especially where and if you allow one company to overbuild another which could result in one player using its pricing to push a rival out.
Ofcom proposes to cap the wholesale price OpenReach (the infrastructure piece of BT) can charge retail providers for its slower copper-based final drop services to ensure they remain affordable. At the same time it will stop Openreach from offering competition-stifling discounts - a difficult balancing act.
Meanwhile it proposes that Openreach could charge a reasonable premium for regulated products if they are delivered over full fibre (thus incentivising fibre roll-out), while the fastest fibre services can remain free from pricing regulation to offer providers the chance of making a healthy profit to justify the investment.
In rural areas, where there is no prospect of multiple networks being deployed, Ofcom is in the clear as far as subsidising investment by Openreach is concerned and it plans to allow that company to recover investment costs across the wholesale prices of a wider range of services, thereby lowering its investment risk.
Even though it’s thrown up price protection for the low end (copper based products) Ofcom is keen for the incumbent to lower its costs by taking out the copper network and thus enjoying only one - easier to maintain and manage - fibre network.
So, what’s the verdict?
Truespeed’s CEO, Evan Wienburg, fired a warning shot against allowing overbuild by OpenReach once a rural network was already in the ground. He urged Ofcom to ensure a level and fair playing field between private and part public-funded infrastructure providers, but overall, the proposals seem to have garnered a cautious welcome by the companies likely affected.
BT says the plans are positive and CityFibre’s Greg Mesch, approves of Ofcom’s direction of travel but would like to see it move further and faster (natch).
From the user side, Ed Dodman, directory of regulatory affairs at Ombudsman Services welcomed Ofcom's move.
KCOM promises more fibre
Meanwhile, one of the UK’s telecom anomalies is Hull-based network operator KCOM (formerly Kingston Communications). It somehow avoided being aggregated into the Post Office back in the day and has pushed on as an independent entity.
It has announced that it will show extra fibre willingness with plans to invest around £100 million to expand the fibre broadband network it has already rolled out to around 200,000 premises across Hull and East Yorkshire.
The latest investment will add tens of thousands more homes and businesses to its total, it claims, and maintains it’s readying a wider investment programme supported by its new owner, MEIF 6 Fibre, a wholly-owned subsidiary of Macquarie European Infrastructure Fund, which acquired the company in August 2019.
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