Encouraging a third major fibre network would be ‘extremely difficult’, finds a BT study
Ofcom’s call for a third ultrafast broadband network in the UK is unrealistic with it being “highly unlikely” such a network could compete with Openreach and Virgin Media, according to a study commissioned by BT.
The regulator is looking to foster competition by making BT’s network of ducts and poles more easily available to other companies who want to run fibre-optic cables to homes and businesses, and to that end is considering calls to structurally separate BT’s wholesale and retail operations.
Ofcom said earlier this year a “good long-term outcome” would be full competition between three or more networks for 40 percent of premises and coverage beyond those areas by two providers.
BT’s report, however, argued a new entrant would only find it economically feasible to compete for at most 25 percent of the market, or 2 million premises, with a “more realistic” outcome being 20 percent share.
Even an existing operator with a large broadband base would find it difficult to justify laying fibre to link more than 2.8 million premises, or 10 percent of the market, said the study, which was compiled by Analysys Mason.
“The UK has a highly competitive broadband market, but our economic modelling suggests that encouraging a third separate network to invest in covering more than 5-10 percent of the country will be extremely difficult to achieve,” Analysis said in a statement.
The study also suggested the UK is likely to perform better in many areas than Australia and New Zealand, where structural separation of retail and wholesale has been implemented, in spite of more public funding in those countries.
‘The future is fibre’
Ofcom responded that it has found evidence of “significant” interest in laying fibre-optic cables using BT’s network.
“Progress is happening each week and smaller operators are building fibre networks in cities across the UK,” the regulator stated. “The future is fibre and we expect BT to play its part in making that happen.”
Further bolstering BT’s position that structural separation isn’t necessary, the study found availability and take-up of superfast broadband – 30Mbps and faster – would lead the five largest EU countries, France, Germany, Italy, Spain and the UK, in 2020.
The UK is set to be second in the group of five for superfast competition and second for 100Mbps broadband by that time, the study found.
Britain currently leads that group on average broadband speeds, although Sweden offers faster average speeds, and tops all the countries studied on the availability of speeds of at least 10Mbps, which now stands at 96 percent.
“The UK generates very good outcomes on all key broadband metrics, in part due to the regulatory approach taken to date,” stated Analysys partner Matt Yardley. “That performance is expected to improve if companies deliver on their plans to invest in rolling out superfast and ultrafast networks.”
BT competitors including Sky, TalkTalk and Vodafone argue the current regime makes it difficult to invest in fibre-to-the-premises (FTTP) networks that can offer speeds up to 1 Gbps.
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