Ofcom Orders BT Openreach To Reduce Cost Of Superfast Broadband

BT Openreach will be required by Ofcom to reduce the wholesale cost of access to its superfast broadband network from 2018 and will be subjected to stricter repair and installation targets from 2021.

Ofcom claims the measures will keep prices down, improve levels of service and encourage investment in ultrafast broadband networks built with G.Fast and fibre to the premise (FTTP) technology.

The regulator says Openreach’s ability to raise prices for superfast broadband has so far been constrained by the comparatively low cost of standard broadband using copper lines for those who only need moderate connectivity.

Superfast regulation

However the attractiveness of this standard broadband has decreased due to the popularity of cloud applications and streaming services. Ofcom’s proposed regulations apply to the entry-level 40Mbps download / 10Mbps upload product with a view to establishing that as the new cheap option.

To balance this, Ofcom will not regulate ultrafast services, at least for the time being. The theory is that if ultrafast is more profitable for BT and others, they will actively seek to deploy it in the hope they can generate more revenue.

One of the criticisms levied at BT in the past is its alleged willingness to ‘sweat’ copper assets rather than invest in new infrastructure because the revenue it could gain isn’t enough to justify the expenditure.

However the company has committed to bring ultrafast to 10 million homes and businesses by the end of the decade and to the ‘majority’ of the UK by 2025.

“Our plans are designed to encourage long-term investment in future ultrafast, full-fibre networks, while promoting competition and protecting consumers from high prices,” said Jonathan Oxley, consumer group director at Ofcom.

“People need reliable phone and broadband services more than ever. We’re making sure the market is delivering the best possible services for homes and business across the UK.”

Service targets

Openreach will also be required to complete 93 percent of repairs within 2 working days, up from 80 percent, and complete 97 percent within 7 working days.

Appointments for new line installations must be provided within 10 working days on 90 percent of occasions (down from 12 days) and 95 percent of connections must be installed on the date agreed between Openreach and the telecoms provider – up from the present 90 percent. All of these must be met by 2020-21.

The regulations are the latest squeeze on BT since it reached a deal with Ofcom to make Openreach a legally separate company to the rest of the group rather than face the prospect of spinning it off.

Earlier this week, BT was fined £42 million for actively working to minimise the amount of compensation it was obligated to pay wholesale customers for delays in the installation and repair of Ethernet connections. It has also set aside £300 million to reimburse those affected.

Openreach said it did not think the new measures would stimulate ultrafast investment, but it does support the new targets.

“On first viewing [the proposals] do not appear to incentivise more investment in ‘full fibre’ networks,” a spokesperson told Silicon.

“The UK needs a regulatory framework that encourages investment and rewards risk. Building digital infrastructure is very expensive with long payback periods and we won’t recover our more than £3bn investment in fibre until after this charge control period.

“Improving service is our number one priority and while we have been making great strides over the last year, we are determined to go even further in meeting our customers’ rising expectations.

“We support the ambition of higher service targets and we want to work closely with the rest of the industry to make sure these are the right measures and that they’re achievable.”

Expert view

Industry observers suggest the moves will reduce the cost of superfast broadband – if the savings are passed on – and stimulate investment.

“This move is recognition that superfast broadband is increasingly becoming the new normal when it comes to the speed consumers expect from their internet provider,” said Richard Neudegg, head of regulation at uSwitch.

“In return for controls on some superfast wholesale prices, Openreach will have flexibility on its emerging ultrafast services, such as G.Fast. The hope is this will help keep the investment going to upgrade the UK’s digital infrastructure.

“The new rules will also place the impetus on Openreach to up their game on repairing faults and installing new broadband lines – this should help to reduce fears of broadband blackouts, that research shows puts some consumers off moving to better services.”

Quiz: What do you know about fibre broadband?