Ofcom has ruled that network providers will be able to charge more for full-fiber connections.
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Millions of households in the UK could soon be upgraded with faster full-fiber connectivity as telecoms providers prepare to significantly ramp up the deployment of the technology, pushed by new business-friendly rules announced by regulator Ofcom.
Ofcom has ruled that network providers will be able to charge more for full-fiber connections, which is expected to encourage private telecoms companies to invest more aggressively in the technology, as they eye more generous profits.
The decision is part of new regulation published by Ofcom to guide the telecoms market for the next five years, at a moment of deep change. The UK’s copper telephone network, some of which was installed over 100 years ago, is currently helping deliver broadband to 96% of homes in the country – but the service is now being replaced with next-generation connectivity in the form of full-fiber networks.
The average 30 Mbit/second delivered by copper-based technology is sufficient to meet the current needs of most users, but demand for data is skyrocketing: UK households are already using 40% more data every year through applications like streaming TV shows, video calls and online gaming. With the new needs created this year by the COVID-19 pandemic, including remote working and online schooling, the need for faster networks is only set to further increase.
This is why network providers have started building up full-fiber connectivity to replace copper-based technology. Ultimately, the objective is to remove the UK’s copper network entirely: Ofcom’s new regulation states that where new fiber is laid, existing copper lines will be removed. The process will happen over several years, and customers will be protected to make sure that they can still access network services.
Currently, only 18% of the country has access to full-fiber speeds (about five million homes), but the government’s objective is to expand next-generation connectivity to the vast majority of the country.
This will require digging up roads across the UK and building brand-new infrastructure to support the new network – in other words, significant investment from network providers will be necessary.
Ofcom’s new set of rules was, for this reason, hotly anticipated. The regulator’s decisions, which set the conditions under which network providers can carry out their operations, are key to determining how much return private companies can expect from their investment in deploying full-fiber technology.
The new regulation focuses specifically on leading telecoms provider Openreach, owned by BT, which Ofcom labels as having a “significant market power” in the provision of physical telecoms infrastructure – meaning that the company needs to be kept under a close watch to ensure competition against rival businesses, but also to protect customers from unfair prices.
For example, for the past few years, Ofcom has placed price caps on BT’s charges for copper-based “superfast” data speeds (which reach 40 Mbits/second); those caps will remain in place, according to the regulator’s latest announcement, along with the prices of slower copper broadband packages.
When it comes to full-fiber connections, however, the regulator has decided to keep the prices charged by network providers unregulated. The business case for the technology seems to have been successfully made: BT responded enthusiastically, confirming that the rules will allow the company to earn a fair return on its investment in full fiber.
“This is good news for all fiber providers in the UK,” said Philip Jansen, chief executive of BT Group. “For us, it is the greenlight we’ve been waiting for to get on and build like fury.”
BT expects to now be able to connect up to three million households per year to full-fiber connectivity, and to have upgraded 20 million premises by mid-to-late 2020s.
Ofcom’s decision to not impose price controls on BT’s fiber product for the next few years, however, might not be welcomed as warmly by other players in the telecoms market. Internet service providers (ISPs) that buy the use of full-fiber networks, for example, might be facing higher costs – and in turn, this could translate in a price hike for paying customers.
“There hasn’t been any reaction yet from ISPs, although it is fair to say that they may have expected Ofcom to go a little bit harder on BT,” Kester Mann, director of consumer and connectivity at analysis firm CCS Insight, tells ZDNet. “We may hear some more downbeat assessments in terms of Ofcom having sided more with BT on this one. If there is no price control for years, that could potentially raise concerns over costs and competition.”
Ofcom’s new rules include a number of provisions to sustain network competition despite BT’s market size. For example, Openreach will continue to be required to open access to the company’s physical infrastructure, including ducts and telegraph poles, to other network providers. This could halve the upfront cost of connecting a home – a key factor in an industry where the barrier to entry for new players is elevated by the prohibitive cost of network infrastructure.
In addition, Openreach will be prevented from offering discounts to ISPs if it is found that slashing prices might threaten competition by discouraging investment from rival network providers.
According to Ofcom, the new rules are set to significantly boost the deployment of full-fiber across the country. Mann concurs: for the analyst, the regulator managed to strike the right balance in what was widely seen as a delicate equation to solve.
“Ofcom was treading a fine line between protecting customers and supporting the deployment of broadband,” he says. “Overall, this is good news, even for customers. If Ofcom has been more stringent on BT, it would have hindered broadband roll-out. The UK has been on the backfoot in terms of full-fiber deployment, and this sets the wheel in motion to accelerate that.”
The UK government previously pledged to bring next-generation connectivity to the whole of the country before 2025 – a target that has since been revised to covering only 85% of the UK. Although there are other technologies capable of accelerating broadband speeds, much of the success of the project rests on the deployment of full fiber.
It is expected that private investment will upgrade 80% of the UK’s premises, and the government will subsidize the roll-out of faster connectivity to the remaining “harder-to-reach” areas.
“The government’s targets – even if they have been downgraded – are very ambitious,” says Mann. “And in that respect, Ofcom’s new regulation is good news. The target needed this outcome. It will be interesting to see how the government hooks on to that.”
Recent reports have raised doubts that official targets will be met on time, highlighting that this would require speeding up the rate of network building three-fold, while working with only a fraction of the necessary budget.
Source: Networking - zdnet.com
