WIREDGOV

More UK homes are set to benefit from ultrafast internet speeds, after a draft decision by Ofcom today that will halve the upfront cost of building ‘full-fibre’ broadband networks.

• Upfront cost of building ultrafast broadband networks set to halve
• Pricing decisions to encourage investment in full-fibre networks
• New measures to force faster repairs and installations by Openreach

Full-fibre broadband is many times faster – and around five times more reliable – than today’s superfast internet services. But it is available to just 3% of UK homes and offices.

So Ofcom has today published [1] a package of measures to further increase investment in this future-proof form of broadband, following a range of recent commitments by broadband companies that could see up to six million premises covered by full fibre by 2020.

Cheaper, better, faster networks

BT must make its telegraph poles and underground tunnels open to rival providers, making it quicker and easier for them to build their own full-fibre networks directly to households around the UK.

This measure, which is already being used by providers such as Virgin Media and CityFibre, will fundamentally change the business case for building new networks. It could cut the upfront costs of laying fibre cables by around 50% [2] – from £500 per home, to £250. It could also reduce the time required for digging works, enabling fibre to be installed in some streets in a matter of hours, where it would have taken days.

Openreach, BT’s network division, will have to repair faulty infrastructure and clear blocked tunnels where necessary for providers to access them.

Openreach must ensure there is space on its telegraph poles for extra fibre cables connecting homes to a competitor’s network. And it must release a ‘digital map’ of its duct and pole network, so competitors can plan where to lay fibre.

Boosting incentives to invest

Competing providers will invest in building their own networks only if this is more attractive than buying wholesale services from BT.

These companies also need confidence that, in return for investing in full fibre, they will be able to recoup some of the costs through future prices on their network.

Our decision not to regulate the prices of Openreach’s fastest wholesale superfast broadband products, including its new full-fibre services, supports the incentives for operators to build full-fibre networks [3].

To prevent BT from stifling new investment by rivals as network competition emerges, BT will not be allowed to make targeted wholesale price reductions in areas where rivals are starting to build new networks.

Protecting consumers, particularly in rural areas

At the same time, Ofcom has a role to ensure affordable access to superfast broadband for people and businesses. We wish to protect against high prices, particularly in places that are unlikely to benefit from competitive investment, such as rural areas.

We will do this by cutting the wholesale price that Openreach can charge telecoms companies for its basic superfast broadband service, which has a ‘download’ speed of up to 40 Mbit/s, and an ‘upload’ speed of 10 Mbit/s. [4]

Regulating this price will also help BT’s rivals to compete for customers, while several build out their own full-fibre networks, as well as protect consumers from high prices during this period. In March 2017, we proposed to set the monthly charge for Openreach’s ‘40/10’ Mbit/s broadband package by 2021 at £11.23. Following our consultation, we are adjusting this figure to £11.92.

Building momentum

Today’s draft decisions confirm pro-investment measures set out by Ofcom in 2017. Since we put these forward, strong momentum has built towards full-fibre broadband in the UK. A range of broadband companies have announced plans to invest, including:

• Virgin Media has made progress on its previous commitment to reach a further four million premises, half of which will be full-fibre.
• Gigaclear to reach 150,000 rural properties by 2020.
• Hyperoptic to cover five million premises with full fibre by 2025.
• KCOM to have full-fibre coverage across all of its network by March 2019, covering 200,000 premises in the Hull area.
• CityFibre, in partnership with Vodafone, to roll out full fibre to up to five million homes by 2025.
• Openreach to connect three million homes and businesses to full fibre by 2020.
• TalkTalk to cover three million premises with full fibre.

These plans could take coverage of full fibre in the UK from 3% today to up to 20% by 2020. Today’s measures are designed to help deliver this and promote further investment beyond these ambitions.

Jonathan Oxley, Ofcom’s Competition Group Director, said: “Full fibre meets the country’s future broadband needs, as demand for data soars.

“Ultrafast speeds will allow people to download entire films, or businesses to share huge files, almost instantly. Full fibre will also underpin exciting technology like remote healthcare diagnostics, 5G mobile and connected devices.

“The measures we’ve set out today will support the growing number of companies who have already announced plans to build full-fibre networks, and open the way for even more ambitious investment around the UK.”

Improving repairs and installations

Moving customers to full-fibre broadband will be a gradual process. In the meantime, Ofcom wants to ensure that Openreach installs new lines on its existing network, and fixes faults, more quickly.

So we have decided that, in future, Openreach will be required to:

• complete at least 88% of fault repairs within one or two working days of being notified, up from 80% today;
• complete at least 97% of repairs within seven working days;
• provide an appointment for 90% of new line installations within 10 working days of being notified, compared to 80% within 12 days currently; and
• install 95% of connections on the date agreed between Openreach and the telecoms provider, up from 90% today.

These new requirements must be met by 2020/21. Ofcom has also set out interim targets to ensure progressive improvements in its service before then. We will monitor Openreach’s performance closely and step in if these mandated standards are not met. [5]

These rules are part of a range of measures designed to ensure all telecoms companies provide the quality of service customers expect. For example, Ofcom has already announced that broadband and landline users will receive automatic compensation when things go wrong.

We are also supporting the UK Government’s plans for homes and businesses across the country – including in rural and remote areas – to have the right to request a decent broadband connection.

Next steps

Today’s draft decisions follow Ofcom’s ‘Wholesale Local Access’ market review, which sets how much Openreach can charge telecoms providers for selling today’s superfast broadband services over its network. They cover the period April 2018 to March 2021.

Our measures have been submitted to the European Commission for comment, after which we will publish our final statement next month.

Notes to editors

1. Under Article 7 of the Framework Directive we are required, following completion of the domestic consultation process, to notify the European Commission, BEREC, and other national regulatory authorities, of our final proposals. There is a one-month period for these organisations to provide their comments to us.

2. Ofcom estimates suggest that reusing existing infrastructure enables significant cost savings, reducing the average cost per home passed in some cases by up to 50%. Given ongoing costs, including rental charges for duct and poles access, the reduction in total lifetime costs is lower, though substantial.

3. Duct and pole access lowers build costs for full- fibre while pricing flexibility on higher bandwidth services, along with growing demand for these services, is likely to lead to higher ‘buy’ costs over time, as illustrated in the diagram below:

4. Until now, BT’s ability to raise wholesale charges for superfast broadband has been constrained by people’s willingness to buy cheaper, standard ‘copper’ broadband as an alternative. However, this constraint is weakening, as people increasingly need faster, more reliable connections.

Standard broadband delivered over Openreach’s existing copper network has long been subject to a wholesale charge control, and this will continue over the coming years, with the price remaining broadly stable.

The ‘glidepaths’ for the annual ‘40/10’ Mbit/s and copper access charge controls are:

Both the ‘up to 40 Mbit/s’ service and the copper access service are required to provide retail superfast broadband services.

5. Quality of service targets will take account of external factors beyond Openreach's reasonable control, such as extreme weather. The targets will allow that up to 3% of repairs, and 1% of installations in a typical year, might be delayed by such factors.