Government policy to encourage broadband infrastructure competition has transformed the UK from full fibre laggard into having the fastest full fibre network growth in the world. It is also delivering clear benefits to consumers in the form of lower prices, better service and greater reliability.
However, Ofcom is putting this at risk by implementing regulation that assists the incumbent and harms new infrastructure builders, such as alternative networks (Altnets), especially in rural areas. This report from INCA, entitled Securing long-term benefits for broadband customers, urges government to ensure that the regulator delivers against Government policy and acts in the interest of consumers by:
- Improving the transparency of Ofcom’s decision making and showing how each decision clearly delivers Government’s policy objectives
- Clearing up consumer confusion over the use of the term 'fibre'
- Incentivising large national ISPs to use Altnet networks, and
- structural reorganisation of Ofcom to ensure prioritisation of telecoms and broadband as a key organisational responsibility
INCA Chair Tim Stranack said: “No regulatory intervention can replicate the impact of real competition, and this has been proven in recent years in UK telecoms. The government adopted the right policy, the market responded with enthusiasm and INCA’s research shows that consumers are already benefiting from lower prices and better services – where competition exists. The differences between government policy statements and Ofcom actions are putting these benefits, to businesses and consumers, at risk”.
Ofcom’s failure to regulate the market in a way that supports infrastructure competition also risks the UK’s reputation as a destination for inward private infrastructure investment. However, by adopting 7 key recommendations set out in the report (summarised above, see below for details of all 7), Government can provide a critical boost to investor confidence that should lead to more than 85% of UK properties having access to full fibre broadband by the end of 2025, potentially exceeding Government’s coverage ambitions.
The report also recommends that BT group be split with the physical infrastructure business (its duct and pole company) being sold off into a separate organisation without common ownership with BT. This is to reverse the current situation where BT, as the largest retail broadband ISP in the country, has publicly stated that it will never use another network provider other than Openreach and to remove differences in conditions between Altnet fibre network builders and BT.
“INCA considers the continued integration of the physical infrastructure parts of Openreach with the remainder of Openreach, and with the remainder of BT Group, to be the underlying cause of many of the issues identified in this report”, commented INCA Chief Executive Malcolm Corbett. “Enough time has been allowed for functional and legal separation to deliver and both have failed. It is therefore time for a full structural separation of the passive infrastructure components of Openreach from the remainder of the group”, Mr Corbett continued.
The Report's Seven Recommendations
Securing long-term benefits for broadband customers sets out seven carefully considered recomendations, as follows:
| 1 | Government should ensure that Ofcom prioritises telecoms and broadband as a key organisational responsibility | We are concerned that Ofcom is distracted by its large portfolio of responsibilities, many of which are the subject of significant press and political attention. To prioritise telecoms and broadband it may be necessary to consider organisational or structural changes to Ofcom itself. | |
| 2 | Government should mandate that all Ofcom telecoms decisions expressly show that they are compliant with Government policy | Ofcom should explain how each of its telecoms-related decisions further the implementation of the government’s policies in each Ofcom telecoms consultation and decision document and in an annual report. | |
| 3 | Government should mandate that Ofcom increases the transparency of its underlying analyses | Government should ensure that Ofcom provides full transparency in enabling stakeholders to understand the different options considered, the parameters applied in assessing those options, and how proposals and decisions are reached. This must include substantive sharing of underlying data, at an aggregated level where necessary. | |
| To help break down the barriers that are currently preventing ISPs from using Altnet infrastructure and delaying the point at which consumers can benefit from full fibre services, INCA recommends that: | |||
| 4 | Ofcom must urgently conclude its work to reduce consumer confusion around the use of the term 'fibre' | Ofcom should only allow use of the term 'fibre' where full fibre infrastructure is marketed. | |
| 5 | Government should mandate that BT group be structurally separated from the physical infrastructure business | BT's duct and pole company should be sold off into a separate organisation without common ownership with BT. | |
| 6 | Government should issue a statement to confirm that its policy of infrastructure competition means that there will almost certainly be locations in the UK where Openreach will not be present in the future | Ofcom must design its regulatory framework to accommodate this future market structure. | |
| 7 | Barriers to ISP use of Altnet networks must be removed | Government, Ofcom and industry must work together to ensure the right incentives are in place for large ISPs to use the optical fibre networks built by Altnets. | |