Ofcom won't impose fiber price controls for a decade

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• Ofcom won't impose fiber price controls for a decade

Ofcom has said it will not seek to impose price controls on fiber-to-premises (FTTP) broadband services until 2031, as this move is expected to accelerate investment by Openreach and others. network builders. The vast majority of UK broadband infrastructure is provided by Fiber The Cabinet (FTTC) technology, which uses copper for the last few meters of a connection. However, Openreach, Virgin Media and "altnets" such as CityFibre, Hyperoptic and Gigaclear are now investing in "full fiber" or gigabit networks. BT-owned Openreach plans to connect four million properties to full fiber by March 2021 and said it could reach 20 million by the end of the decade. But he says the latter goal depends on sufficient government support and a favorable regulatory environment that rewards investment. As the dominant player in the FTTC wholesale market, Openreach is subject to price controls that regulate the prices it can charge third parties such as Sky and TalkTalk. This is designed to promote competition and therefore the adoption of very high-speed broadband. The cost of providing FTTP coverage across the country has been estimated at around €30 billion and some have raised concerns that excessive regulation could discourage investment and put the UK at a competitive disadvantage. Speaking at the annual FTTH Council Europe conference, which took place virtually this year, Ofcom chief executive Dame Melanie Dawes acknowledged that network builders need fair margins and a "compelling investment case". "No one can predict exactly how the market will behave during this period," she said. “But if companies follow the rules, competition is healthy and prices remain affordable, Ofcom would not expect to intervene during the investment cycle in a way that hampers that investment. “Instead, our goal is to allow all companies to earn a fair return over their entire investment period, allowing margin above their cost of capital to reflect risk. "To be clear, we do not plan to introduce cost-based pricing for fiber optic services until at least 2031." Inevitably, infrastructure builders like Openreach and Virgin Media responded positively to feedback, while those that relied on wholesale services like TalkTalk were less receptive.

Future regulations

Dawes was speaking ahead of next year's launch of the Fixed Wholesale Telecoms Market Review, a document that will provide a regulatory foundation for the next five years. The hope is that by making the market as attractive as possible to investors, there will be enough competition to make future regulation unnecessary. "If Ofcom's strategy is successful, we will see a mix of network providers in different parts of the UK," Dawes continued. “Ofcom will not need to regulate in places where there is a healthy degree of competition and innovation. Where competition is still emerging, we would continue with regulations that leave a healthy margin for further development. “Otherwise, if competition on the network doesn't materialize and Openreach emerges dominant in more parts of the UK, with the benefits that come with it, we will of course make sure those returns are fairly regulated. But Openreach would keep the benefits of its investment and get a fair return on it. "Last week the government backed down on a clear promise promising full fiber optic coverage to all homes in Britain by 2025 and will only seek to connect 85% of installations by the same date. Meanwhile, only a fifth of the €5 billion allocated to extend fiber to the hardest-to-reach regions of the country will be made available during this legislature.