An Ofcom director today laid out plans for the UK’s fibre broadband roll-out, and admitted that the full fibre target could take another five to seven years with “undoubtedly…a little bit of tail back on that” to come to fruition. However, he said the telecomms industry was likely to remain resilient in the face of Covid-19.
Boris Johnson backed a full fibre by 2025 pledge as recently as July 2019, but this promise was swiftly diluted in time for the general election after industry denouncements of its wild optimism. The promise is now “full fibre and gigabit-capable broadband by 2025”, with £5bn committed in the latest budget to connecting up the country’s hardest to reach.
Speaking at a Westminster policy conference on Tuesday morning (28 April), competition policy director of Ofcom, David Clarkson, said that central to the strategy of encouraging fibre deployment (something that a 2015-16 strategic review found that a number of providers were interested in, excluding BT), is increasing access to ducts and poles.
“Because that can reduce the cost of entry, it can reduce the time of entry – it puts other competitors on a more level playing field with BT when it comes to deploying these types of network,” said Clarkson. However, he pointed out the issues of timing – “these networks are not going to get rolled out overnight” – and the issue of geography and demographics, where “some areas are very attractive for investment and other areas are less attractive to investment”.
He said an ongoing market review by Ofcom outlines a necessary framework to address these issues going forward. Clarkson said that the review identified three different geographic types of market in the UK. There are those areas with sufficient network competition, where no further regulation was needed. He said that unfortunately, no areas currently fall into this category. The review also identified mid-tier “prospectively competitive areas”, as well as areas with a weak competitive dynamic, where there wasn’t expected to be any competition in coming years.
In the prospectively dynamic areas, Clarkson said the aim is to create an environment that encourages competition and investment, but simultaneously provides protection for consumers and existing, successful business models. “Our basic approach here is to regulate what we call the entry level product…but actually leave pricing flexibility and flexibility for new services,” said Clarkson. Regulation will be focused on indexed current prices, he said, rather than “hard cost-based regulation”. In areas of low competition, however, he said that the aim was to regulate cost-based prices.
He also discussed efforts to force a transition from the old copper network to the fibre network, because “it makes no sense parallel running the old and the new network”. He said Ofcom proposed removing regulations from the old network and putting a limited set of regulations on the new fibre network, so that people can be discouraged from using the old one.
He said that despite the potential for recession as a result of the Covid-19 fall-out, he believed that this position remained broadly valid. “I think comms has demonstrated itself to be more important than ever over the last weeks, and so I think people will want and be prepared to pay for better networks,” said Clarkson. However, he did note the potential for timing issues, and there would be an announcement on this in the next few days.
On the question of full fibre, Clarkson noted UK coverage of 12 per cent, adding that 55 per cent of properties in the UK today can have access to services of greater than 300 megabits per second. “Everything that we’ve heard over the last few years leads me to believe that there are real plans in place to ultimately fibre up the whole of the UK,” said Clarkson. “It’s undoubtedly true that there will be a part of the country – 10 to 15 per cent – where commercial efforts and competition efforts run out, and government intervention will almost certainly be necessary.”
He said that his view was that the £5bn investment signposted in chancellor Rishi Sunak’s budget was enough to “finish off the job” in more remote areas. “I definitely think that there is a good scope that the next five to seven years the vast majority of this [full fibre] can be done. There will undoubtedly be a little bit of a tail on the back of that, is my personal guess.”
“Nationwide gigabit broadband remains a key priority for the government,” said Robert Burles, head of broadband strategy and regulation at the Department for Culture, Media and Sport (DCMS), speaking at the same event. He said that to this end, a piece of legislation that ensures “new build homes come with gigabit connectivity from the outset” – the telecommunications infrastructure leasehold property bill – is currently making its way through the House of Lords.
On the question of full fibre, Burles said: “I think it’s worth saying that before the the outbreak struck, build rates across the industry were beginning to scale up significantly,” adding that the March estimate for fibre coverage was around 13 per cent of the country, compared to Ofcom’s figure of 10 per cent from September, and that gigabit cable coverage was at 18 per cent. “Clearly COVID-19 is going to have an impact on on build rates, but hopefully the action that the government has taken in terms of designating telecoms workers as key workers, and issuing guidance to local authorities and landlords has helped to mitigate the potential impact,” he said.
Matt Agar, head of commercial design and strategy at Building Digital UK, DCMS, said all the network coverage now being built is full fibre. In reference to how the £5bn investment was going to be spent, he said that “DCMS has conducted modelling of which parts of the UK are more likely to get commercial investments into the network, and our funding is going to target the 20 per cent of UK premises that are not effective without the public funding,” adding that within these areas, the plan is to prioritise those with worst speeds.
A recent study by Assembly Research, commissioned by Huawei, has calculated that achieving the goal of delivering gigabit-capable broadband to the entire country could add as much as £51.4bn gross value to the economy. On this issue, the UK compares dismally to other European countries such as Portugal, which has full fibre to 89 per cent of homes, and Spain, which is at 71 per cent.