The 2018 Conference of the UK Internet Services Providers' Association (ISPA) took place in London on 30 October, at a time when the UK broadband market is undergoing fundamental change. Panels of usually opposing sides were characterised by comparatively little conflict, perhaps reflective of the new conciliatory nature of today’s infrastructure builders. Challenges however do exist on the horizon, especially owing to the ambitious targets set by the government for full-fibre deployment to every home by 2033 and the continuing need to remove barriers to deployment. To this end, there was some criticism to the government’s recent budget statement, particularly on business rates reform; and alternative operators expect improvements once Ofcom overhauls the framework for access to Openreach’s ducts and poles.
Less conflict than the previous years, and a changing broadband landscape
This year’s conference felt different from previous years in several ways. Until not long ago, alternative operators would have taken the opportunity to heavily criticise Openreach over access concerns and a lack of fibre investment. While there may have still been undertones at this year’s event, the debate was considerably less conflictual. There are at least two good reasons for that to be the case, which reflect the times of change facing the UK broadband market. One is the rise of infrastructure providers alternative to Openreach, which make the wholesale broadband market more dynamic and competitive; the second relates to Openreach itself, which is now a legally separate entity within the BT group, and has therefore more independence in serving its wholesale customers.
The combined effect of these circumstances has resulted in renewed optimism for the UK broadband market, as operators begin to take on the full-fibre challenge set by the government as part of the Future Telecoms Infrastructure Review. The opening keynote by James Heath, director of telecoms in the government’s Digital, Culture, Media and Sport department (DCMS), welcomed operators’ recent investment commitments (CityFibre and Hyperoptic above all, but also Openreach) and noted that it is now critical to get behind the long-term strategy put in place by the government. It is a strategy with ambitious targets, aiming to reach 15m premises with full-fibre by 2025, and full coverage of all homes by 2033. Heath maintained that this is doable given industry’s commitments, and found encouraging that £3bn have been allocated to cover the final 10%. Asked about the possible drawbacks of network overlap, Heath also noted the importance of having healthier competition at the wholesale level.
Government and Ofcom are aligned in the long-term view of the market
The first panel discussed the regulatory environment needed to support the long-term vision of the government. The underlying principle for the years to come is to promote competition as much as possible, since “when you are having competition you don’t need regulation” as stated by Henry Shennan, Deputy Director, Broadband and Telecoms Market at the DCMS. Brian Potterill, Director of Competition Policy at Ofcom, assured that the regulator is “well aligned” with what the road ahead looks like, and is encouraged by the visible increase in network investment. By comparison, Potterill pointed at the lack of parallel network investment from alternative operators at the time of LLU, whereas now there is much more interest in full-fibre investment by more than one provider. Potterill pointed to the importance of competition to make sure that existing players do not overmilk the investments they’ve already made, and stated that, in Ofcom’s view, Openreach has had the opportunity to make a reasonable return on its initial FTTC investment.
For fibre to be deployed ubiquitously, regulators and policymakers will have to improve the conditions for access to buildings. Catherine Colloms, Director of Corporate Affairs at Openreach, called for a simplification of the rules. “The UK is a complex topography to build fibre”, she noted; and added that Openreach currently cannot access about 80% of the multi-dwelling units (MDUs) in London. “It seems crazy these days that you can build new property and not think about fibre connectivity”. Colloms argued that the measures in the government’s latest budget might not be sufficient (the matter “probably needs primary legislation”); and also criticised the reform of business rates, which could turn out to be “a tax on full-fibre build’ thereby stifling incentives to invest.
Openreach has a crucial role to play, as Ofcom prepares to remove restrictions to DPA
Even in a more competitive fibre-build environment, the role of Openreach will remain crucial for deployment in the UK for the years to come. And the company is up to the challenge, in the words of Catherine Colloms “We are hiring 3,500 engineers this year” as Openreach becomes a “full-fibre business”. The objective is to connect 3m premises with full fibre by 2020, and about 10m by mid-2020s. In a Q&A, Openreach chairman Mike McTighe also noted that the company spends about £1.8bn a year in capex.
However, some challenges lie ahead, as highlighted by the debate. McTighe stressed that better rules for access to buildings are needed, like other utilities, because “we are a utility after all”. And alternative operators look forward to working with the new Openreach, but have also expressed the need to improve the access process quickly. Mark Collins, Director of strategy and public policy at CityFibre, said that the practice at the operational level is currently very different from the theory, as ordering duct and pole access from Openreach is still difficult “at every turn”. There are still operational problems to solve: for example, poles currently do not support the infrastructure of four competing operators. To this end, Ofcom’s recent proposal to reform DPA and make it unrestricted should improve flexibility and ease of access for different use cases. The regulator aims to make this a reality by mid-2019.
There still exists uncertainties around demand and the investment case
Crucially, the market needs to find ways to stimulate demand, and facilitate switching from copper to fibre. McTighe noted that, while there is widespread adoption of FTTC, there is no scaled adoption of FTTP at the moment; and Catherine Colloms mentioned that 17m households today could take superfast broadband, but are not yet doing it. While the discussion throughout the conference showed agreement on the importance of stimulating demand, different views were expressed as to the importance of such demand for the investment case. Alternative operators, such as Hyperoptic, are more in favour of a “build it, and they will come” approach, whereby demand is a consequence of network availability. Collins of CityFibre had previously made a similar remark, saying that “When you show consumers there is faster speed available they do respond”.
To this end, the debate also touched on broadband advertising practices, which have been a lively topic of discussion for UK operators in recent months. CityFibre, which has been very vocal against the use of the term “fibre” for FTTC connections, called for the need to investigate whether current advertising prevents FTTP uptake, and to find ways to enable customers to make proactive decisions. Regulation can also play a role in stimulating demand, as pointed out by Oliver Johnson of Point Topic, who referred to Korea as an example of interventionist country in getting the demand going through regulation. Regardless of different stances though, nearly all stakeholders at the event see times of investment ahead, and look positively at the future of fibre deployment in the UK. In a year’s time, the next ISPA conference will tell us whether such optimism continues to be well-founded.
