With fibre investment and coverage since the last review surpassing expectations, Ofcom is now keen to effect the second half of a 10-year framework, keeping Openreach honest while enabling scaled fibre network competition to materialise and ultimately be sustainable in the long-run.
Straying from the path set out in the 2021 WFTMR would have been surprising and wrong at this stage in the development of the fibre market. Ofcom’s proposals reflect a commitment to the regulatory enablers and the fair bet, as well as the ongoing objective to promote effective network competition. Maintaining the stability of the last review that saw significant investment also aligns with the Government’s desire for growth.
Having listened to all stakeholders, Ofcom’s preliminary decision to champion stability is the right one given the uncertainty for the future. Proposals to maintain PIA regulation and extend QoS standards to fibre are appropriate, if expected, as is its caution in determining areas having already developed ‘established competition’.
Openreach’s wholesale pricing, especially regarding discounts, has proved particularly contentious. Altnets may be disappointed not to see Ofcom propose a price floor, although requiring a longer notice period without prohibiting further Equinox offers strikes a balance between ensuring stronger safeguards without preventing competition on the merits.
The regulator has correctly focused on the principle of preserving competition over protecting specific competitors. Despite acknowledging the fragmented nature of the market, it was never Ofcom’s role to protect any one operator or business model – instead it was to give altnets an opportunity, but not a guarantee, to succeed.
It is inevitable that the UK’s fibre market will see consolidation, although it is unclear whether this will mean an orderly flow of deals, a fire sale of distressed assets or a combination of the two. Post-2031 (the next review) is when we expect to see scope for more substantial change to the regulatory framework, with cost-based pricing and the identification of competitive areas likely to be priority issues for Ofcom.
Straying from the path set out by the WFTMR would be premature given the ongoing development of the UK’s broadband market
On 20 March 2025, Ofcom published a draft of the Telecoms Access Review (TAR), which will establish the regulatory framework for the UK’s wholesale fixed broadband markets for the 2026-2031 period. At the heart of the current Wholesale Fixed Telecoms Market Review (WFTMR) for 2021-2026 was Ofcom’s objective to provide the enablers to incentivise a step change in investment from BT and a host of alternative fibre builders. Through this review, it sought to mark a turning point for the UK’s broadband market that had been considered a laggard relative to other European countries. Ofcom’s TAR proposals now effectively set out the second half of a 10-year framework to provide operators and their backers with the clarity and certainty that it hopes will ultimately secure long-lasting competitive investment in fibre networks. Specifically, the regulator has made the following proposals:
Geographic markets: Area 2 should expand from 70% to 90% of premises in the UK, with Area 3 contracting from 30% to 10%. There are no areas yet where competition is sufficiently established or effective (i.e. Area 1);
Wholesale pricing: A cap on the nominal price that Openreach can charge retail providers for speeds up to 80/20Mbps, rather than 40/10Mbps at present;
Discounting: Prohibition on Openreach offering geographic discounts across all charges and longer notice periods on certain commercial terms from 90 days to 120 days;
Physical infrastructure access (PIA): Continued access for competitors to Openreach’s ducts and poles based on no undue discrimination and updated charges; and
Quality of service (QoS): Where Openreach is unlikely to face competition, new backstop standards around the speed and quality of repairs and installations for fibre services.
Since discussions (and intense lobbying) over the TAR began around two years ago, Ofcom has stressed more than once that it would be unlikely to divert from its current path at the halfway mark. The regulator has also recognised that aspects of the TAR are contentious and that there may be some market developments that could mean considering how regulation should evolve. Nevertheless, at industry events here and abroad, Ofcom has emphasised that the spirit and much of the substance of the existing regime would remain intact, with tweaks made only where necessary. Ofcom’s proposals show that it has been true to its word – and it is right to stay the course. Given that a lengthy pre-consultation phase has already played out in public, nothing in the proposals came as a genuine surprise. We therefore expect limited changes between now and the March 2026 statement, making for an atypical situation for such a high-profile market review.
By preserving the status quo (rather than seeking to effect any sort of regulatory overhaul), Ofcom is both maintaining and creating the conditions for sustainable network competition and investment in gigabit-capable broadband in order to deliver better services and choice for end users. Its proposals align with, and are directly supportive of, the Government’s growth agenda, which will depend on the UK’s digital infrastructure being fit for the future, capable of driving productivity and innovation over the next five years and beyond. Ofcom appears alive to its Growth Duty obligations and the Government’s new Statement of Strategic Priorities (SSP), with targeted regulatory changes to incentivise investment while being mindful of its responsibility to act in the interests of citizens and consumers.
Ofcom will have listened to all stakeholders, including some more radical suggestions, but has settled in the right place
Fibre coverage in the UK has risen significantly in a fairly short space of time; from just 7% in January 2019 to 69% as of July 2024, according to Ofcom – one of the fastest growth rates in Europe during that period. Despite the considerable progress made (predominantly due to private investment), the country’s fibre build phase is not yet complete. With work left to do, expanding fibre coverage remains top of mind for Ofcom, especially in light of the Government’s aim to ensure “nationwide” access to gigabit speeds by 2030.
After the TAR officially launched in March 2024, there have been questions raised about how ‘root and branch’ Ofcom’s analysis will be, with some colleagues known not to be looking to change tack less than five years into the current regime. That said, Ofcom has issued information requests, engaged with stakeholders and reviewed hefty pre-consultation submissions. It has given all suggestions due consideration, even the most radical ideas, and will continue to do so over the next year. INCA, on behalf of altnets, has been particularly active in sharing reports and data with Ofcom and DSIT, spending hundreds of thousands of pounds in the process.
Amid conflicting calls for rolling back versus strengthening the rules imposed on Openreach, Ofcom has chosen not propose major changes, instead preferring stability in order to maintain the direction set by the WFTMR. Given the aim to ensure fair competition while also promoting investment, the regulator seems to have taken the right approach in several key areas:
Geographic markets: Here, Ofcom’s proposed boundary adjustments between Areas 2 and 3 are arguably appropriate, and perhaps a reflection of it being overly pessimistic in the past about the level of rural network investment that would occur and an acknowledgement of the mechanics of competition at work. While Ofcom’s vision is to deregulate in competitive areas, thereby shifting premises into Area 1, it still considers that no such locations exist, but foresees they will emerge in the future. This is sensible given that not enough time has passed for most altnets to become established post-deployment and drive adoption in order to then represent a material and sustainable competitive constraint on Openreach;
Wholesale pricing: Continuing to honour the fair bet principle (that allows BT to earn returns above its cost of capital within charge controls) is the right call at this moment in time, reflecting the risk of network investment and associated payback periods. While Ofcom will consider its position on this issue in the next market review, consistency in support over the coming five-year cycle could be the catalyst for BT to raise its fibre rollout ambitions above the current 25m premises;
Discounting: This has been a major concern for stakeholders, with CityFibre and nexfibre urging Ofcom to prevent Openreach from making any additional price reductions (i.e. Equinox offers) that might have the effect of locking in customers, while INCA has gone further, pushing for a wholesale price floor. Openreach has stated that the two Equinox offers were customer-led and deemed fair by the regulator. By dismissing an upfront prohibition of the Equinox scheme, Ofcom’s proposals arguably side with Openreach and access seekers, although it has opted to bolster competitive safeguards by putting some additional protections on discounting in place. This should reduce the risk that any future price constructs have a destabilising effect, while still giving Openreach the flexibility to compete on the merits;
PIA: The PIA remedy imposed on Openreach is largely functioning well, with ducts and poles utilised at scale, enabling cheaper, quicker and easier fibre rollouts by multiple providers. While even Openreach has admitted that PIA may not have always worked as well as hoped for some parties, it is a useful and popular product that has helped transform the market, and it is good to see Ofcom not be complacent and look to further refine its PIA regime given that this foundational remedy is essential to a comprehensive regulatory framework. The recommendation from Openreach to extend PIA rules to all network owners on equivalent terms was made more in hope than expectation, and it is appropriate that Ofcom has not pursued it; and
QoS: Applying new backstops on repairs and installations on fibre ensures Ofcom’s minimum standards once again evolve in line with the market, which is seeing a continued shift away from copper. That these would only be implemented in Area 3 is notable, reflecting the regulator’s faith that competition will put sufficient pressure on Openreach to deliver a high level of Qos in the rest of the country.
The regulator has correctly focused on preserving competition in the market over protecting any specific operator or business model
Altnets have caused a sea change in the UK’s digital infrastructure landscape, with their fibre rollouts impressive in terms of scale and pace, challenging larger players to do (more of) the same. Accordingly, Ofcom’s regulation has been designed to ensure this trend continues. In the WFTMR, Ofcom sought balance, offering Openreach a degree of pricing flexibility on fibre and some support for its copper switch-off plans, while introducing measures to help alternative fibre builders, such as preventing Openreach from offering discounts (including geographically targeted discounts) that could stifle investments of rivals. Ahead of the TAR consultation, the regulator has been urged by at least one altnet to not only promote competition but to protect it by focusing sectoral regulation around delivering long-run consumer welfare through a diversity of supply – i.e. various network providers. The thinly-veiled suggestion here is that Ofcom tips the scales in favour of either all or a subset of alnets relative to the more established operators.
The regulator has recognised how independent altnets have become an important piece of the connectivity jigsaw, as well as the challenges the community is contending with. Only CityFibre has turned a profit, while Fibrus is one of a small group expected to do so in the near future. In addition, a high cost of capital has caused some to halt or pare back their build plans. Ofcom has identified a “fragmentation of competition”, which means that some altnets will not be able to achieve the necessary economies of scale and ROI to survive. It has also reiterated support for sustainable network competition, the principal belief that has clearly underpinned its thinking throughout the TAR process. However, intervening to support specific competitors or business models would risk Ofcom over-reaching beyond what is justifiable, proportionate and importantly non-discriminatory in the bounds of a wholesale market review. Rightfully, it has aimed to promote network investment by creating opportunities (but not a guarantee) for providers of all sizes to succeed, rather than sustaining artificial competition by ‘picking winners’ and looking to shape the rules of the game in their favour. For the same reasons it is correct not to require retail providers (namely BT Consumer and Sky) to use certain wholesalers, Ofcom has made the right choice not to play favourites at the infrastructure layer and instead for its proposals to strike a balance that drives healthy competition upstream and choice downstream.
In light of the economic and operational challenges facing altnets, Ofcom – and the Government – should be prepared for the prospect that competition in some parts of the country will not be sustainable, and that a number of smaller players could fail. In such a situation, Ofcom has said that it would work with alternative (upstream) suppliers, e.g. Openreach and others, to help reconnect customers as soon as possible. Unlike the business market, consumer telecoms does not have a Supplier of Last Resorts (SoLR) process in place, which would otherwise establish a safety net for the customers of struggling providers. Should other altnets encounter financial difficulties but are not snapped up by a rival, the consequences are currently somewhat unclear. Outside of the TAR process, Ofcom should resume talks with industry over a contingency plan to anticipate and manage the fallout from a potential worst-case scenario.
Consolidation is now inevitable, although it is unclear exactly which future will materialise
Market realities – such as increasing overbuild, intense retail competition and weak fibre adoption – have presented three broad outcomes for altnets: get big (i.e. scale); get bought; or get stranded, failing without rescue by an investor or a larger competitor. With the fibre ‘gold rush’ over, consolidation is widely anticipated as an inevitable part of the sector’s outlook even if the ‘endgame’ and the pace of change are still unclear. Virgin Media O2’s NetCo has been created as a “platform for potential altnet consolidation opportunities”, while its sister company nexfibre has also looked at ways to grow inorganically. CityFibre has positioned itself as a potential main aggregator of smaller altnets, although any future M&A activity will hinge on it resolving outstanding funding questions. As such, there is definite uncertainty about the exact path the consolidation journey will take, and whether there will be a wave of consolidation involving various distressed assets or an orderly sequence of deals similar to Netomnia/Brsk, for example.
As industry looks ahead, there is also a polarisation of views regarding the number of fibre networks the UK will – and should – end up with in the long-run. For some, infrastructure-based competition will have run its course within a matter of years. Hyperoptic has stated that “no one expects” there to be more than three or four national fibre networks in total, of which Openreach and Virgin Media O2/nexfibre are all but guaranteed to be two. CityFibre has argued that the country needs three national networks to see effective competition, although nexfibre has stated that the economics of that kind of market structure do not add up, and that there is more likely to be two in the end, plus some niche rural players. Absent a universal view that a concentration of most altnets into a few stronger operators is certain, the success of many could be determined by securing a large wholesale customer or reaching an ambitious break even point of retail adoption, or both.
Whichever scenario plays out, it is highly likely that post-TAR Ofcom will soon hear calls to evolve its framework – and to do so by a more material extent. In its proposals, the regulator has sought not to rock the boat, taking the most minimal interventions to have a meaningful positive impact without creating a waterbed effect. However, it is currently too soon to know whether the next market review in 2031 will herald a more significant departure from the current strategy and framework, for example with Ofcom no longer honouring the fair bet or looking to relax rules imposed on Openreach. Ofcom has stated that market conditions will be the trigger for how it will regulate – i.e. prices and services available to consumers or adoption rates, rather than the number of infrastructure builders in each area – and it will be eager to step back and let the market take over where and when that is possible. If effective competition has taken root and becomes sustainable, Ofcom may be in a position to deregulate, shifting premises into Area 1. If investment is ongoing and sustainable competition is still emerging, Ofcom should be expected to continue to regulate in a way that supports that process.
For now, the main TAR consultation will run until 12 June 2025, after which Ofcom is expected to publish a further (up to 12-week) consultation on remedies in the summer, with the process concluding with a statement in March 2026. Based on current proposals, Ofcom has recognised that its framework is broadly working but that there is more to do, and so there is the need for certainty and stability, rather than having the referee change the rules before even reaching half time. As ‘1.5’ fibre networks would not be a good result for the UK market or its customers, consistency and predictability of regulation, albeit with some adjustments, is key to finishing the job by continuing to incentivise investment and promote long-run network competition.
