Regulatory stability was the overarching request to the new Government and Ofcom from industry
Rural coverage and fibre adoption persist as two major headaches for industry
Picking up discussions around rural connectivity from Day 1, a morning session on the second day of the conference saw speakers further debate strategies to deliver coverage to all corners of the UK. There was praise for the work of BDUK, which was described as “ahead of the curve” (at least in comparison to the BEAD Program in the US), although panellists were less complimentary about Project Gigabit’s Type C contracts that have so far all been won by Openreach. With the incumbent not part of the panel, it made for a convenient focus of criticism from some speakers. Nathan Rundle (CEO, Gigaclear) accused Openreach of charging altnets a disproportionately high amount to access its ducts and poles. Gavin Rodgers (CEO, Highland Broadband) sounded underwhelmed by the physical infrastructure access (PIA) remedy generally, stating that it is no silver bullet to overcoming rural rollout barriers. Dana Tobak (Founder and CEO, Hyperoptic) reminded us that fibre deployments in urban areas should also not be seen as an easy task, with each building having a different set of rules providers must navigate. As the build phase continues, Tobak noted the shift in focus to adoption and the promise of the new One Touch Switch (OTS) process, which went live that day. She stated that there have been some teething issues on the technical side and that effective implementation of OTS requires collaboration between providers. Amber Pine (Managing Director, Connectivity, Sky) was similarly upbeat about the prospects for OTS, particularly to remove the hassle barrier to switching for out of contract consumers. Pine added that education around the benefits of fibre is needed to stimulate adoption, largely reiterating her comments at last year's event.
With challenges relating to investor caution and capital scarcity, altnets may be likely to pursue mergers over acquisitions
An afternoon session at the main stage offered some different perspectives on the UK fibre market. Echoing comments from Day 1, Daniel Mendes (Digital Infrastructure Investor, DigitalBridge) cited a high level of “capital vulnerability” in the market today, with investor interest lower than when altnets first burst onto the scene. To attract meaningful and sustained investment, Mendes underlined the need for altnets to demonstrate their ability to quickly commercialise and deliver against their business plans. As a result of a softer funding environment, he predicted mergers – rather than acquisitions – would be the likely next step for many. On the issue of consolidation, Jonathan Dann (Senior Managing Director, Guggenheim Securities LLC) spoke to the inevitability of a scaled third player in the UK, competing with Openreach and Virgin Media O2. Dann also pointed to higher levels of fibre take-up in European markets compared to the UK, while also urging the pace of UK rollout to keep up with countries such as Germany. Take-up as a major factor driving new and renewed investment in fibre represented a theme across the panel, with Ankit Agarwal (Managing Director, STL) noting similar concerns at the UK’s relatively low adoption rate, which he said sat in the 10-15% range on average. Both Dann and Georgia Grimes (Director, Fibre Build, Openreach) emphasised the role of regulatory stability in supporting the UK’s ongoing fibre deployment. Grimes stated that the country is only halfway to achieving its goals and needs to remain an attractive place to invest, while also calling on the Government to spearhead the take-up of fibre as a customer, starting with connecting the many local authority buildings dotted around the country.
New Minister of State outlines his priorities for telecoms, promising support for network investment, deployment and resilience
Arguably the highlight for many attendees on Day 2 was a speech by Sir Chris Bryant MP (Minister of State for Data Protection and Telecoms, DSIT). Starting broad, the Minister made a plea for the telecoms industry to help the Government “fix the foundations” of UK society and the economy, promising in return to base policymaking on evidence, rather than prejudice, and to provide support for investment. Bryant noted that investment in the sector is made more difficult by the current international climate, and that strong competition needs to be maintained; however, he reaffirmed a commitment to a light-touch regulatory framework where possible, under which timely and swift decisions are made. Particularly interestingly, he stated that a mobile market review was underway, looking at how to support commercial investment and lower rollout barriers, for example through reforms to planning regulations. The Minister shared the concerns of earlier panels on digital exclusion, describing the latest national strategy (from 2014) as “well past its use-by date”. He also hinted at interventions in several areas, including space and legacy network retirement, as well as improved connectivity on transport and in crowded arenas – calling for anyone with a solution to poor connectivity on trains to email him. In supporting the deployment of full fibre to urban blocks of flats and social housing, the Minister encouraged greater network sharing from operators, reducing the need for the installation or new telegraph poles or street works, while reserving the right of government to intervene in the absence of voluntary sharing agreements. The Minister also underlined the importance of network security and resilience, calling for the strengthening of robust connectivity in the case of power cuts or extreme weather, which disproportionately affect rural and remote communities. The Government’s desire to work with Ofcom and operators in ensuring resilience, while balancing the inherent costs to involved parties, was re-emphasised.
Panellists re-affirm a desire for regulatory stability in upcoming SSP, request answers from Ofcom on copper switch-off, and clash over PIA pricing
Providing an appropriate follow-on to the Minister’s address was a panel dedicated to regulation moderated by Assembly. Panellists were asked for their key requests of the new Government, with regulatory stability by far the most popular answer. Giles Rowbotham (General Counsel and Chief Development Officer, nexfibre) warned that material deviations in regulation could harm the fragile relationship between network providers and investors. With respect to the next Statement of Strategic Priorities (SSP) for Ofcom, which is currently under development, all panellists urged certainty and consistency, which was seen as particularly vital following the change of government and in light of the successful full fibre rollout witnessed so far. The merits of a clear, long-term plan for ensuring strong competition and investment were repeatedly identified, with Mark Shurmer (Managing Director, Regulation, Openreach) equating regulatory stability with economic growth and positive outcomes for consumers. Robert Burles (Director, Regulatory Policy, AllPoints Fibre Networks) expressed concerns at the rapidly approaching nature of the next SSP, and warned of the detrimental impacts of any regulatory surprises for operators – with clarity and forewarning from the Government essential in the case of changes. Burles also called for additional efforts around barrier busting, e.g. on flexi permits and access to MDUs, to further reduce obstacles to the rollout of gigabit-capable broadband.
Reflecting the asks of government for stability were requests of Ofcom for the ongoing Telecoms Access Review (TAR) to stay the course at the halfway point in its 10-year framework. Ben Harries (Policy Director, Ofcom) noted that the current framework, set out by the Wholesale Fixed Telecoms Market Review (WFTMR) in 2021, is working broadly well, but that tweaks would be made where necessary to ensure its evolution. Ofcom continues to work through over 700 pages of submissions relating to the TAR, and Harries emphasised that continued review is necessary, particularly given the uncertainty involved in how newer coverage in rural areas will impact competition. Rowbotham and Alex Blowers (Director, Regulatory Affairs, CityFibre) urged Ofcom to approach the question of deregulation with caution and not to look to roll back rules on Openreach prematurely. Blowers noted that his comments indicated a role reversal with Shurmer over the past five years, with Blowers previously calling for a hands-off approach from the regulator as Shurmer argued for the status quo to be preserved. Kathryn Bowden (Director, Regulation, Policy, Risk and Compliance, Hyperoptic) stated that there has been significant change to the regulatory landscape in recent years as a result of OTS, changes to the ECC and the introduction of auto-compensation, for example, and that there needs to be fair and level across the piece. Burles agreed but added that the copper switch-off was left as an unanswered question following the WFTMR that could present an opportunity to inject some new competition into the market. However, he also warned of the risks of frequent regulatory intervention on the costs facing industry, and suggested time for Ofcom to pause and allow time for market dynamics to take hold. This appeared to resonate with Harries, who recognised the regulator has made a succession of consumer-focused measures, and would now be stepping back to monitor how they play out.
The most contentious points related to wholesale access and pricing. Rowbotham stated that PIA has been one of the most successful remedies for a long time, facilitating faster and more cost-efficient rollouts; however, he added that other operators are paying more for duct and pole access than Openreach charges itself. Shurmer rejected this accusation, offering figures from Openreach’s latest regulatory accounts to support his defence. Shurmer asserted that PIA is “as cheap as chips and has been flying off the shelves”, and called for Virgin Media O2 to reciprocate by opening its assets for use by competitors. Blowers suggested that the root of the issue may stem from PIA not being subject to rules around equivalence of inputs (EOI), leading to different consumption of the product between providers – but that this is something Ofcom’s TAR could reconsider. Rowbotham also took Openreach to task over its Equinox offers, which he said had been seen as a way for the incumbent to weaken competition in the short-term in order to recapture value in the long-term. Shurmer stated that the balance (between the level of pricing and the potential impact on competition) has been set correctly and that Ofcom and the CMA were both happy with the Equinox offers it has brought to market.
