Both industry and policymakers appear pleased with progress on rollout, but there is work to do connecting rural areas and driving adoption
Ofcom is as focused on telecoms as ever despite a broader remit
On 20 March 2024, ISPA (the association for UK broadband providers) hosted its annual ‘Parliament & Internet’ conference. Simon Fell MP – the Government’s rural connectivity champion – opened the event, highlighting the progress the sector has made on driving fibre coverage. In his view, this isn’t talked about enough. Lindsey Fussell (Group Director for Networks and Communications, Ofcom) subsequently acknowledged that success in terms of build-out, reiterating Ofcom’s support for sustainable network competition. This belief will clearly underpin the regulator’s thinking in the forthcoming Telecoms Access Review (TAR), the successor to the Wholesale Fixed Telecoms Market Review (WFTMR) that will begin imminently. However, Fussell recognised challenges with some deployments, with adoption and with a “fragmentation of competition”, which means that some altnets will be unable to achieve the necessary economies of scale to survive. She also identified challenges with affordability for many households. Here, industry has stepped up, for example through the voluntary provision of social tariffs. Though these plans would benefit from better awareness, a regulated version would involve questions around the right service level, cost and source of funding – all things for the next Government to consider. Once again, Fussell faced questioning on Ofcom’s priorities in light of its expanded responsibilities, for instance as the UK’s new online safety regulator. She considered that having a single authority able to look across networks and services is valuable, and that Ofcom has a “large and proactive” programme of work focused on its traditional remit of telecoms, so stakeholders should expect no reduction of effort on that front.
Consolidation is seen as inevitable amid a challenging financial climate
In the first panel session, Rebecca Molyneux (Deputy Director, DSIT) and Mark Shurmer (Managing Director of Regulatory Affairs, Openreach) echoed comments on the strong position the UK was now in with respect to gigabit-capable broadband coverage – which both considered was largely a result of private investment. Shurmer sees healthy competition upstream and choice downstream, with these outcomes only possible with the alignment of public policy and regulation over recent years. For him, the dynamic set in motion by the Future Telecoms Infrastructure Review (FTIR) and the WFTMR is “unstoppable”. While accepting that Ofcom’s physical infrastructure access (PIA) remedy may not have worked as well as hoped for some parties, he can only see competition strengthening and considered that should be allowed to play out. Molyneux stated that the Government now wants to work with Ofcom on a stable and competitive regulatory environment that sustains investment. However, Giles Rowbotham (General Counsel and Chief Development Officer, Nexfibre) foresaw the next five years as being challenging for altnets, with a high cost of capital putting business plans under pressure and causing some to “dial back their build engines”. He said that there is a truism in telecoms that it is possible to build networks at a small scale but not to operate them profitably at a small scale. As such, consolidation will happen and there will be a lot fewer altnets in the future. Richard Tang (Founder and CEO, Zen Internet) went a step further, stating that in a few years infrastructure-based competition will have run its course. By 2031, Openreach and Virgin Media O2/Nexfibre will exist but there is consensus that the UK will only have three or four fibre networks in total. He felt CityFibre could be an aggregator of smaller altnets. As deals start to be done at an increasing rate, Tang is concerned about the prospect of consolidation and is not convinced it will deliver the level of competition Ofcom’s market reviews have sought to create.
Openreach congratulates altnets and suggests reciprocal network access
On consolidation, Clive Selley (CEO, Openreach) recognised the trend but said he had no idea how many discrete networks there will be in the coming years, preferring to focus 99% of his time on Openreach rather than any other company. With lots of the UK (including rural areas) uncovered by fibre but commercially viable, he considered industry should “crack on with building until everyone is served”. As such, at the end of the rollout stage, there will be very few places where Openreach is not present. Selley stated though that the growth in fibre coverage witnessed since 2019 – which has been faster than any other European country – is a whole-of-industry story, not just an Openreach one. With the fibre adoption rate “whizzing up” UK-wide, he saw no reason for policymakers to change tack now. Stable regulation will therefore be key moving forward, yet facilitating wayleaves to access premises such as MDUs would help operators build faster and more economically. Permanent full expensing and flexi permits for street works are also on Selley’s wishlist – but the latter is an initiative he considers “needs more oomph”. With poles currently in political crosshairs, Selley stated that this is something he thinks about regularly given that Openreach has 4.1m of them across the UK. 1.9m are now utilised by competitors, which he felt reflected the success of the PIA model. Selley suggested extending PIA to all parties, making all poles (and ducts) available for sharing on the same terms – although this is unlikely to be a proposal that comes out of the forthcoming TAR.
Coverage and affordability are two enduring barriers to inclusion
The second panel, chaired by Selaine Saxby MP, discussed a range of issues relevant to digital inclusion, including access, affordability and skills. Fell proposed a handful of “easy wins” for the Government: getting more people connected (i.e. increasing network coverage), reducing confusion about technologies (for example, FTTC vs. FTTH) and embedding a connectivity champion in local authorities to bridge the gap between the needs of a given area and those of central government. He also suggested policymakers make a pragmatic choice about the technology used to reach the unconnected in the most remote areas. Alex Towers (Director of Policy and Public Affairs, BT) reported anxiety among some consumers about the digital switchover, while Saxby identified a challenge in persuading those on superfast broadband to upgrade to a gigabit-capable connection. Professor Simeon Yates (University of Liverpool) stated there were lots of consumers that don’t see the value in going for more than what they’ve got, while lots of older people don’t go online for fear of scams. He also saw problems with current social tariffs, which are often too expensive and above the £5-£11 per month “sweet spot”. Agreeing with earlier comments, Towers felt considerations should be made about the future funding of social tariffs (which we have estimated costs industry £62m per year). Casey Calista (Head of Public Affairs and Policy, Vorboss) reminded the conference that the digital divide is more than urban versus rural, with certain businesses in central London having lower average speeds than some homes in Gloucestershire. She considered there are many SMEs in need of help navigating the market to choose the right plan and service level for them. Calista agreed with Yates and other panellists that a revised national digital inclusion strategy should be a collaborative effort, involving multiple government departments and key stakeholders such as the business community.
