Ofcom received praise for supporting network investment, but further interventions will be needed to connect remote areas lacking commercial incentives
Success in fixed broadband, but some potential challenges in mobile
On 18 March 2024, Assembly attended the latest Westminster eForum event on priorities for broadband and mobile connectivity in the UK. Umayr Loan (Director, Economics, KPMG) considered the UK had seen considerable success in fixed broadband, with fibre coverage and investment growing, and 100+ altnets competing with Openreach at the infrastructure level. However, he recognised that the retail market was more concentrated and that several headwinds (e.g. high interest rates, low penetration, intense competition) presented a challenging commercial environment for many smaller providers. Loan stated that consolidation was inevitable, although the “endgame” was currently unclear. He also claimed that Virgin Media O2 was in a strong position to acquire altnets in the future and that the operator envisages only two networks in the long-run – itself and BT. In mobile, Loan painted a relatively unfavourable picture, with declining real-terms investment and making the well known point that both Three and Vodafone are earning below their cost of capital. Heather Thompson (Senior Audit Manager, National Audit Office) also signalled some concerns, stating that the Shared Rural Network (SRN) programme – despite not missing any coverage target so far – is “behind schedule”. She put this down to preparatory work, local delivery, agreeing site sharing, finalising mast locations, procuring services and securing planning permissions all taking longer than expected. In addition, Thompson noted that deployment costs have also risen, but that this is a hit industry should be expected to take.
Planning is a key issue in the delivery of mobile connectivity
In response, Bryn Jones (SRN Director, Digital Mobile Spectrum Limited) stated that the project is on track, but acknowledged that delivery can be difficult, recognising that “people love mobile coverage, not so much masts.” This is an issue on which the Department for Science, Innovation and Technology (DSIT) has written to industry recently. Jones identified planning, fibre, the environment and power as four considerations for the SRN, which individually and collectively represent challenges in remote areas. However, highlighting insufficient resources in planning authorities as a major cause of delays triggered a reaction, with one audience participant arguing that the problem was really due to planning teams’ struggles with a lack of acceptable applications, which have to be resubmitted and hold up the validation process. Jones also noted the positive impact of revised permitted development rules, enabling operators to deploy masts less than 30 metres high more easily. Councillor Susan McDonnell (Portfolio Holder for Customer Services, Digital and Procurement, Durham County Council) stated this change may have worked for operators, but not necessarily for councils or residents. She also considered that rollout delays could be minimised by operators talking to councils about their plans at an earlier stage, even suggesting that her organisation would be willing to sign a non-disclosure agreement if it would encourage operators to communicate. While other speakers were reluctant to comment on a potential Three/Vodafone merger, McDonnell stated that if it extends their capability and coverage, then it is “exactly the sort of thing they should be doing.”
Ofcom unlikely to diverge from its current regulatory approach to fibre
Lindsey Fussell (Group Director, Networks and Communications, Ofcom) largely focused her remarks on the upcoming market review of the wholesale fixed broadband market, which will set the five-year regulatory framework from 2026. She said the previous decision centred on a belief in sustainable network-based competition delivering better choices and services for consumers, and that the scale and pace of the build-out of fibre (from Openreach and altnets) have surpassed Ofcom’s expectations. While indicating Ofcom will not depart significantly from its current strategy, Fussell recognised that there have been some changes in the market, which means there is a need to consider if or how regulation should evolve (for example, to take account of the future copper switch-off). In this respect, nothing new was said here. She stated that some aspects of the review will be contentious and Ofcom will be listening to all views. When questioned about One Touch Switch (OTS), Fussell stated that the ongoing delays to implementation were a big disappointment and that the industry could have done better. Though it is a complicated matter, she was hopeful about the revised deadline and urged operators to “strain every sinew” to meet it. Alongside a strong brand and clearer rules around terminology, Fussell considered that OTS would play a key role in driving fibre adoption, which can vary greatly between providers. Tom Rigg (Chief Operating Officer, Broadband for the Rural North) later outlined the proven impact of vouchers in boosting take-up of gigabit-capable broadband in very hard to reach (VHTR) areas.
Connecting everyone will involve different technologies and government schemes
In delivering broadband nationwide, Richard Wainer (Policy and Public Affairs Director, Networks, BT) stated the UK had come a long way, but cautioned that regulatory stability and certainty were now crucial to finishing the job and maintaining commercial incentives. He saw the universal service obligation as a “useful safety net” (to which the Government could impose a modest speed uplift), but that it should be considered in how it fits with other initiatives – an approach he felt DSIT was right in taking. Wainer urged the Government and industry to work together on Project Gigabit, any new VHTR intervention and a revised USO to deliver a plan for the “final fraction” of unconnect premises. Ceren Clulow (Programme Director, Connecting Cambridgeshire, Cambridgeshire County Council) also wanted to see better collaboration at the local level, although echoed comments from McDonnell that operators’ rollout plans are rarely revealed before the delivery phase. On the progress Project Gigabit was making to achieve its 2025 ambitions, Martyn Taylor (Chief Commercial Officer, BDUK) described the situation as “so far, so good.” However, he did flag emerging concerns about “urban deserts” that account for 2% of premises and should be covered by private investment but aren’t. BDUK is considering extending vouchers to these unserved areas, but Taylor is alive to the risk that it could end up using public money to subsidise potentially profitable locations.
