Ofcom has set out how regulation could evolve to support competition and further investment from new alternative networks, Openreach and Virgin Media. It also sets out a framework for Openreach to transition customers from its copper to fibre network.
Background: A growing number of alternative network providers (Cityfibre, Gigaclear, Hyperoptic etc.) are now competing with Openreach and Virgin Media to deploy full fibre and Ofcom recognises the need to encourage and enable significant, long-term investment in full-fibre broadband, allowing providers to make a fair return.
Different regulatory approaches in different parts of the country: Ofcom intends to vary its approach depending on the intensity of network competition. In urban areas regulated prices will only be set for entry-level superfast services and allow all operators including Openreach freedom to set prices for higher speed and higher-quality fibre-based services. Ofcom also wants to maintain stable prices for Openreach’s regulated entry-level superfast broadband (up to 40Mbit/s). In more rural areas, where Openreach faces more risk and a weaker commercial case for investment, Ofcom is proposing a ‘radical departure’ from its previous approach and intends to allow Openreach to spread the costs of investment in fibre across a wider group of consumers – something more akin to utility rate of return regulation or a regulated asset base model. There will also be cost-based access to Openreach’s dark fibre network in these more rural areas to enable 5G deployment.
Transitioning from copper to fibre: To support a smooth transition from copper to fibre networks Ofcom is proposing an overlap where they continue to regulate copper-based services in parallel to regulating fibre-base services – suggesting this should be at least two years. At the start of this overlap period, Openreach would no longer be required to provide new copper connections. Much of this appears to mirror Openreach’s own industry consultation on migration.
Next steps: The consultation sets out their initial views on regulatory measures from 2021 and is open until 7 June 2019. Ofcom intends to consult on the full set of proposals, including market definition, market power and remedies, in December 2019.
