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Friday 29 March, 2019

OFCOM

Ofcom's plans to promote competition & investment

RNS Number : 3961U
Office of Communications
29 March 2019
 

29 March 2019

 

Ofcom's plans to promote competition and investment in fibre networks

As part of our ambitions to see full-fibre broadband available nationwide over the coming years, Ofcom has today set out how regulation could evolve to support competition and further investment from new alternative networks, Openreach and Virgin Media.

 

Ofcom's goal is to encourage and enable significant, long-term investment in full-fibre broadband to give customers a choice of networks where feasible, while allowing companies who build these networks to make a fair return.

 

A brief overview of our plans is available here: https://www.ofcom.org.uk/__data/assets/pdf_file/0021/142572/promoting-competition-investment-overview-of-plans.pdf

 

Supporting fibre investment across the UK, by both Openreach and its competitors

There is growing momentum in fibre investment. But competition and investment will vary by geography. So we propose taking different regulatory approaches in different parts of the country, depending on the intensity of network competition.

 

To support network competition and investment in the more urban areas, we propose:

 

·     setting regulated prices only for entry-level superfast services and allowing all operators including Openreach freedom to set prices for higher speed and higher-quality fibre-based services; and

·     maintaining stable prices for Openreach's regulated entry-level superfast broadband (up to 40Mbit/s) and high-capacity 'leased lines' based on costs for new entrants and not the costs of the scale incumbent operator, BT. Thus, we are injecting more margin into the network layer to allow sufficient margins for all network investors.

 

The remaining more rural areas, where there is no prospect for competing networks and a weaker commercial case for investment, should not be left behind. Therefore, our proposals support continued retail competition while maintaining the incentives for Openreach to invest in full fibre by allowing Openreach to spread the costs of investment in fibre across a wider group of consumers. This is a radical departure from our previous approach and is akin to utility rate of return regulation or a 'regulated asset base' model (RAB). This will enable Openreach the opportunity to profitably invest in full fibre at low risk.

 

Enabling 5G networks to emerge in the more rural areas is also critical, and this requires the availability of fibre to connect the mobile base stations. To support this, we are proposing cost-based access to Openreach's 'dark fibre' in these areas, including a reasonable return on Openreach's investment. Dark fibre is where Openreach gives competitors physical access to its fibre cables, allowing them to take direct control of the connection. This approach will allow continued and effective supply of mobile backhaul capacity and business connections.

 

Supporting a smooth transition from copper to fibre networks

Once Openreach has built its full-fibre networks, we want to support a smooth, managed transition away from the old copper network to release cost savings and to increase incentives on all broadband providers to promote full-fibre. We are proposing a framework to help Openreach move customers from its copper network to fibre efficiently and quickly by:

 

·     allowing for future regulated products to move from the copper to fibre networks to ensure continued protection for consumers;

·     permitting the network investor to realise the 'value premium' full fibre brings in terms of speed, reliability and resilience in the form of a mark-up on the regulated price; and

·     allowing greater flexibility for Openreach in setting copper-based broadband product pricing to allow a managed transition from copper to fibre services.

 

Next steps

Today's consultation closes on 7 June, and can be found here: https://www.ofcom.org.uk/__data/assets/pdf_file/0018/142533/consultation-promoting-competition-investment-approach-remedies.pdf

 

We intend to consult on our full set of proposals, including market definition, market power and remedies, in December.

 

ENDS

 


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