Ofcom drafts full-fibre broadband rules

BT share price jumps as Ofcom eases Openreach charge controls

In particular, we will need to look carefully at geographic pricing restrictions and need to define future fair bet conditions in more detail.

However, it is only available to just 3% of United Kingdom homes and offices.

The main initiatives consist firstly of a further call for BT to make its ducts and poles available to anyone who fancies whacking a bit of their own fibre into them, including a commitment to clear them out or add capacity if need be and the provision of a digital map. It should be noted that ability is already being used by rival ISPs such as Virgin Media and CityFibre.

It says this will fundamentally change the business of broadband networks in the United Kingdom and could cut the upfront costs of laying fibre cables by around 50 per cent, from £500 per home to £250.

While customers are gradually moved to full-fibre broadband, Ofcom also states that it wants Openreach to install new lines on its existing network, and fix faults, more quickly, with a requirement that it: completes at least 88 per cent of fault repairs within one or two working days of being notified, up from 80 per cent; completes at least 97 per cent of repairs within seven working days; provides an appointment for 90 per cent of new line installations within 10 working days of being notified, compared to 80 per cent within 12 days now; and installs 95 per cent of connections on the date agreed between Openreach and the telecoms provider, up from 90 per cent.

Shares in BT Group (LON:BT.A) have advanced in London in today's session, with investors reacting positively to news that Ofcom will ease price controls on the telco's network division Openreach.

Ofcom's move not only protects customers in today's market, but also ensures Openreach and others are encouraged to invest in the full fibre networks of tomorrow.

"These companies also need confidence that, in return for investing in full fibre, they will be able to recoup some of the costs through future prices on their network".

But Ofcom is also concerned about BT undermining any new fibre investment by selectively dropping its trousers on price to undercut its new competitor, so it's banning that, and then it's knocking 25% off the annual wholesale rental price for the 40 mbps service, as shown in the table below.

Ofcom seems mindful of this and has proposed a fresh set of regulations, largely aimed at BT's fixed-line wholesale arm Openreach, which are created to both encourage fresh fibre to be laid, but at the same time keep "superfast" broadband affordable for everyone by lowering what Openreach can charge other providers for its 40 Mbps service.

"We will do this by cutting the wholesale price that Openreach can charge telecoms companies for its basic superfast broadband service, which has a "download" speed of up to 40 Mbit/s, and an "upload" speed of 10 Mbit/s". After consulting on the matter, this is to be increased to £11.92.

"Today's draft decisions confirm pro-investment measures set out by Ofcom in 2017", Ofcom explained.

The government has made no secret of the fact that it wants the United Kingdom to have a full fibre network as well as 5G connectivity going forward.

Today's announcement follows proposals put forward by Ofcom previous year and recent commitments by broadband companies that could see up to six million premises covered by full fibre by 2020.

Hull telecoms monopoly KCOM was set to have full-fibre coverage across all of its network by March 2019, covering 200,000 premises in the Hull area.

TalkTalk aims to cover three million premises to full fibre.

BT said the watchdog's plans provide "certainty on their approach to key products and we welcome Ofcom's intention to support investment in full fibre networks".

Ofcom also wants to ensure that Openreach installs new lines on its existing network, and fixes faults, more quickly in the meantime.

It said that in the future, Openreach would be required to complete at least 88% of fault repairs within one or two working days of being notified, up from 80% today.

It must also provide an appointment for 90 per cent of new line installations within 10 working days of being notified, compared to 80 per cent within 12 days now, and install 95 per cent of connections on the date agreed between Openreach and the telecoms provider, up from 90 per cent today.

These new requirements must be met by 2020/21.

But now Ofcom with its Wholesale Local Access review (WLA) draft statement has stepped in and said that its proposals will see the upfront cost of building ultrafast broadband networks halve, as well as new pricing decisions to encourage investment in full-fibre networks.

BT said the price changes would impact Openreach's revenue and profit in the 2018/19 financial year to the tune of between £80 and £120 million and lead to further impacts in the following two financial years in the range of low- to mid-tens of millions of pounds.

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