Ofcom plans stimulus for super-fast broadband

Ofcom is hoping to deliver consumer benefits through broadband investment and competition

UK telecoms regulator Ofcom has outlined plans to open up regulation for the investment of next-generation broadband networks.

The watchdog hopes that the move will clear the way for companies and organisations to invest in the next generation of broadband services for the UK, delivering consumer benefits through investment and competition.

BT has said that it is looking to invest around £1.5bn in upgrading its copper network over the next four years to introduce fibre-to-the-cabinet and even fibre-to-the-home for up to 20 million residences, but would only do so once it got the go ahead from Ofcom. This announcement provides the green light that BT has been waiting for.

"Super-fast broadband represents one of the most important developments in modern communications for many decades," said Ed Richards, chief executive of Ofcom.

"It will deliver significant benefits to consumers and businesses with the prospect of new digital services delivered over the internet at high speed.

"Our message today is clear: there are no regulatory barriers in the way of investment in super-fast broadband. We want to promote investment but also ensure that there is fair and effective competition for the future."

Companies such as Virgin Media have already begun rolling out similar services, including a recently unveiled 50Mbit/s service in certain areas.

Although fibre, cable, copper wires, mobile, fixed wireless and satellite networks are all mentioned by Ofcom, the main focus of its statement is on the upgrade of the copper access network to fibre.

As part of this, Ofcom commissioned a survey of BT's underground telecoms ducts to determine whether there is space in the pipes for fibre-optic cables, thereby easing the transition and minimising disruption.

The survey revealed that between 40 and 50 per cent of these ducts have room for new cabling, but the amount of space is highly variable and there remain some potentially significant hurdles to using existing ducts in the majority of locations.

Regarding future regulation, the statement sets out five key points designed to promote private sector investment and competition.

First and foremost, Ofcom has stipulated that providers such as BT will have the freedom to price wholesale next-generation broadband products without any regulatory intervention. This move is designed to ensure that investors will be able to make an appropriate return on their investment, based on the risk they are taking but with pricing at a level that the market will bear, given the ready availability of alternative broadband services.

Secondly, should further competition emerge upstream from companies offering these services through passive access, investors will have the opportunity to earn a rate of return that genuinely reflects their costs and the associated level of risk.

Thirdly, Ofcom wants to ensure that the networks are as efficient as possible to help encourage investment and avoid excessive complexity of business systems needed to support the network.

In order to secure competition, the fourth point is to provide wholesale access for all by supporting new active fibre-based wholesale products offered by BT. This will require BT Openreach to offer these services to other providers, including BT Retail, on equal terms and without favour.

Lastly, Ofcom will allow companies to invest alongside BT when these new networks are built, thereby encouraging future competition as the new infrastructure will support further future competitive investment should demand arise.

Ofcom has reiterated that this is only the first phase in the development of next-generation networks, and that it will be working closely with all stakeholders to understand how far private sector investment will take the UK, and whether there is a need for further action to bring the benefits of super-fast broadband to a wider group of UK consumers, citizens and businesses.

Furthermore, to promote efficient investment and secure competition in super-fast broadband, Ofcom is consulting on a variation to BT's legally-binding undertakings agreed with Ofcom in 2005. The consultation will run until 14 April 2009. If Ofcom accepts BT's proposal after assessing the consultation responses, it will aim to publish a new consolidated set of undertakings.

Ofcom's statement also lays out plans to work closely with the European Commission on its recommendations on next-generation access, co-operate with industry on developing a standard active wholesale product, and contribute to the government's Digital Britain proposals.