A competitive fibre future for the Channel?

The latest news regarding BT Group’s accelerated fibre rollout being given the green light by OFCOM makes for an exciting fixed connectivity future with faster broadband than ever before, but what does the latest news mean for end users and the UK communications Channel?

The last 20 years has seen the growth of a healthy and competitive telecoms industry, creating lots of new jobs and allowing resellers to offer services to UK businesses through products and solutions such as Wholesale Line Rental (WLR), CPS and various broadband services, ranging from the early ADSL services to FTTC. Having a level of regulation across the products has created a competitive Channel and enabled partners to offer their customers choice.

Fast forward 20 years to present day and with the retirement of the PTSN/copper network and the roll out of full fibre, the Channel is going through a huge transition period. Until now, the majority of broadband services have been delivered on copper WLR lines, where providers have direct relationships with Openreach for the copper service in a well-regulated market and are able to overlay this with broadband connections. The transition to full fibre removes the traditional reseller’s ability to transact directly with Openreach (unless investing in exchange equipment) and fibre services must be purchased from alternative networks, such as CityFibre or Virgin Media, who are investing in building independent fibre networks, or those who partner with BT Group via Openreach, such as BT Wholesale, TalkTalk Business and Vodafone.

Dame Melanie Dawes, OFCOM’s Chief Executive, denied OFCOM’s move would harm consumers on BBC Radio Four’s Today Programme: “It’s true we certainly want to make sure that BT can have a fair bet on this investment, but at the core of our approach is that we are trying to get competition into the wholesale network layer, of broadband for the future, really for the first time in quite a new way.”

The Channel have been raising concerns on their ability to compete fairly on fibre services for some time, and with resellers one step removed from the Openreach relationship, without a regulated Channel model, larger direct Openreach fibre providers will have a competitive advantage.

While the focus is presently on the connectivity solutions, the Great Switch Off has an additional challenge for customers in needing to replace their traditional telephone calling service with an internet-based service, again coming at an additional cost for the customer. Whereas residential customers are undergoing a natural shift to mobile as opposed to traditional telephony, with most now using their landline for broadband only, the UK business is often forgotten by larger industry changes and requirements.

Although we know many will welcome OFCOM’s statement as it justifies large investment in the deployment of Gigabit-capable full fibre, what the statement fails to address is BT Group’s Significant Market Power (SMP) in the Retail and Wholesale Channel that could lead to the market being undermined in the UK in favour of its direct retailers to residential and business customers. At DWS, we think that OFCOM urgently need to intervene so that the UK Channel can compete on an equal footing with BT as we all move to full fibre services, in the same way it has done so successfully with WLR services.