Ofcom Consult on Impact of Openreach PIA on the UK Leased Line Market

The UK telecoms regulator, Ofcom, has today opened a “narrow consultation” that proposes to amend their leased line access (LLA) market analysis for the ongoing Telecoms Access Review 2026 (TAR) to reflect a “greater potential impact” from Openreach’s Physical Infrastructure Access (PIA) product (this allows rivals to run new fibre via existing cable ducts and poles).

The regulator has already recognised that competitive conditions are different across the UK for the supply of high-capacity leased line (Ethernet) services to businesses and network operators. Ofcom has thus already proposed different market boundaries compared to wholesale broadband services, reflecting differences in how the markets has developed since 2021 (i.e. this approach sorts postcodes into ‘Areas’ based on the presence of competing networks). The existing TAR proposals already split this as follows:

Different Regulation in Different Areas (original proposal)

• High Network Reach (HNR) area, where there is significantly more leased lines network competition, but BT still has SMP [Significant Market Power]. In this area, which covers 9% of UK postcode sectors, we propose that Openreach should provide access to its leased lines services at fair and reasonable prices.

• Area 2 where there is, or there is likely to be the potential for, material and sustainable competition. In this area, which covers 42% of UK postcode sectors, we propose to continue to require Openreach to provide access to its active leased lines services, and to set flat, inflation-adjusted price caps.

• Area 3 where there is not, and there is unlikely to be potential for, material and sustainable competition. In this area, which covers 46% of UK postcode sectors, we propose to continue to require Openreach to provide dark fibre and to set prices based on its reasonable costs. In addition, we propose to continue to require Openreach to provide access to its active leased lines services. For higher bandwidth active services, we propose to maintain flat, inflation-adjusted price caps while the market transitions to dark fibre. For lower bandwidth active services (1 Gbit/s and below), we propose to reduce prices in line with costs as dark fibre is a less attractive alternative than we expected in 2021.

The main focus of today’s new mini-consultation is on how Ofcom defines Area 2, which requires Openreach to follow a more specific pricing policy at wholesale. “In light of responses to our March consultation and new evidence we have received in relation to the use of PIA by competing networks, we are consulting on a proposal to extend the ‘buffer distance’ we use to identify areas where there is or there is likely to be the potential for material and sustainable competition (known as ‘LLA Area 2’),” said Ofcom.

Ofcom originally felt that a 50 metre buffer distance was an appropriate proxy to capture cases where networks are already fibre-connected to, or are a short distance from, demand sites, and that LLA providers would typically find it economic to dig only short distances for customer-specific network extensions. But PIA has the potential to increase the distance over which an LLA provider can extend their network to connect and compete for customers, with the regulator now suggesting a distance of 75m or 100m for Area 2.

The proposed change would have the effect of increasing the size of Area 2 since their March 2025 Consultation, “supporting further competition and investment in these places“. Ofcom’s illustrative analysis shows that this could increase the size of Area 2 from 42% of postcode sectors to a maximum of 50%.

Ofcom’s Full Proposal(s)

• Leased Lines Access market definition – we are consulting on a proposal to extend the buffer distance, which we use to define the boundaries between the LLA Area 2 and LLA Area 3 markets. This reflects new evidence that PIA could have a greater potential impact on providers’ ability to build customer-specific network extensions than we had previously assumed in our modelling. In response to stakeholder comments, we are also clarifying our view on the potential impact of altnet consolidation on LLA competitive conditions in this review period.

• PIA pricing – we are consulting on a change to the way we calculate the simplified lead-in duct rental charge. We are proposing to update our approach to how we apply discount rates to certain components.

• Fibre cost reallocations – we are consulting on a proposal to incorporate certain fibre cost reallocations which BT plans to capture in its 2026 RFS in our charge control modelling for the TAR Statement. This proposal impacts our proposed cost-based charge controls for leased line access services up to and including 1Gbit/s sold in LLA Area 3, and dark fibre services sold in LLA Area 3 and in SMP exchanges (i.e. BT Only exchanges and BT+1 exchanges) within the IEC market. As a consequence of this, we are also proposing to amend the sub-cap on each Main Link service charge within each of the Ethernet charge control baskets in the LLA and IEC markets, from CPI-0% to CPI+5%.

• Low Bandwidth (LBW) services cost-based charge control in LLA Area 3 – we are consulting on a proposal to adopt an updated glidepath that allows Openreach to maintain national LLA pricing at CPI-0% for a one-year transition period, followed by a glidepath down to cost-based prices by the end of the TAR period.

• Dark fibre cost modelling – we are consulting on a proposal to change the treatment of Openreach sales product management component costs within our dark fibre cost modelling. This change follows on from BT’s recent amendments to its cost allocation methodology for this component, which took effect in BT’s 2025 RFS.

Ofcom’s final decision on all this will be published in March 2026 and the above consultation will remain open until 17th December 2025.