Government Reject Calls for Cheaper Rural Access to Openreach’s UK Cable Ducts

The Government’s recently published Statement of Strategic Priorities (SSP) for telecommunications (here) appears to have rejected calls by some, but not all, alternative UK broadband networks for Ofcom to make access to run new fibre optic cables via Openreach’s (BT) existing cable ducts and poles cheaper in rural areas.

Network access provider Openreach is required to provide access to their existing cable ducts and poles via the regulated Physical Infrastructure Access (PIA) product, which has been extremely successful. This enables rival networks (altnets) to run their own fibre optic cables via the incumbent’s existing infrastructure – cutting down on build costs, disruption and speeding up rollouts of gigabit-capable full fibre (FTTP) broadband.

However, some altnets have consistently argued (here, here and here) that such deployments are being hampered by the rules and high costs of harnessing the PIA product in rural areas. For example, the founder of Fibrus, Conal Henry, previously stated (here) that altnets must pay for the use on a per-metre basis, which he said was “disproportionately impacting rural areas“.

Rural properties are on average 200 metres away from their nearest neighbour, compared to just 10m in urban areas. As a result, Henry says it can cost altnets “almost twenty times more” to deploy new gigabit broadband lines to rural areas than in towns and cities.

The counterargument

On the flip side, the fact that rural builds cost significantly more than urban ones is nothing new, and it’s worth bearing in mind that Openreach will also suffer that impact when they build the infrastructure (they still need to gain a fair return on the investment for it to be viable).

The incumbent is also not magically immune to the realities of rural deployments being disproportionately more expensive than urban ones. This is partly because there are fewer premises to reach, and they’re often dispersed over a much wider area of difficult terrain. Finally, the incumbent has maintenance, repairs and other upkeep costs to consider too.

Openreach has previously argued that the prices they charge for PIA may actually be too low and that rivals don’t share access to their own infrastructure in the same way (note: altnets that receive public investment are often obliged to offer a degree of infrastructure access, but this is rarely as attractive as PIA). On the other hand, smaller altnets carry a lot of risk and often desire to protect the value of their asset vs those with Significant Market Power (SMP), such as Openreach – it’s not an even battlefield.

However, the argument over this – as spotted by the Telegraph (paywall) – appears to have already been partly settled inside the depths of the Government’s recently published SSP, which rejected the idea of Ofcom moving from a ‘No Undue Discrimination‘ (NUD) approach to an ‘Equivalence of Input‘ (EOI) approach.

In a NUD approach, Openreach must treat all the networks in a fair and transparent, but not necessarily identical way: different terms could be offered to different customers if the difference is justified. In an EOI approach, the same terms must be offered to all customers. One altnet proposed that, for the 20% of premises for which PIA charges are the highest, operators should pay a discounted price based on a national average price, that is, based on the total PIA cost Openreach needs to recover for all premises and the total number of premises. But the government disagreed.

Government Response

The government’s view is that a continuing with a NUD approach is the most appropriate and proportionate means by which to achieve a fast roll-out of fibre. We believe a change of approach could have a negative impact on roll-out if it leads to significant organisational and structural changes within Openreach. Additionally, a change would only have a limited positive impact on competition as Ofcom’s interpretation of NUD requires strict equivalence where possible, as set out in the regulator’s consultation on the Telecoms Access Review. Ofcom set out that any difference of treatment between Openreach and their competitors must not put the latter at a disadvantage in terms of cost, time or uncertainty. For new or upgraded services, Openreach would only be able to offer different terms in “exceptional” circumstances. We believe any change of approach would therefore create disruption for limited benefits. We also note that some altnets do not support a change of approach.

We do not agree Ofcom should move to a per-premise model of PIA charging for the most expensive rural areas. PIA charges are set so that Openreach can recover the cost of its physical infrastructure used by third parties, which we believe is an important principle of regulation. The changes proposed by the respondent mean that Openreach would no longer recover the full cost of its infrastructure. While they argue that the loss to Openreach will be negligible, these costs would accumulate over time and, even accounting for their SMP, it would be unfair to mandate Openreach to rent their infrastructure at a discounted price over any substantial period of time.

The proposed discount would also only apply to the 20% premises which use the highest length of the infrastructure network. This would be unfair to networks which connect premises which use a slightly shorter length of the network, as they would end up paying more for less use of the network.

Some stakeholders have shared changes to PIA rental charges could lead to lower prices in rural areas. DSIT has seen no evidence that higher operating costs (including PIA charges) in rural areas are driving up prices for consumers in those areas. Evidence suggests instead that price differences are more likely to be driven by overbuilding that is more common in urban areas, leading to operators offering discounts to gain market share. Furthermore, we have seen no evidence that lower PIA prices for operators in rural areas would lead to lower prices for consumers in those areas.

Conal Henry has already warned that the above decision may “all but put a stop to competitive rural broadband rollout … Decisions being made by this government are likely to establish a permanent digital divide between rural and urban Britain“, although wider economic challenges (e.g. rising build costs, higher interest rates and competition) have already resulted in quite a few altnets needing to scale-back or stop their FTTP builds in both urban and rural areas. Similarly, a number of altnets have, over the past 12-18 months, either withdrawn or scaled-back their Project Gigabit contracts in rural areas.

The future of PIA pricing and regulation for the next 5 years will be set next month, when Ofcom publishes their final Telecoms Access Review 2026 (TAR) statement. The expectation is that this may contain some tweaks for PIA pricing too (this is set by Ofcom, NOT Openreach), albeit clearly not the sort of major shift that has been discussed above.