UK ISPs in Legal Threat Opposing £600m BT 10Mbps Broadband USO

Several ISPs, including Sky Broadband, TalkTalk, Hyperoptic and Gigaclear, are reported to be considering a possible legal challenge if the Government chooses to adopt BT’s voluntary proposal to deliver a 10Mbps minimum broadband speed across the UK by 2020.

At present the Government’s Broadband Delivery UK programme estimates that around 98% of premises across the United Kingdom should be within reach of a 24Mbps+ capable “superfast broadband” connection by around 2020, which would leave the remaining 2% to be catered for by a new “legally binding” 10Mbps+ Universal Service Obligation (USO).

So far BT appears to be the only operator willing to actually deliver on the proposed USO (except KCOM in Hull), which the Government could impose through a strict mandatory policy. But at the end of July 2017 BT proposed an alternative / softer voluntary option (here), which would involve an estimated investment of £450m – £600m.

The cost for BT’s plan could then be recovered from product charges, which wouldn’t have a hugely negative impact on consumer prices, particularly if it were partly used to limit Ofcom’s controversial price reduction on Openreach’s 40Mbps FTTC broadband tier (here). Ironically perhaps, the Government has also just intervened to potentially limit that very same price reduction (here), which adds a new twist to this story.

However a new report in The Times, which stems from an industry source, claims that Sky Broadband, TalkTalk, Hyperoptic and Gigaclear have been taking legal advice and might launch a legal challenge if the Government adopts BT’s voluntary proposal instead of a true mandatory and “legally binding” USO.

The rival providers’ fear that a voluntary USO could stifle competition, even though BT’s investment would be commercial. The Scottish Government has also raised similar concerns, albeit partly for different reasons (here).

The Industry Source said:

“The law is very clear on how a USO should be delivered. BT and government can’t simply call the USO something else and hope the law doesn’t apply. If BT persuades the government to ignore the legal framework, they could face years in court. That would derail the process and leave customers waiting even longer for the fast broadband they deserve.”

So far the Government has continued to say that they want a “legally binding” USO and as a result no firm agreement with BT has yet been established, although it’s looking more likely that a deal will be done and the devil could thus be in the detail. Put another way, is it really going to be a binding USO or more of a toothless Universal Service Commitment (USC) that is a USO in name only?

The UK had a USC of sorts for 2Mbps and it wasn’t very effective, although that ended up being more of a political state subsidy / voucher scheme for rural areas than a truly national deployment of new networks. Meanwhile BT’s competitors appear to desire a fully regulated model, in which all broadband ISPs could invest, with costs recovered from consumers via a levy on profits or another funding mechanism.

The problem for the Government is that they don’t have a lot of public money spare and none of BT’s rivals are willing to step in, which means they’re only left with one supplier. Finding the right model could be tricky. Last week the CEO of Ofcom, Sharon White, told a select committee inquiry that if a voluntary deal were reached then they would “examine in detail what BT claims its cost are and what we believe are appropriate costs to be recovered … it will be a robust process.”

The Government hopes to reach a conclusion by the end of this year and the last thing they need is another legal challenge, particularly given that one is already holding up Ofcom’s 5G spectrum auction.

UPDATE 12:49pm

Gigaclear has sent us the following statement.

Matthew Hare, CEO of Gigaclear, said:

“Gigaclear has not considered legal action, but we strongly believe that a regulated Universal Service Obligation (USO) is the only way to guarantee a competitive marketplace. Competition is vital, not only to give consumers choice and access to high quality broadband, but also to secure the future of this country’s digital economy. If the Government were to go with BT’s voluntary deal this would effectively stifle competition.”