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Cityfibre Calls on Ofcom to Rethink its Approach for Full Fibre

Friday, February 23rd, 2018 (12:01 am) - Score 1,941
router with fibre optic cables on top

The Head of Regulatory Affairs at Cityfibre, Alex Blowers, has criticised Ofcom’s focus on regulating wholesale access to Openreach’s (BT) legacy UK copper network down to cost and called on them to rethink their strategy in order to better support the new generation of “full fibre” (FTTH/P) ultrafast broadband.

At present the regulator states that one of its primary duties is to “further the interests of consumers in relevant markets, where appropriate by promoting competition.” In many ways Ofcom has done a good job on this front, not least by encouraging a highly competitive market with lots of affordable broadband packages, most of which are based off Openreach’s old copper network.

On top of that the recent Strategic Review has helped to weaken BT’s grip by adopting an approach of “legal separation, for Openreach, while at the same time making it easier for rival ISPs to access their existing cables ducts and poles (details). Some of this could take a few years to produce the intended improvements and indeed since the review we’ve seen a raft of major “full fibre” announcements.

For example, Hyperoptic aim to cover 2 million urban premises with FTTH/P by 2022 (aspiration for 5 million by 2025), while Vodafone with Cityfibre will reach 1 million by 2021 (aspiration for up to 5 million by 2025) and Virgin Media plan 2 million by around 2019/20. Not to mention all of the work by smaller operators and Openreach’s own plan for 3 million by 2020 (aspiration for 10 million by c.2025). TalkTalk has also proposed a similar deployment.

Nevertheless Alex suggests that Ofcom is still too stubbornly focused on maintaining low prices and “will not contemplate any course of action that drives short-term price increases for consumers, even if the long-term benefit would be a healthy competitive marketplace with much lower prices.”

Alex Blowers, Cityfibre’s Regulatory Boss, said:

“Increasingly, I’m coming around to the view that the problem lies with that clunky primary duty and specifically, the vagueness of the duty when it comes to a clear focus on securing a first-class national digital infrastructure.

In short, Ofcom has been successful in delivering (relatively) low priced access for consumers via a mediocre legacy telecoms network, but the cost of this has been a failure to provide the right incentives to the industry to replace that network with something fit for purpose.

The best way to understand this is to reflect that high prices and crap customer service (the stock-in-trade of incumbent telcos the world over) can be rectified by two methods: you can regulate the hell out of them, specifically by forcing price cuts and imposing ‘quality of service’ obligations, or you can encourage someone else to enter the market to do the job better.”

Ofcom would perhaps argue that they’re already trying to use both of the aforementioned methods to improve the market, although Alex believes that they haven’t gone far enough. Meanwhile he suggests that BT’s rivals often appear to be too comfortable with the idea of maintaining their existing unbundled (LLU) copper assets, as opposed to replacing them with pure fibre. On this point Openreach and Cityfibre might actually agree.

Back in October 2017 Openreach claimed to have found “broad support” for their own FTTP aspiration for 10 million premises by 2025 and they spoke of a desire to start the work “sooner rather than later” (here). However they also warned that such a roll-out might only be possible with co-investment support from other ISPs, as well as softer regulation (e.g. flexibility over wholesale prices and the ability to switch-off copper as FTTP is deployed) and reduced logistical barriers (improved planning) etc. Easier said than done.

Like it or not full fibre is very expensive and Openreach, being as bogged down by regulation as a horse in deep mud, finds itself stuck between a rock and a hard place (here).

Alex continued:

“When I joined CityFibre, I took some comfort from the recently published Ofcom Digital Communications Review – essentially the Telecoms Strategic Review Mark II. It signalled at least some recognition that we couldn’t, as a country, go on like this and that investment in new full fibre infrastructure should now be encouraged.

Unfortunately, though, this strategic rethink is hardly visible in Ofcom’s actual decisions. In both its recent business connectivity and wholesale local access (i.e. residential broadband) market reviews, Ofcom has essentially maintained the same course, focused on regulating wholesale access to BT/Openreach’s legacy assets down to cost – even at the expense of blunting new market entry opportunities for competing full fibre operators.

When pressed, their explanations are revealing. They will not contemplate any course of action that drives short-term price increases for consumers, even if the long-term benefit would be a healthy competitive marketplace with much lower prices. In one memorable exchange, we were told “Today’s consumers cannot be asked to pay for tomorrow’s network”. This is a wrong-headed view on two levels.

* First, any infrastructure upgrade of any kind involves some foregone benefit today for a more substantial benefit in the future. Consider, for instance, the way that the push for renewables is leading to some short-term pressure on energy prices. Apart from a few marginal voices though, no-one questions the national benefit of this policy.

* Second, the timescale on which consumers would benefit from a mass market deployment of FTTP is not some time several decades hence, but in the next decade – provided Ofcom genuinely put its shoulder to the wheel to make this happen.

There is also an increasing recognition in broader public policy circles that the UK is experiencing a crisis of under-investment in critical national infrastructure. Whereas the focus of the Communications Act was on delivering private benefits to consumers, attention is now switching to the broader, public benefits of a switch to full fibre; not just in terms of faster and better access for consumers to movies and other content but in terms of increased productivity and closing the troubling regional disparities across the UK. These broader public benefits are hardly touched on in the Communications Act and therefore, unsurprisingly, don’t seem to loom large in Ofcom’s thinking.

I’m all for the interests of consumers. I’m one myself, who happens to be experiencing one of the mysterious periodic outages to which my copper connection is prone as I write this. But somewhere along the way, the idea that regulatory policies should involve a proper balance of short term and long term interests, both public and private, has gone missing. The problem is exacerbated by the lobbying power of the regulatory dependents [ISPr Editor: TalkTalk, Sky Broadband etc.] who entered the market to exploit what was only ever intended to be a temporary expedient of regulated access to the legacy copper network. These firms have consistently argued for lower priced copper, regardless of the effects of that on long-term investment incentives to deploy fibre.”

In the end Alex calls for a “course correction,” where the Government would amend Ofcom’s duties to end the focus on low priced copper access and instead encourage more fibre. Naturally Cityfibre has some vested interest in getting their own way here and Alex doesn’t specifically spell out what his solution would be, but he does make some fair and relevant points.

The missing aspect above is how all of this might impact Openreach, which is crucial because they already have the workforce necessary to make full fibre a national reality, but this also gives them the power to threaten an emerging market of alternative network (AltNet) ISPs – regulation allowing – and Cityfibre are one of those. In such a complicated market, balance can be a hard thing to find.

On top of all that there’s the big question mark over how today’s consumer market, which has become use to suckling from a selection of super cheap broadband services, would react to the idea of paying more for FTTH/P. At least on this front the AltNets have an advantage over Openreach because they don’t suffer from the same regulatory baggage, which is one of several reasons why they’re sometimes able to offer cheaper services.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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42 Responses
  1. Avatar New_Londoner

    Looking to Ofcom for a coherent regulatory framework is a big ask. Past experience suggests that it is unlikely to respond positively, no matter how well reasoned the case. The sooner its current CEO moves on the better!

    • Avatar Chris P

      Exactly that. OFCOM need a new captain, one that is more focussed on creating an environment that encourages fibre, rather than flooding the market with cheap copper that runs plenty fast enough for most consumers. If we all paid more for copper, and copper could be replaced with fibre there’d be more incentive to go fibre.

    • Avatar Joe

      Keep hoping for a new CEO in vain.

      OFCOM is probably too big to function properly whoever leads; it has been one of the most successful regulators in empire building its powers and budget.

  2. Avatar Bill

    Although I am not really in favour of reducing BT’s income I am beginning to think there may be a good aspect to regulating FTTC prices.

    Given that BT are hell bent on delaying proper FTTP as long as possible, this may be the only way to encourage them. If the profitability of FTTC goes down they may hopefully rebalance their priorities. Gfast is also a gross waste of time and a huge expense (despite what they claim). All that research effort and deployment expense not to mention future maintenance which would be much better directed to a long term full fibre vision. So it might be good if they regulate that too.

    • Avatar Chris P

      The majority of consumers are typically happy with their current speeds and prices. Keeping FTTC low cost does not encourage consumers to demand the higher priced fibre. If FTTC cost almost as much as FTTP or even more, consumers would be more likely to demand FTTP as the value judgement argument becomes clearer.

      LLU & low cost FTTC are 2 main things holding back FTTP.

    • Avatar AndyH

      “Gfast is also a gross waste of time and a huge expense (despite what they claim)”

      Do you have any evidence of this?

    • Avatar Bill

      @AndyH – Did you read the next line?

    • Avatar Steve Jones

      @Bill

      No, those are just words and a claim by you. Not evidence which would include references to formal studies or anything else that tries to quantify the costs.

    • Avatar Gadget

      I read the next line, and in the absence of any linked information. or indeed any numbers all I can see is a missing “IMHO”.

    • Avatar GNewton

      To get an idea about the G.Fast deployment costs, here is a link:

      https://www.thinkbroadband.com/news/7490-new-estimate-for-cost-of-rolling-out-g-fast-to-10-million-premises

      For many areas, its deployment costs are relatively low, compared to FTTP. However, it’s still only an interim technology, and only suitable for short lines. And since it’s mostly deployed in areas which already have good VDSL services, and VM cable competition, we can reasonably expect that market demands will be relatively small. And a low uptake will make this investment less attractive.

    • Avatar Gadget

      an article 18 or so months old is unlikely to be current in terms of prices…… industry developments and general price reductions, further market knowledge based on initial deployments, better view of retention capabilities to name but a few

    • Avatar GNewton

      @Gadget: You are welcome to show us a newer link. The main point was that for many areas G.Fast is cheaper to deploy than fibre. However, it will have to cope with a relative low market demand.

    • Avatar Bill

      I think some here are deliberately missing the point. Whatever money is being squandered on Gfast could be put to better use for progressing fibre – a far more future proofed technology.

      In its current form Gfast only benefits those who already get fast speeds, so IMHO it is a waste of time, effort and resources as far as the bigger picture is concerned.

      For all those asking for evidence or facts, it is a bit of a silly demand, as Gfast hasn’t even been deployed yet. ANY comments on Gfast, including your own, happen to be opinions only at this point. So let’s not confuse the issue… oh wait… that was your whole intention 🙁

    • Avatar TheFacts

      @GN- if GFast has a relatively low demand then FTTP would be even lower?

    • Avatar FibreFred

      I don’t think people are missing the point Bill. But I think you are obviously missing one.

      G.Fast is quick to deploy and higher speeds to be available quickly.
      FTTP is slow to deploy.

      The market cannot wait, we all know G.Fast is a stepping stone but it can provide great speeds for many and its quick to deploy. FTTP is not

    • Avatar Bill

      @TheFacts… Getting the facts wrong again…

      GFast has low demand because it is being made available to those who already get fast speeds.
      Make it available to those who currently get slow speeds – bingo, demand will be high.
      Make fibre available to those who currently get slow speeds – bingo, demand will be high.

    • Avatar FibreFred

      “Make fibre available to those who currently get slow speeds – bingo, demand will be high.”

      Typically though, those are the most expensive areas to deploy to.

    • Avatar AndyH

      The retail pricing for the SmartAX MA5818 chassis is $300 and then around $500 for the line cards. So we’re talking around $2,300 RRP for the chassis + 4 line cards. BT will be buying this kit at a substantial discount, so it wouldn’t surprise me if they can get it for around $1,000 or so.

      We’re probably talking around $15-20 a line to install a G.fast pod as a rough idea.

    • Avatar TheFacts

      @Bill – I was comparing GFast and FTTP in the same area…

      There should be some concern here about areas with 2 FTTP suppliers.

    • Avatar GNewton

      @TheFacts: “There should be some concern here about areas with 2 FTTP suppliers.”

      No, rather, there should be some concerns here about areas which have no FTTP suppliers. But I guess you are not interested in fibre anymore since you have distanced yourself from your idea of a nationwide fibre.

  3. Avatar Chris P

    It’s great to read such comments from a serious infrastructure provider, hopefully if others make similar noises then OFCOM may change its course and create the right conditions needed to encourage FTTP deployment rather than making FTTC ever cheaper.

    • Avatar Joe

      OFCOM has had years of representations of this nature and doesn’t pay the slightest as regulatory decision after decision shows.

      I agree it would certainly help if the Gov placed a statutory requirement to encourage the provision of FTTP. But that doesn’t change a concrete like groopthink @ OFCOM.

  4. Avatar CarlT

    What that man said, though I find it likely it will fall on deaf ears. More expensive broadband would not be politically expedient.

    • Avatar Chris C

      CarlT, I think its solvable by removing the regulation from openreach or loosening it but at the same time regulating retail prices, so consumers pay the same, openreach get more money, but the ISPs lose some profits.

      Perfect solution.

      The above scenario could offer an alternative to isps whereby they keep their current arrangement of artificially high margins, but they are forced to contribute to new infrastructure.

      For me I would do the following.

      1 – Increase openreach share of line rental.
      2 – Allow openreach to deal direct with consumers.
      3 – Tell the CPs if they dont like this new arrangement they free to build their own local loop if they want consumers to only deal with them.

      Sky and talktalk have probably constantly been threatening ofcom with higher prices or pulling out of the market if they dont get their own way, ofcom need to grow some balls really.

  5. Avatar Bobby

    It is clear that G.Fast is the correct approach. With Offcom pushing hard to keep copper and providing a regulatory frame work that deeply embeds LLU and copper for the foreseeable future. G.Fast is clearly the right choice.

  6. Avatar TheManStan

    What I’ve been saying from year dot… OFCOMs function and duties are not compatible with long-term strategies for infrastructure… there is too much consumer focus to the detriment of the sectors long term requirements for infrastructure provision…

  7. Avatar 3G Infinity (now 4G going on 5G)

    Alex does know a thing or two, he was at Ofcom for 7 years before joining CityFibre

  8. Avatar Joe

    “Like it or not full fibre is very expensive and Openreach, being as bogged down by regulation as a horse in deep mud, finds itself stuck between a rock and a hard place”

    Sadly spot on.

  9. Avatar occasionally factual

    I’ve had this thought.

    Let’s scrap OFCOM and have just ONE company that creates a full FTTP system across the country. No wasting of resources by having competing physical networks.

    We could call it “British Telecommunications” and make it Government owned.

    Why hasn’t this been thought of before?

    “sarcasm mode off”

    • Avatar Bobby

      A great idea, but unfortunately not an original one. BT offered to fibre up the entire country in the 80s. Thatcher said no.

    • Avatar occasionally factual

      @Bobby

      Yes I know, I was around at the time it happened.

      I’m lucky as I’m plumbed into Openreach FTTP but I understand other people’s frustrations.

      I also do not think it is a good idea to have multiple in the ground FTTP networks as it will cause dilution of effort across the UK and may give some people (like me) multiple fibres. A waste and in time there will be consolidation, just like cable TV.

    • Avatar Chris P

      i’m just awaiting the complaints from those on single vendor FTTP/B/H lines when they fall out with their provider and realise their alternative is any other ISP over DSL and not their nice fast Fibre connection.

  10. Avatar Joe M

    Fake news: “Like it or not full fibre is very expensive”

    Sheesh!!

    Fibre costs £2 per meter for 100+ cores. 1gbit SFP modules $14, 10gbit SFP modules under $20 now.
    Fibre routers start from around £600.
    So B4RN is making a profit on rural install at £150 per house and £30 per 1gbit symmetric fibre internet.
    That is not expensive because it is something like £800 for copper wire install because copper needs water ingress protection and brick line tunnels and ducts to make it happen while fibre requires nothing more than a plastic tube. If you blow fibre then it takes two people to do two installs – first the empty tube, then blow the fibre, while if you just pull the fibre bundle once, you got 100+ fibres in one install. At £2 per meter for 100+ cores, that cable cost is the least of your worries for the day!
    The fibre can be spliced with 6 axis automatic fusion splicer for under $1000 and 0.01db loss so you can have hundreds of joins before needing repeaters. These machines do the splice in under 3 minutes.
    Data contention and speed limiting is done in the router with software which means symmetric gigabit is cheaper to provision than copper of any description. It is also 20x quicker to roll out symmetric fibre because the cost of equipment is 20 times less than copper equipment so your money is not tied up in equipment purchases. A contention of 50:1 for symmetric 1gbit gives an average of 20mbits per customer, while 10gbit links give 500:1 contention – all implemented as software in routers. Cheaper than cheap skate to provision!!

    • Avatar Gadget

      and the civils????

    • Avatar AndyH

      @ Gadget – I think he’s quoting the new magic fibre cable. When you say ‘fibre, fibre, fibre’, it magically ends up in the ground, fully ducted.

    • Avatar Gadget

      and connected to backhaul……..and no maintenance or running costs or whatever tax you pay.

    • Avatar FibreFred

      Arrr the magic fibre, of course. The one that can also drill itself through the wall into the (also magically provided) Fibre NTE.

      Things have certainly moved on. The stuff these kids can do at Hogwarts eh.

    • Avatar CarlT

      Even with volunteers doing some of the labour, sponsoring the duct, free wayleave and lots of work digging through soft verges and fields B4RN were still spending, according to the numbers I saw, £800-£1k per premises. Gigaclear are spending twice that in some cases.

      That’s some seriously inefficient work given how cheap it all apparently is.

    • Avatar Joe M

      @CarIT if the cost is £800-£1000 per premise average, then it requires around 20 people working for a full day average per household to put in fibre.

      Difficult to even remotely imagine how that could happen. It is about £50 – or about 1 working average per day (8 hours) to install fibre to a household with additional costs for equipment hire taking up average another £50 per day and then about £50 profit average. In theory and in remote areas average prices.

      In urban areas these averages are higher because ground is not soft and other obstacles to negotiate. But not significantly higher – about £250 per household or less average cost. This assumes the work is being carried out efficiently installing a £2 a meter 100+ core fibre down the road, instead of empty tubes and blowing single fibre at a time which is cheaper than installing empty tube and doing double job clocking up a lot of time blowing one fibre at a time. An SFP with media converter and power supply is about $14 which is effectively the NTE. However with copper, it is far more complex ADSL modem at one end and similar equipment in the cabinet which is expensive. Fibre on the other hand can be routed some 20km to a building without need for repeaters with 0.01db connections all the way. Even if you got 10000+ cores, that don’t amount to much in terms of cable diameter. A small building can house all the fibre optic SFP module + router. So there is no need for equipment between customer and router unlike copper. The whole thing is a fraction of the cost to set up and if you got 10gbit SFP, then contention ratio like 500:1 is good enough for average user which means very low equipment cost. Effectively you grant yourself a magic wand with enormous power if you know how to provision using latest technologies like building own FPGA open source routers. So your funds are not tied up in equipment costs, and it becomes some 20 times faster to roll out the fibre deployment for a given amount of funding.

      What we need to speed up fibre deployment faster is an open source web site that fills out ready made forms to tackle red tape and expose bottlenecks to social media to get people power to put pressure on whatever it is that is unfriendly to fibre. Red tape adds significant costs to the delivered product which I’m sure the customer is not happy to pay up for under any circumstances, and introduce delays that is costing them opportunities. Its a fact country side folk uses half the internet measured in bits and bytes – because like city folk they have exactly the same time to their daily internet work. So slow speed = missing out on internet.

    • Avatar AndyH

      ” if the cost is £800-£1000 per premise average, then it requires around 20 people working for a full day average per household to put in fibre.”

      Check your maths. Companies would be paying below minimum wage for this labour.

      I’m not sure what the average salary is for an Openreach engineer these days, but I can say with confidence they do not pay them £1,000 a month.

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