Industry Says UK Gov and Regulation is Key Barrier to Full Fibre Rollout

A recent debate of the Digital Infrastructure Panel (hosted by law firm Herbert Smith Freehills), which included representatives from ISPs BT, Hyperoptic and Virgin Media, has highlighted government policy and or regulation as the “key barrier” to large-scale investment in “full fibre” (FTTH/P) broadband.

Overall some 50% of attendees identified the above issue as a key barrier, while 23% said that access to funding (public and/or private) was the main barrier and another 23% pointed to the technology’s “challenging economics” (e.g. high deployment costs and uncertain consumer demand) as the primary stumbling block.

The debate took place as a backdrop to the Government’s on-going ‘Future Telecoms Infrastructure Review‘, which is examining what changes may need to be made (e.g. planning, copper switch-off) in order to turn the United Kingdom into an attractive place for investment to support the deployment of new “full fibre” broadband (FTTP/H) and future 5G Mobile networks.

At this point some readers may rightly point to all the recent announcements concerning major Fibre-to-the-Premises (FTTP) style deployments of Gigabit capable broadband technology across the UK (see our summary and INCA’s report), although most of those are focused upon the easiest low hanging fruit of urban areas, but the costs increase disproportionately the deeper you go (many billions of pounds).

Similarly many of the schemes that the government has introduced so far, such as their £400m Digital Infrastructure Investment Fund (DIIF) and the c.£200m Local Full Fibre Networks (LFFN) programme (details), will only go so far in helping to improve coverage before hitting a wall. On top of that the 5 year holiday on business rates for new fibre, while useful, has been countered by a significant rise in rates on existing fibre.

Meanwhile operators are calling for further changes, many of which could be tricky to implement. For example, Openreach and KCOM are both keen to switch-off their older copper networks as fibre optic lines are rolled out to individual homes and businesses, yet they face a complicated barrier of competition and historic regulation. Not everybody wants to pay more for FTTP and so you can’t simply switch off copper-based services without creating a mountain of complex problems for ISPs.

The recent debate included some useful feedback from members of the panel and we’ve summarised some of their key points below.

Dana Tobak, CEO of Hyperoptic, said:

“One of our biggest challenges is actually getting wayleaves in local authority buildings. Our coverage in urban areas would be significantly greater if councils signed wayleaves, but fundamentally that’s something that’s gone really slowly and there seems to be a disconnect in appreciating that in order to get full fibre you actually need to put fibre in there.”

Dan Butler, Virgin Media’s Head of Public Policy, said:

“We hope that the DCMS Future Telecoms Infrastructure Review will be a vehicle for more policy consistency and to solve some of the genuine supply-side barriers to build, which are wayleaves and getting broadband in to new developments. And Government should implement policy which stimulates demand for ultrafast broadband – through voucher models, and encouraging people for whom there might be an economic barrier to move to high speed broadband.”

Emily Clark, BT Chief Economist, said:

“I would argue that you can leave more to the market and move away from the very micro management by regulation that you see at the moment, which is not good for BT/Openreach or rivals either – regulation of Openreach affects the prospects of Openreach’s rivals by taking out value from the industry. When you look at what happens in other countries they have taken much bolder decisions about regulation.

In countries like Spain and Portugal – where there is a lot more FTTP – they’ve tended to step back from regulation like VULA in order to really drive incentives for rivals to invest. And in other countries they’ve actually stepped back from competition and said what we’ll do is create a very stable and predictable regulatory framework around the single national provider and that has also worked very well. In the UK we have neither of those models.”

Geoffrey Norris, Senior Advisor (Global Counsel), said:

“Across the UK political class, ambitions and expectations about broadband and 5G are high and rising, and are likely to lead to Governments of whatever political complexion to become more interventionist in the pursuit or realising them. We’re already seeing this in some of the moves by Matthew Hancock in terms of him taking powers to set objectives for Ofcom and I also think that Brexit will facilitate a more interventionist UK Government.

Secondly, a Jeremy Corbyn-led Labour Government would have none of the reticence about state-led solutions that has characterised UK public policy under Labour, Coalition and Conservative Governments over recent decades. … A Jeremy Corbyn led Government may indeed favour the renationalisation of Openreach as a wholesale, open-access provider.”

As usual with industry events like this there can be a tendency for each provider to talk-up aspects of change that are in their own vested interests, which can skew some of the points of view being offered. Nevertheless it will be for the government to rummage through all these competing interests and to drive forward a policy that can hopefully resolve some of the problems.

We’d also urge caution when country-to-country comparisons are used because other telecoms and infrastructure landscapes can be significantly different from the UK. For example, some countries have benefited from significantly more state aid funding and others may have a much larger proportion of people who live in easier to reach apartment blocks etc.

At the same time there’s also an argument for avoiding overly invasive industry changes, particularly any that could risk destabilising the currently quite healthy and growing market for alternative network providers that have sprung up to compete with Openreach (investors might take a ‘wait and see’ approach that would slow progress).

Suffice to say, the government have a difficult job ahead.