Margot James MP Hints ISPs Should Pass FTTC Price Cut on to Homes

The UK Minister of State for Digital, Margot James MP, yesterday reaffirmed the government’s commitment to a Gigabit “full fibre” (FTTP) future and also called on ISPs to “pass on [the] benefit” from Ofcom’s recent wholesale market reviews in order to improve the take-up of “superfast broadband.”

The remarks were made during Margot’s speech to the Digital Britain event in London, in which she confirmed that some 2,000 vouchers under the new £67m Gigabit Broadband Voucher Scheme (GBVS) had so far been issued to businesses. On top of that she also spoke of the need for ISPs to pass on the benefit from Ofcom’s recent wholesale market review (here and here).

The review itself requires Openreach (BT) to adopt stiffer Quality of Service standards for installations and repairs, as well as to open up their cable ducts to rival ISPs and to introduce a big price cut on 40Mbps (10Mbps upload) Fibre-to-the-Cabinet (FTTC / VDSL2) based broadband lines.

Margot James MP said:

“I am also very keen to increase the take-up of superfast broadband. We want providers to be confident that demand will follow where they build: through increased take-up providing more returns to the market and realising greater benefits.

The more affordable it is compared to standard broadband, the higher the take-up will be. I would call on ISPs to pass on benefits from the WLA review, and look at how to promote further take-up.

This will not only realise the benefits of superfast, but continue to stimulate consumer demand for the next step to full-fibre and 5G.”

The government’s £1.6bn+ Broadband Delivery UK programme, which has so far predominantly deployed FTTC in order to reach over 95% coverage of “superfast broadband” (24Mbps+), would benefit if more premises adopted the service (average take-up is currently 41%) because of the clawback (gainshare) clause (i.e. this returns public investment as take-up rises, which can then be reinvested to further improve coverage).

In keeping with that Ofcom’s recent review introduced a significant reduction to the wholesale rental cost of Openreach’s 40Mbps FTTC tier, which will drop its annual cost from £88.80 +vat to £59.91 by 2020/21 (excluding line rental and ISP costs etc.). Indeed the heavy price discounting on related packages over recent months suggests that providers like Vodafone, TalkTalk and Plusnet etc. may already be doing what Margot wants.

The caveat in all this is that by making “superfast” connections faster, Ofcom may have also made it harder to up-sell the new generation of Gigabit capable “full fibre” services to consumers and risk discouraging investment. After all, if you can get a cheap 30-40Mbps package that does most of what you need today, then it may reduce the attractiveness of FTTP. Low uptake of the latter will only make it more difficult to build such networks.

Speaking of full fibre, the minister also committed a few sentences to reiterating the government’s aspiration for the whole country to be reached by Gigabit capable fibre optic broadband networks by 2033 (here).

Margot James MP said:

“So, where do we want to be in the next 5, 10, 15 years? Fibre is the future. I’m talking about fibre all the way to the home or business. The type of technology that doesn’t simply deliver ultrafast speeds but also greater reliability and resilience.

In his recent speech to the Confederation of British Industry, the Chancellor set a new target of full fibre connections to 15 million premises – so the majority of UK homes and businesses – by 2025, and national coverage by 2033. That is where we want to be.

We want to make conditions for investment even better, making it quicker, easier and cheaper for any provider to build a fibre network. We want the innovation in deployment techniques and technology to continue and gain pace.

We are setting up the Productivity Council, to drive engagement with business, and improve productivity across the economy through appropriate use of digital technologies. And we are looking at ways to tackle digital exclusion and give people and organisations access the best digital skills training opportunities.”

As we’ve said before, making an aspiration is easy but putting the necessary foundation and investment behind it is far more difficult. Judging by existing progress, we anticipate that commercial operators should in theory be able to extend ultrafast Fibre-to-the-Premises (FTTP) networks to around 15 million premises by the government’s primary target of 2025 (i.e. without much public funding support). Admittedly overbuild may be an issue.

However, reaching nearly 100% of premises would require many billions of public investment, while the details on that will almost certainly end up being a problem for future governments to resolve and that’s assuming they even pursue it (i.e. 2033 is a good general aspiration but not a real solid target until it has some meat behind it).

The forthcoming publication of new proposals under the Future Telecoms Infrastructure Review, which is due to surface within the next few weeks, should help to lay the basic foundations for this but it almost certainly won’t commit the necessary public funding to deliver on that 2033 aspiration.