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Ofcom UK Rules Out Cost-Based Prices for Full Fibre Until 2031 UPDATE

Thursday, Dec 3rd, 2020 (2:01 pm) - Score 2,256

The CEO of Ofcom UK, Dame Melanie Dawes, today told the FTTH Council Europe that the regulator intends to give operators’ deploying “full fibre” (FTTP/B) broadband networks as much flexibility to build as possible and thus doesn’t “expect to introduce cost-based prices for fibre services until at least 2031.”

At present the regulator already imposes cost-based charge controls on copper services, such as fully unbundled lines (MPF) and FTTC. But their forthcoming Wholesale Fixed Telecoms Market Review 2021-26 (FTMR) is expected to move away from this as part of an effort to encourage ISPs, like Sky Broadband and TalkTalk, to go fibre.

Despite this some in the market have wondered how long it might be before Ofcom considers the need to impose similar charge controls against Fibre-to-the-Premises (FTTP) networks (post-2026). The good news is it’s likely to be at least another decade before that happens and, if the market continues to develop in the competitive way that we see today, then it may not even be necessary.

However, the regulator-in-chief did clarify that they would still consider intervening in less competition areas in the far future (e.g. those where only a single operator like Openreach holds dominance), before adding that “full fibre must be a fair bet.”

Dame Melanie Dawes said:

“We must also look further ahead. We recognise that full fibre is a long-term investment, taking more than a decade – if not two – to pay back.

No one can predict exactly how the market will evolve over that time. But if companies play by the rules, competition is healthy and prices remain affordable, Ofcom would not expect to intervene during the investment cycle in a way that hampers that investment.

Instead, we would aim to allow all companies to achieve a fair return over their whole investment period, allowing for a margin above their cost of capital to reflect the risks.

So to be clear, we don’t expect to introduce cost-based prices for fibre services until at least 2031.”

The CEO of Virgin Media, Lutz Schüler, was quick to welcome Ofcom’s “reassuring” words.

Lutz Schüler said:

“As the biggest competitor to Openreach, it’s reassuring to hear Ofcom’s Chief Executive, Melanie Dawes, use her first public speech to emphasise support for broadband building.

The reality is, in the current climate we need to do everything possible to unlock investment that will help to stimulate our economic recovery and support our digital future as a nation. The regulatory direction that is set towards Openreach isn’t something that sits in a vacuum, it is a yardstick for those building networks as to whether fair returns can exist, risk can be taken and a level of long-term certainty can be provided. As the Chief Executive of a UK company owned by a global business, this clarity is vital to help me when making the case for more investment to flow into this country.

Ofcom now needs to stick to its guns, keep its Market Review pricing proposals in place and ensure network expansion remains a top priority. By doing so, more of the UK will benefit from competing networks that turn gigabit ambition into action and provide a backbone to the UK’s recovery and future success.”

It’s worth pointing out that Virgin Media have proposed a potential extension of their UK network that could see them building FTTP out to another 7-8 million premises (here) and maybe even offering a wholesale solution, which helps to explain why Ofcom’s position on this is so important for them (they don’t want to build only to immediately find new regulation being imposed).

The regulator intends to publish their final statement on the WFTMR early next year.

UPDATE 4th Dec 2020 – 6:46am

Cityfibre has largely agreed with Virgin Media.

Greg Mesch, CEO at CityFibre, said:

“As a business investing billions of pounds into full fibre infrastructure across the UK, we welcome any offer of long-term regulatory certainty such as that announced by Ofcom today. Given the long payback of digital infrastructure, this news provides all investors with the confidence to continue to invest.

It is critical however that the spark of infrastructure competition, which has unleashed full fibre investment from incumbents and new entrants alike, is both encouraged and protected. It is only a healthy competitive market that will ensure full fibre reaches every corner of the UK in the shortest possible time.”

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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 X (Twitter), Mastodon, Facebook and .
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5 Responses
  1. Avatar photo chris says:

    slash the bureaucracy, make it attractive for 2 or 3 national providers across the whole nation (commitment for >90% reach) and commit them to wholesaling to others.

    OFCOM set the market conditions and should encourage growth.

    1. Avatar photo Ad says:

      The first part of that is what looks like happening at the moment.

      Openreach, vigin media, and an amalgamation of the “new boys” probably headed by cityfibre. The second part is the rub, if openreach becomes just a 3rd competing company then who’s responsibility is it to cover the uneconomical bits, and why shouldn’t all 3 networks offer wholesale rates.

    2. Avatar photo Alex says:

      It isn’t Openreach’s “responsibility” to upgrade uneconomical bits today, aside from under the USO. It’s a business just like VM and altnets. That’s what people seem to not understand or choose to ignore.

  2. Avatar photo Brian Storey says:


    It’s easy to immediately think great news for Openreach, but for years Virgin in particular have been trying to operate at a level so as to avoid drawing too much attention to themselves and carefully tread the line.

    A good opportunity for them. Likewise the next phase in the world of alnets, some of which only exist for this bit, buy outs!

    I wonder who’ll go for that. That potential Talk talk group buyout from Tosca fund could make things interesting.

  3. Avatar photo Sasquatch Sam says:

    FTTP needs rate relief as the ROI takes longer to make up. 20yr should do, at least then costs permitting they may roll out even further requiring less public funding.

Comments are closed

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