Ofcom Tells BT to Improve 10Mbps UK Broadband USO Quotes

Ofcom’s investigation into BT’s compliance with their obligations under the new Universal Service Obligation (USO) for broadband has concluded that “some customers have been asked to pay materially higher amounts than they should have been.” As a result, they’ve asked the ISP to make a few improvements.

The USO, which was officially introduced one year ago, is aimed at those who can’t yet receive a 10Mbps+ capable download speed and aren’t currently planned to in the near future. At present around 0.6% of UK premises (180,000+) fall within the USO’s scope – this reflects those living too far from both fixed line, fixed wireless and suitable 4G mobile coverage.

However, last year we reported on various examples (here) where people had been hit with quotes for excess costs that ran from tens of thousands of pounds and all the way up to well over £1m. Often this has been exasperated by issues of mixed messaging and inconsistencies in the quotes themselves. Suffice to say that the accuracy of BT’s quotes and how they’re pieced together came in for a lot of scrutiny.

Ofcom soon launched a related investigation into the issues (here) and the Government’s Digital Infrastructure Minister, Matt Warman MP, similarly called on both sides to find a “resolution” (here), which at the time we warned would be easier said than done.

The biggest obstacle here is that it remains an inherently difficult task to accurately estimate the cost of a fibre optic rollout in areas where no good fixed line or wireless solutions exist. At the same time, there are some very real cost barriers involved, which cannot simply be swept aside by good intentions or small tweaks.

What has BT done so far?

At the time of the last update we speculated that Ofcom would probably seek to improve how the costs of USO connections are calculated and or shared between properties. Earlier this year BT introduced a cost sharing “option” for their USO quotes (here), which enables communities to “crowdfund and share the excess cost of a broadband network upgrade“ (preferable to lumping all the costs on to the first accepted quote / home).

In addition, if more than 70% of premises in a cluster register their interest, a contribution of an “additional £3,400 per premise” is included, lowering any excess costs that the community may have to pay (it’s quite tricky to get this right and requires a lot more organisation).

On top of that, the 4G solution that BT ships in response to most USO requests now come with unlimited data usage (some people can also get an external antenna installed, if deemed necessary). Finally, BT states that they’ve improved their processes and reduced complaints.

The regulator’s conclusion

Naturally, we weren’t expecting Ofcom’s investigation to result in a magic wand that could resolve the many inherent cost problems involved in deploying fibre optic broadband to extremely remote areas, which largely just reflects the reality of how much these networks cost to build. Indeed, in some very remote areas it would be cheaper to build somebody a new house, in a better connected area, than to run a new fibre line to them.

Suffice to say that the regulator recognised that BT had agreed to change its approach for quotes where the cost of connecting a property is not significantly above the £3,400 threshold. BT has also agreed to refund affected customers and re-issue quotes it has previously provided. “We have therefore suspended our investigation, but will monitor BT’s actions closely to ensure our concerns are addressed,” said Ofcom.

Ofcom’s Statement

• Where excess costs are very high, BT can recover total excess costs before commencing build. When one customer makes a request, and excess costs are more than £5,000 (excluding VAT) per eligible premises based on the forecast assumption of 70% take-up in the area, BT should inform customers of the total excess costs and gain agreement to cover these before building.

One or more customers can cover all the excess costs of the build, including shared infrastructure. We expect that very few customers will be willing to pay more than £5,000 (excluding VAT) to receive an upgraded broadband connection under the USO, so this change should have a very limited impact on customers, while reducing any risks on cost recovery.

• No changes for the assessment of premises where excess build costs are £5,000 (excluding VAT) or below. Where excess build costs are £5,000 (excluding VAT) or below, based on a forecast of 70% take-up, customers’ quotes should be based on this assumed take-up. BT must then provide any connection where a customer agrees to pay their quote. As a result of our investigation, BT has now agreed to apply this approach.

Ofcom are not proposing any other change to the existing rules on how BT must assess USO connection costs. The regulator is also not proposing to make this same change for KCOM, given the availability of decent broadband services in the Hull Area. “We note that, to date, KCOM has not received any requests from USO eligible customers,” added Ofcom.

BT’s assurances should result in a number of customers receiving lower quotes in the future, but the regulator rightly recognises that the cost of connecting some properties – including those in the most remote parts of the UK – will remain very high.

The Government’s new £5bn Project Gigabit programme has similarly warned that those in the final 0.3% would be prohibitively expensive to reach (here) and they’re now consulting on how to resolve this (we expect new wireless networks and LEO satellites to be options), which may ultimately help to provide another solution to the USO problem (e.g. support for more fixed wireless networks or LEO based broadband satellites).

A BT Spokesperson said:

“As the designated provider of the Government’s Universal Service Obligation scheme, we’re working hard to connect many premises to decent broadband speeds, often surpassing requirements by delivering full fibre connections to them, as well as supporting communities with options to help fund their local builds by sharing costs.

We’re committed to delivering connectivity to even more properties and welcome the recent constructive conversations with Ofcom, including their proposals to suspend their investigation whilst they seek to amend the scheme. Connecting homes in the most remote locations under the terms of the USO remains highly complex and extremely costly, and for these premises a different solution will be required.”

The consultation on this will run until 10th September 2021 and Ofcom intend to then publish their final decision by the end of 2021, which seems unlikely to change much from what is written above.

UPDATE 3:14pm

One potential issue that we can see in Ofcom’s new approach occurs “where excess costs are £5,000 (excluding VAT) or less per premises, BT must connect customers on request if there is agreement that the excess costs relevant to their premises will be paid” (3.26 in Ofcom’s consultation). In short, eligible USO builds would be triggered through the first request and then built out to all the properties in that cluster, regardless of whether they’ve all contributed.

On the surface this is a good thing, for consumers, as the infrastructure gets built up front (at least in part). But digging deeper (no pun intended), this also fosters a situation that, further down the road, could cause confusion and frustration for consumers.

People will see the network being built and assume they can just request it at minimal cost, albeit without realising that they may still need to pay up to £5k +vat before they can connect (i.e. this is partly how Ofcom makes the shared costs approach work, since not everybody will always apply to share USO costs in an area at the same time).

Suffice to say, BT may end up taking the blame for an approach that Ofcom has required them to adopt when people run into such issues. In fairness, and much as we said earlier, this was never going to be an easy problem to solve.