Ofcom move will aid ISPs such as TalkTalk and BSkyB, speeding up rollout of superfast broadband
Ed Richards said Ofcom's move was a 'very very important milestone'. Photograph: Frank Baron for the Guardian
BT will be required to allow competing broadband providers fuller access to its infrastructure, in a move aiming to speed up the rollout of superfast broadband services across the UK.
As a result of Ofcom's new regulatory regime, published today, competing internet service providers such as TalkTalk and BSkyB will now be able to use BT infrastructure – including underground ducts and telegraph poles as well as its fibre-optic network – to channel high-speed broadband to customers.
BT and cable company Virgin Media are the only providers with the infrastructure to offer superfast broadband – defined as 25 megabits per second (Mbps) or more – at present. However, TalkTalk today said it would be the first wholesale customer to use BT's network and Ofcom hopes others will follow suit.
The announcement was welcomed by BT, which added that it had been providing rivals with access to its fibre-optic network for months.
The Ofcom chief executive, Ed Richards, said the development is a "very very important milestone" in the UK's rollout of high-speed broadband, with the proportion of the country where it is available lagging just behind Portugal but comparing favourably with Germany.
BT plans to reach two thirds of the UK with high-speed broadband based on fibre-optic cable by 2015; it will be available to 4m homes and businesses by the end of 2010. BT has said it will carry out a nationwide survey to establish the demand for high-speed broadband throughout the country.
Stuart McIntosh, a partner in Ofcom's competition group, said that although duct and pole access was something the broadband industry had been talking about for years, today's announcement represents a "milestone" in high-speed provision for "the final third" of the UK where fibre-optic cable has yet to reach. On average, broadband speeds in urban areas are 5.8Mbps, compared to 2.7Mbps in rural regions.
"In a few years' time when we look back at this period, we will see this as the point at which the UK began to migrate from current-generation broadband to much higher-speed broadband," McIntosh added. "A few years ago the UK was very much a laggard in the provision and takeup of broadband and over past five or six years this has gone up by a factor and prices have halved. What was rare and a bit of a luxury in the early part of the last decade has, for many people, become essential and more affordable."
Ofcom said: "The decisions are consistent with the government's potential role in encouraging superfast broadband rollout. For example, duct and pole access could extend the reach of services to more remote areas, potentially in combination with public funding at a UK or EU level."
Richards added that public-private partnerships were coming into fruition in localities such as Cornwall. "Companies themselves are really beginning to move on this. We're certainly not OK with an outcome that involves consumers getting less choice and higher prices. This is something we've got a very careful eye on and the kind of problem that is potentially a real problem," he added.
"But, equally, we don't want to get in a position where we say that there should be no initiatives, no public-private partnerships, because we know that those kinds of collaborations will help deployment. We will try and balance the benefits of those kinds of initiatives alongside seeking to work with those organisations to make sure they support a competitive model."
In contrast to the standard copper cables used to provide current-generation broadband, fibre-optic networks carry signals using light and are not affected by distance. BT, the UK's largest broadband provider, has committed to investing £2.5bn in developing next-generation broadband networks over the next five years. It will be able to set its own prices for access by competing services, Ofcom said, though they will be subject to anti-competition rules.
BT said: "This statement is reassuring in that Ofcom agrees that we have been providing suitable unbundled access to our fibre for some months now, that our product provides others with substantial control and that it will be the most likely way that fibre will be delivered in the future. That recognition, combined with us having pricing freedom for that product, provides much of the regulatory clarity and certainty that we have been seeking.
"While Ofcom have been conducting this consultation, BT has been hard at work with our fibre roll out. More than two million premises now have access to fibre broadband and we are on track to pass four million premises by the end of this year. This is one of the fastest and most ambitious deployment plans in the world and so we are pleased that Ofcom is providing us with this level of regulatory clarity and certainty."
However, Ofcom's new regulations gave no reference to "wayleave", whereby BT is granted special permission by rural groups such as the National Farmers' Union and Countryside Landowners' Association to string cable on poles or in ducts, as part of its universal service obligation. As providers other than BT would have to establish deals from scratch, more likely at a prohibitively more expensive rate, it would likely prove a disincentive for new players to lay their own fibre.
Similarly, BT benefits from discounted tax rates on the rollout of fibre-optic cable from the Valuation Office Agency (VOA), giving the telecoms company a financial advantage over rivals to lay new cable.
BT is currently charged about £15 a kilometre for its fibre, compared to more than £2,000 a km for non-BT companies laying cable outside of London. A number of court cases are currently in progress challenging this approach, and Ofcom said it would not comment on the VOA's valuation scale.
TalkTalk said Ofcom's plans are "broadly in line with the consultation conducted in March", adding that there are "a few notable improvements that will help ensure that UK consumers will continue to enjoy a choice of innovative and competitive ISPs".
"The wholesale product that BT and Openreach must offer must be designed to allow ISPs such as TalkTalk more flexibility to develop their own products. In particular, the product should be uncontended, unmanaged and not artificially capped, provided on a wires-only basis and must be unbundled so that ISPs can provide the installation themselves rather than having to use an Openreach engineer," TalkTalk said.
"We are also pleased that Ofcom have introduced a framework to prevent anti-competitive pricing by BT, particularly the so called margin squeeze where they squeeze the price between the wholesale and retail products. While we welcome Ofcom's decisions we still think that there is room to improve this further."
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