Openreach warns broadband investment means higher prices

Thu, February 8th, 2018

There has been talk of the necessity of upgrading the telecoms infrastructure

For some time now, there has been the talk of the necessity of upgrading the telecoms infrastructure to support faster broadband services via fibre optic cable. However, Openreach, the division of BT that maintains and owns the vast network of exchanges, cables and wiring that connect most homes, mobiles and business systems, has given warning that the billions needed to upgrade broadband services would have to be raised by increasing prices.

Openreach has disclosed the findings of an industry consultation it conducted, announcing that the cost of supplying new fibre optic cables that would deliver superfast broadband to some 10 million dwellings would lie between £3 billion and £6 billion. The company said that this expense would have to be spread across the customer base.

Openreach has also called for a telecoms policy that supports what the company is trying to achieve, and a regulatory framework that is encouraging to investors.

It is thought that Ofcom, the telecoms regulatory body, will not be able to follow through on its earlier plans to cap wholesale prices for the ultrafast broadband services that are already in place. It appears that price caps will have to be pushed aside to pay for the cost of upgrading the technology.

Ofcom had proposed caps on the wholesale prices of superfast broadband in early 2017. The proposal was met with anger by Openreach, which said that the company had not yet been able to make a decent return on its investments in broadband technology and business systems. Rival firms, such as Virgin Media, were not impressed with the Ofcom proposal either, as they were fearful of undercutting.

Clive Selley, the CEO of Openreach, said that a series of challenges lay ahead, during which his company would be struggling to formulate a business plan that would be workable and deliver fair results for all involved. He added that to help achieve this, the regulatory framework would have to be encouraging to investors. In addition, there would need to be agreement on how the huge costs of this massive undertaking in engineering could be recouped in a fair manner from all the parties which would later benefit from the technology upgrade.

The government has urged Ofcom to reconsider its capping proposal, saying that it could discourage investment, and make the UK’s struggle to keep up with what the nation’s economic rivals were achieving even more difficult. All of the major countries in Europe already have more extensive fibre optic networks than the UK.

The Openreach industry consultation involved a number of broadband providers, such as TalkTalk, Vodafone and Sky. The move was part of Openreach’s attempts to smooth relationships with other elements of the industry, after Ofcom ordered BT and Openreach to separate in November 2016. In March 2017, BT agreed that Openreach would be separate companies. Openreach is accountable to telecoms providers and Ofcom.

Openreach also confirmed that other telecoms providers could, for the first time, invest in Openreach infrastructure. The benefits of this would include more agreeable terms for using the infrastructure that was put in place.

For more information contact Alex Phillips at alex@prstelecom.co.uk or on 07948 237 655

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