Low prices for FTTC to encourage more roll-out of Full Fibre
Ever since Dido Harding some time ago lead a call for lower FTTC pricing it was likely that we would see Ofcom act, and as part of its much wider Wholesale Local Access review the regulator is proposing to regulate the price of some Openreach products with changes starting in 2018. As usual these are proposals so industry can feedback on issues this may cause, in this the deadline in June 2017.
"Ofcom has today announced measures designed to promote investment in new fibre networks and ensure that customers are protected from higher prices.
We are proposing to maintain our policy of pricing flexibility for Openreach’s fastest broadband products, including those based on BT’s own network investments in full-fibre and its new G.Fast technology.
We plan to protect broadband customers and promote competition, by cutting the wholesale price that Openreach – the part of BT responsible for its network – can charge telecoms companies for its popular superfast broadband service, which has a download speed of up to 40 Mbit/s.
We would expect these savings to be passed on to residential customers through cheaper prices. This promotes competition in the superfast broadband service most used today by consumers, while companies construct their own full-fibre ultrafast networks to compete with Openreach.Extract from Ofcom press release
Ofcom believes that by making the most popular FTTC/VDSL2 speed of 40/10 cheaper at the wholesale level it will encourage more full fibre providers to roll-out and compete, but this presumes that the public will be willing to make what is likely to be a wider price jump from the basic FTTC services to the entry level product for the new full fibre networks. The change is good if your plan is to encourage those people who have not upgraded from ADSL or ADSL2+ onto the FTTC platform, but we are still searching to see how this guarantees more investment from Openreach competitors into full fibre.
|Current Monthly Price for GEA-FTTC 40/10
All exclude VAT
|Proposed Monthly Charges|
So without a doubt people will be asking what happens to providers selling 40/2, 55/10 and 80/20 products (and the one no-one seems to sell yet 18/2)? Well its not clear, no mention is made in the press release but the 300+ pages of consultation seem to suggest that the price drops will also impact 18/2 and 40/2 but given the confusion we will chase Ofcom explicitly to determine if this is the case.
Update 10:25am We have had a very quick response from Ofcom and they have confirmed that the only product having its price regulated is the VDSL2 40/10 service. The slower 40/2 and 18/2 VDSL2 products are not affected by the regulated price cut and neither are the 40/2 and 40/10 GEA-FTTP products.
The main outcome is that without regulating the retail market, Ofcom by not regulating downwards the price of 55/10 is making BT Consumer Infinity 1 look expensive, thus making it easier for Sky and TalkTalk to win custom in the competitive retail market. Though how competitors like Hyperoptic and Virgin Media will feel is another matter.
There are further improvements proposed to the metrics that Openreach has to meet working on an escalator from todays metric to the goal in 2020/2021:
- Today 80% of repairs need to be done within one to two working days this will rise to 93%
- Plus 97% of repairs to be fixed no later than six or seven working days
- 80% of new line provisions are within 12 days, improve this to 90% within 10 working days
- 90% of connections are made on the agreed date, improve this to 95%
Hitting the increased repair and provision metrics along with a main GEA product price point where it appears there is little or no profit means if Openreach wants to keep making a profit it will need ensure that its G.fast and faster full fibre products are widely available and at a price that people are willing to pay for, e.g. if a 40/10 product sells for £20/m to the public the G.fast or faster full fibre option cannot be two or three times the price, since a big jump will be something people find hard to justify.
One outcome now we have had clarification is that it seems likely that TalkTalk and PlusNet may stop selling the 40/2 product and switch to a 40/10 version thus improving the upload speeds for the public while potentially lowering the monthly cost.
For those in the 1.5% of the UK (and its growing) where until now the GEA-FTTC products have been the same price as the GEA-FTTP products at the same speed points there is the possibility now that FTTC areas may have cheaper pricing, and while FTTP does offer a more reliable connection and the connection speeds are as mentioned in the adverts people are likely to be upset to be paying more than someone down the road. Of course Openreach is free to continue price matching if it wants, but that might draw complaints from competitors in the full fibre sphere.
"Ofcom is finally delivering its promise to support full fibre investment and competition that will help close the UK’s embarrassing fibre gap.
This review is a major step forward. It provides the incentives for investing in full fibre networks that compete with BT. In addition to the measures announced today, we urge Ofcom to follow through on its proposals to improve access to BT's ducts and poles, and if Ofcom gets that right it will give us the tools and incentive to continue our investment in full-fibre infrastructure across the UK, and deliver it further and faster."Mark Collins, Director of Strategy and Policy
Maybe we have the wrong view of the public in that we expect millions to be happy with the cheapest entry level product that will support web browsing and TV streaming for some years, as CityFibre seem very optimistic that cheaper wholesale pricing from Openreach is a step forward. Of course a full fibre product competing in an area where VDSL2 speeds are slow e.g. in the 5 to 12 Mbps area is likely to win lots of customers, and if todays move means ADSL2+ moves more quickly to vanishing like dial-up then that is good, as if the spectrum from ADSL2+ can be recovered VDSL2 will go faster and reach further.