New rules aim to help boost full fibre roll-outs
Almost nothing in the announcement from Ofcom today is totally new as there are lengthy consultation processes to undertake but we are at the point where what has been announced today should stay the same once the statutory months notification has been submitted to the European Commission.
For those in a rush the changes are:
- Combined copper access and 40/10 Openreach service priced at £12.80/m in 2018/2019 dropping to £11.92/m in 2020/2021
- Openreach must allow access to duct and pole network, produce digital map and repair and fix blocked ducting and ensure space is available in ducts and on poles.
- Openreach to complete 88% of fault repairs within 1 or 2 working days, up from current 80% target.
The PIA (Physcial Infrastructure Access) system has existed for some time but is complex and felt too expensive by the majority of full fibre operators for massed use at present, hence PIA2 has been under construction for some time and Ofcom has presented analysis that the new rules could cut full fibre deployment costs from £500 per home to £250, they also point out that pole and duct access will allow some streets to be completed in hours rather than days - we presume this reduced labour time has been factored into their costing as the labour costs can be the highest part of large full fibre deployments.
No one knows how many of the Ofcom projected figure of six million premises passed by 2020 will use the shared duct and pole access, but to hit the 2020 target we need to be seeing over 220,000 premises passed every month, or if they mean by 31st December 2020 the pace drops to 147,000. There is an important caveat and this explains why CityFibre and Vodafone for example are talking of microtrenching still and that is the sharing reduces the build costs but ongoing rental costs to access ducts and poles means total lifetime costs is not so large and for consumers in the long term may lead to higher costs. With the Openreach three million premises target it looks like that by 2020 Openreach is still going to be the largest FTTP operator in the UK.
For the public the immediate change that will affect millions is the price changes to the 40/10 Openreach service (Ofcom does not explicitly state FTTC and/or FTTP but based on wording we presume it covers GEA-FTTC and GEA-FTTP). To make it clearer what the impact at the wholesale level Ofcom has included the line rental that is required and is calling this the copper access charge.
|Prices exclude VAT||Current Annual Charge||2018/19||2019/20||2020/21|
|40/10 Mbps rental||£7.40/m||£5.72/m||£5.00/m||£4.92/m|
|Copper access aka line rental||£7.03/m||£7.07/m||£7.01/m||£7.00/m|
We doubt whether there will be drops in the retail pricing of the 40/10 services, but the recent price rises from Sky are likely to be a familiar pattern, i.e. ADSL2+ pricing will increase but the reduced wholesale costs will allow the 40/10 services to remain static.
Regulating this price will also help BT’s rivals to compete for customers, while several build out their own full-fibre networks, as well as protect consumers from high prices during this period. In March 2017, we proposed to set the monthly charge for Openreach’s ‘40/10’ Mbit/s broadband package by 2021 at £11.23. Following our consultation, we are adjusting this figure to £11.92.
Until now, BT’s ability to raise wholesale charges for superfast broadband has been constrained by people’s willingness to buy cheaper, standard ‘copper’ broadband as an alternative. However, this constraint is weakening, as people increasingly need faster, more reliable connections.
Standard broadband delivered over Openreach’s existing copper network has long been subject to a wholesale charge control, and this will continue over the coming years, with the price remaining broadly stable.Ofcom on Openreach charge controls
For customers in areas where the recent millions of premises of full fibre announcements are not likely to reach the news that basic superfast services are not going to increase will be very welcome BUT in areas where competitors are rolling full fibre services the passion shown by the public for paying the least money for their broadband may present difficulties in getting people to upgrade if new networks are more expensive, for those where VDSL2 is not delivering speeds that allow a household to all stream video the decision to upgrade may be easier. The alternative which is already happening is that to build market share rapidly (just like the early says of Sky TV) the prices will be low and attractive e.g. TalkTalk Gigabit in York is only £21.70/m.
To stop Openreach/BT from special offers to tempt operators to keep customers on their network, geographically based wholesale price reductions on its superfast portfolio (when Ofcom say superfast they include GEA-FTTP due to their definition of ultrafast broadband) that target areas where rivals are starting to build rival networks.
The final set of changes are mainly just the continuing increase of performance metrics that Openreach is intended to meet and the new metrics define performance for the 2020/2021 period.
- Complete 88% or more of repairs in 1 to 2 working days, compared to current 80% target.
- Complete at least 97% of repairs in 7 working days
- Provide an appointment for 90% of new lines within 10 days of notification, current target 80% within 12 days
- Install 95% of connections on date agreed between service provider and Openreach.