BT plans huge build after Ofcom unveils new rules

Following telecoms regulator Ofcom’s unveiling of a new plan to stimulate rapid growth in the UK’s broadband infrastructure, BT has said that it will embark on an effort to expand Openreach’s FTTP network to 20 million UK premises by the mid to late 2020s.

Part of Ofcom’s market review includes the announcement that it will not impose price controls on BT subsidiary Openreach, which has previously been heavily regulated. The new approach will help BT generate returns on a £12 billion upgrade that will eventually replace its copper lines.

BT Chief Executive Philip Jansen commented: “It is the greenlight we’ve been waiting for to get on and build like fury. Full-fibre broadband will be the foundation of a strong BT for decades to come and a shot in the arm for the UK as we build back better from this pandemic.”

Measures in the new review include freezing the prices for Openreach’s standard 40 Mbps FTTC service, which Ofcom has previously forced to fall by around 20 per cent, while prices for Openreach’s FTTP service won't be capped in most areas of the country.

Such measures, which will be in place for the next five years, will form a core part of the government’s plans to rapidly scale up the UK broadband speeds and the coverage area in which gigabit-capable broadband is available.

Confirming Openreach’s planned expansion in the wake of the review, Openreach CEO Clive Selley commented: “We’ve now passed almost 4.5 million premises and are building faster, at lower cost and higher quality than anyone else in the UK. Today’s regulation will allow us to ramp up to 3 million premises per year providing vital next generation connectivity for homes and business right across the UK”.

Ofcom Chief Executive Dame Melanie Dawes said: “Over the past year, being connected has never mattered more. But millions of homes are still using the copper lines that were first laid over 100 years ago. Now it’s time to ramp up the rollout of better broadband across the UK. We’re playing our part – setting the right conditions for companies to step up and invest in the country’s full-fibre future. This is a once-in-a-century chance to help make the UK a world-leading digital economy.”

The regulatory change means most broadband users - who cannot yet order full-fibre broadband - will be forced to subsidise the substantial roll-out of full-fibre broadband. The lack of regulatory price caps on full-fibre broadband in over 70% of the country is likely to lead to higher wholesale and retail prices than would otherwise have been the case.

BT's window for charging what it likes for full-fibre broadband in much of the country will be time-limited. In future reviews, OFCOM is expected to move back to a cost+ pricing model for Openreach's new fibre investments. However, this won't apply to fibre investments made prior to that change.
Tax changes announced in the recent budget allow firms - including BT - to reduce their corporation tax bill by 130% of investments made within the next two years.
These two factors may explain why BT now plans to "build like fury."