Ofcom publishes regulation of UK’s wholesale telecoms markets

Ofcom has published its findings from the Wholesale Fixed Telecoms Market Review 2021-26, setting out its plans to regulate the fixed telecoms markets that underpin broadband, mobile and business connections.  

Spanning seven volumes and 26 annexes, with further supporting documents, there is much to consider in the WFTMR. However, the key decisions Ofcom has made include: 

Access to Openreach’s telegraph poles and underground ducts 

Openreach will continue to be required to allow all network operators to lay their own fibre networks using Openreach’s infrastructure through its Physical Infrastructure Access (PIA) product, facilitating competition by reducing costs for other builders. Product orders have ramped up with over 100 customers.  

Different approaches to regulating Openreach’s residential broadband products in different parts of the UK 

Ofcom has stated that it will vary how it regulates Openreach’s broadband products, depending on the level of competition in different areas. Where there is established competition, such as cities, and designated Area 1, wholesale prices will not be regulated. This aims to boost competitive network build.  

Area 2, which Ofcom deems as having “potential for material competition” and comprises 70% of the UK, Openreach will again have no regulation on its wholesale fibre prices, but will be subject to a flat, inflation-adjusted, regulated price for its entry-level superfast broadband service (download speed of up to 40 Mbit/s).  

Where Openreach is the only scale operator, in Area 3, regulation is designed to allow Openreach to recover its costs of both its existing copper network and its investment in a new full-fibre network.  

Allowing Openreach to charge more for full-fibre broadband 

To further help the investment case, Openreach will be able to charge more (£1.70 per month extra) for the 40 Mbit/s service if it is delivered over full fibre. This reflects the additional customer benefits, such as speed and reliability, that fibre offers over copper. Geographic discounts for fibre are ruled out as well. 

Long-term view 

Although the WFTMR will apply until March 2026, Ofcom has recognised the longer term business case for fibre, and the time needed to recover the build expense. The regulator does not expect to introduce cost-based price controls until at least 2031, with the expectation that the same wholesale access prices to apply throughout the UK, as it expects ongoing investment, commercial and state funded, in both Area 2 and Area 3 throughout the period to 2031. Beyond that, Ofcom would continue to regulate in a way that supports the continued development of competition and investment. 

Finally, if there is a need to move to cost-based regulation in the future, Ofcom will honour the fair bet principle.  

Closing the copper network

As it lays new fibre to replace copper lines, Ofcom states that Openreach should not have the unnecessary costs of running two parallel networks. So when Openreach has rolled out full fibre in a particular area, Ofcom will progressively remove regulation on its copper products over a number of years.  

Crucially, customers will be protected during this transition to ensure they can continue to access their services – particularly those in vulnerable circumstances. 

Why next-generation gigabit capable networks matter

Ofcom noted how the pandemic has underlined the importance of a reliable internet connection for UK homes and businesses. While the copper telephone network has helped deliver superfast broadband to 96% of homes, the rollout of fibre and gigabit infrastructure will ensure the speeds and reliability consumers need today and in the future. The telecoms industry has provided better services in recent years, without spending more in real terms as this graphic shows.

techUK members who are interested in our work on communications infrastructure deployment, and reducing the barriers to fibre rollout in the UK, are very welcome to join our Fibre Driving and Infrastructure Sharing Working Group. Our next meeting is Tuesday 23 March, 10:00-11:30.  

Sophie James

Sophie James

Head of Telecoms and Spectrum Policy, techUK

Manuel R. Marti

Manuel R. Marti

Programme Manager, UK SPF and Satellite, techUK

Julia Ofori-Addo

Julia Ofori-Addo

Programme Assistant, Central Government, Digital Connectivity Forum, Comms Infrastructure, UK SPF, , techUK