Regulatory proposals designed to accelerate investment in improving British broadband have been thrown into disarray, as one set of rules was quashed on appeal and telecoms companies rounded on plans for a wider shake-up of the sector.
Ofcom is facing stiff opposition to its plans to slash the price that BT’s rivals would have to pay to deliver standard network speeds over its network. Consultation documents have been published showing the level of anger at the proposals, with companies including Virgin Media and CityFibre warning that the move threatens to scupper investment in faster full-fibre networks.
In a separate blow, to plans to stimulate competition in the business broadband market, the Competition Appeals Tribunal said that the regulator had “erred” in the definitions of that market in its Business Connectivity Market Review published last April. The court “quashed” the regulator’s proposals, in response to an appeal by BT, throwing Ofcom’s plan into doubt.
The regulator had ordered BT to introduce a “dark fibre” product that would allow the company’s rivals, including Vodafone and TalkTalk, to access unlit fibre lines used for ultrafast business broadband products and Ethernet cables to connect phone masts.
Ofcom, which has the right to appeal, said it was “disappointed” with the decision and will now wait until September to discover the rationale for the CAT’s decision before deciding how to proceed. Two people briefed on the process said that Ofcom would likely have to launch a fresh consultation on the business market proposals, delaying its plans to set more stringent service targets and price controls on the Openreach telecoms infrastructure company in the business market.
An Openreach spokesman said: “We note today’s ruling by the Competition Appeals Tribunal which found that Ofcom’s market review definitions were inaccurate.”
BT shares rose 1 per cent, or 3.5p, to 310.5p.
The CAT ruling comes against a backdrop of a fierce debate about Ofcom’s plans to boost investment in full-fibre networks offering ultrafast speeds for consumers while also reducing the price of wholesale access to existing superfast broadband lines. Some telecoms companies have expressed anger at the plans, as they argue that cutting the price of standard broadband will damage the investment case for full-fibre networks.
Virgin Media accused Ofcom of “serious shortcomings” in its response to its “perplexing” plan. “The reduction in wholesale prices does more than constrain prices for higher speeds: it means that they will fall . . . It is this collateral effect that has the potential to damage investment in fibre,” it said. The cable company is spending £3bn on its UK network, but said the Ofcom proposals could have deterred it had they been in force when it began the build.
Greg Mesch, chief executive of CityFibre, which is investing in full fibre in second cities, said Ofcom needed to rethink its approach to return on investment. “If you take the price to zero, we all die. They are going too low, too fast,” he told the Financial Times.
However, both Sky and TalkTalk, which rely on access to Openreach’s network, praised Ofcom’s planned charge controls on the superfast products, but called for the regulator to introduce caps on faster services that would reduce competition for faster broadband packages.