Openreach seeks wholesale price rise to pay for UK-wide FTTP

The UK’s last-mile provider Openreach is preparing the ground for higher wholesale access charges in order to pay for a nationwide fibre programme.

In its first significant strategy statement since it became managerially separate from BT, the company said it wants to build fibre to the premises (FTTP) to connect 10 million homes, a project that “would cost in the region of £3 billion to £6 billion”.

Openreach CEO Clive Selley said: “We believe that under the right conditions, we could build FTTP connections to 10 million homes and businesses by the mid-2020s. We want to do it, we think it’s the right thing to do for the UK, but it’s clear that we can’t do it alone, so I’m encouraged to hear that our wholesale customers support our vision.”

Selley was quoting a consultation commissioned by Openreach – which is still 100% owned by BT – that said “there is broad support for Openreach to build a large-scale FTTP network which would bring substantial benefits for all, including better, more predictable services and faster, more consistent broadband speeds”.

Major service providers such as BT, Sky, TalkTalk and Vodafone were consulted, said Openreach, “and hundreds of others represented by the Federation of Communications Services”.

But Openreach needs to justify the investment, said Selley. “We’re under no illusions about the challenges that lie ahead because we need to build a business case that’s workable and fair for everyone. That means we need a regulatory environment that encourages investment, and we need to agree how the costs of such a huge engineering project can be recovered fairly from all those that stand to benefit.”

The company said: “to make the investment viable, a number of key enablers will need to be put in place through close co-operation among the communications industry, Ofcom and Government”.

Openreach added: “In the near term, most [communications providers] expect Britain’s existing broadband technologies to provide enough speed for the majority of consumers but, whilst there is no consensus on when gigabit speeds will be needed, they agree that ultimately a large-scale FTTP network will be a necessity. Given the timescales involved in building that network, there is strong support for Openreach to start the engineering work required sooner rather than later.”

The company is suggesting an “FTTP switchover”, by which “all customers should be migrated over to the new network as quickly as possible after it has been built in a given area”.

Openreach said it has been trying out new fibre deployment techniques which have “already resulted in a halving of the cost of its FTTP delivery over the last year”.

But it needs “a more supportive policy and regulatory environment to build more FTTP in the UK, including a constructive resolution to the application of business rates [local taxes] and to Ofcom’s Wholesale Local Access (WLA) market review”.

It warns “Openreach will need to recover the costs of a very large investment in a new, faster and more reliable network in the wholesale prices it charges to [communications providers]”. The company said it wanted to publish its proposals “by the end of 2017”.

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