Ofcom has announced that it will not regulate BT’s pricing for next-generation broadband to enable the telecoms giant to make the necessary investment in fibre-optic cabling.
The decision means that BT’s Openreach infrastructure division will be able to price super-fast wholesale broadband to ISPs at market rates in such a way as to allow the company to make sufficient profit to justify the levels of investment required.
In the early days of UK broadband rollout, BT was heavily regulated by the communications watchdog to prevent abuse of its dominant position and ensure fair competition.
But the telco has successfully argued that the scale of investment required to install fibre cabling to its street cabinets – so-called “fibre to the cabinet” (FTTC) – would not be justifiable without the ability to determine its own pricing.
BT chief executive Ian Livingston said the announcement allows BT to proceed with its £1.5bn plan to deliver super-fast broadband to at least 40 per cent of UK households by 2012.
“Today's announcement from Ofcom has set expectations for the whole UK industry as the market evolves into a fibre-based world. This is an important step and will allow the market to develop the next generation of the UK's broadband infrastructure, which is so critical to the UK's future as a knowledge-based economy,” he said.
“The stage is now set for a wide variety of players, of all different shapes and sizes, to do their bit in providing consumers with a choice for super-fast and innovative services. Now it's all about delivery.”
Ofcom’s decision took into account the availability of competitive broadband services, such as Virgin Media’s cable-based products which already offer up to 50Mbit/s speeds, as well as a variety of local fibre-based initiatives around the country.
"Super-fast broadband represents one of the most important developments in modern communications for many decades. It will deliver significant benefits to consumers and businesses with the prospect of new digital services delivered over the internet at high speed,” said Ofcom chief executive Ed Richards.
"Our message today is clear: there are no regulatory barriers in the way of investment in super-fast broadband; we want to promote investment but also ensure that there is fair and effective competition for the future."
Livingston said BT Openreach has already signed up five communication providers to provide up to 30,000 residential customers in Whitchurch and Muswell Hill with fibre-based services in the next few months.
“We will also shortly be announcing the locations of the next 500,000 homes to be fibre-enabled, beginning in January next year,” he said.
“At our pilot at Ebbsfleet Valley, consumers are, today, enjoying speeds of up to 100Mbit/s - the fastest available to consumers anywhere in the UK.”
BT’s next-generation broadband access rollout focuses primarily on FTTC. The alternative approach of fibre to the home (FTTH) – which would be far more costly on a national basis – will be covered for now by existing plans for installing fibre cabling to newly-built homes.