Single-network dependence in the UK hampers broadband progress

Posted on November 22, 2016

BT has long faced a litany of public complaints about the way it runs much of the UK’s broadband infrastructure. Rival companies that have to piggyback on the Openreach network to provide their own services say the group does not invest enough. Customers often complain that service speed and quality are poor.

A particular beef has been BT’s focus on reusing as much of its existing copper infrastructure as possible to deliver fast broadband services. True, this may make sense from a narrow financial perspective — helping to minimise the telecoms group’s risk on its investment in a fibre product that is more costly for consumers. But the move has wider consequences for the UK’s broadband infrastructure.

Not only does it result in patchy download speeds, it has also led to concern about the way the UK has perforce adopted an intermediate, and of necessity slower, technology. Britain may have impressive statistics when it comes to broadband take-up, which now reaches 80 per cent of homes. But with average speeds of 29 megabits per second (Mbps), this is for the most part steampunk rather than cutting-edge technology. When it comes to the real thing — broadband fibre delivered to the premises and capable of 10Gbps and more — penetration is a feeble 2 per cent.

Increasing this is the focus of an initiative from the government, due to be unveiled in Wednesday’s Autumn Statement. The details are patchy but the state intends to put up £400m on a matched funding basis to expand the “full fibre” network. The idea is to push this money at so-called challenger outfits such as Hyperoptic, City Fibre and Gigaclear — smaller companies that play the role of full fibre pilot fish, nimbly installing local networks ahead of BT’s lumbering shark.

This seems sensible enough from a wider market perspective. Ideally, it ought to goad BT to invest more in full fibre coverage. The alternative, after all, is for the incumbent to see its markets eroded as the challengers pinch customers keen on faster speeds. BT has seen City Fibre break into a number of towns across the UK with just such a product. And in one area where BT is for historic reasons not the incumbent — the northern (and not notably prosperous) city of Hull — fibre is available to more than 50 per cent of businesses and homes.

A £400m bung will, however, not change the overall market dynamic. Britain’s broadband system remains too dependent on a single network — Openreach — which in turn remains too closely entwined with BT, its owner. Even assuming the terms of the public support are sufficiently compelling to draw in challengers, supporting the emergence of competition for 7 per cent of UK households will not change the reality, that the network and one of the biggest service providers are effectively joined at the hip.

Putting that right remains the priority. And that involves more than just a splash of new investment. It requires a harder separation between BT and its Openreach operation. That means the latter must open its infrastructure fully to rivals, allowing them to lay their wires and fibres to Britain’s homes.

jonathan.ford@ft.com

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