Head of Ofcom tells group it must ‘fibre up or risk fading away’
Nic Fildes, Telecoms Correspondent
APRIL 26, 2018
The head of Ofcom has warned BT that it risks sliding into history unless it invests more in full-fibre networks to compete with rivals backed by big infrastructure investors.
Sharon White, chief executive of Ofcom, said the company faces a critical juncture in the coming years that could define whether it survives.
“Incumbents face a choice in my view — fibre up or risk fading away,” she told an industry event at the Tate Modern in London.
“History is strewn with once-successful companies that failed to anticipate and act on shifts in customer demands and to innovate. Think Kodak, Polaroid, Palm and Blockbuster. The UK cannot afford for BT to be added to that list.”
It is the latest broadside from the regulator against BT ahead of a potential overhaul of rules governing the sector to encourage more investment in full fibre networks.
Only 3 per cent of UK premises can connect to a full fibre line, well below Portugal’s 80 per cent and a fraction of what is available in other European markets including Spain and France.
Openreach, BT’s infrastructure arm, has committed to connect 3m homes to full-fibre lines by 2020 and wants to reach 10m homes by the middle of the next decade.
The UK’s slow progress toward full-fibre has opened the door for infrastructure investors to bankroll a new generation of “alt-nets” to build rival networks.
Infracapital, part of Prudential, has bought rural player Gigaclear and plans to roll out to 3m homes alongside TalkTalk. Hyperoptic, backed by the Quantum Strategic Partners fund controlled by billionaire George Soros, and Community Fibre, backed by the government’s National Digital Infrastructure Fund, are both targeting urban areas.
CityFibre, which has partnered with Vodafone to build fibre, this week agreed to a £538m takeover by a consortium of infrastructure funds backed by Goldman Sachs.
That has put pressure on Openreach. Clive Selley, its chief executive, told the event that his company has adopted a “fibre first” strategy and will invest a “record amount” this year in the network technology compared to £1.5bn last year.
Gavin Patterson, BT chief executive, added a note of caution that demand for faster speeds was rising but not to “gigabit” levels. “Ultrafast is starting to grow in popularity, but we’ve yet to see significant demand,” he said.
Yet some of the smaller players felt that Ofcom had gone “off piste” in warning BT that it needs to react to the growing competition.
Mark Collins, CityFibre’s director of strategy, said that Mr Selley and Mr Patterson were given too much prominence at the event, which was organised by Ofcom and the government, given its previous reluctance to invest in full-fibre. “It’s perverse logic,” he said.
Ms White also committed to extend the length of its market reviews in the telecoms sector from every three years to every five after Brexit, a move welcomed by the industry.