With UK comms regulator Ofcom set to announce the conclusions to its Digital Communications Review later in the week, UK multi-play operator Sky has renewed its call for the watchdog to implement what it describes as a “simple quick fix” that can take Britain out of broadband’s slow lane.
Writing an opinion piece in The Times, Jeremy Darroch, Chief Executive, says that among the Review’s conclusions will be how Ofcombelieves broadband in Britain should be delivered. “The debate has focused on whether Openreach, which operates most of the wiring used to deliver broadband to homes and businesses, should be separated from BT. It’s no secret that Sky supports separation. But while some portray the issues as a battle between commercial rivals the truth is it matters to us all. Consumers, small businesses, think tanks and MPs have all said that change is needed. I’ve never seen such a coalition of support,” he says.
“So it’s important this week to focus on the heart of this debate. If the UK is to improve its productivity and international competitiveness, and ensure our businesses, homes, schools and hospitals benefit from the latest technology, then we need better digital infrastructure including an ultrafast broadband network with speeds of 1Gb/s or more, through fibre laid direct to homes and businesses (‘fibre to the premises’). Ultrafast connectivity is critical to Britain’s future economic and social welfare,” he declares.
According to Darroch, the technologies exist. “Much of the rest of the world is already rolling out fibre to the premises. Cities like Stockholm, Barcelona, Atlanta, Mexico City, even Dunedin in New Zealand already have these networks. But in our country there’s a catch. There’s one national infrastructure broadband network and currently only BT determines how fast it will be,” he argues.
“BT has shown little willingness to invest in fibre to the premises,” he says. “Instead, it plans incremental upgrades to decades-old copper cables as the final connection to homes and businesses, falling far short of the potential of a true fibre network. Indeed, what it has chosen to invest in faster broadband, has come largely at the expense of investment needed to maintain the existing copper network, resulting in the service levels so many complain about,” he contends.
“It is naive to think that under the existing structure anything will change. This approach will not deliver the 1Gb/s speeds Britain needs and anything less is unambitious. Investing in copper in 2016 is, as Henry Ford would have put it, like breeding a faster horse rather than building a car,” he suggests.
“The potential for new technology to transform our society is limitless. In New Zealand every rural hospital is connected to ultrafast broadband, allowing doctors to consult with isolated patients and distant specialists. Imagine the benefits for working parents and small businesses if the network helped them work remotely, seamlessly connected through a powerful fibre connection,” he says.
“But because BT’s broadband network faces little competition, BT sweats its copper assets for as long as possible, knowing it will not lose its captive customers and continue to earn decent profits even if it does not invest in fibre,” he claims. “Sadly, it is often not economically viable for other providers to roll out separate ultrafast networks. We are working with TalkTalk to trial fibre to the premises in York. While demand is encouraging, it is difficult to achieve a reasonable return on investment while BT Retail remains tied to Openreach. Freeing up Openreach would allow the right level of investment to be made,” he suggests.
According to Darroch, BT defends its position by saying that Britain is currently leading in Europe in terms of take-up, or that separation is a major undertaking that will interrupt progress. “Perhaps more revealingly, last week the Chairman of BT expressed concerns about the impact of separation on BT’s dividend policy. Regardless, these arguments are flawed. Whatever the comparison today with Europe, we are being overtaken by the likes of Spain or Denmark who are rolling out fibre to the premise,” he observes.
“The actual process of separation is not complicated. Companies split and change all the time. BT itself successfully demerged Cellnet, which flourished as O2. Now it is embarking on integrating EE, a far bigger undertaking. Openreach is already functionally separate from BT so full separation is possible,” he says.
“It is clear the status quo is not an option. BT invests virtually the same amount today in the network as 10 years ago. This has seen the annual level of faults grow to 10 per cenrt of all customers, and customers waiting more than two weeks for their broadband to be connected. Unacceptable for a modern society,” he suggests.
“A wise man once defined insanity as ‘doing the same thing over and over again and expecting different results’. With so many agreeing change is needed, Ofcom this week has the opportunity to lead the way. The industry, with much of the nation, will be ready and eager to support it” he concludes.
In July 2015, John Petter, CEO of BT’s Consumer Division called on Ofcom to broaden the scope of its Review to include pay-TV, citing high prices and poor outcomes for consumers arising from a lack of competition in pay-TV. Petter compared the falling prices, rising speeds and strong international performance in the UK broadband market with the high prices and bad outcomes for consumers suffered by UK pay-TV subscribers.
He suggested that Sky – the dominant player in the UK pay-TV market with over 64 per cent of the subscribers – had been “very shrewd” in its approach to the Review. “They’ve gone to great lengths to try and keep the focus of Ofcom’s review away from pay-TV They’ve done that by raising concerns about the UK broadband market; mounting attacks on BT; even calling for us to be broken up.”
He suggested this was “just a diversionary tactic; a smokescreen to distract the regulators and the wider world from the real issue: their dominance in pay-TV.”
Ultimately, Ofcom chose not to broaden the scope of the Review as called for by BT.