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Surprise, surprise. BT the only Universal Service Obligation provider in town

Ofcom also hints at deadlock with former monopoly regarding legal separation

BT is the only player to offer its services for universal coverage of 10Mbps by 2020, but has also placed a number of conditions on doing so, head of comms regulator Ofcom Sharon White has said.

Speaking at the Culture, Media and Sports Committee hearing, White said BT has expressed interest in delivering the government's Universal Service Obligation "but only if certain conditions are met".

She said BT wants "regulatory certainty" in return, "which is essentially hands-off reform of Openreach but also... in terms of continued flexibility on the VULA [Virtual Unbundled Local Access] pricing. Now we think those are two separate conversations".

Earlier this year, Ofcom said a legal separation of BT from Openreach, whereby the broadband division would have separate governance in place, was its preferred option. It found that Openreach has an incentive to favour BT retail over and above other competitors in the market.

White said it was a conversation for the government, not the regulator, on how the USO would work. She insisted that a decision has to be "a conversation in a different part of the forest" as to the one around what Openreach's future governance should look like.

She added: "I would be absolutely against an agreement on the USO which ties the hands of the regulator, which means we can't deliver for consumers."

If BT is the only provider, that will raise questions over procurement and its ability to deliver value for money, she said. "We would love that to change as we would love that to be contested."

The government has said it is on track to reach the target of 95 per cent 24Mbps next year. Controversially, BT was also the only provider to win those contracts.

In its once-in-a-decade Digital Communications Review, the regulator fell short of recommending a structural separation because of the associated property and pension costs associated with the former model. However, it has kept that option on the table.

White said Ofcom has received 100,000 responses from that consultation and is expected to issue a statement by December. A detailed proposal is scheduled for March next year.

Ofcom is in discussion with the European Commission on how it could mandate a change of BT's structure if a voluntary agreement cannot be reached, she said. Asked if that means BT currently would not be closer to Ofcom's position if a decision is to be made without an EC mandate, she said "Yes."

"If you look at BT's capital investment over the period of ten years, it has broadly been flat at about £1bn. It has increased very recently by about 30 per cent on the fibre side. It is interesting for a player that has still been very reliant on its copper network. Even now in the future with, BT invests less in its copper network £300m per year than in the depreciation."

BT has also pledged to invest £6bn into UK broadband and mobile and make 300Mbps-capable broadband available to 10 million premises and 1Gbps-capable FTTP to two million premises by 2020.

White said BT has been "looking in its rearview mirror" at competitors such as Virgin's £3bn scheme to extend ultrafast fibre broadband to 17 million homes by 2019, which she said has helped BT up its game.

But she said Ofcom "would love" to see BT boost its broadband investment.

In his Autumn Statement today, Phillip Hammond will announce a £400m broadband investment fund intended to further increase fibre investment by the smaller "alternative network" providers. ®

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