Ofcom Lines Up Major Review of UK Broadband Market

Early next year, Ofcom will publish a consultation on its proposals for regulating the UK’s wholesale telecom market. The Telecoms Access Review (TAR) represents a major piece of work for the regulator; it will cover the period from 2026 to 2031 and replaces the regulation set out in the Wholesale Fixed Telecoms Market Review (WFTMR), which came into force in April 2021.

Ofcom’s main objective is to determine how well the fixed-line broadband market is functioning and whether there’s scope for interventions to further promote competition and investment.

In March 2024, it began reviewing the current regulation and gathering the latest market information. This means the entire process from initial kick-off to implementing new rules will last about two years.

To briefly recap, the WFTMR intended to give investors the certainty they needed to support the huge investment required to upgrade the UK’s fixed-line networks from copper to full fibre.

It’s hard to argue that it hasn’t been a success. Ofcom’s latest data for January 2024 shows that 62% of UK homes can now access full-fibre services, up from little more than 20% when the WFTMR came into force. This helped the number of gigabit-capable homes — including those accessing Virgin Media O2’s cable network — to 24 million, or 80%.

Before the WFTMR, the prices Openreach could charge to access its network were regulated based on cost. It rightly argued that this was a barrier to investing huge amounts in a future technology that wouldn’t offer a payback for many years.

Instead, the WFTMR allowed Openreach to raise prices in line with the Consumer Price Index. It also heralded the start of longer review cycles of five years rather than three, offering a little more certainty to investors worried about frequent changes to regulation. And, crucially, it set out guidance that it wouldn’t introduce price controls on full-fibre services for at least a decade.

BT Group surmised that the WFTMR would allow it to earn a “fair return” on its £15 billion full-fibre investment programme intended to reach 25 million homes by December 2026. It prompted ex-CEO Philip Jansen to proclaim that BT Group would build fibre “like fury” and the company has lived up to its word; Openreach has now reached nearly 16 million premises, placing it well on track to hit this target. In its fiscal 1Q24/25, it passed an average of 78,000 premises a week.

The WFTMR also required Openreach to open its national network of ducts and poles to enable alternative fibre providers, so-called altnets, to deploy their networks more efficiently. Known as passive infrastructure access (PIA), this has spurred major investment from over 100 other fibre providers bringing welcome new competition to the market.

According to the Independent Networks Cooperative Association, altnets in the UK had passed almost 13 million premises at the end of 2023, a figure it said was higher than that of Openreach. The leading contributor was CityFibre, which had passed 3.8 million premises in August 2024.

So, what should we be looking out for when the consultation gets underway? With the UK fibre market clearly performing strongly, anything but a relatively light regulatory update would be a surprise. But that’s not to say there won’t be plenty to discuss.

Wholesale regulation always provokes fierce debate and I’m expecting to hear plenty of strong views before any proposals come into force.

The altnets will probably make the most noise, and I expect them to press particularly hard for a better deal on PIA, proposing that this would bolster competition and investment. They’ll probably also clamour for another review of the controversial Equinox pricing offer, which provides discounts to service providers like Sky and TalkTalk in return for committing to placing over 90% of Openreach orders on full fibre, where available.

Openreach recently set out its position on the future of the UK broadband market in this discussion document. One part that caught my eye was a request for rivals such as Virgin Media O2 to also start sharing its ducts and poles, on similar terms. This would fall under the government’s Access to Infrastructure regulations, rather than being a direct request for Ofcom to look at under the TAR, but it might give an early hint as to the direction of future debates. Earlier this year, Virgin Media O2 announced the creation of a new “netco” as it moved into the wholesale market for the first time, seeking to bolster its challenge to Openreach.

Openreach has plans to extend its full-fibre target from 25 million premises to 30 million by 2030. But this is predicated on the “right regulatory and investment environment”, a tacit warning to Ofcom not to impede long-term investment.

I’d like to see more thought given to how best to encourage uptake. Only about a third of UK premises able to access the Openreach full-fibre network have signed up to a service; among many altnets, this take-up rate is far lower.

As is often the case with regulation, Ofcom will have a delicate path to tread to balance the interests of multiple stakeholders. When the TAR gets underway in a few months, I’ll be following its development with interest.