The past few years have seen a flowering of businesses building new digital networks in competition with BT. They provide pure fibre networks (Fibre to the Premise (FTTP)), fixed wireless networks (FWA), hybrid networks and satellite broadband services. They operate in urban and rural areas and have a range of business models. However, none own a copper phone network and, with limited exceptions, they do not rely on state aid. Instead they use commercial investment to build brand new networks and establish close relationships with the communities they serve. These companies are INCA’s members – the Altnets.
Extensive FTTP, with complementary wireless networks, is fundamental to the UK’s future success. Building Gigabit Britain presents a comprehensive overview of the benefits of investment in pure fibre networks, as well as comparisons between the performance of FTTP and other technologies, such as G.fast, concluding that wide-scale deployment of FTTP is necessary to deliver Gigabit Britain.
The UK has done well in the deployment of first generation and superfast broadband, but it lags behind all its international competitors in the deployment of FTTP networks. BT continues its strategy of extending the life of the copper network, while the Altnets are already building Gigabit Britain, stepping up to the challenge of investing in and constructing digital infrastructure fit for the 21st century.
Altnets already offer FTTP connections to twice as many premises as BT and by 2020 we forecast they will reach 18% of the UK with FTTP – 1.5m premises more than BT and Virgin Media’s planned FTTP builds combined. Together, the Altnets form the UK’s third digital infrastructure competitor.
In this report we present six recommendations, which, if followed, will help the Altnets to meet and exceed their current deployment plans. Our recommendations do not demand Government subsidies, but Government does have a vital role to play. It needs to set out a clear Gigabit Britain Strategy, including a target for the majority of the UK to have access to an FTTP connection by 2026 – we think that 80% FTTP coverage can be delivered competitively by the market in the next ten years.
If INCA’s recommendations are implemented we believe the Altnets can deliver around half of these FTTP connections by 2026. This sector is ambitious, capable and central to Building Gigabit Britain.
David Cullen, INCA Chair and Malcolm Corbett, INCA CEO
8 September 2016
- Digital connectivity is already a critical building block for a strong modern economy and is set to become even more important. The world is on the verge of the next phase of the digital revolution, which will transform all aspects of our lives through tech-enabled developments such as the Internet of Things, smart cities and automated vehicles. Only countries with digital infrastructure fit to support a “Gigabit Society” will be able to fully exploit this new digital wave.
- The UK is at an important juncture in determining how to develop the digital infrastructure needed to build on its existing digital strengths. The regulator Ofcom declared in its Strategic Review that “fibre is the future” and is putting plans in place to deliver this vision. The previous Digital Economy Minister, Rt Hon. Ed Vaizey MP, spoke of the need for “Gigabit Britain” to succeed today’s Superfast Britain and a Digital Strategy outlining further details is expected shortly.
- A mix of digital networks will be needed to support Gigabit Britain, with wireless networks in particular playing a critical role. However, INCA argues that to meet the Government’s goal of ensuring “the UK builds the right infrastructure to maintain [its] position as a world leading digital nation”, a significant step-up in the extent of Fibre to the Premise (FTTP) networks is required. The alternative networks – or “Altnets” – are already building these future-ready networks and can play a central role in delivering the scale of FTTP required in the UK, if the right policy and regulation is in place.
- Gigabit Britain will need networks that deliver not just fast download speeds to some of the people some of the time (as is the case with copper-based networks such as Fibre to the Cabinet (FTTC) and G.fast, the next copper upgrade), but networks that consistently, reliably and securely deliver high upload speeds, low latency and ultrafast download speeds. FTTP is the only fixed-line network able to fully deliver against these criteria and support a Gigabit Society. Fibre is also essential for the roll out of 5G and other wireless networks, has far lower operating costs and energy consumption than copper, and can help the UK meet wider policy objectives, such as increased productivity, a balanced economy and a smart approach to energy and public services.
- Most of the UK’s international competitors have already understood that strong future economies will be built on FTTP and are making firm progress towards widespread coverage, often spurred on by clear government visions for a Gigabit future and a supportive regulatory environment. However, while the UK performs well against its peers on today’s key connectivity metrics – superfast speed, coverage, take-up and price – it performs poorly against the critical metric for tomorrow’s connectivity – the extent of FTTP deployment. Unless there is a swift and significant increase in FTTP deployment, the UK will trail behind all other developed nations on connectivity, significantly undermining its long-term economic growth and competitiveness.
- BT has made clear that its plans for the future rest not on fibre, but copper. The upgrade of the Openreach network to G.fast promises eye-catching potential top download speeds but the copper in the connection will simply repeat today’s broken broadband problems: unreliable service, a patchwork of “up to” speeds and post-code variations and potentially an even greater digital divide between those with 1Gbps+ speeds and those without. The UK must therefore look to BT’s competitors to lead the FTTP charge. Virgin Media will play a significant role in providing competition, but a third competitive force is required to deliver FTTP deployment at scale, sufficient competitive pressure on BT, and choice for consumers.
- Collectively, the Altnets provide the additional competition required. They are deploying FTTP, growing fast and attracting significant and rising investment. INCA’s 2016 Member survey shows that Altnets already pass more than twice as many premises with FTTP as BT. By 2020 the Altnets forecast their FTTP networks will pass nearly 5m premises (or 18% of the UK) – 1.5m premises more than BT and Virgin Media’s planned FTTP builds combined. The Altnets’ say that their deployment plans could increase by between 25% and 50% in a more supportive policy and regulatory environment. To build Gigabit Britain, Government and other stakeholders must therefore recognise the significance of the Altnets and ensure that policy and regulation maximise their potential.
- To do this the Government needs to build on Ofcom’s Strategic Review announcements and go further, by setting out an ambitious and coherent “Gigabit Britain Strategy” focused on encouraging commercial investment in FTTP networks. To give focus to the Strategy and confidence to investors, network builders and operators, the Government should announce a target for the majority of UK citizens to have access to a FTTP connection by 2026 and near universal coverage by 2030. INCA suggests that coverage of 80% of the UK with commercial FTTP by 2026 is an attainable goal, which is also in line with the level of competitive infrastructure that Ofcom believes can be achieved. Based on their current deployment trajectory, and on the condition that the recommendations in this paper are adopted, the Altnets are confident they are on track to reach around half of the 80% commercial coverage target by 2026.
- The target is ambitious but achievable through commercial deployment rather than public subsidy: the cost of delivering FTTP has fallen significantly in the last decade and the Altnets’ deployment forecasts, combined with the sharp increase in commercial investment in FTTP elsewhere in the world, prove there is commercial appetite to deploy at scale – in the right policy and regulatory conditions.
- The coming digital revolution provides an opportunity for the UK to translate its existing digital strengths into significant social and economic gains. However, to do so requires a quantum leap in the quality of our digital infrastructure. The Altnets are already building FTTP networks fit for Gigabit Britain and are on course to reach a significant proportion of the UK by 2020. However, a clear Government strategy that prioritises competition and investment in truly future-ready networks is required to unlock the Altnets’ full potential.
Recommendations for Building Gigabit Britain
Government should set out a Gigabit Britain Strategy, specifying the UK’s ambition for fixed-line digital infrastructure, which includes:
- announcing a target for the majority of the UK to have access to a FTTP connection by 2026 and near universal coverage by 2030, with 80% coverage commercial deployment by 2026 suggested as an attainable goal;
- encouraging the UK’s devolved administrations, cities and local authorities to create their own local Gigabit strategies, which should include exploring the feasibility of anchor tenancy arrangements and agreeing wayleaves to bring Gigabit services to council housing stock;
- asking the National Infrastructure Commission to advise on the development of the Strategy as part of a broader Government review, including developing an up-to-date costing analysis of commercial FTTP deployment;
- aligning all relevant Government policies and programmes to support the Strategy, including ensuring the broadband USO policy does not undermine incentives to invest in competitive infrastructure.
To encourage greater investment in FTTP networks, Government should:
- oversee a fundamental review of the business rates for fibre, including removing all rates on new fibre assets for 10 years;
- ensure the launch of the Broadband Investment Fund, to give confidence to the wider investor market and provide an important source of capital to alternative networks.
To remove barriers to FTTP deployment, Government should:
- make amendments to the New Roads and Street Works Act 1991 to reduce the notice required on minor roads, review the circumstances under which Permits are required and charged for, and adopt a more common sense approach to builds on recently laid footpaths and roads;
- work to retain the key elements of the Electronic Communications Code as it becomes law (including provisions on fair valuation, the right to upgrade and contracting out) and ensure that a connectivity-focused Code of Practice is in place to underpin the working relationship between Communications Providers and landowners.
To ensure efficient use of public subsidies and assets, Government must:
- ensure that tight and strictly enforced rules are in place prohibiting the overbuild of FTTP networks using public subsidy (which will also reduce the negative impact of overbuild on the FTTP investment case);
- commission a comprehensive inventory of existing public sector infrastructure assets and make those assets available to builders of FTTP networks on a fair and non-discriminatory commercial basis.
To deliver its vision of a “fibre future”, Ofcom must place competition and investment in FTTP networks front and centre of all its work by:
- ensuring that BT Openreach’s governance does not inhibit investment by alternative networks;
- ensuring that BT Openreach fully commits to making Duct and Pole Access work by providing timely, effective and fit for purpose access to its ducts and poles;
- applying passive remedies consistently across all fixed markets, through the DCR, the BCMR and the forthcoming fixed market reviews;
- requiring that procurement of BT Openreach services by BT Consumer takes place in an open and transparent way;
- creating an independent tribunal to resolve disputes between BT Openreach and alternative operators.
To stimulate the demand needed to drive FTTP investment, the ASA should review its guidelines to ensure that future advertising of both FTTP and copper-fibre hybrid products gives consumers the accurate information required to make informed choices.
INCA wishes to thank the sponsors of this report. Their generous contributions made this work possible.
This report is published by the Independent Networks Co-operative Association Ltd. It has been written and compiled by Victoria Read of Victoria Read Consulting and Gita Sorensen of GOS Consulting. The report is published under the Creative Commons licence BY-NC. Licensees may copy, distribute, display and make derivative works based on it only if they give the author or licensor the credits (attribution) in the manner specified by these. Licensees may copy, distribute, display, and make derivative works and remixes based on it only for non-commercial purposes.