Ofcom dangles carrot for BT fibre investment

 

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By Barry Collins

Posted on 4 Jul 2008 at 16:08

Ofcom has offered a clear signal to BT that it's prepared to ease off on regulation if the company puts up the billions required for a fibre-to-the-home rollout.

BT has consistently argued that it couldn't make the business case for a fibre rollout if Ofcom insisted on giving competitors equal access to the network.

Now it seems Ofcom boss Ed Richards is prepared to bow to BT's demands. "Our position is clear," Richards claimed in a speech made last night. "Ofcom favours a regulatory environment for the next generation of networks and access that both allows and encourages operators to make risky investments, to innovate for the benefit of consumers and, if the risks pay off, for the benefit of their shareholders too.

"We are very clear that if operators are going to make investments in new infrastructure, investment that is inherently more risky than developing the existing infrastructure, then they need to know that the regulatory framework will allow them to make and keep a rate of return that is commensurate with the risks they are taking," he added.

Furthermore, Richards suggested that BT would need to be given long-term assurances that it would not face regulatory interference. "They need a time horizon that gives them a degree of assurance for a realistic period in the future; that they know for example that the regulator will not suddenly change the rules of the game to reduce the returns just as the rewards for the risk start to flow in," he said.

Mobile competition

Whilst he admitted that the current economic chill could make lavish spending on a new network more difficult, Richards claimed the emerging competition from the mobile sector could prompt companies such as BT to act.

"The emerging success and rapid take-up of mobile broadband will provide a further spur to the fixed-line operators to upgrade to next-generation high-bandwidth products to differentiate themselves competitively to consumers," he said.

"Whilst wireless may not supplant fixed for very high-speed broadband, as technological improvements lead to faster and faster mobile broadband, there will be plenty of situations and applications where it will give fixed a run for its money - as I think the latest data is beginning to show."