A woman talks on her phone as she passes the BT building in London, the UK. Picture: REUTERS/NEIL HALL
A woman talks on her phone as she passes the BT building in London, the UK. Picture: REUTERS/NEIL HALL

BT Group has welcomed a government plan to spur deployment of fibreoptic broadband in the UK and bring internet speeds closer to those in other developed nations.

Industry regulator Ofcom proposed new rules for the industry that combine incentives for BT’s fixed-line unit, Openreach, to move faster on the fibre rollout with measures to help smaller rivals to compete with the country’s dominant carrier.

BT has been waiting for Ofcom to lay out the future regulatory landscape before deciding whether to step up fibre investment, and potentially cut the dividend to help fund the effort. Its shares rose as much as 3.4% after Ofcom’s statement on Wednesday.

“We welcome the direction of today’s consultation from Ofcom, which is a significant step forward towards a widely shared ambition to fibre up the whole of the UK,” BT CEO Philip Jansen said in e-mailed comments.

However, he said further discussions were needed with the government, Ofcom and the rest of the industry so that BT can have the confidence to increase its goal of connecting 15-million homes and businesses to full fibre by the mid-2020s. BT’s current plan involves bringing fibre to 4-million premises by March 2021, up from about 2-million now.

British Prime Minister Boris Johnson wants the industry to connect the entire country to gigabit-per-second internet by 2025. That could happen via a combination of fibre, the latest cable technology, and fifth-generation wireless connections.

Ofcom’s measures are “broadly supportive”, Goldman Sachs analyst Michael Bishop said in a morning note to clients, as pricing on key existing products will remain stable in real terms.

“The dividend policy decision remains on hold, with BT, as expected, holding out until Ofcom’s regulatory framework becomes the final statement,” Jefferies analysts led by Jerry Dellis wrote in a note.

Ofcom will set wholesale fibre prices on Openreach “in a way that encourages competition from new networks” in urban areas, the watchdog said. It plans to remove regulation of Openreach’s copper products in areas where full fibre is built — a move it hopes will spur the company to switch customers over to the faster network.

In less heavily populated rural areas, Ofcom would support investment by Openreach by allowing it to recover costs across a wider range of services, reducing investment risk. “If BT provides a firm commitment to build fibre in these parts of the country, we can include these costs in its prices upfront. If not, we would only allow it to recover these costs after it lays new fibre,” the regulator said.

A spokesperson for Openreach said the proposals “appear to be a big step in the right direction to give clarity and investment certainty”.

The plans will now go out for consultation with industry, a process that will close in April.

Johnson has promised £5bn to subsidise the network rollout in remote areas. Jansen has said he wants to “build like fury” to meet that goal, if the regulatory conditions are right.

Bloomberg

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