29 November 2017

Openreach estimates connecting ten million properties across the country with FTTP will cost up to £6bn.

Openreach says it will have to pass on the costs of building a large-scale FTTP network to its wholesale customers. 

Since mid-July, the firm has been consulting customers such as BT, Sky, TalkTalk, Vodafone, amongst hundreds of others represented by the Federation of Communications Services. Openreach’s aim was to see if there’s enough demand for a large FTTP network that could deliver Gigabit speeds and more reliable broadband services for decades to come. 

The consultation came to an end at the end of September and Openreach found broad support from communications providers (CPs) for it to build such a network. But the firm estimates that building FTTP connections all the way to ten million front doors would cost around £3bn to £6bn. It says that deciding how that investment can be recovered fairly through wholesale pricing will therefore be “critical” to making a commercial case work. 

Openreach adds that a large-scale FTTP network is likely to benefit a broad set of customers over time, so it believes the costs should be spread fairly across a wide base. It reckons this would help to keep down any wholesale price increases required to support the investment case, whilst CPs and Openreach would benefit from savings through increased network reliability.

CPs acknowledged that charging a large premium for ultrafast services alone is unlikely to succeed, but questioned how much more customers will be willing to pay for the same headline speeds on a better platform. Some also expressed interest in sharing the risk of the investment but in return for preferential terms on the infrastructure that’s built, with a variety of different models suggested. 

There were also a range of views about how Openreach should decide on the scale, make-up and locations of the new network. Openreach says these will be considered in detail as it develops its new network strategy. By the end of 2017, it will then invite views on more specific proposals that cover pricing, footprint and a plan for automatic switchover.

“We believe that under the right conditions, we could build FTTP connections to 10 million homes and businesses by the mid-2020s,” says Openreach CEO Clive Selley. “We want to do it, we think it’s the right thing to do, but it’s clear that we can’t do it alone.”