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Ofcom flashes cash guarantees at BT for fibre investment

Next gen network quid pro quo tabled

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The boss of Ofcom has given the clearest indication yet that regulators are ready to offer BT more control over a next generation UK broadband infrastructure in exchange for investment.

In a speech in London at IT bigwig yacking shop Intellect yesterday, Ed Richards sympathised that "operators" who might invest in new infrastructure (read: BT) need to know that watchdogs will let them "make and keep" a rate of return on the investment.

That will likely mean allowing BT to operate a fibre network at a big competitive advantage, via high wholesale charges to other broadband providers who want to use the lines.

It's very unlikely that Ofcom would let BT run a national fibre network as a traditonal incumbent monopoly. German regulators have tried the same trick to tease more investment in fibre from Deutsche Telekom, and are facing court action from the European Commission as a result.

Richards said: "They [investors in fibre] 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."

This ought to be music to the ears of BT top brass. Their rhetoric on investment in fibre has warmed in recent months, but always with the proviso that the sums would have to be attractive for a rollout to go ahead.

Richards said the debate on next generation access in the UK has been "slow to ignite" because the existing copper-based broadband market is so competitive. Ofcom has invited a bunch of communications CEOs to a new series of jaw-jaw sessions focused on practical action to combat industry inertia.

It's estimated that a national next-generation network deployment would cost up to £15bn. Ofcom is currently investigating whether that figure could be reduced by laying cables in existing holes in the ground owned by the utility companies.

One thing is certain: the government is very keen that taxpayers don't shell out to bring make Britain's internet infrastructure competitive with more advanced networks in countries such as South Korea and France.

Full details of Ofcom's regulatory plan for a fibre quid pro quo are set for release in September. Ed Richards' speech is here. ®

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