Openreach Needs Fiber Partners for UK Rollout, Says Chairman

BERLIN -- Broadband World Forum 2017 -- The chairman of BT's Openreach infrastructure business has said the UK operator will only be able to build a nationwide fiber network through an entirely different and much closer relationship with the retailers that use its services, suggesting that co-investment could prompt rollout activity.

The operator has recently concluded a consultation process with customers on the appetite for full fiber investment and plans to publish details of that in the autumn.

Openreach has come under pressure from government authorities and other players to increase investment in higher-speed fiber networks. Under a strategy developed when Openreach was more integrated with the rest of BT Group plc (NYSE: BT; London: BTA), it currently plans on using a copper-boosting broadband technology called Gfast to connect about 10 million UK premises by 2020, and will connect only about 2 million homes and businesses using fiber-to-the-premises technology.

But there is now a growing concern that the UK could fall behind other countries in Europe unless full fiber networks become more widely available in the next few years.

Speaking at today's Broadband World Forum in Berlin, Openreach Chairman Mike McTighe said the "build it and they will come" approach that BT took with copper broadband would not work when it comes to fiber networks.

"We need more alignment between the infrastructure provider and the retail level service providers, and we are open to models in that regard such as co-investment " he told conference attendees. "We need a different relationship with customers to consider building a full fiber network."

The comments follow moves by regulatory authority Ofcom to enforce the "legal separation" of Openreach, forcing BT to run the business at arm's length from the rest of BT Group. It acquired its own board in January and aims to incorporate Openreach as a distinct legal entity by Christmas, said McTighe. The company is also in the midst of a rebranding exercise that will strip BT's name from any Openreach advertising.

Ofcom's intervention was aimed largely at spurring investment in the UK's broadband market and improving conditions for the retail service providers that use Openreach.

BT has already this year suggested that it could build a full fiber network covering about 10 million UK premises by 2025 under the right regulatory framework.

But McTighe insisted that Openreach would need to be allowed to switch off its older copper networks as it rolls out fiber and warned of increases in wholesale charges.

"It is imperative that we don't end up trying to manage and run two networks," he said. "We need the ability to switch off the copper network and in support of that we are going to need modest increases in wholesale pricing of services to retail service providers."

In the short term, Openreach wants to be able to put together a fiber business plan that it can take to its shareholders, but it needs the industry "to stop bickering and arguing" about broadband, said McTighe.

"Openreach wants to build and deploy a full fiber network for the UK but it will take a long time and we have to get started," he said. "We need the industry… to get behind this and figure out collectively how to make it happen, and we need the government and Ofcom to play their part if we are to come up with a compelling investment case that we can take to shareholders. We cannot do this on our own."

Those remarks hint at some Openreach frustration with government authorities and customers, which continue to blame it for service-related problems and say it has failed to make sufficient investments in broadband infrastructure during the past few years.

BT was several weeks ago reported to have begun talks with Vodafone Group plc (NYSE: VOD), one of the retailers that use the Openreach network, about co-investing the rollout of a full fiber network.

Broadband operators including Sky , TalkTalk and Vodafone have previously complained they cannot access BT's existing network facilities on acceptable terms. The legal separation of Openreach is aimed partly at addressing those complaints and was welcomed by BT rivals, even though had pushed for a more stringent "structural separation" that would see Openreach spun out of BT entirely.

Quizzed at today's show about the future of copper, McTighe said: "I think we are getting to the point where the copper will run out of steam. In the UK, we need to start planning for the future, which is to retire the copper network."

— Iain Morris, News Editor, Light Reading