Matthew Howett, Chief Executive of Assembly Research comments:
“The largely indiscernible reaction from Openreach and the altnets to Ofcom’s conclusion of its Telecoms Access Review suggests the regulator has probably struck the right balance at the midway point on a 10-year journey. The bigger issue of consolidation and how that leaves the market will fall to the CMA, with Ofcom right to only say it will provide input.”
In summary:
As we said at the consultation stage in March 2025, “Ofcom is right to stay the course halfway through what was always sold as a 10-year pro-investment framework” and that “we expect only limited change between now and the March 2026 statement”. Today’s statement confirms that, recognising that now is not the time to radically depart from what was outlined in 2021. The early reaction from Openreach, CityFibre and others is similar enough in tone, suggesting the regulator has probably struck the right balance.
At the consultation stage, Openreach had hoped for more on copper retirement and arguably that has been set in motion. While Ofcom has not fully defined the environment for copper deregulation, it is consulting on pricing flexibility for copper retirement, with the suggestion that charge controls could be removed where 90% of premises have access to fibre. In this scenario, you could envisage Openreach being able to increase prices for its legacy copper services.
Altnets raised PIA as one of the bigger concerns and we’ve seen some movement here from Ofcom, although not going as far as some would have liked by introducing alternative pricing structures for rural deployments. Instead, some prices will come down (lead-in charges and single bores), but no average pricing impact has been given due to the varying product mix that will be chosen by fibre builders. Ofcom’s commitment to PIA as a foundational remedy beyond 2031 will be reassuring for the many altnets that have made use of it.
Ofcom’s greatest challenge has been the need to balance the longer term need to invest with the uncertainty of how the market will develop over the next five years. Together with the CMA, the collection of regulators should have sufficient tools to respond, flex and adapt as required, and we’re not expecting them to revisit the market in any meaningful way before 2031.
On the specifics of consolidation, as you’d rightly expect, Ofcom was fairly tight lipped given it’s predominantly a matter for the CMA. The regulator has correctly focused on the principle of preserving competition over protecting specific competitors. While acknowledging the fragmented nature of the market, it was never Ofcom’s role to protect any one operator or business model – instead it was to give altnets an opportunity, but not a guarantee, to succeed. The next phase of the market will depend on how the CMA considers the level of sustainable network investment and footprint overlap in the consolidation of Netomnia. Our thoughts on that proposed transaction (and others) are available to clients here.
