We summarise the main talking points from the Connected North conference that took place in Manchester during 17–18 April 2023
Competition as a great discipliner: Brian Potterill (Director of Mobile Network Strategy, Ofcom) provided the opening keynote of the day, reiterating the regulator’s faith in the role of competition in driving innovation, investment and value for money – albeit not always network security or resilience. He described how over the past five years, mobile prices have remained flat despite usage growing four-fold, noting there is nowhere else you can get 4x the value for money. He believes the price rise story needs some unpacking, highlighting that price rises haven’t translated into higher revenues and profits for operators, with many consumers ‘spinning down’ to cheaper packages when out of contract. There is, however, a concern operators may not have been fully transparent about recent inflation-linked increases. In the panel that followed, several altnets urged Ofcom to nurture competition, seeing Openreach’s proposed Equinox 2 offer as a direct challenge to their business. Matthew Hemmings (Managing Director of Fibre and Network Delivery, Openreach) dismissed these concerns, arguing the offer was a response to customer requests for better pricing that will be good for the UK as a whole. Ofcom returned to the importance of competition, stating that it has had a ”tremendous effect on keeping Openreach honest”.
The shift in focus from build to scale and take-up: Consolidation in the UK broadband featured prominently, with Daren Baythorpe (CEO, ITS Technology Group) convinced that more M&A will happen as the sector moves from a ‘land grab’ and build-out phase to one focused on connections, revenues and investor returns. Matt Tully (Director of Fibre Upgrade, Virgin Media O2) saw logic in a reduction in the current number of altnets, considering that having four to five fibre providers in one city street makes little sense and is a waste of capital investment. Conal Henry (Founder and Chair, Fibrus) stated that the ‘game has shifted’ from deployment to adoption, but that some operators now need deals – either to buy or sell – in order to achieve their stated ambitions. He sees the current level of overbuild as a “destruction of capital”, the number of premises passed is now a meaningless metric: “Is an asset in the ground without a connection at the other end an asset or does it become a liability?”. He stated Fibrus would rather have half the footprint and twice the customers than the other way around. Rob Hamlin (CSO, CityFibre), however, was pleased with how take-up is growing and the scope to use BDUK contracts to complement a fully-financed commercial rollout. More broadly, CityFibrewelcomed that Ofcom has “moved to protect competition” by looking at Equinox 2 more deeply, and also the recent decision to look at the advertising of fibre. Hamlin expressed a genuine concern that if Ofcom doesn’t do the right thing with Equinox 2 then take-up will be impacted and he is worried about the contributed ‘signalling’ of discounts into the future.
Switching, price rises and discounting in the wholesale market: The regulation panel ambitiously tried to cover three live issues. The first related to the much delayed implementation of ‘One Touch Switch’. There was a rare moment of agreement between panellists that while the delays are frustrating, it’s important to get it right without pointing fingers at who is to blame. On price rises, Ofcom wanted to break the issue into two parts: 1) the transparency and communication by operators; and 2) whether the mechanism should be allowed at all. It’s clear Ofcom’s concerns relate to the former: “A shock was my energy bill going up £50/month, not my phone bill going up £3/month”. Ofcom highlighted that on average prices went up 9% last year, but revenues only went up 1%. What went wrong for operators? While Hyperoptic lent in hard, CityFibre urged against ‘emergency intervention’, instead preferring to rely on competitive market structure and for the regulator to focus on issues of transparency and awareness. Finally, attention turned to Openreach’s Equinox 2 offer. Mark Shurmer (Managing Director, Regulatory Affairs, Openreach) reminded us of the WFTMR’s intentions for network competition and the benefits for consumers and the certainty for investors of the rules at the outset (i.e. the fair bet principle). While there was no guaranteed return, they could be sure the rules won’t change mid-game. He stressed there were no lock-in or exclusivity elements within the Equinox 2 offer. For Alex Blowers (Director of Regulatory Affairs, CityFibre), the points of disagreement are technical but fundamental. CityFibre understood Ofcom wouldn’t intervene to drive down prices (which he considers approving Equinox 2 would do). He sees the offer as designed to nip competition in the bud and believes “constant signalling of new offers and what other goodies might be coming in due course” will prevent communications providers migrating away from Openreach. CityFibre is pessimistic that Ofcom will come to a different conclusion from its preliminary intention to approve the offer, but hopeful for a positive response – noting that investors are looking squarely at Ofcom for reassurance. Hyperoptic’s James Fredrickson (Director of Policy & Regulatory Affairs) claimed that Equinox 2 would result in prices below the minimum cost of a hypothetically efficient operator Ofcom calculated during the WFTMR. The final intervention came from an audience member who said that if the UK was in the EU, the EC would have launched a full competition investigation given there was a ‘loyalty induced discount’. Ofcom’s response: “Well, we aren’t.”
Collaboration between the public and private sector to achieve societal and economic benefit: During a session on sustainability, the panel provided an honest assessment of the efforts made to date to meet critical environmental objectives. While technology could be the catalyst for meaningful – and essential – progress, decent connectivity will be needed ‘across the piece’, as will greater cooperation between the public and private sectors. In fact, collaboration was a term heard throughout the event, with Liverpool and Sunderland’s councils describing how they have drawn on private funding and expertise to support their rollouts of high-performance fixed and mobile networks. John Steward (Digital Infrastructure Lead, Greater Manchester Combined Authority) discussed a pioneering pilot that has seen telcos and social housing providers work together to help demonstrate the value of connectivity and to get thousands of residents online. Steward also called on the Government to update the focus of the UK’s universal service obligation from access to use – a request that mirrors the industry’s own shift in priorities from premises passed with fibre to adoption.
