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Cheap broadband to prevent BT fibre 'monopoly'

Communications regulator Ofcom says cheap mobile broadband and existing fixed services will keep BT from running a fibre monopoly
Written by Jo Best, Contributor

Cheap mobile broadband and existing fixed services will keep BT from running a fibre monopoly, according to the communications regulator Ofcom.

The watchdog on Tuesday announced it will be imposing no price controls on super high-speed broadband services, allowing BT to resell fibre access to other ISPs at whichever rate it sees fit.

Last year, the telco announced a £1.5bn programme of investment that will see 10 million UK homes able to get 40Mbps by 2012, as it deploys fibre to the cabinet.

However, Ofcom chief executive Ed Richards does not believe that BT will be allowed to once again become a broadband "monopoly" as it presses ahead with its fibre rollout.

"This is a risky investment for BT. This is not the BT of old, milking copper assets put in hundreds, tens of years ago by a state-owned monopoly," he told an event in London on Tuesday.

According to Richards, any attempt at excessive pricing of super-high-speed services will be scuppered by the low-cost nature of the current generation of broadband technology and the advent of cheap mobile broadband.

"We think that existing broadband services will exercise a competitive discipline on that pricing," he added, with consumers unlikely to pay excessively above their current broadband rates for any fibre service.

"We expect there to be intense competition," Richards continued.

Forrester Research analyst Ian Fogg, however, questioned the ability of mobile broadband to provide viable competition to fibre rollouts.

"The capabilities of mobile broadband compared to fibre are completely different. The challenge with mobile broadband is the more successful an operator is with selling mobile broadband and the more people use it, the much lower speed that each user will get. With a fibre network, if more people use the service, there could be lower capacity but equally it's fairly easy for the operator to raise capacity by putting in additional fibre into the exchange and into the central office."

While mobile broadband may be no competition for fibre, BT is not without its rivals in super-fast broadband: Virgin has already started offering an up to 50 Mbps service, and some smaller operators have already announced localised rollouts.

According to Fogg, the advent of super-fast broadband could see some existing telcos struggle while new market entrants capitalise on the emergence of fibre.

"It will probably help some of the niche ISPs that don't have capital to invest in LLU [local loop unbundling] and will therefore benefit from wholesale because it gives them more of an even playing field. It may also help some of the companies that have experience with offering broadband but haven't put their full weight behind it because they haven't wanted to put capital investment in — I'm thinking of someone like Vodafone here, but it could be other operators or other companies," he told ZDNet UK's sister site, silicon.com.

"Again, what we'll see this time is some of the companies that prospered in the age of DSL may well struggle to make transition to this new era, this age of fibre broadband, because the business models are different and some investments they've made will not transfer across to the fibre-broadband world."

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