Ofcom gives BT a break on broadband obligations

Ofcom has made changes to the UK’s universal service obligation that ultimately ease some of the cost burden on BT when it comes to providing high-speed broadband in hard-to-reach areas.

The broadband USO has been the subject of much debate since its rules were set out in 2018, and this time last year the telecoms regulator upset incumbent operator BT by opening an investigation into the way it chose to calculate the cost of delivering a 10 Mbps broadband connection to customers’ premises. That announcement came following a flurry of media reports in which disgruntled consumers shared tales of woe, in some cases having been quoted hundreds of thousands of pounds for a line.

Since then, BT has put its side of the story to Ofcom and the regulator has agreed to tweak the regs accordingly.

That’s the simple version. There is a more in-depth version, involving maths. But the upshot is, BT now has the right to hold off on building out a connection to a premises in a costly location until it has covered all its network costs, not just those for providing the actual last-mile connection.

The specifics are broadly as follows: Under the previous USO rules, BT was required to quote for the cost of providing a 10 Mbps-plus (downlink) connection to any consumer that requested it. Should the quote come in under £3,400 (ex-VAT), BT was required to pay for it, but north of that figure and the homeowner could choose to make up the difference.

That sounds simple enough… until you consider that calculating the cost of laying a broadband line is anything but simple.

Ofcom explained it very diplomatically. “BT’s approach meant it was not apportioning the costs of shared network in the way we expected, which resulted in some customers being asked to pay materially higher excess costs,” it said.

Essentially, BT was including all costs in its calculations – not just the cost of delivering a connection to a specific premises, but also related shared network costs. It argued that without this approach, the cost of funding the USO would go up.

Having mulled it over, Ofcom agreed.

So now, if the excess cost (on top of the £3,400 figure BT is required to swallow) to hook up a particular location is £5,000 or less, the previous rules stand; the customer pays the excess and the telco provides the connection. However, in cases where the excess is more than £5,000, BT is now permitted to wait until it has agreement(s) to cover the total excess cost, including all the shared network costs, before it begins the build, rather than having to get started once one customer has indicated a willingness to pay the excess for their specific home.

“This will mitigate the risk of a disproportionate impact on the costs of funding the USO,” Ofcom said. And presumably it will put the regulator and BT on the same page when it comes to the way these costs are totted up.

As for whether it will put an end to sad-faced photos in tabloids of consumers being asked to pay huge amounts for broadband… probably not entirely.

UPDATE, 12:00 12/11/21, we received the following statement from BT after publication:

“As the designated provider of the Government’s Broadband Universal Service Obligation scheme, we’re working hard to connect as many premises to decent broadband speeds, often surpassing requirements by delivering full fibre connections to them, as well as supporting communities with options to help fund their local builds by sharing costs.

“We’re committed to delivering connectivity to even more properties and welcome Ofcom’s decision to amend the way the scheme works for a limited number of properties. Connecting homes in the most remote locations under the terms of the USO remains highly complex and extremely costly, and for these premises a different solution will be required.”