LESS TALKTALK, MORE ACTION

Just because large, often slow-moving, targets are easiest to hit doesn’t necessarily make them fair targets.

Dido Harding, chief executive of X-Factor sponsor TalkTalk, this week took aim at what she described as a ‘talented and lovely monopolist’.  She was referring to BT and, more specifically, to her fears that BT could be building a monopoly in the market for fibre-based, superfast broadband services in the UK.

More investments in fibre, less of a monopoly

Harding’s beef is that she doesn’t know whether BT’s pricing of fibre-based services is competitive as “… there is no alternative [to BT].”  There’s Virgin Media, but it chooses not to open its broadband services as a wholesale proposition to alternative carriers like TalkTalk.

BT, meanwhile, is actively investing £2.5billion to bring fibre broadband to two thirds of UK homes and businesses. This week the incumbent operator announced plans to accelerate its existing fibre rollout plans to deliver superfast broadband to areas of the country where the underlying economics provide a reasonable possibility of a return on that investment over the long term.  Already, around 12 million premises can choose the higher speed, fibre service.

There is consumer choice too.  BT makes its superfast broadband product available on wholesale terms to any provider that wants to deliver high-speed services using BT’s infrastructure. Among the many that does is TalkTalk.

In the remaining, mostly rural, third of the country where the economics are less compelling, the UK Government provides a subsidy.  This subsidy is designed to help improve the odds of an investor ever seeing a return on investment and to avoid what some fear will otherwise become a digital divide between urban and more rural regions of the country.

To date, BT has been awarded the lion’s share of these government subsidies. It’s not free money. It’s designed to bridge the cost gap to encourage commercial interests to invest in fibre-based services where commercial logic would otherwise walk away.  This government funding, issued through a body called BDUK, has helped deliver superfast broadband in areas including Northern Ireland, Cornwall and rural parts of Wales.

Fibre-based broadband is not yet a regulated service.  It’s still too early for that. Traditional copper broadband services, meanwhile, are regulated by Ofcom in more rural areas to ensure the operators play fair, to protect the interests of consumers and to ensure competitive services and keen pricing. As its popularity increases, fibre-based broadband in remote areas will invariably attract regulatory supervision too.

For too long, too many providers of telecoms services in the UK have viewed regulation as a crutch.  Scoring regulatory points is seen as a form of competitive advantage.  While it is important that regulation exists to inhibit and eradicate market abuse, any market that relies too much on regulatory intervention risks diluting innovation and entrepreneurialism and strengthens its aversion to risk.

Here’s a radical suggestion for any telco that fears a monopoly.  Dip into your capital budget and invest in rolling out your own fibre-based services.  That would help create the competitive market for fibre-based services more effectively than cheap shots at the big guy who, today, is shouldering all the risk.

Talk is cheap, you see, but money talks.

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