There is significant interest among investment funds in investing in the roll-out and take up of fibre-to-the-home (FTTH) networks in the UK which, along with incentives from the UK government, has resulted in a boom of regional and national fibre network providers and internet service providers (ISPs), with now over 150 broadband providers in the market, according to USwitch.
Growth in the sector is in large part due to a demand for higher broadband speeds arising from a shift towards remote working and customers' media usage, as well as a conscious push from the UK government (which has included grant funding in the form of the Building Digital UK voucher scheme).
While investment has slowed recently due to lower than anticipated uptake in customer connections, higher costs of capital and concerns regarding over-build, we are nonetheless seeing a number of new equity and debt financings, as well as a likely uptick in consolidations in the market.
Here we set out the key regulatory and data protection considerations that investors in this sector should bear in mind when investing in the UK fibre space and that should be borne in mind in the context of consolidations in the space, in the following parts:
- Part 1: UK communications regulatory framework
- Part 2: Access to infrastructure
- Part 3: National safety and security considerations
- Part 4: Data protection
Physical infrastructure access (PIA)
It is common for telecoms providers to enter into agreements with Openreach for the provision of PIA (PIA Agreements). PIA Agreements are standard documents that BT enters into on the same terms with all network providers willing to deploy their networks using Openreach's poles and ducts.
Under the terms of the PIA Agreement, counterparties can request licences to:
- Install their own sub duct within Openreach's own access ducts from the main spine to the end user's premises.
- Attach cables or attachments to existing BT-owned poles.
The counterparties will need to impose and comply with appropriate data protection restrictions within the PIA Agreement to ensure that processing of end-user data (e.g. addresses of premises being accessed and potentially, contact details) is undertaken in a compliant manner. This is discussed in more detail below.
The minimum licence terms for PIA products are five years for spine ducts, and twelve months for lead-in ducts and overhead lead-in.
PIA is a crucial remedy in the WFTMR. Ofcom promotes unconstrained access to ducts and poles, with the intention to promote infrastructure sharing and support deployment. There is also price regulation on PIA as well as measures to improve usability and practical implementation. BT must also provide access to ducts and poles on a no "undue discrimination" basis, meaning that BT and other providers should access ducts and poles on the same basis and terms (strict equivalence) as BT.
As access to infrastructure is considered a key bottleneck, it is likely that the PIA remedy will remain in place long term, until there are material changes to Ofcom's assessment of BT's and Openreach's market position.
Openreach may also award third party altnets "path to collaboration" status, which would allow them to fast track network adjustments by removing the need for Openreach to conduct field validation after desktop approval has been given. This could in theory increase rollout speeds.
The use of PIA by altnets (particularly in urban and suburban areas where Openreach already has full duct and pole penetration) is vital to many rollout plans, as it prevents the need to construct new infrastructure, increasing rollout speeds and reducing construction costs and permit times. It is therefore important to ensure that altnets have:
- The correct PIA arrangements in place with Openreach.
- A good working relationship with Openreach with no outstanding claims or disputes.
Access to Infrastructure Regulations
The Access to Infrastructure Regulations 2016 (ATI Regulations) are intended to enable network providers to use other third party infrastructure to roll out its network. Relevant third parties (to whom the ATI Regulations apply) are:
- Network providers.
- Providers of physical utilities infrastructure (such as gas, electricity - including public lighting, heating, water and sewage).
- Providers of physical infrastructure intended to provide transport services, including railways, roads, ports and airports.
Specifically, a fibre network provider may:
- Request information about third party physical infrastructure. A network provider can only ask about infrastructure in an area where it envisages deploying a high-speed communications network. The relevant other operator must then respond within two months.
- Request on-site surveys of physical infrastructure. The other network operator can refuse on grounds of network security, network integrity, confidentiality, safety or public health, but only if these issues cannot be resolved by contract. Where the survey may require or enable access to data that is passed over the network (or increase the likelihood of unauthorised access to such data), robust information security and data protection provisions should be incorporated within the relevant agreement, strictly restricting the circumstances in which and purposes for which such data can be accessed. Further information in this regard is included below.
- Access physical infrastructure in order to deploy high speed (>30Mbit/s) communications networks.
Ofcom can determine whether charges are fair and reasonable. Infrastructure operators can refuse access due to:
- Technical unsuitability.
- Lack of available physical space.
- Safety or public health concerns.
- Security or network integrity concerns.
- Risks that the network would interfere with other services provided in the physical infrastructure.
- Availability of alternative means of wholesale access.
However, Ofcom's guidance on the ATI Regulations notes that providers are expected to try to resolve these concerns by contract.
While such access could in theory help speed up the rollout of a fibre network, to date, communications companies have not been able to use the ATI Regulations to access third party infrastructure to the extent that was originally envisaged.
In 2020, the UK government undertook an information gathering exercise to identify issues with the ATI Regulations. The exercise revealed various potential barriers to using ATI Regulations:
- A perceived lack of clarity regarding the level of information that could be requested and exemptions for responding to requests.
- A lack of centralised coordination resulting in a complex and opaque process.
- Confusion regarding the infrastructure that is in scope.
- The need to obtain agreements with landowners.
- No standardised costs for accessing infrastructure.
- Lengthy dispute processes.
- Safety concerns raised by utilities.
In November 2021, the UK government completed its review of the ATI Regulations, stating that it would not make major changes. Nonetheless, it concluded that the ATI Regulations have not been utilised to their full potential and considered it may be proportionate to make clarifications to the scope of the ATI Regulations. It proposed to create a power for the Secretary of State to amend the ATI Regulations through secondary legislation and said it would consult on the potential changes.
It is not uncommon that rural broadband network providers will enter into commercial mast-sharing agreements with power and utilities providers for the mounting of FWA technologies.
UK government support for fibre rollout
The UK government estimated that the total investment required for a nationwide rollout of FTTH in the UK is in the region of £30bn. In September 2019, the UK government stated that it aims to deliver a gigabit broadband network to 85% of the UK by 2025.
This network could be delivered via full-fibre, hybrid fibre-wireless solutions or 5G wireless networks. Building Digital UK (BDUK) is part of DCMS and is responsible for supporting the delivery of FTTH throughout the UK. It administers a number of schemes to help fund fibre rollout, as described below.
For example, Project Gigabit is aimed at delivering gigabit-capable broadband networks in the UK. In March 2020, the UK government confirmed that it would commit £5bn to support rollout to the 20% of premises that are hardest to reach. This "outside in" approach is designed to ensure that gigabit services are delivered in hard-to-reach areas alongside the rest of the UK. This fund is administered by BDUK, which offers rollout contracts following a competitive bidding process.
As part of Project Gigabit, the UK government is also providing voucher funding as part of the Gigabit Broadband Voucher Scheme to help people experiencing slow broadband speeds in rural areas. Vouchers for homes and businesses are available to cover the costs of installing gigabit broadband.
The latest update from BDUK was published in February 2023 and stated that at such time over £1bn had been made available to broadband suppliers through the scheme, with 73% of the UK now gigabit capable.
Other UK government initiatives
As part of the UK government's drive to deliver "gigabit capable broadband" nationwide by 2025, in January 2020 the UK government announced proposed changes to the Code Powers, intended to overcome practical difficulties with rolling out fibre networks:
- The UK government proposed legislation to extend the Code Powers to enable telecoms operators to access multiple dwelling units if a tenant has requested a connection from a telecoms operator but the landlord has failed to respond.
- The legislation, known as the Telecommunications Infrastructure (Leasehold Property) Act 2021 (TILPA 2021), received Royal Assent on 15 March 2021. Among other things, the TIPLA 2021 introduced a new Part 4A into the ECC, to allow operators with Code Powers to apply to the Land Tribunal for interim Code Powers in certain circumstances.
- The UK government subsequently consulted on the proposals for the regulations necessary for TILPA 2021 to take effect. The Telecommunications Infrastructure (Leasehold Property) (Conditions and Time Limits) Regulations 2022 (SI 2022/1057) were passed in October 2022 to implement elements of TILPA 2021 and became effective in December 2022. The regulations set out the conditions to be satisfied before giving final notice for temporary Code Powers and before applying to the Court for a Part 4A order. At this stage, Ofcom has decided to make only minor amendments to the template notices for use by operators with Code Powers.
The UK government also intends to introduce legislation that will require developers to ensure that new build homes have the necessary infrastructure to support gigabit-capable connections. The requirement for developers to engage with telecoms operators is expected to increase opportunities for operators to enter into agreements with house builders to connect homes at the time that they are built.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.