BT faces new rural broadband challenge as officials mull market shake-up

The rights to build new ultra-fast “full-fibre” broadband networks could be packaged up and bid for as regional franchises under a new challenge to BT being privately considered by the Government.
Amid mounting concern that Britain’s digital infrastructure is falling ­behind that of European rivals, officials are understood to be considering a radical shake-up of the market that would echo the roll-out of cable networks 30 years ago.
Fears that the countryside will be left behind as the digital economic revolution accelerates have prompted the fundamental rethink of the telecoms industry.
The franchising discussions are at an early stage and face major hurdles including concerns that creating regional monopolies could bring new complications and problems similar to those suffered on the rail network since its franchise system was introduced.
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Nevertheless, industry and Westminster sources said broadband franchises are being seriously considered as a way to accelerate the roll-out of full-fibre broadband, offering faster, more reliable and future-proof internet access.
Just 3pc of British premises are covered by a full-fibre network, compared with more than four fifths of homes in Spain. The situation has brought criticism on Openreach, BT’s regulated network arm. It has said it will build three million full-fibre lines by 2020, but is under pressure to go much further. Ofcom and the Government were disappointed by BT’s refusal to go further in its investment announcement last month.
Two sources familiar with discussions said advocates of a bigger outlay faced opposition from Tim Hottges, the chief executive of Deutsche Telekom, which is BT’s largest shareholder and faces similar pressure in Germany.
BT faces new rural broadband challenge as officials mull market shake-up

BT has faced criticism for its handling of Britain's fibre-optic broadband infrastructure
It is understood that officials are ­examining whether franchising could be used to ensure that more rural areas do not miss out on broadband infrastructure investment. Densely populated towns and cities, where returns on investment would be highest, could be bundled together with swathes of less profitable countryside.
BT is arguing against franchising that could see it lose sway over large areas of the country to upstart broadband infrastructure builders such as CityFibre.
Instead of franchises, BT wants the Government to consider whether its network subsidiary Openreach should be allowed to charge more for broadband in rural areas to justify investment where returns are lower.
Openreach, which is increasingly ­independent from its owner following a legal split imposed by Ofcom, is ­understood not to support price variations between town and country.
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Officials are grappling with the ­future of broadband as part of an infrastructure review launched by Matt Hancock, the Culture Secretary, which is due to make recommendations in summer. A DCMS spokesman said: “We want full fibre, gigabit connectivity to be widely available to UK homes and businesses.
“The Future Telecoms Review underpins our plan to build a Britain fit for the future, and we are looking at all options to drive commercial investment and boost competition.”
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