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Ofcom tells BT: 'Invest in broadband, reap the rewards'

Regulator wants ISP to foot the bill for upgrade

Ofcom yesterday told BT that in exchange for greater investment, the ISP could have fuller control over next-generation UK broadband infrastructure.

Speaking in London at a trade conference yesterday, Ofcom chief executive Ed Richards acknowledged that operators such as BT who might invest in new infrastructure want to know that watchdogs will support such invesment, and will allow them to make a decent return on it.

"Ofcom favours a regulatory environment for the next generation of networks and access that both allows and encourages operators to make risky investments, to innovate for the benefit of consumers and, if the risks pay off, for the benefit of their shareholders too," said Mr Richards.

The speculation is that this gives BT, and other potential network builders such as Virgin Media, the green light to charge competitive rates to other broadband providers who want to use their superfast lines.

Richards added: "We are very clear that if operators are going to make investments in new infrastructure, investment that is inherently more risky than developing the existing infrastructure, then they need to know that the regulatory framework will allow them to make and keep a rate of return that is commensurate with the risks they are taking.

"And they need a time horizon that gives them a degree of assurance for a realistic period in the future; that they know for example that the regulator will not suddenly change the rules of the game to reduce the returns just as the rewards for the risk start to flow in."

Richards' words brought immediate dividends for BT - literally. BT shares rose 5.75 to 212.75p.

Previously cool on the idea, BT has in recent months indicated that it has warmed towards it. But the price, BT says, must be right.

Ofcom are keen to get them moving. In his speech Richards said that the UK's broadband speeds were lagging behind other countries such as france because the existing copper-based broadband market is so competitive.

Building a next-generation network across the country would cost up to £15bn, and the government is not keen that taxpayers should foot the bill. That being the case, Ofcom is under pressure to incentivise broadband providers to invest in infrastructure, and has invited communications company CEOs to discuss the issue.

Later this year Ofcom will release a regulatory plan for fibre optic broadband.

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