Fiber infrastructure is not a ‘natural monopoly’

Some people in the telecommunications industry like to compare the copper or fiber lines transmitting data under our feet to railways. They are both natural monopolies, they argue: duplication is wasteful, the high costs of construction deter new entrants, and economies of scale are essential for survival. But laying fiber costs much less than laying a railway track. The very fact that over 100 alternative network providers — or “altnets” — have popped up, backed by billions in private capital, suggests the financial incentives are there to multiply the infrastructure. But infrastructure competition in the sector has been a powerful motor for the government’s ambition of turbocharging full fiber rollout across the UK, which had been lagging other countries, and getting ultrafast internet to larger swaths of the public. Many of these companies are now struggling against a backdrop of soaring inflation and high interest rates that have closed off financial taps. Consolidation in the sector was always inevitable. Now Ofcom finds itself in a tricky position. On the one hand, the regulator wants Openreach to continue quickly rolling out fiber and ensure that customers are incentivized to make the leap from copper to fiber. On the other, it wants to ensure that Britain does not return to the relative stasis facilitated by a reticent monopoly.