How Ofcom and the CMA are boosting investment in UK telecoms networks

How can regulators and competition authorities encourage this investment, while still protecting consumers?

We look at how Ofcom and the CMA have adjusted their strategies – and the results they’ve achieved. 

New infrastructure needs a new approach from regulators

Britain is undergoing a major upgrade to its digital infrastructure. Copper broadband lines are being replaced with gigabit-capable fibre networks, while 5G technology is being rolled out nationwide, promising a step change in speed and capacity.

These projects require billions of pounds – and long-term commitment – from investors. But they also present a challenge to regulators. Ofcom and the Competition and Markets Authority (CMA) must ensure operators are incentivised to invest, without exposing consumers to higher prices.

Over the past decade, both bodies have adjusted their strategies to achieve this. Examining these policy shifts reveals important lessons about how regulatory levers can promote large-scale investment in infrastructure.

Ofcom: creating a pro-investment environment for fibre

In 2016, just 2% of UK houses had access to full fibre, compared with around 20–25%  across mainland Europe.

Recognising the need to catch up, Ofcom made what it called a “strategic shift” towards encouraging fibre rollout. This began with its 2018–2021 Wholesale Local Access review, and was reaffirmed in its 2021–26 Wholesale Fixed Telecoms Market Review (WFTMR).

As the WFTMR declared, “promoting competition and investment in gigabit-capable networks” was now a central objective. To achieve this, Ofcom built its strategy on three pillars: 

1.      Light-touch pricing: Moving away from cost-based regulation of BT’s fibre infrastructure and allowing more pricing freedom.

> How it works: This allows operators to earn a premium return when they take greater risk. Tighter regulation on lower-speed services, in combination with emerging competitive pressure from alternative networks (‘altnets’), act as counterbalances to stop prices rising too high.

2.      Access to existing infrastructure: Strengthening the Physical Infrastructure Access policy, which requires BT to lease ducts and poles to competitors on fair terms.
> How it works: This lowers barriers to entry for altnets, who can use existing infrastructure to deploy fibre rather than having to undertake expensive street works.

3.      Regulatory predictability: Extending market reviews from three to five years, and signalling that Ofcom doesn’t expect to reintroduce cost-based pricing for at least a decade.
> How it works: This provides investors with greater certainty about regulation in the coming years, giving them the confidence to commit to long-term capital projects.

The results of this strategy – as we’ll explore below – have been encouraging. Fibre rollout by Openreach, CityFibre, Virgin Media O2 and the smaller altnets has risen sharply. Keeping the promise of greater certainty, Ofcom’s upcoming Telecoms Access Review for 2026–31 will continue with the same philosophy. 

The CMA: using merger policy to promote mobile investment

While Ofcom governs sector-specific regulation, the Competition and Markets Authority influences investment through its approach to merger control. And the CMA has, recently shown more willingness to approve mergers on the basis that they can incentivise investment – in particular, in its landmark clearance of the Vodafone–Three merger. Despite concerns it would weaken competition, the CMA accepted that combining the two mobile operators would give them more capacity to invest in upgrading their mobile network. It judged that the long-term benefits for consumers and the economy would outweigh the short-term risks of higher prices.

As a safeguard, the CMA made its approval conditional on commitments that bind VodafoneThree to delivering its planned £11 billion investment plan.

This case signals a shift to a more pragmatic stance on mergers, as a way of encouraging long-term capital commitment for infrastructure. And the CMA’s approach complements Ofcom’s efforts to create an investment-friendly environment.

The results: investment has risen but challenges remain

The UK’s pro-investment approach appears to be working.

Full-fibre coverage has risen from around 24% of premises in 2021 to nearly 70% by mid-2024 – among the fastest build rates in Europe. 

In mobile, Ofcom’s Connected Nations England report shows that around 95% of the population can now receive 5G coverage from at least one operator. VodafoneThree’s £11 billion programme is expected to provide a further boost in coverage, and should also trigger rivals to respond: Virgin Media O2 has already plans to invest around £700 million in 2025.

But despite this progress, challenges remain. Reaching remote areas with fibre is difficult and costly, with government estimates suggesting subsidy will be required for around 20% of premises in the UK. The most remote 5% of locations might even require alternative technologies, like fixed wireless access.

There are concerns too about the financial viability of the UK’s altnets: the sector posted cumulative losses of £1.3 billion in 2023. Consolidation is expected as a result, with a recent survey of altnets revealing that 96% are considering M&A.

What next? Balancing competition, policy and support

The shift towards a lighter touch, investor-friendly approach to regulation appears to have helped the UK make big strides in digital infrastructure. The results for fibre coverage have been particularly impressive.

But the pressures above show that neither market forces nor regulatory strategy alone will guarantee success. Rural coverage remains a challenge – and so too will keeping pace with rapid growth in mobile data traffic.  

But the UK has momentum. Sustaining it will require a healthy mix of competitive forces, investment-friendly regulatory policy and targeted government support. Keeping that balance right will be the key to ensuring that every household and business benefits from the country’s digital transformation.