Ofcom Review Sees BT’s UK Rivals Demand Cable Duct and Fibre Access

The UK communications regulator, Ofcom, has published the first responses to its latest Business Connectivity Market Review 2016 (BCMR2016) consultation and perhaps unsurprisingly it finds rivals including Vodafone, BSkyB (Sky Broadband), TalkTalk and Virgin Media all demanding greater access to BT’s cable ducts, dark fibre and leased lines.

It seems like only yesterday (2012) that Ofcom posted the outcome of its last Business Connectivity Review, which investigated the retail provision of leased lines and the wholesale provision of terminating segments and trunk segments in the United Kingdom’s £2bn market for business telecoms (here and here).

The 2012 review made a number of changes, not least with the decision to lower BT’s prices for 1Gbps+ lines outside of the London area and a rejection of the calls by rivals for so-called “passive remedies” (i.e. forcing BT to offer access to its cable ducts, poles or dark fibre lines). At the time Ofcom said that, “We consider that less intrusive remedies are likely to achieve similar benefits for consumers, while passive remedies would carry significant risks of worse outcomes, both for consumers and for effective competition, including adding costs and encouraging inefficient entry“.

But the new review intends to reconsider whether, on the presumption that Ofcom’s finds BT holding Significant Market Power (SMP) again, there is a case for Passive Remedies in wholesale leased lines markets. Aside from opening up access to Dark Fibre (i.e. fibre optic cables that have been laid, but which are not yet fully utilised – ‘future capacity’), Ofcom will also consider expanding BT’s Physical Infrastructure Access (PIA) product for cable ducts and poles for business use (currently it’s limited to residential) and wavelength unbundling of fibre optic lines (allows ISPs to offer differentiated services via a single piece of fibre).

Ofcom BCMR2016 Statement

“One particular aspect that we intend to consider is the impact that passive remedies might have on BT’s common cost recovery. It is an important principle of price cap regulation that BT should have the opportunity, on a forward-looking basis, to recover its efficiently incurred costs including its common costs. One implication is that, if common costs cannot, or can no longer, be recovered from one set of services, we might need to allow BT to recover a greater share of common costs through charges for other services to allow cost recovery overall.”

As expected the first published responses to Ofcom’s new review appear to largely support the call for more Passive Remedies, although BT has unsurprisingly rejected these demands as “unnecessary, intrusive and bad for customers“.

BT also wants “further geographic deregulation in London and other metro areas” to reflect the markets “strong competition“, as well as more favourable charge controls and “an appropriate ‘end of life’ framework for legacy services, allowing them to decline naturally with no artificial extension of their life through regulation“.

Elsewhere BSkyB (Sky Broadband) makes the familiar point that BT’s lucrative leased line income may act as a disincentive for the operator to invest in rolling-out affordable superfast broadband (FTTC/P) technologies to business dominated areas, which Sky suggests could be solved by granting rivals access to the suggested Passive Remedies. On the other hand BDUK’s national target is perhaps already nudging BT to deploy FTTC/P into many more business areas than can currently be served.

BCMR 2016 Responses (ISPreview Selection)

* BT
http://stakeholders.ofcom.org.uk/binaries/consultations/business-connectivity-market-review/responses/British_Telecommunications_PLC.pdf

* Openreach (BT)
http://stakeholders.ofcom.org.uk/binaries/consultations/business-connectivity-market-review/responses/Openreach.pdf

* BSkyB
http://stakeholders.ofcom.org.uk/binaries/consultations/business-connectivity-market-review/responses/BSKYB.pdf

* KCOM
http://stakeholders.ofcom.org.uk/binaries/consultations/business-connectivity-market-review/responses/KCOM_Group.pdf

* Talk Talk
http://stakeholders.ofcom.org.uk/binaries/consultations/business-connectivity-market-review/responses/TalkTalk_Group.pdf

* VirginMedia
http://stakeholders.ofcom.org.uk/binaries/consultations/business-connectivity-market-review/responses/Virgin_Media.pdf

* Vodafone
http://stakeholders.ofcom.org.uk/binaries/consultations/business-connectivity-market-review/responses/Vodafone.pdf

It’s important to reflect, just because this is a “business connectivity” review, that doesn’t mean to say it wouldn’t have a potentially profound impact upon how much domestic consumers pay for their services. At some point the data traffic for almost everybody, from mobile operators to fixed line home broadband ISPs, is likely to pass over part of BT’s infrastructure and thus setting regulation here can directly affect the service you receive.