CityFibre’s Fibre Optic Mobile Supply Deal Threatened by BT and EE Merger

CityFibre has offered up a very practical example of the potentially negative impact on competition that it fears would be created by BT’s £12.5bn move to merge mobile operator EE into their business, which could directly threaten some of their Dark Fibre deals with mobile operators Three UK and EE.

As we’ve said before, the current round of top-level consolidation among mobile and fixed line operators is a complex business, due in no small part to the crisscrossing of different capacity supply deals and network sharing arrangements.

One prime example of this is that fact that BT’s acquisition target in the mobile sector, EE, already has an extensive network sharing agreement with rival mobile operator Three UK. Incidentally Three UK is separately making a move to gobble O2, which itself has a network sharing deal with Vodafone.

All of these mobile businesses have a variety of different capacity supply deals in place with fixed line operators, some of which were reached jointly and others signed separately. Suffice to say that separating out all of this, which BT will need to do if it wants to maximise cost savings from gobbling EE (i.e. by using its own fixed line infrastructure on the supply side), will not be an easy task and could disrupt many of the existing supply deals.

CityFibre has now echoed this concern as part of their official response to last week’s preliminary invitation to comment by the Competition and Markets Authority (CMA), which is currently examining BT’s move to buy EE (here).

The example used relates to the major long-term fibre optic infrastructure (Dark Fibre) deal that they signed (here) at the end of last year with EE and Three UK (agreed under the network sharing umbrella company – Mobile-Broadband Network Limited).

Initially this deal focused on work in Kingston-Upon-Hull (East Yorkshire, England), but other parts of CityFibre’s network across the UK may also be leveraged and the company suggested that it could even assist their work to push Gigabit broadband FTTH services out to more businesses and home users.

CityFibre’s Response said (FT):

“Hull was the first city called off on a national framework agreement. However, post BT/EE the framework has been effectively neutered and the UK is unlikely to benefit from an accelerated rollout of metro fibre. … In a post EE/BT world, [EE and Three] should continue to be able to buy from the provider of best value and choice and not be compelled to buy from BT.”

Naturally CityFibre’s deal is still young and they fear that it could soon become one of the first casualties in BT’s move to gobble EE, although at present EE insists that the deal for Hull remains unchanged; although the possibility of future expansion of the agreement into other UK cities now looks distinctly less likely.

The CityFibre concerns represents just one of the reasons why BT’s rivals, particularly Vodafone, have also been calling on the CMA to ensure that one of BT’s concessions in the merger should be to provide more open access to their Dark Fibre infrastructure. BT has resisted such a notion for years, with Ofcom’s backing, so it will be interesting to see what happens.

In the meantime CityFibre confirmed that they were in discussions with another 25 city councils to build new metro fibre optic networks and they hoped to sign up another three cities during 2015, with the first deal for Edinburgh having already been agreed this month (here).