A Closer Look at Ofcom’s Proposed BT Openreach Duct and Pole Access

One of the key changes in last week’s Strategic Review, which saw Ofcom move to increase the separation between BT and the division responsible for its UK phone and broadband network (Openreach), was the proposal to introduce a new wholesale Duct and Pole Access (DPA) solution to help ISPs build alternative networks.

The DPA strategy aims to promote the large-scale roll-out of new “ultrafast” cable (DOCSIS) or fibre optic broadband services by opening up BTOpenreach’s huge network of telegraph poles and cable ducts to rival ISPs / alternative network (altnet) providers.

Any industry observer reading last week’s announcement would have been immediately reminded of a similar solution that was introduced via Ofcom some years earlier, which brought about the introduction of a very similar sounding Physical Infrastructure Access (PIA) solution that also allowed rivals to access BT’s underground cable ducts and telegraph poles.

However BT warned that going down this route again might not create the sort of improvement that Ofcom hopes to see as the operator had not itself witnessed much in the way of “meaningful” demand for PIA. Indeed outside of a few niche deployments, such as by ISPs like Call Flow Solutions and others, PIA has not really had a significant impact.

But there is another side to this story. ISPs have often complained about the restrictions inherent with PIA (perhaps we should call it PIA+ after the 2013 tweak), which they say created somewhat of a chicken and egg problem that made it “not fit for purpose for scale use.” A variety of issues from awkward costs to tedious administrative processes are often highlighted.

On top of that PIA was intended more for helping to connect residential properties and could not be used for providing rural backhaul or big business connectivity (e.g. leased lines), which would have threatened BT’s own solutions. But being able to use cable ducts for this purpose can also play a pivotal role in making the economic case for building new connectivity.

Ofcom’s Fix

The regulator’s new “long term strategy” is thus to take a more proactive approach with Duct and Pole Access (DPA) by making it “much easier for competitors to access” (both for business and residential purposes), which if not for some re-branding on the name might perhaps be better described as PIA++.

But Ofcom also admit that this kind of investment is currently “most viable in denser urban areas and other places with strong demand for new services,” thus more regulation will also be needed to ensure that BT provides access to its range of “active products” (these allow rivals to buy capacity on BT’s network to deliver services to premises) in places where the “private sector cannot offer competing infrastructure investment” (e.g. rural locations).

Ofcom’s DPA Proposal in Full

• Better information. We will require Openreach to establish an online database, accessible to all of its wholesale customers. We expect this to include the location, condition and capacity of the infrastructure deployed. We expect that a database containing information that already exists could be made available relatively quickly, and over time proactively extended to capture a richer dataset. It should allow competing operators to plan new networks with a degree of certainty that is currently impossible, significantly reducing the level of commercial risk associated with such networks.

• Equivalence of inputs. We will work to apply equivalence of inputs to Openreach’s provision of DPA, so as to require Openreach to provide DPA to all communications providers (including other parts of BT) on the same timescales, terms and conditions, and by means of the same systems and processes. We expect only to consider exceptions to this where it would result in a disproportionate level of costs being incurred, such as in relation to certain existing network infrastructure as opposed to where new network assets are deployed.

• Efficient operational processes. We will work to ensure that efficient operational processes for using DPA are established early. We will do this in part by supporting and, where necessary, enhancing the work of industry working groups and the Office of the Telecommunications Adjudicator. We will ensure that the relevant dispute resolution processes are in place to resolve any disputes quickly and efficiently.

• Pricing. We believe that the pricing of the existing DPA remedy is broadly in line with international comparisons. This was supported by stakeholder submissions. We will review pricing as required, including ancillary service charges such as survey costs or costs to access information, to ensure the product can be effective.

• Making DPA available for business as well as residential consumers. The current DPA remedy is designed to support the provision of broadband services to residential consumers and small businesses, and cannot be used for connecting larger businesses. We recognise that operators are less likely to deploy new networks if they are unable to connect business as well as residential customers. Where DPA is used to deploy to residential consumers at scale, we will look to remove this restriction.

Ofcom states that DPA will help altnets to reduce both the cost and disruption of building ultrafast fibre optic FTTH/P networks and it gives several examples, such as Vodafone’s FTTP deployment in Spain where the regulator notes that DPA “reduced the capital expenditure per home passed … by at least 40% compared to building it on a greenfield basis.” Apparently it’s also a similar story in Portugal and France.

Another example comes from Danish electricity companies, which have deployed FTTP networks covering around 40% of the country as a result of synergies with electricity network upgrades. However we’re always cautious with country comparisons because there can be significant differences in other areas, which won’t always be immediately apparent (e.g. greater public funding or a less dominant incumbent etc.)

Never the less Ofcom believes that “sufficient duct space could be available in the UK to support this model of competition” and points to a 2010 survey, which found that 63% of the 90mm duct ends surveyed and 97% of the 50mm duct ends surveyed (between the street cabinet and the premise) had at least 42% of unoccupied space.

On the other hand BT correctly warns that this will “not all translate into useable duct space” and indeed we’ve seen plenty of issues with blocked or simply poor quality cable ducts crop up as part of the BT and Broadband Delivery UK deployments, which in some cases have prevented local upgrades due to the high cost of repair or challenges with access. But Ofcom believes that it does still “provide a basis for cautious optimism.”

Conclusion

Ofcom intends to introduce its changes gradually, as part of their periodic market reviews. On top of that they view UK implementation of the new Civil Infrastructure Directive on 1st July 2016, which is specifically designed to reduce the cost of deploying such networks by giving a right of access to existing civil infrastructure, as “an important starting point for implementing our strategy to make new network deployment easier and cheaper“.

Going forwards Ofcom perceives DPA as steadily helping to raise demand for new network connectivity, while also reducing deployment costs, and this in turn will eventually help such solutions to reach the parts of the UK that cannot currently be reached by normal network competition.

“A good outcome in the long term would be to achieve network competition of around 40% of households,” said Ofcom’s report. In areas where effective competition is achieved, based on network investment, they have also promised to remove or reduce downstream regulation.

All of this sounds very positive, but then so too did the early drafts of PIA before its limitations were understood. Ofcom’s approach this time around is to try and fix those issues, but once again the devil will be in the detail and the regulator’s reluctance to tackle pricing could be another bone of contention.

In the end these measures are an improvement and they could have a positive impact, but equally we wouldn’t be at all surprised if that impact ends up being somewhat less dramatic than Ofcom hopes. Even with DPA, building FTTH/P networks will remain a fairly slow and expensive process. BT and Virgin Media probably won’t be quaking in their boots any time soon.

Lest we not forget that today’s broadband is still fairly cheap and if you’re already happy with your service speeds then encouraging an upgrade to something faster, but more expensive, can be a tough sell; this makes it harder to build a case for investment. Obviously such problems are less of a hindrance in locations where new networks are replacing already slow services.

A test may be whether or not Ofcom’s solution encourages TalkTalk and Sky Broadband to make a more serious investment into FTTH/P.