Ofcom Business Review Forces BT Dark Fibre, Low Prices and Fast Installs

The UK telecoms regulator has today published the final outcome of its Business Connectivity Market Review 2016 (BCMR2016), which has proposed changes that among other things would open up access to BT’s national Dark Fibre network, cut leased line (Ethernet) prices and deliver quicker installs.

Ofcom’s review of the £2bn leased line market, which runs to more than 800 pages in length (here and here), kicks things off by stating that BTOpenreach has been “taking too long to install leased lines and is not providing adequate certainty that the services will be provided by the date first given to the customer.”

Jonathan Oxley, Ofcom’s Competition Group Director, said:

“All of us depend on high-speed, fibre optic lines. Businesses use them to communicate, and they also underpin the broadband and mobile services used by consumers at home and on the move.

BT is relied on by many companies to install these lines, and its performance has not been acceptable. These new rules will mean companies across the UK benefit from faster installation times, greater certainty about installation dates, and fast repairs if things go wrong.”

On top of that they also found that Openreach was failing to complete one in four leased line installations on the initial date it promised and as a result they’ve moved to impose new rules onto the operator’s high-speed ‘Ethernet‘ services, which should also shorten the install time (reaching 40 days after April 2017, instead of today’s 48 day wait).

Ofcom has further announced new Charge Controls to help push down the prices that BT charges for their leased lines, which is something that they seem to do at every business connectivity review. The new controls will apply to BT’s newer “very high speed” Ethernet lines and their older leased lines using Traditional Interface (TI) technology.

The New Charge Controls

* For BT’s Ethernet services with bandwidths up to and including 1Gbit/s, Ofcom has concluded an initial reduction in prices of 12%, with an overall cap of CPI -13.25%, for each year of the charge control.

* For BT’s traditional interface services with bandwidths up to and including 8Mbit/s, Ofcom has concluded an initial reduction in prices of 9%, with an overall cap of CPI -3.5%, for each year of the charge control.

The regulator said they would bring prices down over a three-year period from 1st May 2016.

Dark Fibre

Operators often build future capacity into their fibre optic networks to cope with expectations of rising demand, such as by laying additional fibres that might not all be made live (unlit) at the same time (saves money versus the need for future civil works). We often call these Dark Fibre.

The last business connectivity review in 2012 (here and here) flatly rejected the idea of using so-called Passive Remedies, such as Dark Fibre access, to improve the market. At the time Ofcom said it would, “carry significant risks of worse outcomes, both for consumers and for effective competition, including adding costs and encouraging inefficient entry.”

However all of this changed in May 2015 when Ofcom made a dramatic U-turn (here) and the recent Strategic Review outcome (here) only reinforced that decision as part of the goal to make Openreach’s national UK telecoms and broadband network more accessible to rivals (this may help ISPs to build rival networks and to do so more cheaply).

Ofcom’s Statement

This means BT would have to give competitors physical access to its fibre-optic cables, allowing them to take direct control of the connection. This service is often referred to as ‘dark fibre’, because the cables would not be ‘lit’ using BT’s electronic equipment. Instead, they would be ‘lit’ by the competitor installing its own equipment at either end of the optical fibre.

BT is already required to offer wholesale leased line products, which bundle the optical fibre and BT’s own network equipment, at regulated prices to competitors. BT would still be required to provide these services, but the new proposal would go further, allowing operators to use BT’s fibre-optic cables with their own equipment, rather than rely on BT’s equipment.

Ofcom’s earlier strategic review also proposed a new wholesale Duct and Pole Access (DPA) solution, which complements the above approach by giving rivals access to the cable ducts and telegraph poles that BT uses to run their network (details here).

Apparently the requirement on BT to make Dark Fibre available would apply in all parts of the UK except central London (including the City of London and Docklands) – where Ofcom deems that there is sufficient competition in the market – and Hull, where most leased lines are provided by KCOM (KC) rather than BT. The requirement would also only apply to a particular kind of leased line known as Contemporary Interface Symmetric Broadband Origination (CISBO).

However the big problem with both Dark Fibre and DPA is with the issue of price and administration (Gigaclear and Hyperoptic recently talked about these issues). BT will naturally want to get the best return possible, while Ofcom will wish to see a simplified administration process for the scheme and perhaps some lower pricing. Easier said than done and there are likely to be big differences between what BT wants and what Ofcom expects them to deliver.

A BT Spokesperson told ISPreview.co.uk:

“Today’s statement from Ofcom is very much in line with what they proposed last year so there are no surprises here. Competition and choice have been growing in the business connectivity market and we believe there is a strong case for less, not more, regulation.

We accept there is more to do on service and are committed to doing better and meeting our business customers’ rising expectations. Ethernet provision can be complex and the need for street works and wayleaves mean delays are often beyond our control. We are doing all we can to overcome such challenges. The required Ethernet price cuts and the introduction of dark fibre will not help to underpin service improvement.

Dark fibre is a flawed piece of regulation that introduces an unnecessary layer of complexity and will deter others from building their own fibre networks. It is at odds with Ofcom’s recent statements about increasing competition at the infrastructure level. It is a cherry pickers’ charter benefiting those who don’t invest in networks at the expense of those who do including BT, Virgin Media, Cityfibre and Zayo.”

Ofcom’s Strategic Review has put pressure on BT to propose a voluntary solution to some of these issues; otherwise Openreach could be split from BT’s control. At the very least Ofcom may have to intervene in order to finalise the terms for Dark Fibre.

The regulator is currently seeking a solution by the end of 2016, which means their final Dark Fibre fix wouldn’t be ready to use until 1st October 2017. In the meantime BT have been told to publish a draft Dark Fibre “reference offer” by 1st September 2016, which will probably show an initial outcome that favours BT’s position.. subject to more negotiation.

Ofcom has also notified today’s proposals to the European Commission and, short of any significant objections, they currently expect to publish their final statement next month.

UPDATE 10:27am

Added the latest BT statement above.