Cityfibre Taking Ofcom UK to Court Over Protection of BT’s Dark Fibre

The outcome of Ofcom’s recent Business Connectivity Review (here and here), which gave Openreach’s (BT) competitors “physical access” to its fibre optic cables (i.e. allowing them to “take direct control of the connection“), clearly hasn’t gone down well at urban fibre optic broadband builder Cityfibre.

The solution itself is often referred to as Dark Fibre, although the fibre optic cables would not be “lit” using BT’s electronic equipment. Instead, they would be “lit” by a competitor installing their own equipment at either end of the optical fibre. Ofcom believes that this solution could deliver more market competition and help to speed-up the roll-out of new broadband services.

However the regulator was worried that BT would “charge excessive prices for dark fibre“, which they said might limit take-up and “lead to distortion in downstream competition“, and so they proposed that the dark fibre remedy should be subject to a charge control (i.e. keep its price low). But by offering Dark Fibre on the cheap the regulator could risk harming BT’s rivals in the same market.

Ofcom’s decision certainly came as a surprise to most of the major fibre optic infrastructure builders, not least since a similar review that was conducted by the regulator 2-3 years earlier had described the same Passive Remedy as carrying “significant risks of worse outcomes, both for consumers and for effective competition, including adding costs and encouraging inefficient entry.” BT agrees with that and they’re not alone.

A BT Spokesperson told ISPreview.co.uk in April 2016:

“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.”

Cityfibre are currently working to expand their own high-capacity fibre optic / FTTP broadband network to around 50 cities across the United Kingdom by 2020, which is predominantly used to serve businesses and the public sector. The operator has also shown that its network, with enough support from major ISPs, can even be extended to deliver 1Gbps Fibre-to-the-Home (FTTH) solutions (e.g. York and Bournemouth).

However Cityfibre doesn’t welcome the opportunity to gain access to BT’s Dark Fibre network through Ofcom’s regulated price approach. Cityfibre’s fear is essentially that the approach will threaten their own Dark Fibre market and they already have the support of other infrastructure developers (here).

Now Cityfibre has moved to challenge Ofcom’s Dark Fibre solution via the High Court’s Competition Appeals Tribunal, with the operator warning that the policy was “ridiculous” and would cement BT’s position in the broadband market as a “single, unassailable wholesale infrastructure provider.” A little ironic, since BT doesn’t want Ofcom’s remedy either.

Mark Collins, CityFibre’s Director of Strategy, said:

“As a major investor in the UK telecom infrastructure market, working to transform digital connectivity across the country, we need to ensure that CityFibre and other fibre optic infrastructure builders can invest against the background of a fair and balanced regulatory regime.

We believe Ofcom is implementing poor and inconsistent regulation, and we have a duty to robustly contest their decisions and policies in the normal course of business – especially where they conflict with stimulating long-term investment in the critical digital infrastructure which the UK so badly needs.”

At this point we should say that it’s important not to confuse the business orientated Dark Fibre fix with Ofcom’s other wholesale Duct and Pole Access (DPA) solution, which will give rivals access to use BT’s (Openreach) underground cable ducts and telegraph poles. Both solutions are essentially two different sides of the same coin and Cityfibre have already been trying, albeit with some difficulty, to make use of DPA for their own advantage (here).

Ofcom has of course pledged to “defend our decisions” and the Government’s Digital Economy Bill may help by increasing the threshold for such appeals, which would make it harder for operators to stall new regulation, but this won’t come in time to stop Cityfibre’s appeal. The need for this change arose after the earlier auctions of 4G spectrum in the 2.6GHz and 800MHz bands, which were delayed for years by legal threats from mobile operators.

Meanwhile Three UK has announced today that mobile Internet use on its network in Hull (East Yorkshire) has increased by 380% since January 2015, which of course follows the completion of CityFibre’s “dark fibre backhaul” network in the area (here). The timing of this PR is surely no coincidence and comes from Cityfibre’s PR firm.

Mobile operators EE and Three UK both invested to help build the new network, which placed the old legacy copper-based infrastructure. The project has enabled the networks to reduce bottlenecks in capacity that had previously affected mobile network speeds in Hull and expand 4G coverage throughout the city.