UK ISP TalkTalk Warns BT’s 10Mbps Broadband USO is “legally questionable”

Budget ISP TalkTalk has warned that it is “legally questionable” for BT to recover up to £600m of the costs incurred for their proposed 10Mbps Universal Service Obligation deployment by extracting the money via charges for products providing access to Openreach’s local access networks.

BT’s “voluntary” proposal to spend between £450m to £600m on the roll-out of a 10Mbps minimum download speed for the whole of the United Kingdom was announced a couple of weeks ago (here), which was followed yesterday by Ofcom’s prediction of how much this might impact their planned charge controls for the Wholesale Local Access (WLA) network (here).

Ofcom predicted that the +vat wholesale cost of a fully unbundled (MPF) or FTTC broadband line might expect to see a monthly additional charge of around £0.03 in 2018/19, £0.10 in 2019/20 and £0.16 in 2020/21 in order to help fund the USO, which isn’t big enough to worry most consumers and is well below what some rather wild newspaper reports had initially claimed (e.g. £20 extra per year).

The increase would also mean that Ofcom could continue with their plan to introduce a dramatic cut to the cost of 40Mbps (10Mbps upload) FTTC “fibre broadband” lines, which would bring the entry-level price of the service down significantly (currently ISPs pay £88.80 +vat per annum but after the USO this would still fall to around £54.70 by 2020/21).

However TalkTalk have told the Telegraph that they’re less than pleased with the idea, which is hardly a surprise since they buy their broadband and phone products from Openreach (i.e. anything that increases the price they pay is likely to be something that will be contested).

Tristia Harrison, CEO of TalkTalk, said:

“We fully back the Government’s ambition to give every home decent broadband as quickly as possible, but the current offer on the table is legally questionable, and will be more complicated and more expensive to implement than it may at first appear.

It’s critical Government and Ofcom stand up for customers, and deliver high speed broadband for everyone, in a transparent and cost-effective way that preserves competition.

Without a level playing field or properly regulated fibre prices, there is a real risk that investment in Britain’s full-fibre future will be jeopardised.”

At this point we’re not sure whether TalkTalk are objecting to the cost increase itself or the fact that deploying a 10Mbps USO via Openreach (BT) might make it harder for alternative network providers to build the investment case for deploying “full fibre” (FTTH/P) broadband networks (maybe both?). No clear alternative is being proposed by the ISP.

We note that BT’s proposal does include a plan to deploy a modified form of Fibre-to-the-Cabinet (FTTC / VDSL2) technology called Long Reach VDSL (details here, here and here), which would enable Openreach’s “fibre broadband” network to cover 99%+ of homes in the United Kingdom by the end of 2020 (the final 1% would be tackled via a mix of fixed wireless and Satellite technology).

The problem with LR-VDSL is that it works best when older ADSL broadband services are disabled, which complicates the roll-out because ISPs then need to be convinced to play ball and vested interests can make that tricky (this sort of conflict may only exist in a few areas).

At this point it remains to be seen whether or not TalkTalk decides to tie the whole thing up in legal challenges, although that could result in the ISP being seen as the nasty provider for delaying upgrades in rural areas. We should add that Ofcom aren’t terribly keen on the idea of conflating rural broadband upgrade costs with planned wholesale charges either, but they’ll follow the Government’s lead.