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BT Clear to Replace Ethernet Excess Construction Charges with Setup Fee

Friday, May 16th, 2014 (10:33 am) - Score 1,694
bt openreach fibre optic engineer in cable duct

Ofcom has formally allowed BTOpenreach to proceed with their proposal to replace the sliding scale of Excess Construction Charges (ECC) on their point-to-point Ethernet Access Direct (EAD) products with a simple balancing charge fee of £548 +vat, which will benefit many but not all customers.

The Leased Line style EAD services “can be used to build and extend customer networks, develop new infrastructure, and meet low-capacity backhaul requirements (ie up to 1Gb)“, although some related installations may incur ECCs that typically cover the cost of either providing additional services or dealing with “situations where the normal cost of providing service is in excess of that listed within the Openreach price list“.

As reported earlier this year, there were 30,616 completed EAD orders in 2012/13 and these attracted total ECCs of £38,129,607 (falling to an adjusted ECC spend of £27,410,421 after you factor in recent price changes). But Openreach wants to simplify all of this by exempting the first £2,800 of ECCs and replacing it with a balancing charge of £548 (this would become part of the standard connection charge for EAD), which would apply to all orders for certain EAD services (except EAD Resilient Option 1).

In doing this the regulator hopes that customers would benefit from shorter lead-times, increased certainty of prices and a reduction in handling costs.

Ofcoms Statement

Our initial analysis found that Openreach’s proposed change would reduce significantly the lead times for provision of most of the EAD orders which incur ECCs. The analysis also showed that the proposed change would have no net impact on Openreach’s revenues, and so is not likely to renew potential concerns of excessive pricing, which we had addressed by imposing the LLCC. Although we identified some distributional effects, with “winners and losers” among end-users and CPs, we thought that the benefits would be substantial enough to outweigh any concerns that such effects might raise.

Only Verizon opposed the proposal, arguing that while it and some other ISPs would pay more, BT Group would derive net financial benefit, because the average of ECCs per order which the rest of BT is charged in consuming EAD from Openreach is higher than the overall average of ECCs for all EAD orders. The other ISPs noted a similar concern but did not oppose the move.

Similarly the change delivers winners and a few losers depending on how much your particular EAD installation will cost. Naturally those who would have spent more than the setup fee on EAD installs will benefit, while those whom might have spent less won’t. In other words the system has gone back to what it was before ECCs.

Leave a Comment
5 Responses
  1. I too was suspicious when I first heard about this. However, the way it is being implemented is that the “standard” install charge is being reduced by the £548. This means that to the CP the “basic” charge is not changing in amount, it just now will include up to £2,800 of ECC.

  2. Avatar MikeW

    I was wondering why this financial change would happen to improve lead times.

    I guess it implies the bottleneck comes from the surveying department; the load is taken off them because any job that is “obviously” less than an £2,800 ECC can be just approved on the nod.

  3. Avatar Brian

    “Our initial analysis found that Openreach’s proposed change would reduce significantly the lead times”

    Can’t work this out. The first £3k of ECCs don’t cause an order to be delayed until 5 working days have elapsed from when they were advertised and the end customer hasn’t accepted the charge.

    After this the order is on hold. As such there is no material increase in lead time for delivery from Openreach’s point of view as they are unable to do anything further.

    So all it leaves is Ofcoms view of the time saving beyond the 5 working days up to the maximum permitted time to accept the costs of 30 working days.

    In my experience the majority of orders of a cost within the threshold we are talking about are either accepted or rejected within the 5 working day period; therefore, no significant reduction in lead times!

  4. Avatar Jamie

    Verizon?? They’re American and have no relation to the UK’s internet network

  5. Avatar Martin

    @Jamie – Verizon are very much involved in the UK market, we’ve had both leased line and data centre colocation services from them over the years.

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