Ofcom UK Impose New Quality of Service Rules Upon BT Openreach

The national telecoms regulator has today confirmed that BTOpenreach, which maintains BT’s UK phone and broadband network, will from 1st July 2014 be officially required to meet tougher quality of service standards (i.e. faster installs, quicker repairs and making available more information about their performance to the public). Shorter contracts and cheaper FTTC switching are also coming.

The changes, which remain broadly identical to those we reported on in May 2014 (here), are a response to concerns that Openreach often doesn’t fix faults or install new services fast enough. But the new rules will only apply to BT’s own Wholesale Line Rental (WLR) product and its Fully Unbundled (LLU MPF) broadband and phone lines, which are used by the majority of ISPs except Virgin Media and a few smaller providers.

Ofcom’s new targets are designed to escalate over the next 3 years before reaching their full potential in April 2016. For example, under the new rules Openreach will be required to, among other things, complete around 70% of fault repairs within 1 to 2 working days of being notified and this should rise to around 80% by 2016.

Openreach’s New Quality of Service Rules

* Openreach must, over the course of a given year, provide an appointment for around 55% of new line installations that require an engineer visit within 12 working days of being notified. This requirement will also rise to around 80% by 2016. Around 25-30% of new line orders typically require an engineer visit. The new target of 12 working days will apply to these jobs. Installations not requiring a visit are usually completed within two working days;

* Make clear the timeframe in which it is currently completing any remaining repairs or installations, to provide reassurance to consumers about how long the work is likely to take; and

* Report publicly on its performance. Openreach must publish quarterly reports on its website from October at the latest. These reports will provide clear, meaningful and transparent information about how long Openreach is taking to repair faults and install new lines, allowing consumers to keep track of the company’s performance. Ofcom will monitor Openreach’s service levels and intervene further if necessary.

BTOpenreach has already started to introduce changes that cater for Ofcom’s requirements and they recently announced plans to recruit another 1,600 engineers in order to help hit the targets (here). Admittedly the improvements will cause ISPs and phone providers to face some additional costs, although this is only equivalent to around “a few pennies per month” and thus won’t have a big impact on end-user prices (most ISPs will probably absorb it).

At the same time Ofcom has also warned that Openreach could be fined if they fail to meet the new targets, although we doubt that will happen. Both of the two 80% targets above will have some limited flexibility to be adjusted during situations that are beyond Openreach’s ability to control, such as damage caused by “extreme weather“, and in any case only around 3% of repairs and 1% of new line installations in a typical year can be hit by such factors. On top of that Ofcom usually gives operators a chance to change once they’ve identified a problem.

A BTOpenreach Spokeswoman told ISPreview.co.uk:

“Ofcom are simply confirming the proposals announced last month so there is no new detail today. Openreach has already stated its commitment to meet and exceed these service targets. Current performance data shows that Openreach is well on track to meet the targets outlined for this financial year. The recruitment of a further 1600 engineers will help us to achieve and exceed the standards set for subsequent years.

We also recently said that we would make Openreach’s performance data more visible to consumers and businesses by publishing regular reports on our website. The first set of quarterly reports will be available within the next few weeks, well ahead of Ofcom’s deadline.”

The new rules were published today as part of Ofcom’s final statement on their recent Fixed Access Market Reviews (FAMR), which hasn’t made as many changes as some competitors might have liked but will at least require BT to provide services on an Equivalence of Inputs (EOI) basis, rather than being more generally required not to discriminate unduly.

Equivalence of Inputs Description

The concept established by the undertakings in which BT provides, in respect of a particular product or service, the same product or service to all CPs (including BT) on the same timescales, terms and conditions (including price and service levels) by means of the same systems and processes, and includes the provision to all CPs (including BT) of the same commercial information about such products, services, systems and processes.

As for BTOpenreach’s hybrid-fibre superfast broadband (FTTC) lines, the wholesale migration fee will be cut from £50 to £11 +vat and the minimum contract period for FTTC lines is to be cut from 12 months to 1 month, although this will only apply to existing FTTC subscribers that migrate to another FTTC ISP (i.e. not first-time customers). We expect that last one might cause confusion for some consumers, depending upon how ISPs market it.

It’s also worth noting that Ofcom has recently changed how it classifies different areas of the country based upon the amount of competition from primary ISPs (e.g. BT, TalkTalk, Sky Broadband, Virgin Media etc.) in any given area (i.e. Market 1, Market 2, Market 3 and Hull). At present Market 3 areas are home to several ISPs and thus have the lowest prices due to de-regulation and better competition, while Market 1 is the opposite (Market 1 currently equates to the last 11.7% of premises).

But the rising coverage of rival services, in particular those unbundled ADSL2+ broadband lines from TalkTalk and Sky Broadband that cover 95% and 90% of the United Kingdom respectively, has changed the landscape somewhat and thus the definitions have had to be adjusted (note: not even BT’s own ADSL2+ lines can reach 95% yet).

The New Broadband ISP Market Definitions

Market A
Telephone exchanges where there are only one or two potential significant wholesale broadband providers present or forecast to be present, which accounts for 9.5% of UK premises in mostly rural areas.

Market B
Telephone exchanges where there are three or more primary operators (ISPs) present or forecast to be present, accounting for 89.8% of premises (exchange areas where there are three or more primary ISPs present or forecast to be present).

Hull Area
Covers 0.7% of UK premises, where KCOM (KC) is the only significant provider.

Most people won’t see a difference from this due to how providers tend to adopt a standard level of pricing, but some ISPs (e.g. PlusNet), will charge more if you lived in the old Market 1 areas (now Market A). The changes mean that this market is now smaller and so more consumers should soon gain access to cheaper prices by virtue of being moved into Market B, although related ISPs rarely adapt to this immediately.