UPDATE Openreach Cancels UK Launch of their Dark Fibre Access Product

The proposed Dark Fibre Access product from Openreach (BT), which would have allowed rival ISPs to gain “physical access” to the operator’s existing fibre optic cables (i.e. enabling them to install their own equipment at either end of the fibre within cable ducts), has today officially been cancelled.. for now.

The plan was first introduced as part of several measures under Ofcom’s 2016 Business Connectivity Market Review (here). The regulator viewed it as a change that could foster more competition and speed-up the roll-out of faster broadband services around the UK (e.g. backhaul capacity for new networks). A number of ISPs (e.g. TalkTalk, SSE Telecoms) had already made significant plans for the new service.

However several major infrastructure builders, such as Openreach, Virgin Media, Cityfibre and Zayo, all feared that DFA would discourage operators from investing to build their own fibre optic networks. In keeping with that BT launched a legal challenge of the measures via the Competition Appeal Tribunal (CAT), which last month dramatically ruled in their favour (here).

A key part of the regulator’s review of the £2bn leased line market was its proposal for BT to make DFA available in all parts of the UK (RoUK) except central London (including the City of London and Docklands) – where Ofcom deemed that there is sufficient competition in the market – and Hull, where most leased lines are provided by KCOM (KC) rather than BT.

On top of that Ofcom also defined DFA as applying to a particular type of leased line(s) known as Contemporary Interface Symmetric Broadband Origination (CISBO), which use newer Ethernet and WDM technologies. However the tribunal ruled that the regulator’s market definitions for DFA were incorrect and this “quashed” some of the key decisions from their 2016 review, which sent DFA back to the drawing board.

CAT’s Ruling

The Tribunal found unanimously that:

—–(1) Ofcom erred in concluding that it was appropriate to define a single product market for CISBO services of all bandwidths;
—–(2) Ofcom erred in concluding that the RoUK comprises a single geographic market; and
—–(3) Ofcom erred in its determination of the boundary between the competitive core segments and the terminating segments of BT’s network.

Under the original plan Openreach was expected to launch their DFA product on 1st October 2017, but the ruling changed all that. In theory Openreach could have either chosen to proceed with DFA (i.e. under less favourable terms), cancel the launch or shelve it until such time as Ofcom can figure out whether DFA is still viable (i.e. the regulator could do that by re-running their review from scratch).

Today the Office of the Telecoms Adjudicator (OTA) held a crunch meeting and the immediate fate of DFA was decided. Industry sources have informed ISPreview.co.uk that the launch of DFA has now been cancelled, at least until such time as Ofcom can set out how they intend to proceed.

The outcome was perhaps the only one possible because Ofcom are still awaiting the tribunal’s full reasoning and until they have that then the regulator will not know how best to proceed, although they continue to believe that DFA can “bring significant benefits for businesses and consumers.” In the meantime DFA will not proceed.

Separately, ISPreview.co.uk understands that the same meeting also included discussion about a potentially significant change to the expensive FTTP on Demand (FTTPoD) product. FTTPoD is similar to Openreach’s native “full fibre” FTTP deployments, except it can be rolled out into certain non-FTTP areas following a request, but the end-user needs to pay a significant installation cost to help cover the construction work.

However we understand that the proposed change would involve dropping the price of FTTPoD to match native FTTP, with “project builds” becoming an option for things like estates. The new FTTPoD solution might also adopt ECC charges rather than a distance band with mandatory survey. But take this with a pinch of salt because we don’t yet have the detail and it’s currently only being “considered“.

UPDATE 2:12pm

We now have some official comments coming in.

Openreach’s Official Statement

“Industry will be aware, in June 2016 BT appealed Ofcom’s findings in the 2016 Business Connectivity Market Review (BCMR) on the market definition and the imposition of the Dark Fibre Access (DFA) remedy.

The Competition Appeal Tribunal (CAT) issued a Ruling on 26 July 2017 that Ofcom had erred (a) defining a single product market for contemporary interface symmetric broadband origination (CISBO) services of all bandwidth, (b) concluding that the rest of the UK comprises a single geographic market and (c) its determination of the boundary between competitive core segments and the terminating segments of BT’s network

In light of the CAT ruling and following discussions between Ofcom and various parties involved in the CAT litigation, Openreach do not intend to launch DFA on 1 October 2017 or notify launch pricing at the end of August/early September 2017. We’ll issue formal communications to CPs over the coming days.

We are very keen to discuss with CPs what existing or future alternatives to dark fibre may meet their requirements.”

Mark Collins, Cityfibre’s Director of strategy and Public Affairs, added:

“After Ofcom’s flawed regulatory efforts in the BCMR were overturned by the CAT, there is no legal basis to mandate the introduction of a regulated dark fibre product. Therefore, Openreach’s decision not to proceed with a dark fibre offering is not a surprise.

As one of the UK’s largest suppliers of dark fibre infrastructure, CityFibre’s growth and proven ability to attract investment, demonstrates that the competitive market for business connectivity, including commercial supply of dark fibre, is alive and well and not in need of disproportionate and unnecessary regulatory interference.

Rather than continuing to drive increased dependency on Openreach, we suggest that Ofcom goes back to the drawing board to focus on delivering more appropriate and proportionate remedies that help meet its own strategic objectives to support increased competitive investment in full fibre for the UK.”