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

Thursday, August 10th, 2017 (10:50 am) - Score 1,072
Law internet uk isp

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.

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11 Responses
  1. Avatar Steve Jones

    So what, I wonder, is TalkTalk’s proposal for the USO? Or are they wholly against the idea in the first place?

    nb. the principle of cross-subsidisation is built into the land-line USO. The much higher capital employed, maintenance and repair costs for lines in rural and less populated areas are subsidised by higher margins extracted from those in urban, more densely populated areas. Ofcom (and the Government) are very insistent on national pricing even if it doesn’t reflect underlying costs.

  2. Avatar Steve Jones

    That was TalkTalk’s submission to Ofcom with regard to the USO. It’s rather long on things it doesn’t like, somewhat sceptical about the whole notion and very short on positive suggestions beyond the idea that the government should put its hands in its pockets to fund niche solutions in areas where there is market failure and some very generic stuff about increased competition. Essentially anything that doesn’t involve BT beyond, maybe, using OR poles and ducts.



  3. Avatar Ultraspeedy

    “the final 1% would be tackled via a mix of fixed wireless and Satellite technology”

    Is this still the same satellite service BT do not currently provide?

  4. Avatar AndyC

    Out of interest how much do talk talk charge their resellers to use their network?

  5. Avatar bob

    I suspect talk talk are terrified that offcom will actual put some weight behind the USO and mandate LLU ASDL switch off in favour of LR-VDSL.

    Of corse Talk talk won’t actually come out and say they want to hold up speed and coverage progression in favour of sweating their copper assets, so you’ll see lots of phrases like “legally questionable” in relation to tge USO.

  6. Avatar FibreFred

    So basically TalkTalk are (unsurprisingly) saying, we don’t want to pay for the USO, we want BT to pay it all, but we are happy to reap any benefits.

    • Avatar Steve Jones

      I think it’s more basic than that – the amount of money is trivial. Ofcom’s calculations are (at worst) about £2 a year on the wholesale rate for the 40mbps GEA-FTTC service. I suspect they just don’t want Ofcom to get into the habit of giving anything to BT. If Ofcom give way on this, then they might on the LR-VDSL issue and that has major implications for the LLU operators. Of course by any sensible technical criterion, exchange-based ADSL ought to be phased out, but it’s difficult to see that being allowed except on a strictly selective basis.

    • Avatar Joe

      @Steve Jones

      We could hope that post Brexit the government/ofcom chooses to use abandon the legal framework that (practically) prevents exchange-based ADSL being universally switched off

  7. Avatar MikeW

    Ah – the great spirit of cooperation in the UK telecoms market is alive and kicking I see.

    This might be legally questionable … right up until the point (if chosen) that the government and Ofcom make the right secondary legislation and regulations to make it legal. But thanks TT for pointing out that this needs to be done.

    IMO the bottom-feeding LLU spawn are the ones that should be listened to least in the USO discussion.

  8. Avatar Steve Procter

    It’s ironic to see Talktalk questioning what Openreach is doing to improve broadband services to the entirety of the UK population. We’re with Talktalk ia semi-rural area and on a good day our broadband speed might get to 2 Mbps. On other days it might be as low as 0.4 Mbps! Talktalk seem unable or unwilling to resolve this problem yet are now quick to criticise the network provider for wanting to get the USO rolled out by 2020.

    I’m not surprised to see TT and Openreach arguing about this point whilst customers such as us continue to receive a poor service. It’s about time that they get their collective act together to improve services for their customers rather than wait for the Government and/or Ofcom to force a solution on them

  9. Avatar Mike

    Non-infrastructure providers/parasites that oversubscribe have an incentive to maintain the status quo, if bandwidth rises sharply compared to the price charged, margins are hit, ADSL is the cash cow.

    This current situation was created by people voting for governments which favoured regulation/taxation over a free market.

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