BT Dark Fibre Ruling Forces Ofcom to Revoke Business Connectivity Changes

The UK telecoms regulator has today announced that they are revoking and re-examining the changes imposed under their 2016 Business Connectivity Market Review (e.g. Dark Fibre Access), which follows a BT supported ruling from the Competition Appeal Tribunal against their market definitions.

As a quick recap, Openreach were due to launch an Ofcom proposed Dark Fibre Access (DFA) product in October 2017, which would have enabled 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).

The regulator claimed that DFA could foster more competition and speed-up the roll-out of faster broadband services around the UK (e.g. backhaul capacity for new networks), while big infrastructure builders like BT, Virgin Media, Cityfibre and Zayo all feared that it could discourage investment in the building of new fibre optic networks.

In the end BT challenged Ofcom’s business connectivity review and won because the CAT found that Ofcom had used “incorrect” market definitions (here), which didn’t just put a stop to the regulator’s Dark Fibre solution but also impacted many other aspects. As a result Ofcom has today revoked the following parts of their 2016 review.

Ofcom’s Revoked Business Connectivity Review

The Competition Appeal Tribunal has found Ofcom to have erred in relation to various aspects of the decisions concerning market definition under appeal and required Ofcom to look again at some specific matters concerning market definition. In the meantime it has required Ofcom to revoke the market identifications, market power determinations, SMP [Significant Market Power] services conditions and directions (where applicable) in relation to:

a) The wholesale market for contemporary interface symmetric broadband origination in the Rest of the United Kingdom excluding the Hull Area;

b) Wholesale market for contemporary interface symmetric broadband origination in the Central London Area; and

c) The wholesale market for contemporary interface symmetric broadband origination in the London Periphery.

The regulator has now said that they are “reconsidering” the matters that were raised by the CAT and “will address these matters as soon as practicable.” In keeping with that Ofcom has today launched a fresh consultation on their original Dark Fibre proposals (here), which is effectively a re-run of what we saw a couple of years ago.

This “exercise” is also expected to “overlap” with the next business connectivity review (they tend to conduct these every 3 years), which Ofcom has already started work on.

Ofcom’s Statement

In the meantime, we are imposing temporary regulatory measures. These will apply in a revised set of markets where, under a conservative approach which takes into account the Tribunal’s judgement, it remains clear that BT has significant market power (SMP). These measures will safeguard competition and protect the interests of consumers in the revised markets.

The temporary conditions include the following changes from the position in 2016:

* There is no longer regulation of services above 1Gbit/s (‘Very High Bandwidth’).
* We have also removed all regulation from the central business districts of Birmingham, Glasgow and Leeds.

The temporary regulations apply to services at and below 1Gbit/s and include: access requirements, charge controls, and minimum quality standards for these ‘Lower Bandwidth’ Ethernet leased lines. These conditions are broadly in line with those set in the 2016 BCMR.

Ofcom is also today consulting on proposals to introduce a revised dark fibre remedy to address BT’s SMP for services at and below 1Gbit/s. We believe dark fibre can provide significant benefits for businesses and consumers – supporting better broadband and mobile services, including 5G. This includes a consultation on the market definition and SMP findings adopted in the temporary conditions statement.

We had been expecting Ofcom to give DFA a second try and so today’s development doesn’t come as much of a surprise. In the meantime Openreach has proposed to launch a new OSA Filter Connect product, which is a kind of virtual (grey) dark fibre style solution (here) but it probably won’t suit every ISP.

The new dark fibre consultation will close on 29th December 2017 and Ofcom expects to issue a statement in early 2018. At this stage it’s unclear whether they’ll be able to fast-track it back into life next year or will need to wait until the completion of their next full review.

UPDATE 1:35pm

Cityfibre is naturally unhappy that Ofcom are taking a second bash at Dark Fibre.

Mark Collins, Director Strategy & Policy at CityFibre, said:

“CityFibre acknowledges and welcomes the Competition Appeals Tribunal’s order which quashes Ofcom’s BCMR in its entirety.

It is now imperative that Ofcom reconsiders and redefines its assessment of the market to reflect the accelerated rollout of full-fibre demanded by the government and being delivered by the likes of CityFibre. Ofcom needs to take to heart the strong criticisms made by the CAT.

However, whilst the quashing of the BCMR is welcome, Ofcom’s response today appears to double down on its misguided approach to assessing the scope for competition whilst maintaining its flawed fixation with regulated dark fibre access. It’s pessimism about the prospects for real, infrastructure-based competition perversely restricts alternative providers’ ability to compete.

We will study the proposals carefully, but regret that Ofcom does not yet seem to have taken the opportunity for a fundamental and much needed rethink. As a company that is making substantial investments in the UK’s full fibre infrastructure, what we value above all else is predictable and rational regulation, rather than a ‘make do and mend’ strategy that simply puts sticking plasters over past errors. In a rules-based system, the referee as well as the players must abide by the rules of the game.”