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Ofcom UK Delays Second Attempt at BT Dark Fibre Access UPDATE

Thursday, April 12th, 2018 (10:36 am) - Score 6,620
openreach core fibre optic telecoms cable

The UK telecoms regulator has announced that they will NOT attempt to reintroduce a “temporary remedy” for Dark Fibre Access, which would have required BT (Openreach) to provide a restricted form of DFA in the leased line (Ethernet) markets for the period until March 2019. But DFA will be tried again.

The originally proposed Dark Fibre Access (DFA) solution would have enabled rival ISPs to gain “physical access” to Openreach’s existing fibre optic cables (i.e. enabling them to install their own equipment at either end of the fibre within cable ducts). Several ISPs are known to have expressed a strong interest in using the service (TalkTalk, Three UK, Vodafone and SSE Enterprise Telecoms etc.).

The regulator claimed that this new DFA, which they had initially rejected back in 2012 (here), could foster more competition and speed-up the roll-out of faster broadband services around the UK (e.g. backhaul capacity for new networks). However infrastructure builders, such as BT, Virgin Media, Cityfibre and Zayo, all warned that it could equally act to discourage investment in the construction of new fibre optic networks.

One of the main bones of contention stemmed from Ofcom’s market definitions, which reflected their plan to make DFA available in all parts of the UK (RoUK) except central London (including the City of London and Docklands). Suffice to say that none of the major dark fibre builders were pleased with this and BT launched a legal challenge, which ultimately found that the regulator’s market definitions were “incorrect” (here and here).

The market definitions were so central to Ofcom’s 2016 Business Connectivity Review (BCMR) that they were left with little choice but to revoke many of the proposed changes (here), albeit with a proposal to try again. One option was to introduce a restricted DFA remedy for leased line services at and below 1Gbps until March 2019 but the regulator has now decided against this.

Ofcom’s Statement

BT is currently subject to a package of temporary regulation in relation to certain Ethernet services, including a charge control. This temporary regulation covers the period to 31st March 2019. In November 2017 we consulted on whether it would be appropriate to add a restricted form of dark fibre remedy to this package of temporary measures. … Following input from stakeholders, [we have decided] not to introduce this restricted form of dark fibre during the period to March 2019.

However, we remain of the view that dark fibre can play an important role in promoting competition in leased lines. In particular, we believe that dark fibre has an important role where duct and pole access (“DPA”) is not an effective remedy, for example because usage restrictions may prevent DPA being used. We will therefore be considering an enhanced dark fibre as a remedy in our further market review.

The update notes that some of the ISPs most likely to purchase DFA “made it clear that a service at higher bandwidths would be significantly more useful to them” and that they would only use a DFA product that was restricted to lower bandwidths in “very low volumes“, because they were likely to need to upgrade to higher bandwidths within the next few years.

The fact that so many alternative network ISPs are now seeking to build significantly faster ultrafast broadband and Gigabit broadband networks over the next few years is likely to have played a role in the above decision. In short, we’ll have to wait for the conclusion of Ofcom’s next business connectivity review before seeing a regulated DFA solution (they’re currently preparing to begin that process).

An Openreach Spokesperson said:

“We note Ofcom’s decision not to impose a regulated Dark Fibre product during the period to March 2019 and we will continue to engage with them as they develop their thinking ahead of the next market review.

We remain confident that our recently launched alternative high bandwidth product – OSA Filter Connect – will meet the needs of our wholesale customers in this fast evolving market. We’ve worked closely with them to develop OSA Filter Connect, and we believe it offers the flexibility, scalability and service guarantees they need at an extremely competitive price.”

As above, Openreach has recently launched their new new OSA Filter Connect product, which is a kind of virtual (grey) dark fibre style solution (here), although it probably won’t suit every ISP but others have shown a strong interest.

UPDATE 2:08pm

Added Openreach’s final comment above and Cityfibre’s one below.

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

“Ofcom’s decision to withdraw its recently proposed restricted Dark Fibre Access remedy recognises that the supply of alternative dark fibre solutions is increasing at pace in many UK towns and cities. The decision to stimulate infrastructure competition rather than impose deeper regulation of BT Openreach’s products is consistent with Ofcom’s strategy to reduce the UK’s dependency on Openreach and is warmly welcomed by CityFibre.

Today, CityFibre provides open access dark fibre infrastructure in 42 towns and cities, providing future proof, unrestricted connectivity solutions for public sector and enterprise customers, as well as full-fibre connectivity to address thousands of mobile towers and future 5G small cells. CityFibre’s expansion plans – which target up to 100 towns and cities by 2025 and include projects already underway to deliver full fibre to homes across whole cities – are best supported through Ofcom’s introduction of duct and pole access (DPA).

We welcome the opportunity to engage with Ofcom in its upcoming Business Connectivity Market Review (BCMR) to help shape regulation that drives competitive investment in, and consumption of, full-fibre connectivity nationwide. We will urge Ofcom to remove the remaining restrictions on DPA to help accelerate the rollout of alternative fibre solutions.”

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he is also the founder of ISPreview since 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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27 Responses
  1. Meadmodj

    This is plain wrong. If a commercial company invests why should their asset, and the related value add, be given up to others who bear no commercial risk. Its like building an office block and then dictating that others can rent out each room and only pay the basic cost of building. I understand the reasoning regarding BT’s near monopoly of the telephony network but I do not understand when we are talking about new infrastructure which is open to any of the ISPs to invest in.
    As consumers we need the network investors (VM, BT/Openreach and the Altnets) to have the longest ROI period so that we can be offered faster speeds at reasonable cost. If Ofcom continue to threaten to allow the parasitic ISPs access then the ROI has to be shorter which means higher broadband cost or lack of investment.

    • Meadmodj

      Sorry for Broadband read Ethernet and other services including Mobile etc. that will use high capacity fibre in the local network

    • John Miles

      Its not wrong. If a very large operator like BT lay a (multifibre) cable they can run many services on the cable and get an effective ROI. If a small Altnet wanted to lay a second cable it would cost the same to put in, but they would have far fewer services to run on that cable, so it would not give a good ROI and probably wouldn’t even get built.

      The solution is to make the large operator’s fibres available at a sensible charge so that they can get reasonable returns from other users and innovative Altnet’s are not inhibited from entering new markets.

    • chrisp

      @John Miles

      “The solution is to make the large operator’s fibres available at a sensible charge so that they can get reasonable returns from other users and innovative Altnet’s are not inhibited from entering new markets.”

      Large operators already resale managed products across their fibre links and is 1 way in which they achieve their ROI. The fact that they lay fibre with extra capacity for future expansion is just good practice and foresight. If OFCOM force spare fibres to be resold to others then there is no reason for BT, SSE or whomever to add extra fibre as they will get less profit out of its usage and hand a competitive advantage to what would be potential customers. If there was no dark fibre others would have to lay their own or purchase bandwidth on a managed service helping the ROI.

      What you suggest effectively kills the market for dark fibre providers, of which there are many who are not ISP’s.

    • Meadmodj

      I agree. Currently investment includes spare or forecast capacity. If I were BT I would install smaller cables and only when I had a signed up customer for each fibre. No one wins then. We end up with business waiting lists, higher per fibre cost and no capacity for others.

    • “dark fibre providers, of which there are many who are not ISP’s”

      Okay name them…

    • Lynne Taylor

      Totally agree, ofcom do not seem to be working in the interest of consumers

    • chrisp

      @James Blessing

      “Okay name them…”

      a few i can name of the top of my head
      COLT
      Zayo
      Interoute
      City Fibre

    • Mike

      Your whole list is companies that do provide Internet services, rather than just dark fibre.

  2. gah789

    I am not sure how much practical experience the authors of previous comments have. I run a cooperative that procures backhaul for wireless ISPs which serve remote rural areas. The loss of DFA is a grave blow for us. Openreach has received large subsidies to lay fibre cables to serve aggregation points and cabinets around the countryside. No-one can seriously suggest that any other fibre provider is going to build a competing network. Unfortunately, OR has little incentive to sell capacity to potential competitors, so we run into endless problems in dealing with OR’s pricing and poor performance. There are regulatory targets which are rarely met but we don’t get compensation when OR failures mean that we can’t deliver services that our members need.

    Whether this is deliberate anti-competitive behaviour or sheer incompetence is not ultimately very important. The effect is to suppress competition and worsen the situation of those with little or no broadband provision. Via DFA we were hoping to remove such barriers by putting our equipment close to cabinets, etc and using our own contractors to install fibre, etc.

    Theoretical arguments about DFA damaging potential competition are all very well if you live in middle of Manchester, but they are irrelevant for those of us in rural areas. Remember that this was not about access to SSE or Virgin fibre built without (cross-)subsidy. It concerns OR and its position as a monopoly provider underpinned by regulated tariffs for its copper network and the subsidised build-out of fibre for FTTC.

    • chrisp

      whats the cost difference between laying your own fibre and paying BT to use theirs? Have SSE or Virgin got fibre close by that you could use instead?

    • Meadmodj

      I am reading this as Dark Fibre (same as Cityfibre, Interoute, Metrowire, SSE etc.) and that it was intended that other providers could have direct access to the BT fibre itself rather than the service.
      If we are talking about rural Openreach fibre then Ofcom should already have the power to regulate cost and service level without seeking open access to the individual fibres. I also understood that Openreach do not use the optic fibres for FTTC for other services and that full fibre services will be on a separate pure fibre design. Therefore its not helped that BDUK contracts appear to focus on FTTC to get the numbers up so currently its the FTTC fibre that is being subsidised not FTTP although that may now change.

      I am assuming that your wireless ISPs or community initiatives require a similar service as say a Vodafone mast or a data centre. If that cost is excessive then Ofcom should address that with OR if they are abusing their dominant position and fibre should be very reliable and resilient.

      We must find a solution that encourages OR to lay more fibre cable to the extremes of the network and the more fibres the better. I think opening up access to DFA results in the opposite and the possible bad behaviours highlighted above.

    • GNewton

      “I also understood that Openreach do not use the optic fibres for FTTC for other services and that full fibre services will be on a separate pure fibre design”

      Are you sure about that? Wasn’t the original idea to be able to run fibre deeper into network, closer to the premises, from the cabinets in a future expansion? Many original BDUK contracts had the capabilities for future upgrades included as part of their contract terms. I am not talking talking about FTTPoD which is as good as a dead product.

  3. gah789

    [Hollow laughter] Do you really think that Virgin, SSE, etc have accessible fibre in the heart of Mull or Snowdonia? B4RN only exist because they were lucky enough to be within a short distance of major fibre capacity running along or close to the M6. The point is that neither OR nor anyone else has any reason to run fibre in thinly populated areas unless they are paid to do that – and, indeed, they have been paid to do that in some places under the BDUK contracts. The issue is about access to fibre installed under public contracts.

    BT is subject to price regulated charges for leased lines (outside London) but this is a generic price cap as trying to write a set of rules specifically for rural services is practically impossible. As it happens the pricing structure is very unfavourable for rural operators because of the way in which distance enters into the charging structure. So we finish up paying anything from twice to four times as much for a 1 Gbps line as we would in a city or major town. Remember that (a) this is using fibre paid for by BDUK, and (b) operating costs for fibre are (or should be) practically invariant to distance.

    The charges for a Vodaphone mast are the same as what we have to pay, but for them it is swings & roundabouts – cheaper in cities, more expensive for rural masts. That is why mobile broadband services are so limited in most rural areas, because the operators don’t want to buy the backhaul capacity. What they – and we – do is rely on microwave links for the most remote locations, but these are relatively expensive for high capacity backhaul.

    Stepping back, most commentators only see DFA through the filter of infrastructure competition between alternative fibre suppliers. My point is that you get a completely different perspective when you are trying to deal with access to backhaul in rural areas. This has been the major barrier to improving rural broadband services for more than 5 years but nothing has been done to remedy the problem in that period.

    • New_Londoner

      “Remember that (a) this is using fibre paid for by BDUK..”

      Actually it isn’t. It is fibre that was subsided through the BDUK contracts, none of them funded 100% of the costs, just the difference between the commercial investment ceiling and the actual cost. In most cases, a good % of the subsidy has subsequently been repaid as takeup has been higher than forecast.

      It’s quite right that you should pay commercial rates for using this fibre – I’d like to get my money back as a tax payer if at all possible. If you feel your business qualifies for state aid then why not apply for it properly?

    • A_Builder

      @New_Londoner

      “Actually it isn’t. It is fibre that was subsided through the BDUK contracts, none of them funded 100% of the costs, just the difference between the commercial investment ceiling and the actual cost. In most cases, a good % of the subsidy has subsequently been repaid as takeup has been higher than forecast.

      It’s quite right that you should pay commercial rates for using this fibre – I’d like to get my money back as a tax payer if at all possible. If you feel your business qualifies for state aid then why not apply for it properly?”

      I’m not sure that is quite correct.

      @GNewton is I think closer to the money

      There has been some very clever footwork by BT/OR to cloud the issue but various assurances were given by the then OR CEO Liv Garfied.

      The whole reason that BT/OR got as far as they did with the money was that it was presented that a large tentacled fibre network “that was fully future proofed to carry a wide range of traffic types” [Liv’s words not mine] would be built and wholesaled.

      The fact is that has not happened and the precious fibres that are serving the FTTC cabs are doing just that.

      @gah789 hits the nail on the head here

      There will be a load of hot air about how difficult an engineering feat it would be to multitask with them. Not really: BT have proved that themselves with their own offering. Those fibres could easily be upgraded to spectrum using other discreet light frequencies and wholesaled. And yes I do realise that would mean putting a spectrum splitter (prismatic splitter if it is passive) and an L switch in every cab but they are about £300: so peanuts. The fact is that BT won’t do it as it prefers to keep things singular and it prefers to fleece organisations and people who need excellent connectivity at the fringes. As the B2B element of providing connectivity is less heavily regulated than the consumer end of the market and more overhead can be tucked into it.

      And this bring me straight back to my comments on mobile phone mast deployment costs the other day.

      With all due respect to City Fibre, and their good work, their presence is not the real relevance in this debate. The cities and large towns are getting increasingly well covered by the Alt Nets fibres who have clearly proved the ROI case exists for investing in large scale fibre. It is the fringes and tentacles out into the country side that have been built that are crying out to be multi purposed.

      Nobody is say BT/OR should not get some income from the tentacles. And indeed if BT/OR were commercially minded, which they actually don’t seem to be in the least at the moment, adding the spectrum splitting technology to the outlier fibres to FTTC cabs so enabling BT/OR to wholesale another income stream from a largely existing asset would be a pretty smart move.

      This would simply enable BT/OR to sweat another existing asset…………………………..

    • Gadget

      Sorry GNewton, ABuilder New Londoner is correct – the funding is only the gap necessary to bring the project within the commercial viability (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/528793/8-9_June_2016_BDUK_New_Procurement_Pipeline_Supplier_Briefing_Sessions.pdf slide 15, first definition Gap funding)

    • Gadget

      90,000 x £300 (£27m)- certainly not peanuts unless you have the spare cash to fund

    • TheFacts

      @ABuilder – what is the product that is not available?

  4. A_builder

    @Gadget

    None of that does anything to address either of

    -BDUCK contract multi use assurances that have not been followed through
    -Liv Garfield’s assurances around the network usssage and functionality that have been conveniently forgotten

  5. A_builder

    @TheFacts

    “What is the product that is not available”

    Any high bandwidth fibre that hangs off the end of the FTTC network.

    I think this has been covered very thoroughly by others further up the thread.

    So the extension of existing fibre to provide for Alt Nets, mobile masts, business parks etc etc

    • TheFacts

      Again, what is the product that would be bought?

    • Gadget

      The only product that “hangs off the end of the FTTC network” is G.Fast pods providing > 80Mbps speeds – but surely many other point-to-point products (EAD for example) utilise a potential greater proximity of premises to available fibre nodes.

  6. Joe M

    Whenever I hear these fake arguments I think of law of diminishing returns. Could someone put a cost to all these fake concerns?

    Nope.

    BT probably has a million dark fiber connecting each 4G telecom mast to a cabinet in the street back to their exchange, and VM charge around £85,000 for 10gbit, while the average cost is around £25,000. Collectively I can imagine no incumbent player that plays the market for scarcity pricing would like to see anyone else use dark fiber.

    What a surprise.

    Ofcom needs to stop listening to these incumbents and focus on de-regulating the market. If it needs fixing afterwards, then lets do it after listing all issues against a list of concerns and see if the law of diminishing returns apply and whether the benefits swamped the concerns from day 1.

    The alternative is for ofcom to disband and be replaced with fiber only authority reflecting the concerns of fiber companies, housing associations, councils and local authorities who value fiber. A bit like when BT was split from post office. Mail delivery had nothing to do with phones and the sooner it was done each went on with great success. The same applies to pure fiber players whose cost structures are 20x cheaper and 20x faster deployment than incumbents in the telecom market trying to squeeze value out of dead copper.

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