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Ofcom Deregulate More UK Broadband and Tighten Rules for KCOM

Thursday, June 21st, 2018 (10:31 am) - Score 3,692
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After a bit of a delay Ofcom has today published the draft outcome of their latest Wholesale Broadband Access (WBA) market review, which among other things imposes some new rules upon KCOM in Hull (East Yorkshire) and relaxes regulation across more of the UK due to rising competition between ISPs.

At present Ofcom tends to filter each part of the United Kingdom into three categories (markets), which defines which areas need more regulation to protect consumers (Market A) and which can benefit from softer regulation due to rising competition (Market B). This is important, not least because it can affect how much some of you pay for your broadband and phone services.

Generally speaking BT (Openreach) is only considered to have Significant Market Power (SMP) for the wholesale broadband market in a small part of the United Kingdom (Market A), while KCOM is viewed the same for the Hull area and has its own definition. Outside of these areas there’s usually enough competition from rival ISPs and networks for Ofcom to deregulate certain services.

Until today the current market definitions, which were last updated during 2014, were set as follows. We’ve also added the new definitions to show how they’ve changed.

Current UK Market Definitions

Market A (2014)
Exchange areas where there are only one or two potential significant wholesale broadband providers present or forecast to be present (e.g. BT), which accounts for 9.5% of UK premises in mostly rural areas.

Market A (2018)
Now accounts for 0.9% of UK premises.

Market B (2014)
Exchange areas where there are three or more primary operators present or forecast to be present (Sky Broadband, TalkTalk, BT, Virgin Media etc.), accounting for 89.8% of premises.

Market B (2018)
Now accounts for 98.5% of UK premises.

Hull Area (2014)
Covers 0.7% of UK premises, where KCOM is the only significant provider.

Hull Area (2018)
Unchanged.

Rival operators have naturally continued to expand the reach of their unbundled and alternative network (altnet) platforms since 2014, which means that the number of premises considered to be in the least competitive Market A have shrunk significantly over the past 4 years.

BT is currently required to provide WBA services in Market A on reasonable request and on fair and reasonable terms and conditions. In addition, BT is subject to a charge control in relation to one of its WBA products and related services (IPStream) and is subject to a fair and reasonable requirement for all other WBA charges. Broadly speaking this is unchanged by today’s statement, except that Market A is now much smaller.

Meanwhile broadband services in Market B often tend to be cheaper and some ISPs, such as Plusnet, even define their “low cost” pricing areas by Ofcom’s model. In practice this means that those who live in the dominant Market B area are more likely to benefit from lower prices, while Market A tends to be more expensive. Plusnet recently adjusted their pricing to reflect Ofcom’s expected changes, which meant a big price cut for some (here).

The KCOM Challenge

KCOM’s network has dominated the local market in Hull for many years via a mix of copper line phone, ADSL, FTTC and now “full fibreFTTP based broadband technologies, but this often causes frustration for residents when they find that major rival ISPs are not available to them.

The incumbent does offer some limited wholesale solutions to rivals within their network area, although these are not really comparable to the fully unbundled (LLU) and FTTC (VDSL2) / VULA services offered via Openreach’s national UK network (TalkTalk, Vodafone and Sky Broadband use these) and have thus not been adopted by major ISPs in Hull. Meanwhile a few alternative FTTP/H and fixed wireless ISPs do exist within Hull but their current level of influence is comparatively small.

Unfortunately changing KCOM is not an easy task, particularly since they remain both a significant financial contributor and major employer in the Hull area (details), which is something that politicians are wary about disrupting. Lest we forget that they’ve also invested £85m to ensure that nearly their entire network can access Gigabit capable FTTP technology by March 2019 (200,000+ premises), with around 4% on slower FTTC.

Naturally KCOM expect a fair return on that investment and Ofcom have agreed not to get too strict with regulation (the so-called ‘fair bet‘ approach). The regulator’s statement suggests that not much will change and they’ve only imposed some rather administrative new requirements on the operator.

Furthermore they’ve also protected KCOM against having to offer Local Loop Unbundling (LLU), which makes sense given that their copper network is due to be retired much sooner than Openreach’s (note: Sub Loop Unbundling [SLU], where an ISP builds their own street cabinet, is still possible in KCOM’s FTTC areas but that is expensive).

Ofcom Statement

We find that KCOM has SMP in both the WLA and WBA markets in the Hull Area. We believe that, as a result of this lack of effective competition, there is a risk that KCOM would fix and maintain wholesale prices at an excessively high level in each of these markets. This would have adverse consequences for consumers through elevated retail prices. We also consider that KCOM would have weaker incentives to reduce costs and improve efficiency.

A regulatory constraint on KCOM’s WLA and WBA prices is appropriate in order to address this risk, but in designing our remedy, we have taken account of the extent of KCOM’s investment. In particular, we recognise that KCOM has been investing in an FTTP network since 2012 and should be permitted to benefit from sufficient upside potential from its investment to offset the downside risk of failure.

However KCOM does say that they are “preparing to consult on a draft Reference Offer for a fibre-based WLA service,” which could open the door to other ISPs being able to sell on their FTTP or FTTC products. Mind you it remains to be seen whether the new products will be attractive enough to gain any uptake among ISPs.

Ofcom has previously told KCOM that they wanted the operator to “provide fibre network access on reasonable request,” while adopting “fair and reasonable prices” at wholesale (their old copper line wholesale solutions certainly didn’t find much favour, thus as above we have doubts about the proposed fibre solutions).

In terms of new remedies, for Wholesale Local Access (WLA), KCOM will now also be required to publish quality of service information, implement accounting separation and cost accounting. Meanwhile, for Wholesale Broadband Access (WBA), they will need to accept requests for new forms of network access and implement cost accounting. Otherwise little has changed and most of the old measures from 2014 remain intact.

Wholesale Broadband Access Market Review – UK
https://www.ofcom.org.uk/../Draft-statement-Wholesale-broadband-access-market-review-2018.pdf

WLA and WBA Market Reviews – Hull Area
https://www.ofcom.org.uk/../Draft-statement-Review-of-competition-Hull-Area.pdf

Leave a Comment
14 Responses
  1. Avatar The Archbishop

    This is very good news for customers living in the current market A areas, who, in many cases at the moment, pay a premium for exactly the same service as someone living a few miles away. Although some providers do charge the same, others charge a premium.

    My own provider apparently gets their service via BT Wholesale, who charge them a big premium for all market A circuits. They therefore add £5 per month to the price for customers in these “high cost areas”. Looks like this £5 charge will disappear!

    • Avatar Meadmodj

      May be not. BT Wholesale do not currently different their pricing by market except for Cease where Market A cease is zero). If the ISP does not have alternatives for their connectivity to the Internet then they have to use BT Wholesale for which there will be a charge. The ISP decides whether these charges (Market A or Market B) are passed onto particular customers. As Mark highlights some ISPs use national pricing, some by market and some by location. As Market B increases then simple competition should contain prices for the slower speeds but only time will tell as I think charging is going to get a lot more complex not simpler.

    • Avatar Meadmodj

      differentiate

    • Avatar Superfast Dream

      I can confirm that Plusnet have taken this on board and have started to act accordingly.

      I am on a Market A Exchange and as of this month (June) they have dropped my Unlimted ADSL product price from £16.99 p/mth to £10.99 p/mth, they also seemed to have applied a further £6.99 credit too which has brough it down to £4 p/mth! If they keep that up my crap, but unlimted, ADSL service has automatically become an absolute bargain, shame I can’t shift BT’s ridiculous line rental charges to avail of the product though….

    • Avatar Superfast Dream

      Looks like I have a dodgy i, the above should state unlimited….

  2. Avatar The Archbishop

    I can 100% confirm that BT Wholesale have a different price list for Market A, with higher monthly rentals that they charge to the Resellers. Although BT Retail charge the same prices, BT Wholesale do not.

    • Avatar Meadmodj

      Not according to WBC_Price_List_Entry_1June18_v3

    • Avatar Superfast Dream

      @The Archbishop, see my comment above^^, whether Plusnet have taken on board our actual throughput speed may be another matter, but I couldn’t see them putting themselves out of pocket no matter how much they felt sorry for us.

  3. Avatar Declan

    What is the total number of unbundled exchanges. Mine is still a cat A exchange.

  4. Avatar Steve

    What a load of crap this is. KCOM charge £55 per month for unlimited copper broadband to Hull customers and that is without any Call add ons. BT currently have a deal with unlimited Weekend UK calls and Unlimited Broadband for £24.99. Why are Ofcom ignoring this? Because of the lack of choice in Hull, KCOM seem to think they can charge what they want.

  5. Avatar Vincent

    Absolute rubbish as far as KCON are concerned – We pay over the odds for an average service; twice as much as anywhere else. KCON can get away with this as there is nothing when it comes to comparable competition….

    KCON still have the monopoly!!!

    Talk to the residents of the HU area, you will see we all want the competition here, it will make our prices match the rest of the country… I pay over £50 pcm for a limited download service, on lightstream (fibre) plus have to pay for a telephone line which I neither use or require for my fibre connection. If I were to go for KCON’s TV package, it would cost me a further £30 pcm, give or take…

    They are ripping us off!!!!

  6. Avatar Ryan eley

    Kcom home Internet so they call it is fast that’s for sure but it’s not a home Internet connection it’s priced up like a business connection. Secondly its like they glamorize 1gb internetwork, not even some data centers give you this speed… Do home computers round here come here come with a m3 pcie that’s costs £3000+ to achieve a read and write disk access speed of 1gbps, last time I checked not even data centers provide there customers that in there dedicated servers. I would be happy with plan of 75mbps on a unlimited data plan, 90% most hard drives can only read and write at that speed. Kcom home Internet so they call it is fast that’s for sure but it’s not a home Internet connection it’s priced up like a business connection. Secondly its like they glamorize 1gb internetwork, not even some data centers give you this speed… Do home computers round here come here come with a m3 pcie that’s costs £3000+ to achieve a read and write disk access speed of 1gbps, last time I checked not even data centers provide there customers that in there dedicated servers. I would be happy with plan of 75mbps on a unlimited data plan, 90% most hard drives can only read and write at that speed.

  7. Avatar Ryan eley

    They just miss out that they could offer a 75mbps package with unlimited data like all the other company’s for 36 pound? Surely the lower data rate would mean they could provide a unlimited data on slower speed 75mbps for 36pound a month as a user can’t physically download very much as there speeds slower.

  8. Avatar Ryan eley

    Laws of speed says the faster Ur speed the faster your data goes. Your better off on mid lowest deal with unlimited data plan.

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