Ofcom Opens Probe into BT Compliance with Broadband USO UPDATE

Ofcom has this morning opened an investigation to examine whether or not BT is complying with their obligations under the new UK Universal Service Obligation (USO), which requires them to help deliver at least a 10Mbps broadband download speed, upon request, to those in poorly served areas.

The ambition of the USO was to ensure that everybody in such a location could request a 10Mbps service, although the reality has always been that some areas would simply be too expensive for even the new obligation to tackle. Over the past few months, since the new rules were introduced, we’ve thus seen many examples of people being hit with quotes for excess costs that run from tens of thousands and all the way up to over £1m.

The situation has been exasperated by some significant inconsistencies in BT’s USO quotes (based on Openreach‘s data) and their processes, as well as plenty of mixed messaging (we’ve already explored this in some detail – high USO costs examined). Suffice to say that the accuracy of BT’s quotes and how they’re pieced together is now coming in for a lot of scrutiny.

At the end of last week the Government’s Digital Infrastructure Minister, Matt Warman, took the situation a step further by calling on BT and Ofcom to find a “resolution” (here). Today the regulator has responded by launching an investigation in relation to BT’s compliance with its obligations as a broadband USO provider, although it should be said that they were already considering enforcement action before the MP’s intervention.

Ofcom’s Broadband USO Statement

Ofcom has worked to implement the USO as quickly and efficiently as possible. Following consultation, we designated BT as a Universal Service Provider and imposed regulatory conditions setting out how it must provide USO connections to eligible consumers.

Under the legislation, customers can request a USO connection from BT if they cannot currently receive affordable broadband services with speeds of at least 10 Mbit/s and upload speeds of at least 1 Mbit/s (among other technical parameters). Upon receiving such a request, BT must assess the costs of providing that connection and, where this is less than £3,400, BT must provide the connection. Where the assessed costs exceed that amount, BT must also provide the connection if the customer is willing to pay the excess costs.

Ofcom’s conditions set out how BT should assess the costs of providing a connection. In particular, as required by the legislation, BT must take into account that costs may be shared among other customers who could use the same infrastructure. BT must apply this methodology to calculate the costs of each requested connection.

While the cost of some connections will be high due to the remoteness of many of these premises, we are concerned that BT may not be complying with the regulatory conditions correctly where it assesses excess costs for a given connection. This could result in some customers’ quote for a connection being higher than necessary.

The regulator will now gather evidence before deciding what further action to take (a decision on that could come by the end of this year). However, the biggest barrier here is that it remains an inherently difficult task to accurately estimate the cost of an FTTP deployment to areas where no good fixed line or wireless solutions exist (FTTC can technically also still be used but these days full fibre is the expectation).

A proper engineering survey is often required, as opposed to a desktop quote, but that costs more time and money – something BT will usually only do if there’s a commitment to proceed with the build first. Likewise, it remains important to understand that there are some very real cost barriers here, which cannot simply be swept aside by good intentions.

Nevertheless, any attempt to improve how the costs of USO connections are calculated would be most welcome, even if at the end of the day it will still take significantly more funding to deliver 10Mbps+ connections to some of the most remote communities. The USO is an industry funded scheme and BT will want to know that any excess costs it may incur can be recovered from the associated fund.

Meanwhile the Government’s future £5bn programme may help to resolve some of this problem, but that too will no doubt have its “value for money” focused limitations to consider. In short, nobody should be expecting Ofcom’s investigation to be a magic fix for all of the USOs fundamental challenges, but it might help to clear up some of the existing confusion and result in a fairer way of calculating the cost of service delivery.

A BT Spokesperson said:

“We strongly disagree with Ofcom’s assessment of our delivery of the USO. We are disappointed that they have opened an investigation when we’re fully committed to working with both Ofcom and the Government to find better ways to connect the hardest to reach. We are obliged to send USO quotes to customers when they request them and appreciate that for the most remote properties some of these can be unaffordable. We’re working hard to enable communities to be able to share the costs of an USO connection to help drive down costs for individuals. We will launch this as soon as possible.

For some communities, even if they share the costs, the price will remain out of reach. We can connect 400,000 properties without decent connectivity using 4G and for properties where this isn’t suitable we’re already building connections to 4000 premises through the USO scheme. However, it does not overcome the challenges of connecting the most difficult places which represent 0.5% of the country.

We strongly believe this needs to change – alongside the existing USO programme, we need a new plan for the hardest to reach. This has to be a shared endeavour, across industry and with Government and Ofcom. We’d like to see a task force set up, with cross-party support and use our experience and expertise to find a new solution. Options could include alternative technologies, such as satellite (including exploration of the potential role of OneWeb) as well as clarity on the Government’s £5bn funding for rural full fibre.”

A spokesperson for Ofcom told ISPreview.co.uk: “The broadband universal service is a vital safety net that gives everyone the right to request a decent broadband connection. And while properties in very remote locations will clearly be more expensive to connect, we’re concerned about how BT is calculating some of the quotes for people making connection requests – particularly those where costs could be split across a number of homes in an area.”

UPDATE 11:45am

We’ve added a comment from BT above.