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By: MarkJ - 7 October, 2011 (11:53 AM)
ofcom fibre optic broadband uk cable duct sharingbt openreach uk fttc broadbandBTOpenreach, which manages access to BT's national UK telecoms infrastructure, has today announced its revised and "significantly lower" Physical Infrastructure Access (PIA) prices for allowing rival broadband ISPs to access its underground cable ducts and telegraph poles.

The PIA product is designed to make it easier for rival providers (e.g. Virgin Media , TalkTalk , Fujitsu , Sky Broadband etc.) to deploy new fibre optic ( FTTH ) based superfast broadband services around the country, especially into rural areas, by running their own cable over BT's existing network.

Sadly BT's initial Draft Reference Offer (RO) for its cable duct and (telegraph) pole access (here), which claimed to offer prices that were 15% below the European average, was widely condemned (here) for being too expensive and offering prices that were allegedly four to five times more pricey than BT's own underlying costs.

As a result of that BT, under significant pressure from both telecoms regulator Ofcom (here) and the UK government (here), has today released revised prices that it claims are "in some cases more than 60 per cent lower" than the January 2011's draft when "there was a limited understanding of the costs and challenges" involved.

BT Openreach's CEO, Liv Garfield, said:

"I'm pleased to be able to bring down these prices. A lot of hard work has gone into revising them and we have ended up with prices that are up to 38 per cent below the European average. Other companies now have the certainty and low prices they need to build a business case and bid for BDUK funds.

No-one is keener than myself to bring superfast broadband to rural areas but it is an enormous challenge. These prices will hopefully unlock some much needed investment from others but we will have to wait and see. Openreach has largely bankrolled Broadband Britain by getting fibre to more than five million homes but it’s time for others to help us with the heavy lifting."

Andy Conibere of Call Flow Solutions, a PIA trial operator, gushed:

"The trial itself has been a triumph of collaborative working and has produced many valuable learning opportunities for all parties. PIA is undoubtedly a significant advancement in enabling Communications Providers, such as CFS, to deliver much needed superfast broadband in rural areas."

As well as the obvious pricing changes, BT has also broken down many of its PIA products "into their component parts", which will allegedly provide ISPs with "greater flexibility and choice" because they will now be able to pick and mix which services they buy from BTOpenreach and which they deliver themselves. It also makes the process more complex with over 100 PIA products and services.

For example, we note that BT's original price for ISPs wanting to rent spine duct access in its underground cable ducts was £1.16 per metre (per annum), which is now based on the number of cables a duct can carry and will in some cases fall to just £0.44. It's unclear how common the lower end of such pricing would be.

Meanwhile the price for access to a drop pole is roughly halving from £21 per attachment to around £11 or less where several drop-wires are fixed to each pole. This is a significant improvement but costs in other areas could still prove problematic.

Ovum's Regulation Practice Leader, Matthew Howett, said:

"PIA allows service providers to install fibre in the access network using the incumbent operator’s ducts and poles. The importance of PIA grew in significance following the European Commission’s Recommendation on regulated access to next-generation access networks, and is now being imposed by a number of NRAs across Europe. While we expect other wholesale products such as virtual unbundling to form the basis of a competitive NGA environment, duct and pole sharing is expected to play a crucial role in ensuring broadband ubiquity, particularly in rural areas.

It is generally assumed that for broadband, rural areas make up a third of the UK. Being more rural and less populated makes them more challenging to reach, but with £830m of public funding available, there is real potential to make use of existing passive infrastructure such as ducts and poles."

Separately a future adjustment by Ofcom to the value of BT's regulatory asset base, which BT plans to dispute, could force prices even lower. Thankfully BT has promised not to hold up the BDUK bidding process and will thus not dispute any such adjustment where CPs are bidding for BDUK funds.

We hope to have the reaction from rival operators soon. Has BT done enough to quell its critics? Perhaps not but the more important question is whether or not Ofcom still sees a need to intervene. We should find out soon.
Revised BTOpenreach PIA Prices
http://www.openreach.co.uk/orpg/home/products/ductandpolesharing/...
UPDATE 2:59pm

Ofcom have responded to say that Openreach's announcement is "an important step" in enabling communications providers to participate in the process of bidding for funds to deploy networks in the final third.

Crucially Ofcom states that "the methodology Openreach has adopted for setting charges appears to Ofcom to be reasonable", yet they do still recognise "that this area is subject to significant uncertainty".

The regulator is likely to examine some of the problems further as part of their late-2012 review into the wholesale local access market, though it appears to have ruled out an immediate intervention. We note that Openreach's situation is said to be still very much "under review".

A Virgin Media spokesperson told ISPreview.co.uk:

"We have had to wait ten months only to find many of the crucial new build and ancillary charges remain unchanged or are even increased. Whilst today’s revised pricing is a belated acknowledgement that certain basic charges were too high, there remains significant disparity between what BT is proposing and what industry knows the costs to carry out the work are.

With significant amounts of public money already allocated to help bridge the digital divide between rural and urban areas, it’s crucial that every pound is spent in the most efficient way. Reasonably priced access to BT’s ducts and poles is central to creating a truly competitive process that will enable others, not just BT, to bid for and access those funds."

Virgin Media also questions Ovum's study, which didn't include basic work charges such as blockage clearance, cable recovery, new route build and pole replacement etc. Many of these areas that Ovum didn't investigate have either remained unchanged or gone up in price.

Separately the boss of Fibrestream (NextGenUs) welcomed the news but told us that the big issue remains the "unacceptable ban on PIA in the Middle Mile" (i.e. the links between local communities), which are apparently "still being treated as out of bounds as they are 'business connections'". Clearly BT's revised PIA prices have satisfied Ofcom, to some extent, but not its rivals.
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