Ofcom’s competitiveness quest continues with another ducts and poles assault

Ofcom has unveiled its latest edition of its business connectivity market review with an all too familiar feel; how can it force Openreach and BT to play nicer with competitors.

As with any former state-owned monopoly, BT/Openreach is in the enviable position of having the groundwork already laid for future-proof infrastructure. Of course it has not done enough across the years to meet the demands of tomorrow’s fibre-based diet, though one factor behind this is a lack of external pressure on the business. Without competition, the enforced need to invest and innovate is not there. This is ultimately Ofcom’s objective; create an environment which encourages other ISPs to lay their own connectivity foundations, decrease the reliance on Openreach and improve connectivity options for the consumer.

“We want to give companies greater flexibility to lay fibre networks that serve residential or business customers,” Ofcom said in a statement. “So today, we are consulting on proposals to allow access to Openreach’s ducts and poles to companies offering any type of telecoms services including high-speed lines for large businesses, networks carrying data for mobile operators and high capacity lines supporting broadband services. We intend to implement this unrestricted duct access from spring 2019.”

This review focuses on the areas where there is minimised or no competition for BT. Ofcom believes BT currently has almost 5,600 local exchanges, though at roughly 5,000 of these sites there is competition from fewer than two competitors. BT’s position has been deemed unacceptable in these areas.

Starting with the areas where there is evidence of potential competition, but BT still maintains ‘significant market position’, Ofcom will no longer impose a cost-based charge control or quality of service standards on BT’s wholesale services, which combined with access to BT’s ducts and poles, the theory is competitors will have a stronger incentive to build their networks.

In areas where network competition is unlikely to be a reality, Ofcom has proposed a price cap for services at 1 Gbps and below to protect customers and provide certainty and stability over the course of the review. What is worth noting is that this is a relatively short-review, as while the proposals could come into play next spring, 2021 would see a new review and therefore new proposals.

The final proposal comes at the 4,300 exchanges where BT faces no competition from rival operators for inter-exchange connectivity, and Ofcom has deemed opening up the ducts and poles will have little impact. Rival networks are too far from these exchanges to make it economically viable to serve these exchanges, therefore BT is the only choice as a supplier for backhaul. Ofcom is proposing a requirement for dark fibre at cost for inter-exchange circuits that connect to these locations.

This is of course not the first time the dark fibre suggestion has emerged from Ofcom. In April, Openreach officially launched a compromise between full dark fibre access and full managed service after months of bickering and reviews with BT attempting to resist the Ofcom intervention. Ofcom seemingly lost that battle, with fingers being pointed at suspect market definitions, though now it appears ready to restart the assault.

This is of course only the consultation stage of the process, though the plans are to get the new rules in place by next spring. Whether this timetable is realistic with the almost guaranteed legal challenge from BT remains to be seen, but this is just another step in the never ending Ofcom quest to improve connectivity and competition across the UK.

The Openreach virtual dark fibre service finally sees the light of day

Six months after proposing a compromise between full dark fibre access and full managed service, Openreach has formally launched ‘virtual dark fibre’.

The proper name for this fibre wholesale service is Optical Spectrum Access Filter Connect and the thinking behind it was explained to us by Openreach General Manager of High Bandwidth and Passive Services, Darren Wallington, in October of last year. In essence it aims to combine the service assurance and response times of a managed service with the scalability and flexibility sought from dark fibre access.

“We’ve re-engineered our high-bandwidth optical services to give our wholesale customers far greater flexibility at a fantastic price,” said Wallington. “OSA Filter Connect allows providers to grow their needs affordably, at their own pace and using their choice of innovative equipment.

“By innovating a virtual dark fibre service, we can give customers that extra flexibility whilst still being able to monitor our network and respond to faults and issues proactively. With a regulated dark fibre access product, we would’ve literally been left in the dark with no monitoring capabilities and significantly longer service interruptions due to the reactive nature of fault reporting, but this means we can commit to a national five-hour response time.”

Pricing seems to be one of the things Openreach has worked on a fair bit on the last six months, much of which have been spent in what Openreach characterizes as ‘proper, constructive engagement’ with UK stakeholders. Additionally it has received a significantly increased level of direct lobbying from MNOs, keen to get ahead of the game on 5G fronthaul and backhaul.

“We’ve listened closely to our customers,” said Wallington. “They wanted something that would address the perceived failings of a ‘one size fits all’ regulated product and they’ve helped us to shape the product we’re launching”

“Both large and small customers told us they wanted a service that offered more competitive high bandwidth pricing with low incremental scaling costs. They also wanted more flexible and configurable services that give them more control, the ability to support fast evolving technology – like synchronization, and more efficient use of space and power.”

It’s not for us to say whether or not this is the right solution to the dark fibre access issue, but it does seem like a good-faith attempt by Openreach to balance a number of different factors and needs. We’ve copied the new pricing tables below to help you make up your own mind.

 

*Pricing – OSA filter connect prices below, note the 5 year term variant is less than our original consultation range

This provides CPs with a 10GB managed service with spare filter ports that they can use to scale to higher bandwidth by themselves with no additional costs from Openreach. We will continue to offer additional Managed Wavelengths for those CP’s who prefer a managed service at very competitive price points.

Product Minimum Period Connection £ Exc VAT Rental per annum £ Exc VAT
OSA Filter Connect FSP3000 – 12 month 12 month £15,550 £7,845
OSA Filter Connect FSP3000 – 36 month 36 month £12,233 £6,276
OSA Filter Connect FSP3000 – 60 month 60 month £12,233 £5,775

* Can be upgraded to 20Gb without a site visit

 

EAD 10Gb will see connection prices reduced by up to 32% and rentals by up to 53%

At the same time the 5 year term variant will now in effect make be a 3 year term product, as we’ve set the early termination charges for Year 4 and 5 to zero.

Product Charge type Current Price New price for 3 April 2018 Price reduction
EAD 10000 Connection £5,990 £5,590 -6%
EAD 10000 Rental £10,500 £4,980 -53%
EAD 10000 (60 month minimum period) Connection £5,990 £4,090 -32%
EAD 10000 (60 month minimum period) Rental £8,400 £4,380 -48%
EAD Local Access 10000 Connection £5,990 £5,590 -6%
EAD Local Access 10000 Rental £7,500 £4,146 -45%
EAD Local Access 10000 (60 month minimum period) Connection £5,990 £4,090 -32%
EAD Local Access 10000 (60 month minimum period) Rental £6,000 £3,648 -39%

 

Dual Fibre mainlink, the headline rate will be reduced from 37.2p to 24p

OSA Main Link charge feature Current price (pence per meter) Price on 3 April 2018 (pence per meter)
Main link per metre or part thereof  37.2 24.0
Main link + Standby link per metre or part thereof  82.8 57.6
Diverse main link per metre or part thereof 42.0 28.8

 

Ofcom is not giving up on its dark fibre quest

BT/Openreach has been accused of guarding its network for some time, and the latest consultation from Ofcom is another chapter in the watchdog’s mission to break the market dominance.

Despite BT’s legal team hitting back at Ofcom in July, Dark Fibre Access (DFA) is back in action with the launch of the new consultation. Let’s hope this time the Ofcom bods have got their own house in order after muddling market definitions was its downfall on the first assault.

“We consider in this consultation whether to add a requirement on BT to provide dark fibre in addition to the other remedies imposed in the BCMR Temporary Conditions Statement,” the document reads. “As part of this dark fibre consultation, we are also consulting on the market definition and SMP assessment set out in the BCMR Temporary Conditions Statement.”

The idea of course is simple. Ofcom’s believes BT is ready and able to provide dark fibre products, which would make the telco space in the UK better for everyone. Whether it is to improve productive efficiencies by allowing providers to reduce equipment costs, or enhancing dynamic efficiencies by offering telecoms providers more scope to innovate, there does seem to be arguments in Ofcom’s favour. Of course, another advantage for Ofcom is that it would make regulating the market simpler.

The new approach is as such; Ofcom has split contemporary interface symmetric broadband origination (CISBO) services into two areas to tighten up definitions. Lumping everything together is perhaps one of the reasons for the downfall, but of course that will be up to the courts to decide. Ofcom now looks at CISBO as two separate areas bandwidth up to 1 Gbps, and everything else above it.

Since giving the Ofcom bods a lesson in the courts, BT/Openreach has introduced an alternative Optical Spectrum Access (OSA) Filter Connect, which gives telcos access via an Openreach managed service, though Ofcom does not believe this is a suitable alternative to its own DFA idea. There might have been some initial good feedback for BT’s OSA, but this might be down to a ‘better than nothing’ mentality. But just because it is better, doesn’t mean that it is the best option for the telco industry.

“We’re very surprised by Ofcom’s decision and disappointed given the clarity of the CAT judgement and Openreach’s commitment to developing new, alternative products which can meet the demand for Dark Fibre,” said an Openreach spokesperson.

Ofcom is clearly not going to go away. BT/Openreach clearly wants to hold onto its dominant position in the market, and who wouldn’t want to. As with all of these arguments, it will probably end up in the courts before too long, and there is probably a logical solution in the middle somewhere. But of course it will take a while to find that logical middle position.

Openreach proposes dark fibre compromise

Having successfully resisted pressure to provide full dark fibre access to high bandwidth customers, Openreach is proposing a managed but scalable alternative.

Back in the middle of 2016 Ofcom decided Openreach should offer dark fibre access (DFA), but the latter referred the ruling to the Competition Appeal Tribunal, which overruled. Openreach accordingly pulled the plug on DFA, but promised to come up with an alternative.

In an interview with Telecoms.com, Openreach General Manager of High Bandwidth and Passive Services, Darren Wallington explained that alternative has been presented to Openreach customers this week and takes the form of OSA Filter Connect. OSA stands for Optical Spectrum Access and, in essence, this proposal aims to decouple connectivity and scalability. There will now be a one-month consultation period, the results of which Openreach aims to respond to by early December.

OSA itself has been around since 2009. It’s designed for B2B high bandwidth uses such as financial services, datacenters and public sector as well as optical backhaul. Historically it has been a fully managed service but it seems that customers want to be able to scale their bandwidth independently.

The diagram below illustrates Openreach’s proposed solution which combines at least one managed wavelength (the yellow/purple lines) but then all the other wavelengths are controlled directly by the customer. Currently OSA has 4 and 32 channel options, but Openreach intends to introduce 8 and 16 channel ones too. The technology currently supports up to 10 Gbps per channel but expects to support 100 Gbps at launch, which would, in theory, enable a bandwidth of over 3 Tbps.

Openreach OSA Filter Connect

We asked why Openreach is so resistant to DFA and Wallington explained the biggest drawback concerns response and repair time. While Openreach itself has at least one channel open it can monitor the network and commits to a 5-hour response time, but it has provided evidence to show that in the case of DFA the best it can offer is 18 hours.

Regarding the historical allegations that Openreach may not treat all its customers in the same way Wallington pointed to its Equivalence of Inputs obligations as well as the high level of scrutiny it faces from the likes of Ofcom. On the matter of pricing he was keen to point out how competitive the high bandwidth market is, and with the likes of Colt, Virgin Media, Verizon and Vodafone among its competitors, that’s hard to argue with.

Wallington said the proposal appeared to be warmly received by customers and if the consultation results in a green light OSA Filter Connect could be live as soon as 1 April 2018 and will even be backward compatible. There have been many legitimate grievances levelled at BT/Openreach by its customers in the past, but this comes over as an honest, well-intentioned proposal to resolve their concerns and deliver a solid solution. Let’s see if those customers agree.