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Standard User VillageIT
(newbie) Mon 21-Sep-15 18:15:00
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Ofcom's Market A & Market B classification Rationale


[link to this post]
 
In reply to a post by zom22:
No, It is YOU that doesn't understand.
..but I shall try an explain.....assuming you are willing to listen and learn rather than just rant.

The market classification and pricing structure was introduced as a way of encouraging LLU providers into smaller exchanges.
This allowed them to charge higher prices in these smaller exchanges as a way of recouping their considerable capital cost of installing the equipment in the first place.
In short making it 'worth their while'

The time span between re-classification is deliberate.
It gives the LLU operator a period when he is guaranteed higher prices.
Once an exchange is re-classified to mkt 2 or 3 and the prices are lowered then the excess profits for the LLU are removed.

If an exchange is re-classified immediately a LLU operator moves in then the incentive via higher prices to move in in the first place is removed immediately - and none would ever have bothered!
So those who want an exchange re-classified real time on the day are actually saying they want to remove any possibility of making it worth the while of an LLU operator coming in.

Furthermore by having re-classification ever say 4 years the LLU operators are given a further incentive to get into an exchange immediately after a re-classification. This given them 4 years greater than normal profits. If they delay for 2 years then then only get 2 years excess profits.
This means LLU operators are encouraged even more to install in smaller exchanges - and as soon as possible

It is all to do with introducing competition to BT - understand now?

Anyway
There is an Ofcom consultation out: The whole classification scheme is due to be revised into Market A and Market B exchanges.

The above was taken from a previous thread on this forum about Market 1 ,2 or 3 exchanges and is over 15 months old.
I want to start lobbying our MP to put pressure on Ofcom to amend the classification again. We are connected to a Market A (Previously Market 1) Exchange with no other POs presence that has little or no chance of becoming unbundled, mainly because the exchange that it hangs off has to be upgraded first and BT show no signs of doing this unless the County Council or BDUK subsidise it. As a result we are getting very poor service and are paying a premium for it (e.g. £17.49 pm instead of £9.99 pm as an example)
At the very least Ofcom should remove the classification on specific Market A exchanges that are serving "Not Spots" so customers are not disadvantaged until we get an alternative solution in place which may be several years on.

Can anyone point me to a document which explains OFCOMS rationale behind this. I have searched the Ofcom site and it brings up information about various reviews but I can't find the original document. I have found a document published in June 2014 which was presumably the last review but is very hard going.
John
Administrator MrSaffron
(staff) Mon 21-Sep-15 20:01:14
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Re: Ofcom's Market A & Market B classification Rationale


[re: VillageIT] [link to this post]
 
Almost every exchange has one or more not spots so what are you trying to achieve?

The market definitions are really just an Ofcom definition that has almost no effect on actual broadband or pricing. Why? Because various providers have reached their own agreements with BT Wholesale on pricing that does not follow the A/B definitions.

The author of the above post is a thinkbroadband staff member. It may not constitute an official statement on behalf of thinkbroadband.
Standard User VillageIT
(newbie) Tue 22-Sep-15 10:31:20
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Re: Ofcom's Market A & Market B classification Rationale


[re: MrSaffron] [link to this post]
 
Hi Mr Saffron,
What I am trying to achieve is to raise awareness of MPs that the current Broadband market is not working for a large proportion of their constituents in the rural economy and that many of us are receiving a poor service for an inflated cost.

We keep hearing about small businesses being the key to regeneration but I have numerous start up and existing small businesses who either work from home or from a converted cow shed on a farm who cannot work because of slow broadband speeds. Many have had to relocate to towns to be able to work.

Successive governments have espoused competition as the best way to reduce costs which is why the de-nationalised everything. As I understand it Ofcom introduced the Market classification in order to promote competition and for POs who installed equipment at the exchange some grace to recoup their capital costs. That may work in exchanges in towns where it is easy to run new cables and fibre through the streets and recoup money from a wider take-up, but it doesn't work with exchanges which serve remote villages over 5km from the exchange. Its deemed too expensive for many POs to run fibre over those distances.
We probably wont get anywhere but have a chance to put our case to our MP and its better than sitting on our hands and just complaining.
John


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Standard User 961a
(member) Tue 22-Sep-15 11:14:04
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Re: Ofcom's Market A & Market B classification Rationale


[re: MrSaffron] [link to this post]
 
In view of that reply I wonder if you could give a brief summary of what does affect broadband pricing?
I've found time and time again that as a customer in an exchange which has only BT as the supplier through which all other operators supply telephone and broadband, that offers are poorer than in what Sky and Plusnet, for example, will define as "their own areas"
This I take it means where they have LLU
And the differences in price aren't just a few pennies and become even greater if one doesn't haggle after the initial contract period is up
Standard User TheEulerID
(committed) Tue 22-Sep-15 11:14:25
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Re: Ofcom's Market A & Market B classification Rationale


[re: VillageIT] [link to this post]
 
It would be fairly pointless removing the classification and trying to make LLU operators charge the same prices at unbundled exchanges. If they can't recoup the higher costs of buying capacity off of BTW rather than that at lower cost exchanges, then they'll simply not offer the service at all. There is no regulation that compels an LLU operator to offer services out of unbundled exchanges. As it is, LLU operators ae distinctly lukewam about providing services via BTW. It's a very small part of their total market share and it may well not be cost effective for them.

So if that market classification system was to go it would very likely just see more ISPs pull out of offering services at those exchanges.
Standard User 961a
(member) Tue 22-Sep-15 11:25:44
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Re: Ofcom's Market A & Market B classification Rationale


[re: TheEulerID] [link to this post]
 
In reply to a post by TheEulerID:
As it is, LLU operators ae distinctly lukewam about providing services via BTW. It's a very small part of their total market share and it may well not be cost effective for them.


Back to operators cherry picking the easy bits, which is exactly what Ofcom should be preventing
Your argument seems to be the exact opposite of what Andrew is saying
Standard User TheEulerID
(committed) Tue 22-Sep-15 11:45:43
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Re: Ofcom's Market A & Market B classification Rationale


[re: 961a] [link to this post]
 
What on earth makes you think I'm saying something contradictory to what Andrew has said? All I've stated is that LLU operators face higher costs at exchanges which they haven't unbundled. That's will be true whatever deal they've made with BTW, it just might vary a bit in detail according to locations.

That the LLU operators are a bit lukewarm on services at non unbundled exchanges is hardly news.

Just where have I said something opposite to Andrew?
Standard User ian72
(eat-sleep-adslguide) Fri 25-Sep-15 13:27:10
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Re: Ofcom's Market A & Market B classification Rationale


[re: TheEulerID] [link to this post]
 
And to expand on that the cost an LLU supplier charges in a non-LLU exchange is not to do with the market classification but the fact they don't have their kit in that exchange.

Very few ISPs base charging on classification. The only large supplier that does it is Plusnet. LLU suppliers don't base on classification but on whether they have equipment there.
Standard User TheEulerID
(committed) Fri 25-Sep-15 13:53:54
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Re: Ofcom's Market A & Market B classification Rationale


[re: ian72] [link to this post]
 
yes, and the reason Plusnet do that is whilst they don't operate their own DSLAMs, they are competing with TalkTalk etc. In consequence they are pricing against what the full unbundlers charge at those exchanges.
Standard User nemeth782
(member) Sat 07-Nov-15 07:57:00
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Re: Ofcom's Market A & Market B classification Rationale


[re: VillageIT] [link to this post]
 
Your price differentials come from Plusnet. Name another ISP that is not a different arm of Plusnet that has similar market based pricing.

Most ISPs have the same pricing regardless of market classification.

OFCOMs obsession with contrived competition via LLU is what has created this issue, and other issues, such as the prevention of exchange based VDSL2, blocking hundreds of thousands of people on EO lines from receiving fibre, and notching power masks for every fttc customer.

We don't need more messing around with the rules.
Standard User VillageIT
(newbie) Sun 08-Nov-15 07:33:51
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Re: Ofcom's Market A & Market B classification Rationale


[re: nemeth782] [link to this post]
 
In reply to a post by nemeth782:
Your price differentials come from Plusnet. Name another ISP that is not a different arm of Plusnet that has similar market based pricing.


Sky, Zen and a few other smaller providers to name a few

Most ISPs have the same pricing regardless of market classification..

Sorry but are you connected to a Market A exchange and when was the last time you looked round to get alternative price.
OFCOMs obsession with contrived competition via LLU is what has created this issue, and other issues, such as the prevention of exchange based VDSL2, blocking hundreds of thousands of people on EO lines from receiving fibre, and notching power masks for every fttc customer.

We don't need more messing around with the rules.

That's easy to say if you are on a Market B with lots of competition. Where we live we get less than 1Mbps and we are paying more than everyone else on an unbundled exchange getting the full 8 Mbps or higher. This is reverse competition and discriminatory.
Standard User Ragnarok
(member) Sun 08-Nov-15 09:49:51
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Re: Ofcom's Market A & Market B classification Rationale


[re: VillageIT] [link to this post]
 
In reply to a post by VillageIT:
That's easy to say if you are on a Market B with lots of competition. Where we live we get less than 1Mbps and we are paying more than everyone else on an unbundled exchange getting the full 8 Mbps or higher. This is reverse competition and discriminatory.


Thats the problem with legislation, and regulation, Unintended consequences. in trying to make things fair they actually make them unfair.
Standard User gah789
(regular) Sun 08-Nov-15 19:42:18
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Re: Ofcom's Market A & Market B classification Rationale


[re: Ragnarok] [link to this post]
 
All kinds of things are getting mixed up here, so it is worth trying to get the facts straight.

A. In line with standard regulatory practice wholesale market reviews - the source of the Market A and Market B distinction - occur at intervals of roughly 4-5 years. There will not be another one until late in this decade. You can lobby all you want but that is not going to change.

B. LLU presence at an exchange depends on (i) the size of the exchange, and (ii) links to nearby exchanges. These determine the expected revenues and costs of installing LLU equipment. The threshold for LLU presence has steadily fallen over time so that almost exchanges with > 1000 lines have LLU equipment but very few with < 500 lines. Unless the cost of DSLAMs and leased falls very markedly that is unlikely to change much.

C. Low sync speeds - < 1 Mbps - are a consequence of distance and line quality, not whether there is LLU equipment at the exchange. Apart from upgrading from ADSL Max to ADSL 2+ the introduction of LLU equipment will not change anything. Given the distance curves, lines that get < 4 Mbps for ADSL Max are unlikely to see much improvement from an upgrade to ADSL 2+. In any case BT Wholesale have upgraded almost all exchanges to WBC/ADSL 2+ that might be attractive to LLU competitors. Where they haven't done this it is usually because of constraints on backhaul, which will keep out LLU competitors as well.

D. The unpalatable fact for those connected to small exchanges is that economies of scale mean that large operators have little or no interest in installing LLU equipment in 2000-3000 small exchanges serving < 500 lines each because the market size is too small. If you want to change that, small exchanges have to be converted into satellites of larger exchanges. That is happening with VDSL but it won't help much if the distance from the property served to the old/new exchange is too long or the lines are too poor.

E. You may feel that it is discriminatory to charge higher prices at Market A exchanges. Unfortunately the reality is that - again due to economies of scale in equipment, backhaul, etc - it is more costly to serve a customer at a small exchange than at a large exchange. There are substantial cross-subsidies built into the uniform charge per line paid to Openreach and in what BT Wholesale is allowed to charge. However, LLU operators are under no compulsion to install equipment at exchanges which they do not think will cover the costs incurred. Again, no lobbying is going change the basic economics.

Edited by gah789 (Sun 08-Nov-15 19:49:02)

Standard User MacLe0d
(newbie) Tue 22-Dec-15 19:08:35
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Re: Ofcom's Market A & Market B classification Rationale


[re: gah789] [link to this post]
 
Yep it sucks to be on a Market A non-LLU 20CN exchange. Paying more for an inferior service, Basically if your exchange is non-LLU in effect whilst some operators might offer you a connection several in recent years have sold are in the process of selling their off-grid customers.


As for fibre if you are getting it you'll be left to last as obviously it's far more important to give those who already have a fast connection an even faster connection.
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