Ofcom tells BT - Give rivals access to the 'dark-fibre' grid

In reference to www.telegraph.co.uk/finance/newsbysector/epic/btdota/11607319/Ofcom...:

Ofcom tells BT to give rivals access to its 'dark-fibre' grid

Telecoms giant will face more rivalry from competitors as it is told to open up access to its high-speed network

The proposal is aimed at increasing competition in the "leased-lines" market worth £2bn a year, Ofcom said in a statement on Friday.

Such lines are dedicated, high-speed links used by companies as well as mobile- phone and broadband carriers to transfer data.

BT should give rivals physical access to its fibre-optic cables, allowing competing operators to take direct control of the connection, Ofcom said.

Blow to BT: Ofcom proposes 'dark fibre' rules to let rivals take control of business lines. Also new installation deadlines for Openreach.

Yep, and in a less well publicised ruling at the same time .....

I'm to let Virgin Media engineers use me transit and tools as and when they want, they can also claim for half my wages, my first born child, and the fillings from my teeth !

That is totally wrong.

Why should BTs investments be used to subsidise companies that cannot be bothered to build their own infrastructure? You can be certain that as soon as BT tell competitors what the costs will be there will be complaints about "excessive charging".

On day OFCOM will realise what a "level playing field" actually is, because at the moment there is certainly a steep slope on the one they use.

[applause]

This was the expected regulatory 'cost' of the EE merger.

There is a solution, never install spare fibre that can be available for dark fibre use.

Indeed. Would be profoundly counter-productive though.

BT aren't the first and won't be the last incumbent compelled to deliver dark fibre. Could be worse. NTT were both compelled to deliver dark fibre and spin off their retail arm.

I imagine this will also be part of allowing Openreach and Wholesale to merge.

BT are required to say that the sky will fall in though it really won't be that damaging in the grand scheme.

In reply to a post by MrSaffron:

There is a solution, never install spare fibre that can be available for dark fibre use.

This isn't about allowing access to existing unused fibre, but rather compelling BT to provide 'just' the fibre without the optical NTEs.

Dear Mr Virgin,

I want to fly some aircraft from Heathrow every day, please give me 10 of your unused slots.

Thank you,

Mr FlyByDay.


****************************************************************


Dear Mr Ford,

I need to build cars in the UK. Please provide two of your productions lines for my use from next Wednesday.

Mr Hyundai

****************************************************************

Virgin and Ford were never under public ownership though. Whilst BT is no longer under public ownership, the Government might feel like they have some say over it.

Irrelavent.

BT is a PRIVATELY owned company and the investments in fibre infrastructure have been made by BT.



So, change Ford to BMW and a request to use part of their Mini production line ... Or BA instead of Virgin

At which point unless Ofcom is very tight we will find pricing like

Dark fibre £X per year rental
1 Gbps lit fibre costing £X+5% between the same two points.
And the same install costs.

Third party dark fibre £x+200

Or are we going to see BT forced to provide it, but at a cost higher than anyone else. In which case why bother, why not just something to encourage a wider roll-out from the others. Or is that the hope of Ofcom that by 2017 dark fibre networks will be so widespread that no-one will need to buy the BT version anyway.

Perhaps it makes most sense to have one entity providing fibre infrastructure which is not involved (either directly or indirectly) in retail, in order to minimise the cost, mess and disruption off laying fibre everywhere, multiple times. Much like the gas, electricity, water and rail networks.

Edited by Oliver341 (Fri 15-May-15 11:04:56)

There will be a few shocks when companies see how much the business rates are on Lit Fibre ! It is not cheap.

I would imagine companies wanting to purchase this will have some idea of what the business rates are on lit fibre. If they are paying for them under this it won't be a huge shock.

You mean reverse the 30 years of attempting to not have a monopoly and create one?

It's perhaps more complicated.

The fibre itself is bandwidth agnostic, so the cost of providing just the glass is the same regardless of how fast the service will be. It's the CPE at each end providing the light that controls how fast it can go. These can be quite expensive though, particularly for higher bandwidths - hence the pricing differentiation between speeds.

So a (say) 100Mb EAD can be converted to 1Gb by changing the boxes that are used to terminate the fibre.

The argument is that BT should be compelled to provide only the glass, allowing the CP to provide their own terminating boxes. They can then run it at whatever speed they like, depending how much they want to spend on the CPE.

Dark Fibre costs would then form part of the overall price, with the CP adding the costs of the CPE along with their own costs and margin, before selling to an End User.

But this primarily being driven by the mobile operators, who want dark fibre for use within their own networks rather than with the intent of selling as a retail product.

This isn't without some issues though, as without controlling or having access to the CPE BT would have no visibility at all of the service and so won't be able to remotely monitor or test.

In reply to a post by Zarjaz:

Yep, and in a less well publicised ruling at the same time .....

I'm to let Virgin Media engineers use me transit and tools as and when they want, they can also claim for half my wages, my first born child, and the fillings from my teeth !

You didn't mention them getting first dibs on your Hobnobs...

In reply to a post by MrSaffron:

You mean reverse the 30 years of attempting to not have a monopoly and create one?

BT Openreach still has a monopoly in many areas, and it looks unlikely to change. There is justification for an independent monopoly for infrastructure, but not retail. Which of course Ofcom are considering, still.

No, BT Openreach is one operator not a monopoly. There is nothing to stop any other company building their own network throughout the UK.

Global Crossing, COLT, CityFibre all have fibre networks.

Not likely though is it. TalkTalk and Sky laying copper to houses? Installing FTTC cabinets next to BT's? Building new telephone exchanges perhaps?

BT's size, power and ability to invest in all the infrastructure has come about due to their monopoly status under decades of public ownership.

Fewer and fewer areas given 3rd parties like CityFibre, Gigaclear, B4RN, etc plus the network expansion plans of Virgin Media. The BT "single supplier at local level" for wholesale over the coming years will be getting smaller.

At one point would you consider them to no longer be a monopoly? What percentage do they need to be reduced to?

RUBBISH

The telecoms infrastructure in the UK was abysmal and in a total downward spiral when under state ownership. Old decrepit exchanges, delays for installations running to months and sometimes years for a single line. Exchanges that were so bad there were teams of technicians working all hours just to keep it running.

The investment was achieved by BT being in private ownership and able to actually borrow money to invest - yes BORROW money which is exactly what any other company can do - but no, they want to ride on the success of BT.

If BT is forced to open up access to fibre that BT has paid for, then let BT set the price at a realistic level.

As I pointed out before, there is no other UK industry where a company is forced to subsidise competitors.

Do you have an objection to Openreach being split off from BT Group? If so, why?

Simple - why should a company be forced to be split up based on the demands of competitors? Investors in BT who ultimately OWN the infrastructure should be the only ones who should decide to split the company.

In reply to a post by MHC:

Simple - why should a company be forced to be split up based on the demands of competitors? Investors in BT who ultimately OWN the infrastructure should be the only ones who should decide to split the company.

Well I agree it might not be in the best interests of BT Shareholders to split the company, but Ofcom has more than that to consider.

In reply to a post by Oliver341:

Whilst BT is no longer under public ownership, the Government might feel like they have some say over it.

BT hasn't been under public ownership for 30 years and the network has changed so radically and had so much private money invested in it that the government should butt out.

Not likely but they are building their own FTTH network.

1. The cost of the split?
2. What positive benefits are there to consumers?
3. Will the 2 to 3 years while the split is hammered out, mean investment from alt-nets is put on hold, so they can exploit the new network when available, and what guarantee it will be the Narnia people hope for.
4. What safeguards will be placed on the new network to ensure it does not cherry pick?
5. Will an independent operator mean others cannot build their own infrastructure in certain areas?

BT Shareholders might actually do pretty well out of the split in the short term, since they will have to be paid and that might be a large amount if they negotiate strongly.

In reply to a post by MrSaffron:

Not likely but they are building their own FTTH network.

Yeah, in York.

All good questions.

One thing it would solve is the constant wrangling between Ofcom and BT about whether they BT should let other people use their pipes. On the flipside, an independent infrastructure company would be more than happy to let people to use their pipes, in fact it would be their whole reason for existing. It seems a much more positive scenario overall.

BT shareholders will not gain from any form of payment. It would just be like when O2 was split. They would be granted shares in both the Openreach and non-Openreach parts. The costs would no doubt be absorbed by the two successor companies (although OR wholesale costs may have to go up to reflect a different cost base.

The chief objections are mor like the following

1) it will be costly, disruptive and subject to a huge amount of uncertainty as to the outcome (see later). During the period of negotiation (perhaps a couple of years) it's very likely much investment would come to a shuddering halt due to uncertainty. That was one of the reasons Ofcom agree the current equivalence principle.

2) there are a massive amounts of detail to work out. How is the pension liability and deficit to be split? What happens to BT Wholesale? What about where shared systems are involved. True the major operational elements are

3) how much of the debt goes with OR and how much with the rmainder of BT?

4) pricing of OR products will have to be reviewed. OR will not be able to use shared overheads, like HR, accounting and so on. The cost of OR might well go up. Who knows?

5) BT Consumer was set up on the basis of "equivalence". As such, it doesn't have many of the features of other ISPs - like LLU, it's own backhaul and so on. That's unless BT W get absorbed into BT Consumer which, in itself, is a major issue as it provides regulated wholesale services itself (like backhaul from exchanges).

6) OR's business strategy has depended on a core customer. Without BT Consumer's heavy promotion of FTTC, would the investment have been made? It's notable that the major LLU operators have been rather less than keen on heavy promotion of products based on GEA/FTTC, let alone GEA/FTTP, very probably because they have their own investments to protect.

In all, this is a difficult thing to achieve with lots of issues. Also, Ofcom don't even have the power to force this. They can only refer it to the Monopolies commission along with recommendations unless they can negotiate a voluntary deal. It's open to lots of legal action, by shareholders and by the pension scheme trustees should they consider themselves to be unfairly disadvantaged. Potential judicial reviews would add more uncertainty.

Most likely it would require parliamentary action along with all sorts of reserved government powers given the potential for this to go wrong.

In reply to a post by MrSaffron:

3. Will the 2 to 3 years while the split is hammered out, mean investment from alt-nets is put on hold, so they can exploit the new network when available, and what guarantee it will be the Narnia people hope for.

Accessible through a wardrobe, ruled by a wicked witch, with talking lions, centaurs and beavers?

Hopefully it would be Nirvana rather than Narnia?

And shareholders do what with shares they don't want or believe will drop in value - sell them and get the money back. Giving shares away would require people to have confidence that the major institutions will not dump them quickly and undermine any ability for the new firm to invest - how big is that risk?

The end part is the most pertinent - even if Ofcom thinks its the right thing to do, various hurdles that will take time and may actually impact on many other things.

BT and Openreach are far from perfect, but after what is now 8 (or is it 9) years of Openreach everyone is getting a handle on how to deal with them, and just like any firm money talks.

There would still be wrangling, not least in the very issue of this forum. For local leased lines, Openreach is the provider of the wholesale product. It is very much their dark fibre which they won't want to resell as their investment case will be built around the returns from wholesaling "lit" circuits.

Then there's the issue of access to passive infrastructure (ducts, poles, footboxes etc.). Use by other network providers (like Warwicknet), compete directly with OR's use of the very same infrastructure.

Something similar could be said about GEA/FTTC which competes with LLU operators, at least in part.

In short, OR will still be competing at some levels with its customers unless it was restricted to a very narrow set of products. If you take this to the extreme, you end up with one company owning the passive infrastructure, another the metal and fibre links, another the active components in the network, like FTTC cabinets. It's just not a simple business with a "clean" interface and simple interconnection points. Value can be added in many places, and in that respect it's wildly different to gas and electricity grids.

That summarises the situation well, thanks.

I feel ofcom have been getting it wrong lately.

We have clear market failure at the retail level yet they keep only regulating at the wholesale level, and this move to enforce sharing of fibre infrastructure is just wrong, it will discourage investment.

You didn't mention them getting first dibs on your Hobnobs...

... and risk an all out strike ? Some things are sacrosanct.

Anyways, they'd find them pretty tricky to eat ... with no pigging teeth

The retail level is the one they have it right on. The market is vibrant and varied with operators from bargain basement to high quality and every step in between.

LOL!

so you dont think the rapid rise of line rental with the gaps between providers shrinking rapidly isnt market failure (which I remember you saying a while back it was).

The market isnt highly varied either, we have had consolidation happening, there is no true bargain basement isps left at least that are well known, unlike you I dont pretend line rental doesnt exist, my opinion is line rental is set a lot above wholesale level to subsidise broadband services and as such is part of the cost. In addition the retail market has moved on from the adsl days where we had 30 day contracts, now aaisp is the shortest at 6 months with everyone else at 12+ months. Even tho the wholesale was regulated to 30 days.

There is probably only one isp that can be considered high quality which is aaisp. All the others are mass market focused. Previous enthusiast type isp's have gone down the pan or been dissolved such as BE, ukonline, various entanet resellers, and even plusnet has gone down that path as it has grown too big to be what it used to be.

True we not like america where they have a single isp covering an area that has an effective monopoly but I think you paint a picture rosier than reality.

In summary here is the problems I see for the consumer where ofcom have failed. (check the isp unhappiness section to see my experience with faults pre openreach era).

1 - openreach, this is broken plain and simple. Openreach can miss appointments, cancel appointments, reading the plusnet forums makes it look like common practice, which it may or may not be, but the biggest problem here is that openreach is not accountable. End users have no way to deal with it but are reliant on 1 or 2 middlemen (isp plus maybe also BTw unless LLU) to fight the cause for them, and most isp's dont care enough to do that, aaisp is an exception. In addition, the situation with faults, openreach will turn up, do a PQT, if it meets dialup standards they consider it fault free, and walk. Isp's dont tell the true story to the customers who rightly expect a proper investigation on their line not a 10 minute remote jdsu test. This leads onto transparency issues where its fine for lots of info to be kept between openreach and the isp's, so the isp's can then tell stories to end users to basically fob them off. The openreach CEO said end users need to start been treated as customers, but he cant do much because ofcom require isp's to be the customer not the end users. This issue has became recently more apparent during the g.inp rollout with it been ok to treat paying customers as guinea pigs, and any rollout information not been passed on from isps to end users. The so called NDA is meaningless here as an argument because under the rules, any BT competitor can become a customer of openreach and get access to this information anyway. This is a clear failure of isp's to make this information available to their customers.
2 - low wholesale pricing, has started to have little bearing on actual retail pricing, this drags BT's margins down to the point they need to recover revenue to keep shareholders happy, hence the daft situation we have with openreach engineers.
3 - lack of ability for customers to leave early stages of contract penalty free (not an issue if 30 day contracts), virgin media (ironically a non dsl isp) is the only isp I know off that lets you cancel after the service is live penalty free. All the others dont have enough faith in their own service to give customers that option, so any isp is a huge gamble unless you fine with paying off 18 month contracts.

The market was far better 5 years ago than it is now.

Free market solving everything is a myth. Sometimes a push is needed.

[Applause]

Converging prices are not necessarily a sign of market failure. Indeed, economic theory in a "perfect" market of a commodity will actually predict that prices will converge at a level that reflects underlying costs. Of course the retail broadband market is more complicated than a simple commodity, and it's another basic principle that businesses will seek to differentiate products by other than price (hence attempts to bundle things, voucher systems, special deals and so on), but there really isn't any evidence of market failure at the retail level in the UK. No company appears to be making excessive profits.

BT have been very successful in the past facing regulation and competition. If they go into the dark fibre market I would expect it to be broadly neutral on BT as they grow the market and take market share from operators in this area already.

If Openreach was demerged from BT I would expect that it would be bought up by foreign company pretty shortly afterwards. Just like mm02.

I would be interested in the Openreach pension deficit post demerger as Openreach is not allowed to reflect this in their prices. If they are a separate company, somebody is going to have to start paying.

Actually the converging line rental I think I considered a failure of advertising as much as anything else.

Clearly it's being used to subsidise broadband services. This isn't so much a market failure - people are used to cheap broadband and expect it to remain so. ISPs don't set the market conditions they operate under in this instance. People don't like paying for broadband but for whatever reason aren't too bothered by line rental.

I would point out to you though that there are a few crazily cheap deals doing the rounds. SSE's pricing for instance.

https://www.sse.co.uk/phoneandbroadband/products/

Plusnet are bargain basement. In terms of ADSL Sky are bargain basement, as are TalkTalk. TalkTalk are pretty cheap for FTTC, too. Even with line rental taken on board.

It's not that long ago that the cheapest ADSL deals were £39.99/month. Price per megabit, even including a few quid from line rental, is still pretty good.

You complained about pricing however Be weren't exactly cheap, neither were UKOnline. I don't think Plusnet have every really been what many would call a high quality provider. Sky use an upgraded version of the Easynet network and seem to provide a pretty high quality service for the most part, though with the usual dodgy technical support. Be lost money hand over fist. UKOnline used spare ports on Easynet's Lucent kit. The Sky 'Pro' services seem to be keeping their customers happy at the higher end.

Your point 1 is a bit confusing but a lot of what's requested is impractical. I have had various varieties of appointments to fix line issues and the higher end SFI / Boost appointments they do a bunch of things to try and resolve issues. Basic appointments would have to come with a much higher price tag than they do.

The stuff about G.inp, find me a telco that happily discusses technology with end users in depth. Most don't care and wouldn't understand. You can't demand that ISPs provide information to their customer base, you can't force Openreach to render information publicly accessible. This is not unusual and largely pointless to do anything else. Nerds and geeks may want to know, doesn't really matter to most others.

You have every right if unhappy with the level of communication your ISP is providing to look at other options.

Your comment 2 is incorrect and confusing. Openreach revenue, in theory, can't be used to subsidise other business units. BT Wholesale have certain pricing flexibility and ISPs of scale can make their own deals wtih Wholesale. Chances are Plusnet for example are paying considerably less than the price list price due to scale. They are the majority of the shared WMBC customer base and have hundreds of Gb a second from BT Wholesale across dozens of end points via multiple 40Gb MSILs. They aren't going to be paying list price per Mb per second, or rental prices on the MSILs.

Customers leaving penalty free I'm not entirely sure where you're going with that. I'm sure there are a few customers on the Plusnet forum that Plusnet wish would leave penalty free as they are serial pains in the posterior with whichever provider they're on.

The reason for the ETFs is usually because the operator has sunk a few quid into connection / equipment charges and hasn't charged the customer for these. The only way to mitigate these would be for the customer to pay for connection and CPE in advance. If a customer were to do that I'm sure an ISP would have no problem.

Virgin Media are different because of the full vertical integration. One company delivering the service from infrastructure through to retail. ISPs make the choice to take on the upfront costs themselves then recover it through the duration of the contracts.

The more hoops you force companies to jump through the fewer companies will bother and the larger ISPs will be all that's left as they can absorb the costs of the regulation most easily.

Our telco market is a long way from being a free one. Were it a free one the only options would be BT and, in about half the country Virgin.

The vast majority are quite happy with their service it seems. Ofcom have to look after the vast majority and to over-regulate would be as harmful as not regulating enough.

In reply to a post by MrSaffron:

There is a solution, never install spare fibre that can be available for dark fibre use.

This is about providing a product, spare fibre in the network has nothing to do with it.

People don't like paying for broadband but for whatever reason aren't too bothered by line rental.

Increasing the line rental charge brings in more revenue, I don't know the numbers but not everyone who has a telephone line has BB via a BT exchange.

In reply to a post by panda:

It's perhaps more complicated.

The fibre itself is bandwidth agnostic, so the cost of providing just the glass is the same regardless of how fast the service will be. It's the CPE at each end providing the light that controls how fast it can go. These can be quite expensive though, particularly for higher bandwidths - hence the pricing differentiation between speeds.

So a (say) 100Mb EAD can be converted to 1Gb by changing the boxes that are used to terminate the fibre.

The argument is that BT should be compelled to provide only the glass, allowing the CP to provide their own terminating boxes. They can then run it at whatever speed they like, depending how much they want to spend on the CPE.

Dark Fibre costs would then form part of the overall price, with the CP adding the costs of the CPE along with their own costs and margin, before selling to an End User.

But this primarily being driven by the mobile operators, who want dark fibre for use within their own networks rather than with the intent of selling as a retail product.

This isn't without some issues though, as without controlling or having access to the CPE BT would have no visibility at all of the service and so won't be able to remotely monitor or test.

They'll have to invent something similar to the TAM (Test Access Matrix) system that is used for LLU lines currently. Openreach would have to have a test system that can monitor the fibre line after the CP's equipment but before it leaves he exchange. Otherwise repairs would be a nightmare.

an OTDR on every line??????? ,<rolls eyes>

Just leave the primary diagnostics to the CP's and openreach repair the fibre. Charge for misdiagnosis