News Analysis

Ofcom ‘too ready’ to kow-tow to BT, says CMA

Ian Grant

Ofcom's proposed extension of relief to BT from its formal obligation to provide certain high-speed network products has angered the Communications Managers Association (CMA).

"While it is clearly necessary to have some flexibility in this complex area, we question whether Ofcom is too ready to accept BT's requests," CMA regulatory spokesman David Harrington told Computer Weekly.

Proportionality

Ofcom's position was usually based on "proportionality", he said. "This meant too much spend for too little return."

"The Ofcom record of applications for exemption of Wavestream suggests a five-year period of nugatory discussion and negotiation, beginning with BT's request for exemption on the basis that a product is too new or user demand is yet to emerge," he said.

"The undertakings (on BT's regulated services) provide for a mechanism to exempt products on the basis that it is not reasonably practicable for Openreach to provide inputs on an EOI (equivalence of input) basis. CMA is now wondering how far Ofcom is prepared to go in its interpretation of this mechanism.

"Every report coming from the Office of the Telecommunications Adjudicator (which monitors Openreach's performance) now reveals yet another failure of Openreach to meet its targets, and Openreach is addressing this by moving the goalposts in terms of how it reports its KPIs (key performance indicators)," Harrington said.

Costs

He said the Wavestream consultation was written "obscurely". He quoted the summary, saying, 'The costs for BT downstream to consume an upstream EOI input are also likely to be significant. BT therefore considers that it would not be proportionate to require it to consume an EOI upstream input, particularly as there is no evidence of competitive harm at present.'

"We understand this means, in plain English, that BT would have to spend money in order to provide an equal offering to other CPs (communications providers) and Ofcom has decided that this would be disproportionate 'because the demand isn't there' and would result in increased prices for end consumers.

"Our view is that this is a cosy, even circular argument that ignores the potential impact of competition. In other words, spend the money, allow competition, and prices will fall. Do not spend the money, and enjoy your monopoly."

Harrington said Openreach and BT Retail still had not truly separated the information systems for handling orders. "Reliance is placed on a swivel-chair interface until such time as the systems are due for replacement," Harrington said.

Harrington said Ofcom was ignoring its own commitment to infrastructure competition. "It appears that Wavestream is destined to remain a monopoly service and prices will be regulated as such, but not without the sort of argument that always characterises such ex-ante regulation.

"There has to be a limit to flexibility and boundaries to proportionality," he said.

Dark fibre

Wavestream is a 10Gbps point-to-point dedicated or shared fibre-based network product. It requires BT equipment at either end of the fibre to operate. An alternative, called for by the European Commission, would be for the network operator, in this case BT, to allow customers to provide their own end equipment, and for BT to provide so-called "dark fibre".

Harrington said, "There is a very real demand for dark fibre - for use by enterprises (both public and private) to interconnect sites and by CPs for backhaul. BT won't supply it (to protect their leased-line market) and Ofcom seems reluctant to act."

Bill Murphy, who is in charge of BT's £2.5bn fibre-based next generation access programme, told Computer Weekly earlier that it would never supply dark fibre. This was because many dark fibre suppliers went bust or had to restructure following the dotcom crash.

An Ofcom spokesman said, "Openreach has committed to proceeding with the development of a suitable product that other providers can use. However, as the standards and technology for this product are still evolving, it cannot meet this requirement by 1 January 2011, as currently required, which is why we have proposed to grant this exemption.

"We have said we will review the situation when we conduct the next relevant market review (due in 2011). We welcome views from all interested stakeholders on our consultation."

BT did not respond to requests for comment.


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