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Ofcom to readjust BT dark fibre pricing after error

Competition and Markets Authority rules in favour of appeal filed by TalkTalk relating to how much BT is allowed to charge other providers for buying dark fibre

The Competition and Markets Authority (CMA) has ruled that Ofcom needs to make further changes to what BT may charge other communications service providers (CSPs) to access its dark fibre network.

In 2016’s Business Communications Market Review (BCMR), Ofcom concluded that BT had too much power outside central London to provision leased line services to businesses. It therefore imposed what is known as a charge control and a series of changes relating to Ethernet leased line services. These included the opening up of more of Openreach’s dark fibre infrastructure, as Computer Weekly reported at the time.

Following this, TalkTalk appealed to the Competition Appeal Tribunal (CAT) and in November 2016, these appeals were referred to the CMA. In a final judgment handed down on 10 April 2017, the CMA said the regulator was using the wrong metrics to calculate the cost of buying dark fibre from BT.

At first, Ofcom said the price of dark fibre should be set by subtracting an active differential from the price of the corresponding BT wholesale Ethernet 1Gbps leased line service. This differential has three components: long-run incremental costs avoided by BT when providing dark fibre instead of the active service (a leased line); a deduction of BT’s non-domestic rates (NDRs) associated with the active service, if appropriate; and the long-run incremental costs of any objectively justifiable differences between dark fibre and the active service.

TalkTalk appealed on the basis that Ofcom was wrong to decide that (in the absence of a government-led change to the rules) the second component should actually be based on the CSP’s higher NDRs, not BT’s, which are naturally lower because its network is bigger. In the light of this, the CMA has now told the CAT that Ofcom should change its sums.

Richard Thompson, commercial director at TalkTalk Business, said: “We are pleased that the CMA has recognised that BT’s wholesale dark fibre price needs to be adjusted to ensure that it becomes the cost-effective alternative it was originally intended to be.

“While there is still much to be agreed, we are very excited about the opportunities dark fibre will bring to increasingly data-hungry businesses, and we are looking forward to being able to unveil our plans for giving our customers access to the great value, high-performance connectivity they are crying out for.”

Read more about dark fibre

In response, Ofcom has launched a consultation setting out an alternative method by which it would calculate the second component to better reflect the NDRs paid by other service providers. The regulator did not make any further comment on the judgment.

BT declined to comment directly on the CMA’s ruling, but said it was still working closely with CSP customers – such as TalkTalk – to launch a dark fibre access product in October this year.

The telco had previously confirmed that it had lodged an appeal itself against certain elements of the BCMR because, like others that have invested in their own networks, it believes regulated dark fibre is the wrong approach.

“Given that the UK already has a vibrant business connectivity market with a large, diverse and growing choice of providers, we believe this is a flawed piece of regulation that won’t encourage investment in new networks,” a BT spokesperson said at the time.

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