It can hardly have surprised communications minister Ed Vaizey (pictured) and BT CEO Ian Livingston that would-be competitors to BT would find the terms, conditions – and prices – of access to BT's poles, ducts and other infrastructure unacceptable.
It may have been slightly surprising to find TalkTalk, which has developed close relations with BT recently, and Fujitsu, which is a supplier to BT, aligning themselves with the smaller network operators. Their support for Virgin Media, Geo and Vtesse Networks gives weight to hints that they might boycott the BDUK rural broadband pilot projects, and with that, scupper the government's £830m plan to give the UK the "best" broadband network in Europe by 2015.
The letter's existence suggests that the government's softly-softly consultative approach to introducing a more competitive environment, especially in rural areas, is not working.
BT is the sole supplier in what Ofcom calls Market 1 areas. These occupy roughly two-thirds of the UK's geographic space but are home to only 12% of the population. BT says that two-thirds of its 5,600-odd exchanges are in Market 1 areas.
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BT inherited its physical network when it was privatised in 1984. Critics charge it has done as little as possible to upgrade it ever since, being content to limit competition and take super-profits from its de facto monopoly. But last year BT said it would invest an extra £1bn in fibre to the cabinet, bringing its three-year capital spending budget for networks to £2.5bn.
To be fair, BT has played the hand it has been dealt by successive governments that have not engaged with the technicalities of communications, and hence been a light-touch regulator. BT is little different, and in many ways better, than former state-owned communications monopolies in Europe. In fact the OECD says the UK has the third most cost-competitive broadband market in the world.
Critics say that has been at the expense of investment in fibre, especially to premises. Some have called for the equivalent of renationalisation of Openreach to form a "utility" network provider.
But the political mood has changed. Europe has a new pact, one that seeks to create a single
market in telecommunications and services, and Digital Agenda commissioner Neelie Kroes is determined to see more competition between telcos, better services and lower prices, fundamentally as a way to improve Europe's economic competitiveness and attractiveness.
The government has taken account of what's happening in Europe. Simon Towler, the government's point man on the subject, told the recent Communications Management Association conference that Kroes was a "friend" of the government's ambitions. He felt the UK was on course to meet Kroes's target of a 30Mbps universal broadband service by 2020, but he was sceptical of demand for her other target of 100Mbps for 50% of the population.
Towler also referred to BT's proposals for allowing third-party access to its poles and ducts. "You wouldn't expect it to offer its best price at first," he said, indicating an awareness of criticism of the offer.
BT published its proposals in January to almost universal condemation by competitors and community broadband operators. Openreach, the regulated BT division that owns BT's physical network, proposed network operators should pay £21 per pole attachment and from £0.95 per metre for duct access annually to share BT's poles and ducts. A range of ancillary services and prices should also apply, it added.
But as early as November 2010 Geo Networks chief executive Chris Smedley told Computer Weekly that third parties would not be allowed to replace BT's leased lines to businesses, or to offer backhaul to exchanges or cell masts. These restrictions would cripple the business case for competitor networks, he said, because they limited the market to residential customers whose traffic volumes were likely to be very low.
Towler told CMA members the government had held round table meeting on the controversial topics of sub-loop unbundling (SLU) (the part of the network between the premises and the cabinet, often called "the last mile") and business rates, also known as the fibre tax.
"These are not easily tractable issues," he said. Innovative companies like Rutland Telecom and Vtesse networks had shown that it was possible to use SLU successfully under some circumstances in rural areas "to reach the parts that others maybe can't".
He said the economics of SLU in rural areas were challenging, especially when it was hard make a business case without competition. But the discussions had shows there was greater appetite for SLU. But there were still "substantial" disagreements, especially around pricing, he said.
Referring to business rates with a special acknowledgement of the work done by Computer Weekly to keep the matter in the public eye, he said the results of the January round table had been published, and the government continued to discuss through the Broadband Stakeholders Group (BSG) whether there was room for a different valuation to be applied to new rural fibre networks.
"It's not an easy subject, but there is goodwill on both sides," he said. "I'm not promising an earth-shattering change in policy, but I hope that we will do good work in helping people to invest better in networks."
Vaizey has drawn cautious praise for his willingness to get communications industry stakeholders together and for listening to them. For him, the time to act has come.
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