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BT Openreach will be forced to cut the wholesale prices it charges for high-speed business leased lines and improve its performance in installing them. It will also be subject to more stringent service standards, following the conclusion of Ofcom’s Business Connectivity Market Review.
The market for leased lines – dedicated high-speed data links used by large businesses – is estimated to be worth £2bn in the UK, and most of them are owned and managed by BT.
Ofcom confirmed it plans to cut the wholesale prices BT charges, and it expects the savings to be passed onto business customers.
Its charge controls will relate to two groups of services currently offered by BT: Newer lines based on Ethernet standards, and older traditional interface lines.
BT will have to cut prices by 12% on Ethernet services with bandwidths up to and including 1Gbps, with a cap linked to the consumer price index (CPI) of 13.25% for each year of the charge control.
On traditional interface services with bandwidths up to and including 8Mbps, the telco will have to cut its prices by 9%, with an overall cap of 3.5% of CPI for each year of the charge control. Both reductions will take effect over a three-year period from 1 May 2016.
Since 2011, the average time taken between a leased line order and activation has increased from 40 to 48 days. Openreach is also failing to complete a quarter of installations on the initial date it promised, said Ofcom. In light of this, the regulator has decided that BT is not pulling its weight.
“All of us depend on high-speed, fibre optic lines. Businesses use them to communicate and they also underpin the broadband and mobile services used by consumers at home and on the move,” said Ofcom competition group director Jonathan Oxley.
“BT is relied on by many companies to install these lines, and its performance has not been acceptable,” he said.
As a result, Openreach will be required to complete cut average installation times to 46 days by the end of March 2017, and back to 2011 levels by the end of March 2018. It will also have to deliver 80% of leased line orders by the date initially promised, and fix 94% of faults on its leased line network in five hours.
Access to BT’s dark fibre network
The regulator also set out plans to require BT to give other leased line service providers access to its dark fibre network and direct control over their connections.
Ofcom believes this will enhance the opportunity for competitors to develop their own services. As previously reported, this will not affect central London – where Ofcom has deemed there to be sufficient competition – or those parts of East Yorkshire covered by local incumbent Kingston Communications.
The move to open up BT’s dark fibre network mirrors steps that Ofcom took to force the telco to let competitors access its ducts and poles to provide fibre broadband services, following its recent Strategic Review of Digital Communications.
Ofcom believes that such a move will incentivise competitors, such as Sky and TalkTalk, to up their game and improve competition in the market without resorting to full structural separation of BT and Openreach – although this option remains on the table.
Dark fibre commitment
As yet, no major broadband operator has committed to exploring accessing BT’s infrastructure to deliver its own services.
TalkTalk Business managing director Charles Bligh said he welcomed the focus on the opening up of dark fibre, but stopped short of saying whether or not TalkTalk would go down this route.
“At first glance, these final proposals do not represent the step change in quality and service Ofcom called for in their own strategic review just a few weeks ago,” said Bligh.
“We hope that we and our customers will see material improvements quickly, and that Ofcom maintains the pressure on Openreach to ensure they finally deliver the broadband businesses deserve,” he said.
“We have outlined plans to reduce the country’s reliance on BT’s Openreach division. Our proposals on dark fibre do just that, letting BT’s competitors better serve their customers by getting direct access to BT’s cables,” said Ofcom’s Oxley.
When Ofcom first proposed such a move in May 2015, BT said that mandating dark fibre risked favouring larger communications service providers with the greatest capacity to deploy it, to the detriment of smaller rivals, and would therefore hinder competition.
“It will undermine investment – as a number of service providers have warned – and it would increase costs, divert resources and add more complexity just when we’re beginning to make progress on improving service,” said BT at the time.
In a statement on Ofcom's ruling, a BT spokesperson stood by this general view.
“Today’s statement from Ofcom is very much in line with what they proposed last year so there are no surprises here.
“We accept there is more to do on service and are committed to doing better and meeting our business customers’ rising expectations. Ethernet provision can be complex and the need for street works and wayleaves mean delays are often beyond our control. We are doing all we can to overcome such challenges. The required Ethernet price cuts and the introduction of dark fibre will not help to underpin service improvement," said the spokesperson
“Dark fibre is a flawed piece of regulation that introduces an unnecessary layer of complexity and will deter others from building their own fibre networks. It is at odds with Ofcom’s recent statements about increasing competition at the infrastructure level. It is a cherry pickers’ charter benefiting those who don’t invest in networks at the expense of those who do including BT, Virgin Media, City Fibre and Zayo."
The new rules will be finalised at the end of April 2016, subject to consideration by the European Commission.
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