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BT keeps hold of Openreach but loses tight grip on its fibre

opticalfibrre

via Flickr © Groman123 (CC BY-SA 2.0)

  • Ofcom forces performance improvement on BT and Openreach
  • Proposes dark fibre access for competitors
  • Much negotiation ahead

BT may now be paying at least a small price for its determination to keep Openreach - it’s access infrastructure arm - in the BT family rather than see it spun out as BT’s competitors were urging the regulator, Ofcom, to arrange.

In any case, having passed up the splits option the UK regulator has now felt able to impose a new round of open access obligations and mandatory performance improvements - all while keeping the separation option hovering in the background as a vague threat should BT not step up to the mark.

The new obligations spring in part from Ofcom’s Business Connectivity Market Review, also published today, which was set up to ponder on the provision of leased lines for UK  business. It has concluded that Openreach has to both drop wholesale prices and speed up its provisioning times.Ofcom has also just completed its Strategic Review of Digital Communications, its broad, once a decade look at the entire market. The review found a need for better quality of service across the entire industry.

So with those following winds Ofcom is proposing to oblige both BT and Openreach to up their game, pointing out that the average waiting time for customer line install has actually risen since 2011 from 40 to 48 working days. It’s proposing that BT hit 46 days by next year and back to 40 the following year. It’s also asking for improvement on the percentage of leased line orders completed by the date first offered the customer. And it will oblige Openreach to fix at least 94 per cent of faults on its leased line network within five hours.

All these are improvements you might expect that BT would be able and willing to make without the special urging of the regulator.

Ofcom also plans to reduce the wholesale prices BT charges for leased lines services, for both the newer  'Ethernet' connections and the traditional old leased lines (yes, they’re still around in huge number).   

If you can’t split if off, build around it

But there is some real fundamental change too: as predicted, Ofcom is going to prise open BT’s ‘dark fibre’ network. In Ofcom’s words it “plans to reduce the UK’s reliance on Openreach by further opening up BT’s network.” That might make a difference. At present competitors are able to use BT’s duct and pole infrastructure to lay their own bundles of fibre  - they are free to ‘overbuild’ existing infrastructure in the hope of getting some sort of return over the longer term, in other words.

The trouble is that such a level of investment is difficult to justify in many cases since there may not be enough customers at the end of the run (as BT itself is only too aware). However completely different economics emerge if a competitor is able to request access to existing BT dark fibre.  This - essentially dark fibre unbundling - is what Ofcom is proposing.  

This new class of  product won’t affect BT’s existing range of wholesale leased lines running across BT’s own own network equipment at regulated prices, but should enable, says Ofcom, the opportunity for competitors to develop new high-capacity services for their customers.

For competitors and their customers,  who would ideally would like to see Openreach split off, this may be a second-best way forward for at least one of their concerns. But if past experience of unbundling is anything to go by there is much negotiation and arguing to be had before processes for dark fibre access are put into place - although perhaps not quite as much distress as the  “ten years of litigation and argument,” that BT’s CEO, Gavin Patterson threatened should the regulator move to split off Openreach.

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