The plans are part of Ofcom’s Business Connectivity Market Review, published today. The new rules will be finalised at the end of April, subject to consideration by the European Commission.
Today’s announcement follows Ofcom’s Strategic Review of Digital Communications, which confirmed plans for tougher quality of service standards for BT’s Openreach division, and better quality of service across the telecoms industry.
Ofcom’s Business Connectivity Market Review considers the £2bn market for ‘leased lines’ - dedicated, high-speed data links used by large businesses and mobile and broadband operators to transfer data on their networks. Most of these lines are owned and maintained on behalf of competing providers by BT.
Faster installations for businesses
Leased lines often require complex, bespoke installations, and the completion date may be affected by factors such as street works or difficulty accessing premises. Nonetheless, Ofcom has decided that Openreach is taking too long to install leased lines and is not providing adequate certainty that the services will be provided by the date first given to the customer.
Since 2011, the average time between a customer’s order and the line being ready1 has increased from 40 to 48 working days. Ofcom’s proposals would require BT to reduce this to 46 working days by the end of March 2017, and return it to 40 working days the following year.
Ofcom has also found that Openreach is currently failing to complete one in four leased line installations on the initial date it promised to its customer.
So Ofcom is proposing that by the end of March 2017 Openreach must complete 80% of leased line orders by the date it promises customers, rising to 90% from April 2018.
Ofcom has also said that Openreach must fix at least 94% of faults on its leased line network within five hours. This will ensure that, while meeting the new rules on installations, BT continues to observe the need to fix faults quickly.
The new rules would apply to high-speed ‘Ethernet’ services, the most common type of leased line used by businesses. The new rules are summarised in a table below.
Jonathan Oxley, Ofcom Competition Group Director, said: “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.
“BT is relied on by many companies to install these lines, and its performance has not been acceptable. These new rules will mean companies across the UK benefit from faster installation times, greater certainty about installation dates, and fast repairs if things go wrong.”
The proposed new requirements for business leased lines follow plans announced in Ofcom’s Strategic Review of Digital Communications for better quality of service across the telecoms industry. Ofcom also intends to introduce tougher rules on faults, repairs and installations for consumers; transparent information on service quality; and automatic compensation for consumers when things go wrong.
Opening up BT’s ‘dark fibre’ network
In its strategic review, Ofcom set out plans to reduce the UK’s reliance on Openreach by further opening up BT’s network.
Today, Ofcom confirmed plans to require BT to provide access to its optical fibre network for providers of high-speed leased lines for businesses.3
This means BT would have to give competitors physical access to its fibre-optic cables, allowing them to take direct control of the connection. This service is often referred to as ‘dark fibre’, because the cables would not be ‘lit’ using BT’s electronic equipment. Instead, they would be ‘lit’ by the competitor installing its own equipment at either end of the optical fibre.
BT is already required to offer wholesale leased line products, which bundle the optical fibre and BT’s own network equipment, at regulated prices to competitors. BT would still be required to provide these services, but the new proposal would go further, allowing operators to use BT’s fibre-optic cables with their own equipment, rather than rely on BT’s equipment.
This should increase the opportunity for competitors to develop new high-capacity services for their customers.
Jonathan Oxley added: “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 optical fibre cables.”
Lower prices for high-speed lines
Ofcom has confirmed plans to reduce the wholesale prices BT charges for leased lines services, which Ofcom expects to result in lower prices for businesses.
The main ‘charge controls’ relate to two groups of services provided by BT. These are: newer lines based on the 'Ethernet' standards for sending data at very high speeds over networks; and older leased lines using 'traditional interface' technology.
For BT's Ethernet services with bandwidths up to and including 1Gbit/s, Ofcom has concluded an initial reduction in prices of 12%, with an overall cap of CPI -13.25%, for each year of the charge control.
For BT's traditional interface services with bandwidths up to and including 8Mbit/s, Ofcom has concluded an initial reduction in prices of 9%, with an overall cap of CPI -3.5%, for each year of the charge control.
Ofcom aims to bring prices down over a three-year period from 1 May 2016. This type of control is linked to inflation based on the consumer price index (CPI), and provides an incentive for BT to make efficiency gains. The charge controls have been informed by a review of BT’s costs.
Next steps
Today’s draft statement follows consultation with industry and has now been notified to the European Commission. Subject to the Commission’s consideration, Ofcom will publish its final statement next month.
As part of the dark fibre proposals, Ofcom would require BT to publish a draft ‘reference offer’ for industry, containing wholesale pricing and terms for access, by 1 September 2016.
This would then be subject to negotiation between BT and other providers, with a view to BT publishing a final reference offer by 1 December 20164. Dark fibre access would then be available to telecoms providers from 1 October 2017.
In response to this Ofcom announcement a spokesperson for BT said:
“Today’s statement from Ofcom is very much in line with what they proposed last year so there are no surprises here.
“Competition and choice have been growing in the business connectivity market and we believe there is a strong case for less, not more, regulation.
“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.
“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.”