Had British regulator Ofcom decided to separate BT’s wholesale infrastructure arm, Openreach, it would have been the first incident of its kind in Europe. Now as part of Ofcom’s demands, BT must instead allow its competitors access to its dark fiber network – something that other European operators would surely fight to the death to avoid.
BT must now allow competing operators such as Vodafone, Sky, and TalkTalk access to its optical fiber network for enterprises, Ofcom says this is referred to as dark fiber 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 fiber” – essentially optical fiber assets that are not in use. BT already leases its active fiber lines to other companies via Openreach, but Ofcom will now force it to offer all its fiber holdings, even those not in use, with rivals able to connect their own equipment (from base stations to FTTH boxes) to the lines, and so control their own traffic.
Jonathan Oxley, Ofcom Competition Group Director, said, “We have outlined plans to reduce the country’s reliance on BT’s Openreach division. Our proposals on ‘dark fiber’ do just that, letting BT’s competitors better serve their customers by getting direct access to BT’s optical fiber cables.” BT has to publish a draft ‘reference offer’ by September 2016, which is subject to negotiation between BT and its rivals, and awaiting EC approval – Ofcom plans for the dark fiber access to become available from October 2017. Presumably the price, once agreed, will be regulated by Ofcom, along with price increases in the same way that copper local loop unbundling is controlled.
BT has hit out at Ofcom in a statement: “Dark fiber is a flawed piece of regulation that introduces an unnecessary layer of complexity and will deter others from building their own fiber networks. 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.”
MNOs in the UK panicked that without opening up BT’s dark fiber network, it would give the operator’s newly acquired mobile arm, EE, an unfair competitive advantage. This fear is also visible in MNOs across other EU countries – Vodafone, for instance, claims that Dutch telco KPN operates a dark fiber service, but does not offer it to mobile carriers because it does not want to hurt its managed services business or its own MNO.
This is driving the non-telco MNOs to other fiber sources. Telefonica O2 has been deploying a full fiber core network in the UK, supported by 19 connectivity points, via a 15-year agreement with Zayo to manage the transition from its traditional SDH and Ethernet-based managed services infrastructure to a dedicated fiber optic network.
In the retail space France has around 25 million broadband lines, of which around 4 million are FTTH lines, and the country plans to increase this to 20 million by 2022. In comparison, the UK has around 21.5 million lines, but Ofcom recently found that BT’s FTTH network passed just 200,000 premises in the UK, less than its competitors. However, only 2% of the UK has access to FTTH.
It’s unlikely that a shared dark fiber ruling such as this would play out as well across the rest of Europe, but it’s worth noting that rumors of a BT takeover by Deutsche Telekom, and a Virgin Media merger with Vodafone, continue to circulate. Vodafone recently said in a filing with the EC that FTTH must be the norm in Europe, if the region is to be competitive with Japan and South Korea.
Ofcom’s Strategic Review of Digital Communications also rules that Openreach is taking far too long to install enterprise lines – with time between order and installation increasing from 40 to 48 working days since 2011. By March 2017, Openreach must reduce this time to 46 days, and 40 days by March 2018. In comparison, AT&T says its enterprise installation time is 30 days for businesses with existing AT&T fiber. Ofcom has also told BT to improve its quality of service by fixing at least 94% of faults on its leased line network within five hours.
Oxley, added, “all of us depend on high-speed, fiber 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.”
Furthermore, Ofcom has put ‘charge controls’ in place to reduce BT’s prices for leased line services for businesses. For BT’s Ethernet services with bandwidths up to 1Gbps, the regulator has ruled a price reduction of 12%, and a reduction of 9% for its traditional services with bandwidths up to 8Mb per second. These controls will come into place as of May 2015 and continue over the next three years, and Ofcom states this will provide an incentive for BT to make efficiency gains.
Vodafone said in a statement this week: “We believe it is vital that the structural separation of BT Openreach remains an option Ofcom is actively considering, as it could effectively address all of the current problems the regulator has identified in the UK telecoms market.” A potential spin off could well be back on the table before the next review in 10 years’ time, since the agency has reserved the right to enforce break-up at a later stage.
Last month, Ofcom said BT should open up the poles and ducts of its network to competitors, to which the operator responded, “we are happy to let other companies use our ducts and poles if they are genuinely keen to invest very large sums as we have done. Our ducts and poles have been open to competitors since 2009, but there has been very little interest to date. We will see if that now changes.” This seems to indicate that BT is trying to steer clear of having to support small-scale requests for a small number of fibers, and to focus Openreach’s efforts only on large players.