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UK goes down Universal Service Obligation route for broadband

The Universal Service burden that the UK government has placed on broadband from British Telecom this week, is effectively the political opposite of the US, which has cancelled its shift to Title II.

But conditions in the UK are very different from the US, and it is a market where local loop unbundling was popular and had a good run, but this is changing as faster broadband speeds are being taken up BT OpenReach, which gives access to telephone wires, ducts, cabinets and exchanges, which is now maintaining most crosstalk cancellation for vectoring. Vectoring doesn’t work unless all lines in an exchange are connected to the same server for crosstalk cancellation.

In future much of the broadband access from BT’s rivals will come from VULA access, virtual allocation of bandwidth on a line owned by BT, both in vectoring and in fiber. This makes it much more of a wholesale market than an unbundled loop market, and it is going through a transition.

But simultaneously with this, complaints on rural BT lines are at an all-time high. Many parts of the UK, including those most likely to attract tourists, cannot get a decent broadband signal. As a result the UK government is turning to legislation rather than rely on its regulator Ofcom. In 2018 it will queue up Universal Service legislation giving everyone the right to at least 10 Mbps broadband, no matter where they are in the UK. No other operator will be expected to furnish this.

So on the one hand BT will have an advantage because one of its “arms-length” subsidiaries looks after all wire maintenance and connection, with the tendency for it to prefer BT work, while on the other, BT will be saddled with most of the unprofitable broadband lines in rural areas.

It is not expected to result in Universal Service at the point of sale for about two years. British Telecom had offered to invest £600 million upgrading rural infrastructure by 2020 instead, but the UK government has ignored this suggestion.

Give the weak position in terms of a majority of this government, there is a high likelihood of this never making it through the legislation process and a new government after that may not consider it such a high priority.

BT said in a statement that it respects the government’s decision and will work closely with the government, regulator Ofcom and the industry to help deliver regulatory USO.

Across Europe there is a directive to reach 50% of homes with a 50 Mbps broadband line, but nowhere else has a universal service obligation that we know of. And of course within 2 years the YUK may no longer by in the European Union. Even so rival telcos in other European countries will rely on what happens in the UK ad evidence of whether or not a similar strategy would work elsewhere.

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