Can Ofcom get its ducts in a row?

Full-fibre for everyone!

Ofcom’s latest update of the Wholesale Local Access Market Review promises to usher in the new world of full-fibre. Fibre is good, more fibre is better; surely that’s bound to help 5G along the way?

Well, reading the documents there’s some doubt about the speed and direction of full-fibre. More importantly, will it help 5G when we need it to?

But there is glimmer of good news.

Ofcom plans to improve Openreach’s Duct and Pole Access (DPA) products which could turn out to be a windfall. But more on that a bit later.

Ofcom’s update paints a picture of the broadband market that would send any competition and market nerd into a state of ecstasy. Market forces, incentives, consumer harm, anchor pricing … it’s all in there. But what it also reveals is the really complex situation in which Ofcom is going to intervene.

By ‘adjusting’ the regulation of Openreach’s Broadband products, Ofcom hopes it will encourage independent Alt.Net fibre investment – and keep BT in the chase – resulting in full-fibre for all.

But the probability of this happening uniformly across the country is zero.

Ofcom talks about three different situations; places where fibre competition already exists; places where competition is likely; and places where Openreach will remain the only game in town.

And just to complicate matters further……………………….

Ofcom wants to avoid harming any customers – with higher prices, in any geography, while Openreach and Alt.Nets deliver this. All perfectly straightforward – or is it a bit far-fetched?

The new regulatory framework imposes pricing ‘at cost’ for Openreach’s Wholesale Fibre-to-the-Cabinet (FTTC) product, also known as Virtual Unbundled Local Access (VULA). This is good news for Communications Providers (CPs) using the BT FTTC platform, and good news for their customers, given the probability that prices will drop.

 

Is this good news for our Alt.Nets?

Surely, they’ll be shivering wrecks, as they watch their full-fibre business cases sink without a ripple?

Fret not. Ofcom will only regulate the “up to 40mb/s speed FTTC”. Above that speed, BT Openreach can do what it likes. This ‘restores’ the Alt.Net’s business cases, kindling full-fibre investment – which in turn undercuts any premium BT/Openreach prices. That seems to be the theory, anyway.

Isn’t this decision baffling?

The speed of service on FTTC, (line limitations excepted), is a config setting on the FTTC platform. So, set the parameter to 39 Mb/s and you price ‘at cost.’  Set it at 41 Mb/s and you can price it how you like.

Am I alone in thinking . . .

As the popular book “Unpublished letters to The Daily Telegraph” says …… am I alone in thinking this is strange?

We are told BT has now recouped its investment in FTTC. That’s why the ‘low-cost floor’ – and why the belief that BT will charge a premium for 41Mb/s and up.

But what if it doesn’t?

It’s doubtful that enough customers will care about full-fibre in the short term, to make the Alt.Net business cases fly. If there’s a cheap 40mb/s service – or even better a cheap 80mb/s service – there will be very limited demand for premium full-fibre products.

But let’s assume Ofcom’s thinly-veiled ‘poking’ tactics work – and we see a flood of full-fibre investments and demand. How will BT, Sky, TalkTalk, Virgin Media and Vodafone react? BT and Virgin will stay on their own platforms, for sure.

Will the other three be up for offering service across multiple geographically constrained areas? Can their marketers and service staff deal with so much variety?

Different products, prices, and speeds in different places – is far from simple. Cheap mass-market broadband has always been all about national advertising – and standard national sales & service processes that can handle volume.

So how does this help 4G and 5G, both of which need dark fibre?  

Well, this latest full-fibre news is not going to help, because the priority areas for 4G densification and 5G rollout will almost certainly not match the footprint for full-fibre broadband.

 

Returning to Ducts and Poles

If there’s one simple thing Openreach could do for the market, it would be to provide access to DPA for all CPs, on fair and reasonable terms. By definition, you must invest in fibre to use it.

The physical structures that CPs need to deploy fibre are the most difficult, disruptive and expensive to create.

At the moment, Ofcom proposes extending the DPA mandate to “mixed use.” This means pure super-fast broadband CPs can now also provide services for other uses, in the same geography.

The DPA obligations depend on Openreach’s market power in superfast broadband and that’s why usage is restricted to “mainly broadband”.

But wait a minute. Doesn’t this ignore Openreach’s other fibre products, like Ethernet? Dark fibre runs along the very same ducts, unless we’re missing something.

So, why doesn’t Ofcom go further and allow DPA to be used by all CPs – for any purpose?

DPA could then become a “Universal Remedy” to Openreach’s access monopoly – and greatly simplify the complexities and intricacies of this market.

Who knows if DPA will trigger investment in full-fibre broadband?  

But what’s clear is excuses and defences will have been removed – bluffs and blags called.  What seems certain is that those driving 4G and 5G will snap it up for small cells backhaul.

 

So, what should we make of Ofcom’s publication?

First, let’s urge Ofcom to widen the usage criteria for DPA – and push it faster. This will destroy the biggest barrier we have to independent fibre investment.

Second, let’s spare a thought for Ofcom. They are sifting through an extremely complex and ever-changing set of conditions. But let’s not be too kind-hearted either. The situation can’t be solved by fiddling around with regulation. This absurd state of affairs is choking investment and innovation –  and is simply going on for too long.

It’s time for everyone to stop skating around on the slippery surface of irrelevant brilliance – and grasp the nettle.

The harder we grasp it, the less it will hurt.

 

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