In its digital strategy review, Ofcom set out to determine the best framework for accelerating fibre investment in the UK – an area where we are increasingly falling behind our continental neighbours (and even more so vis-à-vis countries in Asia).
The answer it delivered in the digital strategy review was to allow competitors to access BT’s ducts in order to lay their own fibre. This solution has been tried and tested throughout the world and has been proven to work.
There is already a detailed framework for network access but the problem is, such access is only virtual and not physical. Other providers can only access BT’s services, which BT provides at its own locations in its own way. Which areas will and will not receive new fibre investment is a question that, broadly speaking, only BT can answer. However, by allowing access at the physical level, competitors would be able to lay their own fibre thus creating genuine alternatives.
However, a only month after releasing its strategic review paper that proposed duct access for all markets, Ofcom issued its final “business connectivity market review” that almost immediately appeared to contradict its earlier strategy by declining to impose duct access in the business market. Instead, it chose to impose an obligation on BT to supply “dark fibre” (a “halfway house” form of physical network access where the competitor takes a strand of fibre supplied by BT but not the electronics on either end). The European Commission reacted against Ofcom’s failure to confirm duct access, arguing that it had made a mistake.
Ofcom has since clarified their position by stating that duct access may be used for a business connections but only when tied to a larger infrastructure roll-out programme in a residential area.
Why is this an issue?
All end-mile connections, whether residential or business, are delivered from the same backhaul networks and use the same ducts. Yet backhaul networks are considered to be “business” connections, regardless of the identity of the end-users they serve. In this sense, Ofcom is only opening up the market to providers that want to invest in both business and residential markets. Very few such providers exist. Investors that specialise in business connections are left out. Given that business-only providers are among the largest suppliers of backhaul connections to residential and mobile service providers, Ofcom’s position looks half baked.
Thankfully they are still going ahead with the dark fibre ruling, which is a step in the right direction. This allows businesses to put their customers on their own networks, thus and giving control over the service and offering the scalability and flexibility connectivity that customers require. However, duct access still offers the better option for connecting multiple customers, as is often required when rolling out new networks to business parks.
Openreach independence
Ofcom has confirmed its initial announcement that Openreach needs to be a ‘distinct company [from BT Group] with its own board’. However, it stopped short of recommending separation of ownership. The ultimate goal is to give Openreach the incentives to serve the interests of the market as a whole, rather than merely the interest of BT group. The jury is still out on whether, without insisting on separation of ownership, Ofcom’s proposals will deliver the desired outcome.
Looking to the future
Ultimately, Ofcom needs to re-evaluate how it orchestrates its reviews, to ensure greater clarity and direction, and avoid the risk of internal contradiction. Issuing a strategy document that promotes a solution to Britain’s fibre investment problem and immediately afterwards, issuing a decision on the business market that fails to implement that solution, does not look good.
The issue is that Ofcom continually reviews many market segments which are heavily inter-dependent but the timings of these reviews are not synchronised. At the time of writing, its latest business market review has concluded just as the equivalent residential market review is kicking off. This lack of synchronisation causes Ofcom to behave timidly for fear of an unintended consequence in another market, which happens not to be the subject of the current review. The French have got it right by reviewing all related markets in tandem. The digital strategy review was helpful in showing what Ofcom really wants. However, its implementation machinery has immediately proven itself unfit for purpose.
