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Ofcom to regulate wholesale price of fibre for the first time

Summary

On 31 March 2017, Ofcom published a number of consultation documents in relation to its Wholesale Local Access Market Review. The three key proposals are for a broadly stable LLU charge control, a new wholesale price control on some of BT's fibre network and tougher quality of service standards for Openreach. Ofcom expects to publish its final decisions in early 2018, with new rules taking effect on 1 April 2018. Things will still yet have to get a bit worse before then can get better for BT.

Wholesale price regulation for fibre

The news of a proposed wholesale price control on the 40 Mbps VULA product will have come as a blow to BT who have had pricing flexibility for all wholesale fibre products since 2009. Under the proposal, BT would continue to have pricing flexibility on superfast services with a download speed above 40 Mbps and on future services including ultrafast, those using G.fast technology or where fibre goes all the way to the home or premise (now being referred to as 'full fibre'). Ofcom are hoping that this acts as an incentive for BT to shift investment to deploying fibre closer to end users. Things could've been worse of course, Ofcom are clearly are more amenable than the UK government when it comes to G.fast - they could've proposed imposing the charge control on anything that isn't full fibre. 

Charge controls in detail

  • The standard annual rental charge for LLU changes from £85.29 in 2016/17 to £81.98 in 2020/21
  • The annual rental charge for GEA 40/10 (VULA) reduces from £88.80 in 2016/17 to £52.77 in 2020/21

The new charge controls for LLU and GEA (VULA) services will commence on 1st April 2018 and cover the period to 31 March 2021 (the market review period). Prices in 2019/20 and 2020/21 will be at cost based levels. Prices for 2018/19 will be set using a glidepath which has the effect of setting prices 2/3rd of the way along the glidepath between the 2016/17 prices and 2019/20 prices.

Tougher quality of service standards for Openreach

Just days after BT secured a voluntary agreement with Ofcom over Openreach, attention has already turned to improving quality of service. It is proposed that Openreach: 

  • Complete 93% of fault repairs within 1 - 2 working days of being notified (compared with 80% today)
  • Complete 97% of repairs no later than 6 - 7 working days
  • Provide an appointment for 90% of new line installations within 10 working days of being notified (compared to 80% within 12 days currently)
  • Install 95% of connections on the date agreed between Openreach and the telecoms provider (up from 90% today)

These new requirements would need to be met in full by 2020/21, however Ofcom has proposed transitional targets to ensure progressive improvements in service before then. Given that a number of the targets are significantly above what is currently expected, attention turns to the implications should the required standards are not met. Under the current SMP conditions Openerach could face a fine of up to 10% of relevant turnover for breaching any of the new standards. Recent experience shows that Ofcom is not afraid to use its sanctioning powers.

© 2017 Matthew Howett. Anyone is free to republish and/or quote this content without prior consent. Please attribute the relevant author as the source.