EC backs Ofcom plan to require BT to share fibre access
23 June 2010
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Extract from BTwatch, issue 2010.05. Click through for: the Executive Brief from this month’s report; the Issue Snapshot; or to contact us for more information about the full 40-page issue, this industry standard monthly report service, and ongoing subscription access.
EC backs Ofcom plan to require BT to share fibre access
The European Commission (EC) announced that it approved proposals from Ofcom to mandate virtual unbundling of BT’s fibre network (BTwatch, 2010.03), but has called on the regulator to move to full unbundling as soon as it is technically and economically possible. The European body looks to have overruled Ofcom on plans to allow BT to offer unbundled fibre services free of regulatory price controls, however.
Under Ofcom’s current proposals, BT will be obliged to provide “virtual” access to its optical fibre infrastructure to alternative operators though a virtual unbundled loop access (VULA) product. This is intended to offer rival telecoms firms a connection to the BT network, similar to that currently available through local loop unbundling (LLU). Ofcom said that the virtual solution allows LLU-like levels of product differentiation and innovation similar and maintains competition on UK broadband markets as the roll-out of next generation access networks gathers pace.
However, the EC also argues that full unbundling is likely to encourage communication providers to rollout fibre networks faster than BT. It was reported that the exception to allow virtual unbundling will last four years. However, Ofcom is already proposing that deeper access to the BT infrastructure, which would enable competitors to build their own fibre networks, must be made available by BT within months of a regulatory final determination on fibre access, with mid-2011 currently looking likely to be the deadline for its introduction.
Neelie Kroes, the European telecom commissioner, said that, given the “special circumstances” she supported the initial virtual structure, but emphasised that that virtual unbundling is only a temporary measure.
“In this specific instance, virtual unbundling seems the best option to safeguard competition and enable consumers to benefit from a wider range of services provided over next-generation fibre infrastructure…This interim solution is not a long-term alternative to physical fibre unbundling, which should be imposed as soon as possible.”
– Kroes.
BT, which has been moving towards virtual unbundling on its own, and committing to opening up its ducts and offering investment partnerships to rivals (BTwatch, 2010.02), said that it believes the current virtual unbundling model is suited to the requirement of the market.
“Our view is that the current Virtual Unbundled Local Access product meets the needs of the industry, but we will obviously work closely with Ofcom going forward.”
– BT statement.
EC requires cost-based pricing restrictions
When it had proposed the introduction of VULA, Ofcom had indicated it would not regulate the pricing of the product by Openreach, beyond requiring long-running equivalence of inputs measures are in place (which entails wholesale customers having access to exactly the same products, at the same prices and using the same systems and processes, that are available to BT). The EC has said it disagrees with this approach, however, and is calling for cost-oriented pricing, which would mean that Openreach prices will be regulated with set levels of reasonable return decided based on specific factors that contribute towards the costs of rolling out the service. The EC said that this would “drive both competition and investment in [next generation accesses]“.
[Further reference:
Commission accepts UK regulator proposal to mandate virtual unbundling of BT's fibre networks but requests full unbundling as soon as possible -- European Commission, 1 June 2010;
BT will have to share last mile fiber with competitors -- FierceTelecom, 3 June 2010;
EC calls on BT to open fibre networks to rivals -- v3.co.uk, 2 June 2010.]
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Issue: 2010.05
Covering: May-June 2010
Published: June 2010
Next issue: July 2010
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