Ofcom’s Business Connectivity Market Review draft statement

Ofcom today published the draft outcomes from its latest Business Connectivity Market Review (BCMR, more background here), following on from the publication of the outcomes of its Strategic Review of Digital Communications last month.

The announcement was preceded by a speech last week by Ofcom Chief Executive Sharon White in which she highlighted the increasing importance of connectivity for businesses and the steps Ofcom is taking to ensure businesses can access the services they need to grow.

Ofcom’s BCMR examines the markets for the provision of high-capacity leased lines (services offering dedicated capacity between fixed locations with high levels of performance, availability and reliability) for businesses and the public sector. Ofcom’s draft statement (its proposals have been submitted to the European Commission, with the final statement expected next month) builds on the plans set out in its previous Strategic Review to increase the availability of fibre connectivity (“our strategic shift to promote large-scale investment in more fibre”). This is intended to esnure more competition and reduce the current reliance on BT’s infrastructure:

“In the DCR statement we set out a strategy to encourage large-scale investment in new ‘fibre to the premises’ networks for mass-market broadband services, including improving access to Openreach’s network through passive access to ducts and poles. Our DCR statement also recognised that there are important differences between leased lines and mass-market broadband services. In particular, fibre to the premises is not available on a large scale today for mass-market broadband services, whereas there is significant fibre available for the provision of dedicated leased line services for larger businesses.”

As a result, Ofcom is not requiring access to BT’s ducts and poles in relation to the provision of leased line services over the current review period, unlike the market for mass-market broadband services. Instead, Ofcom is requiring BT to grant access to dark fibre, where other operators can install their own equipment to provision services via BT’s existing fibre optic cables:

“We consider that it is appropriate in this review period to proceed with a dark fibre remedy and not to impose duct access...Under the DCR we intend to act to ensure that duct access can be used by competing providers to build new fibre networks to support mass-market broadband. Our work in this area, including under the review of the wholesale local access market and the Civil Infrastructure Directive, may have implications for the outlook of competition in leased lines markets, and we will take this into account in our next review and if necessary we can re-open our market assessment to address any major changes.”

BT is still be required to provide wholesale leased line products, which bundle the optical fibre and BT’s own network equipment, at regulated prices to competitors. Other outcomes from Ofcom’s BCMR include:

• A requirement for BT to offer faster leased line installations: since 2011, the average time between a customer’s order and the line being ready has increased from 40 to 48 working days. Ofcom’s proposals require BT to reduce this to 46 working days by the end of March 2017, and return it to 40 working days the following year. Ofcom is also proposing that, by the end of March 2017, 80% of leased line orders must be completed by the date promised to customers, rising to 90% from April 2018.
• Ofcom has also set out plans to reduce the wholesale prices BT charges for leased lines services, which it expects to result in lower prices for businesses. For BT's Ethernet services with bandwidths up to and including 1Gbit/s, Ofcom has concluded an initial reduction in prices of 12%, with an overall cap of consumer price index (CPI) -13.25%, for each year of the charge control. Ofcom aims to bring prices down over a three-year period from 1 May 2016.

Also see media coverage from BBC News, the Telegraph, the Guardian, ISP Review, Cable and Computing.