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Summary

In a submission to the Competition Appeal Tribunal (CAT) in July 2016, fiber infrastructure provider CityFibre has opposed Ofcom's plans to allow alternative operators to connect to Openreach's dark fiber network at controlled prices. It criticizes the proposal for contradicting the approach taken in the consumer market and claims that the measures would disincentivize other providers from building their own fiber infrastructure in the business market, thereby reducing performance quality. BT has also previously opposed opening up its dark fiber, adding that as more people interact with its network, more faults could occur. However, the UK regulator stands by its decision and expects Openreach to publish a final reference offer by December 2016, including service-level agreements and guarantees. Dark fiber access would then be available from October 2017.

Providing access to dark fiber could deter competitors from building their own infrastructure

In May 2015, Ofcom finished its Business Connectivity Market Review, which analyzed the competition in the provision of leased line services and proposed the implementation of a number of new quality-of-service requirements to improve the market. Openreach is already obligated to offer wholesale leased line products at regulated prices, which bundle optical fiber with its network equipment. However, rivals have complained of poor performance levels and delays, as well as difficulties in building their own networks. To improve service quality, Openreach is now required to fix 94% of faults within five hours and reduce the installation time to its original time frame of 40 days by the end of March 2018. The installation time frame has risen considerably since 2011 and is currently at 48 days. Additionally, the company must complete 80% of leased line orders by the date it promises customers, which will increase to 90% after April 2018.

Ofcom has asked the incumbent to provide competitors with access to its dark fiber network in an effort to incentivize connectivity providers to roll out new services. Opening up access to infrastructure has proved successful in other parts of Europe. For example, in Germany, dark fiber access is imposed in areas where it is technically not possible to provide access to ducts, while in France, dark fiber access is imposed simultaneously with duct access.

It is important that the UK redresses any perceived underinvestment in fiber; however, the value of encouraging other players to develop networks shouldn't be ignored, especially because this has previously been outlined as Ofcom's preferred approach in its Digital Communications Review. Ofcom's proposal is a contentious issue for alternative infrastructure providers because it encourages them to directly access Openreach's cables, which could further cement its position in the market. CityFibre in particular has criticized the regulator for contradicting its approach in the consumer broadband market and has lodged an appeal with the CAT. Ofcom has opened up access to ducts and poles in the consumer market to encourage alternative operators to build their own fiber lines into homes, but this isn't the case in the business market. The argument goes that Ofcom's plan to favor dark fiber over physical infrastructure access in the business market could deter alternative operators from building competing solutions that would benefit from not relying on the resiliency of the incumbent's infrastructure.

Despite the resistance, especially from alternative infrastructure providers, Ofcom has defended its proposal, which the regulator sees as the best option to address competition and investment issues in the business market. The regulator has also publisheddark fiber pricing and leased line charge controls, which will see prices fall by 9–12%. However, despite the alternative operators benefitting from these lower prices, they may be disadvantaged in terms of service because Openreach's ability to invest in its infrastructure could be restricted by the price controls.

Appendix

Further reading

UK (Country Regulation Overview),TE0007-000949 (October 2015)

"The UK regulator, Ofcom, is the latest to turn its attention to business services," TE0005-000804 (March 2016)

Author

Sarah McBride, Analyst, Regulation

sarah.mcbride@ovum.com

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