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New measures to boost superfast broadband competition

July 3, 2013

  • Ofcom plans to make switching cheaper, reduce minimum contract length
  • Separate measures to improve installation and repair times for customers

Ofcom has today proposed new measures to promote competition among superfast broadband providers, as part of a major review of wholesale telecoms services.

Under proposals for consultation, the wholesale cost of switching a customer from one superfast broadband supplier to another would fall by up to 80%. In addition, the minimum length of the wholesale contract between BT and the switched customer’s new supplier would be reduced from a year to just one month.

The proposals are designed to promote competition in the superfast broadband market at the wholesale level. These would be expected to flow through to consumer benefits in the form of lower retail prices and easier switching between superfast broadband providers.

Ofcom is also consulting on ways to ensure that the performance of BT’s network access division, Openreach, is maintained at acceptable levels. Openreach installs and maintains connections to BT’s network on behalf of competing telecoms providers.

These proposals are intended to establish clear targets for fault repairs and the installation of new lines for the millions of telephone and broadband users who rely indirectly on Openreach.

The measures form part of Ofcom’s Fixed Access Market Reviews, a wide-ranging consultation on the wholesale telecoms markets used by a range of companies to offer telephone and broadband services to UK consumers1.

New rules on superfast broadband

Different broadband providers can retail their own superfast services over BT’s network under a process known as ‘virtual unbundled local access’ (VULA), which Ofcom introduced in 2010. At that time, there were fewer than 100,000 superfast broadband connections on the BT network. By last year that number had risen to 1.4m,2 and take-up is expected to increase further over the coming years.

Currently, if a consumer wishes to change to a superfast broadband provider, the company they are switching to must pay a £50 fee to Openreach – a charge which is often passed on to the customer. Ofcom is proposing to cut the switching fee to between £10 and £15 and, where an existing superfast customer switches, to reduce the minimum length of the wholesale contract between BT and the new supplier from a year to one month – providing flexibility to allow telecoms providers to offer shorter-term contracts.

Today’s consultation proposes not to set controls on the wholesale price of VULA. Ofcom believes the price of fibre broadband is currently constrained by the availability of standard broadband services, and by competition from Virgin Media’s superfast cable network. Ofcom is also concerned not to undermine the investment case for rolling out fibre. Instead, Ofcom proposes to maintain a requirement that BT’s charges for access to its fibre network are fair and reasonable.

Speeding up installations and repairs

Communications providers rely on Openreach to install new lines and repair faults on BT’s network. Some operators have expressed concern about the time it can take for Openreach to complete this work at their customers’ premises. These concerns were most acute during 2012, when Openreach’s performance was to some extent hampered by extremely wet weather conditions.

Openreach’s performance has since returned to pre-2012 levels3. However, Ofcom wishes to ensure that its performance remains at an acceptable standard.

Today’s review therefore proposes to require Openreach to meet specific performance standards for new line installations and fault repairs4. Sanctions may apply if performance falls below these new standards.

Ofcom is also proposing, among other measures, to strengthen reporting requirements on Openreach to make it clear how well the company is performing. Ofcom will monitor the service Openreach provides to BT Retail, relative to its other wholesale customers.

Maintaining healthy competition

The Fixed Access Market Reviews consider other aspects of ‘wholesale local access’ – the fixed connection that runs between the customer’s premises and their local telephone exchange.

Today’s consultation proposes broadly to maintain the current regulatory framework, including requirements on BT to offer various wholesale communications products to other providers on a fair, reasonable and non-discriminatory basis.

Next steps

Ofcom will later this month issue a further consultation on its approach for setting any future charge controls on ‘wholesale line rental’ products – which allow competing providers to offer a telephone service over BT’s network – and ‘local loop unbundling’ products, where providers install their own equipment in an exchange to offer telephony and broadband over BT’s lines.

Ofcom will also shortly consult on its proposals for wholesale broadband access, including what regulation should apply in different geographic markets. We expect to publish our conclusions on all these reviews in spring 2014.

Today’s consultation on the Fixed Access Market Reviews closes on 25 September 2013.

ENDS

NOTES FOR EDITORS

  1. The conclusions of the Fixed Access Market Reviews will apply for the period April 2014 to March 2017.
  2. Source: Ofcom, Communications Market Reports 2010 and 2012.
  3. For example, the average lead time for a new line installation is currently around nine days according to the Office of the Telecoms Adjudicator, the body which monitors Openreach’s performance.
  4. Openreach would be required to meet the service levels it has agreed with its customers for new line installations and fault repairs in a specified percentage of cases. Ofcom will consult on appropriate percentage thresholds to apply.

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