BT Openreach’s Ethernet delivery and repair worsens
BT Openreach’s delivery and repair of Ethernet connections continues to deteriorate, the Office of the Telecommunications Adjudicator (OTA2) reports.
Br0kenTeleph0ne reported earlier that Openreach had suspended a new Ethernet ordering system, Ethernet Access Direct (EAD), on 15 September after communications providers (CPs) had found it didn’t work. EAD is meant to process orders for sub-1Gbps Ethernet connections.
The OTA2 described this as “a disappointing set-back for the Ethernet community”, adding “Given the strategic importance attached to this key development, and the need to ‘get it right’, the decision by Openreach to ‘suspend’ whilst a fundamental re-assessment is undertaken is a decision which is welcomed by the CP community.”
BT said CPs could still place orders through the legacy system that EAD is meant to replace.
In its April report just out, the OTA2 said, “We are still awaiting sight of the plan for restarting the (EAD) programme and CPs are expressing concern that the time taken to get to a clear set of strategic goals for the system and for Openreach to share their thoughts on how any new model will work.”
OTA2 went on to say, “The Ethernet products are experiencing a deteriorating performance – there are problems with the delays in planning and the CPs are reporting increasing frustration with the responsiveness of Openreach in any direct communication (job controller answer times have increased significantly) and the jeopardy and escalation processes don’t seem to be as efficient as needed.”
Problems with Ethernet ordering may also affect perceptions that Openreach ignores the needs of business customers. OTA2 said that during summer (2012) a number of CPs complained to Ofcom that “Openreach was not addressing the needs of business-focused CPs and their customers, leading to unacceptable levels of service for this group of CPs.”
CPs and Openreach started to review possible improvements for copper-based products (WLR, ISDN, MPF and SMPF). “Good progress has been made against the Q1 objectives and those for Q2 agreed,” OTA2 said. “A suite of Business KPIs has been developed, which have identified some key variances with industry as a whole, which are now being collaboratively analysed for root cause and to develop appropriate service improvements.”
In other news OTA2 reported that there were 9.02 million unbundled lines, 6.15 million WLR lines and 2.15 million numbers using CPS.
BT’s broadband rip-off – the evidence
Credible evidence that BT is charging more than double what it should for wholesale superfast broadband products has probably prompted national regulator Ofcom to investigate a complaint that BT is conducting an illegal margin squeeze.
The evidence is contained in a confidential report commissioned by TalkTalk, currently the biggest user of BT’s local loop unbundling (LLU) products, which made the complaint.
Ofcom presently does not regulate BT infrastructure provider Openreach’s pricing for SFBB fibre products believing to do so would discourage BT’s claimed £2.5bn investment in fibre to the cabinet (FTTC). Openreach’s prices are generally meant to be very close to its costs, especially where it has ‘significant market power’, in this case, outside the Virgin Media Docsis footprint.
The 59 page report found that Openreach’s costs to build its FTTC network are £4.39 per line per month. BT Openreach charges resellers £7.40 or £9.95 depending on the bandwidth provided. Current prices for BT’s Infinity FTTC services start at £13/month and go up to £26/month. BT Retail offers discounted prices of £6.50 and £20 per month respectively for the first three months.
The report, by German telecommunications analysts Wik Consult, is a sequel to its 2012 report to ECTA, the association of European challenger carriers, that found incumbent operators price LLU access so high as to leave no money for LLU carriers to profit or invest in network upgrades or expansion. It showed that LLU had been a failure in Europe, allowing incumbent operators to retain almost 100% of the market.
“At the prices charged for copper, all the cash flows have gone to the incumbent, and entrants have been persistently cashflow negative,” Wik reported, adding the same might become true for access to fibre-based products unless regulators stopped it.
For its report to TalkTalk, Wik modelled Openreach’s costs based on publicly available information. It found the main factors that affect its costs are penetration (take-up of GEA on the FTTC platform), the weighted average cost of capital (WACC) including any risk premium applied to NGA, the extent to which existing ducts can be reused for the installation of fibre between the street cabinet and local exchange, the depreciation method and asset lifetimes.
It checked the results produced by its base model and sensitivity tests against BT’s own statements and evidence from more developed markets in Europe. The checks suggest Wik’s assumptions and conclusions are conservative.
In particular, it suggests that 65% of non-Virgin Media SFBB subscribers will take up an service provided using Openreach infrastructure. Active electronics had a life span of eight years, cabinets and fibre 20 years each, and ducts 40 years, it said.
Almost two years ago Kevin McNulty, Openreach’s general manager for next generation access commercial partners, told Br0kenTeleph0n3 BT’s NGA financial plan was based on a break-even period of 10 to 12 years and a 20% take-up.
For the record, Ofcom announced on 1 May that it would investigate a complaint from TalkTalk Group that alleged BT has been conducting an illegal “margin squeeze” on wholesale access to Generic Ethernet Access (GEA), BT’s FTTC product.
Ofcom said the complaint alleged abuse of “a dominant position in breach of (regulations) in relation to the supply of superfast broadband (‘SFBB’). Specifically, (TalkTalk) alleges that BT has failed to maintain a sufficient margin between its upstream costs and downstream prices, thereby operating an abusive margin squeeze.”
Ofcom said it could investigate such allegations if it had “reasonable grounds” for suspecting a breach.
TalkTalk said in a statement, “We have long maintained that there needs to be tighter regulation in superfast broadband to ensure a level playing field and therefore deliver real benefits for consumers and businesses. We are pleased that Ofcom is taking this matter seriously and have decided there is reasonable suspicion to investigate BT’s fibre pricing.”
BT said it was “disappointed” by Ofcom’s decision.
Ofcom expects to report its initial findings towards the end of the year. It will decide then whether or not to proceed.
Vaizey sings BT’s praises
BT is a great British company doing a great job for Britain. We know this because communications minister Ed Vaizey said so in parliament.
He was answering a question from one of his predecessors, Stephen Timms. Timms wanted to know why the entire rural superfast broadband fund is being handed to one company—to BT. “BT is now behaving like any monopolist that has everyone over a barrel, and we have heard about the consequences from all sides this morning. Why has competition been forgotten?” he said.
Vaizey replied, “It just so happens that BT has won the contracts, and I reject the suggestion that it is behaving like a monopolist. We are getting value for money for our contracts, and BT is a great British company doing a great job for Britain.”
He complimented Timms “who did so much to promote competition. As a result of that, BT has just a 30% share of the broadband market, and the market share of the historic incumbent in the copper broadband market is one of the lowest in the world. That is a testament to the right hon Gentleman’s great work, but we are carrying it on. We made sure that our process for rural broadband was competitive.”
As Francis Urquhart might say, “You may think that; I couldn’t possibly comment.”
Has BT exaggerated the 15 million homes with SFBB access?
Only 20% of the lines in Cambridgeshire’s new fibre to the cabinets (FTTC) cabinets will be enabled for superfast broadband (SFBB). If this is the case in the rest of BT’s FTTC roll-out, it suggests that BT’s claims that 15 million homes have access to SFBB are wide of the mark.
The revelation came at a feedback meeting to the Cambridgeshire Digital Champions on the county’s new contract with BT for next generation broadband.
According to notes taken by Mel Bryan at the meeting, Annette Thorpe, BT’s regional director for the east of England, told the meeting that BT would apply the same criteria for populating DSLAM cabinets under the CCC (Cambridge County Council) contract as under the commercial areas. “DSLAM cabinets (which come in two sizes max. capacity 256 lines or 288 lines) will initially only have 20% of lines in the PCP offered SFBB,” Bryan wrote.
Almost two years ago Kevin McNulty, Openreach’s general manager for next generation access commercial partners, told Br0kenTeleph0n3 BT’s NGA financial plan was based on a breakeven period of 10 to 12 years and a 20% take-up.
Bryan reported Noelle Godfrey, programme director of Connecting Cambridgeshire (CC), said CCC expects 90% of premises will be covered by SFBB speeds above 24Mbps plus a further 8% of premises will be covered by “fibre” below 24Mbs. 2% will receive at least 2Mbps. Where this speed is measured is not defined.
Bryan wrote, “This figure of 98% SFBB is somewhat misleading – only 20% of 98% will initially be able to receive SFBB. As customers in the Commercial Areas have already discovered, they may have to wait months post the initial DSLAM installation before BT adds more equipment in the DSLAM cabinet to accommodate the increased demand.”
Bryan wrote, “There are no plans to offer FTTP under the CCC contract but after heated representations from the floor who were prepared to pin their money on Annette there and then, BT /CCC agreed to look at this.”
Thorpe told the meeting the BDUK’s £6.7m contribution to Cambridgeshire had to be spent “within the life time of the current parliament” which ends on 17 May, 2015. This gives BT an installation period of just over two years.
“What happens if a general election is called earlier?” Bryan asks. “What happens post-2015 if a village DSLAM cabinet (capacity 256 lines) becomes full and another DSLAM cabinet is required? Will BT deem that commercially viable? In my village we only have one PCP serving 315 premises.”
According to Bryan, Tony Smith, BT Openreach programme manager, told the meeting “it was very difficult, at this stage, to forecast time-scales and even when BT had done their detailed planning down to the exchange level, they cannot forecast how long an installation of the fibre cables and DSLAM cabinets will take, due to the unknown condition of their ducts, planning permission in conservation areas (which most of our villages have), obtaining power supplies, permission to dig up roads and pavements, etc., etc., etc. “
The meeting heard that 20 suppliers had registered an interest in the county’s project. Only three were chosen for “dialogue” after which BT was chosen “for offering the widest coverage and best value”.
The names of the other suppliers were not disclosed, nor was the methodology by which value was measured.
BDUK whistleblower vindicated by BT cabinet deal
Mike Kiely, the sacked BDUK whistleblower who warned that BT is inflating the cost of street cabinets for next generation broadband access in rural areas, has had his prediction vindicated by a BT deal with a parish council.
BT says it is to supply fibre to two new street cabinets it will install in the Oxfordshire village of Binfield Heath, giving villagers access to an ‘up to’ 80Mbps broadband service.
BT says the village, 2.9 miles by car from the closest exchange in Caversham, was not included in its commercial roll-out plan. However, the 648 residents (according to the 2001 census) clubbed together to find the necessary £56,000, or £28,000 per cabinet.
BT’s press release quotes Paul Rollason, chairman of Binfield Heath Parish Council, saying, “The residents were determined not to miss out on faster broadband speeds, and formed an action group to talk to BT about how we could help the economic case to bring fibre to our part of Oxfordshire. They worked out the extra cost to rearrange and uplift the network, and between us, we have raised the funds.”
Bill Murphy, BT’s managing director for Next Generation Access, said, “Binfield Heath’s residents … really engaged with us around the best solution for their community, and together we found a way to bring fibre speeds to almost the entire village; it’s a fantastic result.”
For BT. Two years ago the villagers of Iwade in Kent paid £12,667 for a street cabinet and fibre link to the exchange in Sittingbourne 4.4 miles away by car, a mile and a half further than the distance at Binfield Heath.
Prices rise, but costs don’t in BT’s divide and conquer NGA strategy.
Iwade’s bill was close to the £13,000 average cost of cabinets installed during phase four of BT’s next generation (NGA) broadband roll-out in Northern Ireland, according to Kiely’s confidential report.
Kiely’s report showed that BT was inflating the cost of rural NGA cabinets to around £30,000 each, pretty much what Binfield Heath is paying.
The department of culture media and sport (DCMS), which manages BDUK, sacked Kiely after he blew the whistle on BT’s apparent price gouging and his report leaked to Br0kenTeleph0n3.
Binfield Heath vindicates Kiely’s report. Culture secretary Maria Miller should re-instate him at once, and sack those who turned a blind eye to his warning.
Kroes dodges tough questions over UK broadband
The European Commission faces tough questions over its role and commitment to an open, transparent and competitive market for next generation broadband.
News that the Valuation Office Agency is assessing how it plans to tax wireless broadband infrastructure prompted one Br0kenTeleph0n3 reader to ask the European Commission what it thinks of the move.
Mike Phillips of West Chiltington, West Sussex, has been battling to get high speed broadband into his village for years. He wrote to Neelie Kroes, the commission’s Digital Agenda champion, to question the apparent growing bias against fixed wireless broadband. He also asked Ms Kroes what she thought of Fujitsu’s decision not to bid for BDUK contracts, leaving BT with uncontested access to BDUK’s treasure, when EU state aid rules require a competitive process.
The reply came from DG Connect. It noted that nine firms had expressed an interest in BDUK’s money, but “seven of them withdrew during the selection process due to e.g. financial difficulties, change in strategy or preference for different intervention model than investment gap funding”. Fujitsu’s withdrawal would be “unfortunate”.
DG Connect went on to say that local councils can step outside the BDUK framework but still have access to state aid, including BDUK money. “In such cases the local authorities shall comply with the conditions of openness, transparency and non-discrimination when conducting the tender procedure in line with the principles of the national and EU public procurement rules,” it said.
Phillips is not leaving the matter there. He has written back to DG Connect to ask, “Does the EU agree with the principal of state aid being given to an incumbent telco to provide, at best, an overall maximum of 24Mbps, and often less, whilst an established fixed wireless NGA network is available and can be expanded at far less cost?
“Why has the Commission given the fixed wireless industry in the UK a far greater challenge than that given to BT, namely to provide a minimum of 30Mbps and to revisit served premises to upgrade then to fibre when available? BT have publicly stated they will not undertake the latter and cannot provide the former under FTTC.”
There are other questions one should ask. DG Connect’s reply does not mention the main reason BT is the only recipient of BDUK largesse: the game was rigged. Geo’s Chris Smedley, Vtesse’s Aidan Paul and others have been explicit and public on this: the Ofcom-approved terms and conditions attached to third party access to BT’s poles and ducts in rural areas make it impossible to compete against BT. Why does DG Connect ignore this?
In practice BT has made its NGA proposals to local councils subject to non-disclosure agreements. This has hidden the terms and conditions under which BT could receive up to £1.3bn of taxpayers’ money. Is this what DG Connect means by open and transparent?
VOA seeks info on wireless broadband networks – to tax them
The Broadband Stakeholders Group is hosting a meeting at which the Valuation Office Agency (VOA) will set out its views on the potential application of the non-domestic rating regime (aka ‘business rates’) to wireless broadband network infrastructure.
This meeting marks the start of a public consultation before the VOA publishes a Practice Note to clarify the valuation for non-domestic rates of wireless broadband network infrastructure. It is looking for inputs from industry on rental values and costs of installation.
The meeting comes less than a month after Vfast withdrew its proposal for a wireless broadband network for Tunbridge Wells, saying the VOA had told it the scheme would be subject to business rates taxes.
The VOA is the same organisation that saw fit to subject lit fibre to business rates and introduce three different ways of valuing it, two of which favour BT and Virgin Media. A recent Ofcom report on the market for >1Gbps services found the fibre tax is a serious inhibitor for investment.
Alan Bradford, head of telecoms at the VOA, will provide an update at the BSG meeting and there will be time for Q&A.
The BSG says this meeting is the VOA’s first opportunity to begin this industry consultation. However, Vfast’s reaction to its meeting with the VOA suggests that the VOA has already made up its mind to tax wireless networks. It is now just trying to fix the rate.
The meeting will take place from 10.00 to 12.00 on Monday 22 April at the Intellect offices, Russell Square House, 10-12 Russell Square, London WC1B 5EE.
The BSG thinks this will interest mobile operators, fixed wireless providers and other stakeholders with an interest in the non-domestic rating regime.
RSVP to charlotte.holloway@broadbanduk.org by Tuesday 16 April. Places are limited so early registration is advised.
