Business slams Ofcom over BT stalling tactics, spectrum auction
BT must be broken up and Ofcom shaken out of its complacent tolerance of BT’s stalling tactics if the UK is to get the “best broadband network in Europe by 2015”, the country’s premier business association of communications users says.
The Communications Management Association (CMA) added “a toxic combination of regulatory timidity and the powerful self-interest of licence holders” is delaying the 4G spectrum auction, which would help to expand wireless access to high speed broadband.
Ofcom’s attitude deterred new investment in public communications networks because investors feared BT could “gazump” them without consequence, it added.
In a statement issued on Friday, the CMA, whose members buy some £13bn of communications services a year, said business users were increasingly critical of “the lack of a firm regulatory hand on the telecoms marketplace”.
It said BT was dictating the pace of high speed broadband roll-out in a way that benefited only BT shareholders. Ofcom let BT control services provided by competitors who rented BT facilities to deliver them, it said.
“The outcomes fall a long way short of policy priorities for UK economic growth, the needs of citizens and communities and the localism implicit in the Big Society agenda,” the CMA said.
It accused Ofcom of complacency, both on the speed of BT’s broadband delivery and on allowing competitors access to BT’s physical infrastructure (PIA).
“There is little or no news from BT about a true point-to-point fibre programme or willingness to address the ‘dark fibre’ market that would offer anything like a future-proof architecture for the nation,” it said.
Europe’s Digital Agenda champion Neelie Kroes has told national regulators to insist that incumbent telcos such as BT, France Telecom and Deutsche Telekom offer an unlit or dark fibre product to competitors.
Bill Murphy, who is in charge of BT’s next generation broadband roll-out, has said BT will never offer dark fibre. It had once, but was burned when the dotcom crash meant many telcos had excess capacity and were forced into bankruptcy or to restructure, he said.
The CMA said PIA, which would give competitors’ access to BT’s poles and duct, was the most promising regulatory proposal since Ofcom imposed functional separation on BT. But Ofcom had allowed BT to slow down the process for years.
Ofcom had allowed BT to make a reference offer in January 2011. This was for £0.95/m for ducts, £21 per pole attachment, and competitors had to provide BT with reciprocal access to their networks.
BT’s competitors had rejected it, with some saying the prices were four to five times higher than BT’s costs.
The CMA said Ofcom had allowed BT “to drag its feet for another year while it laboriously works on a further offer – presumably based on figures it already has at its fingertips.”
Even if the revised offer, expected this month, was rejected by competitors, Ofcom had only promised to “review” it, which could take another 18 months.
“Ofcom’s strange passivity is in contrast to the dynamic, hands-on approach taken by, for example, its Swedish counterpart, Swedish Post and Telecom Agency (PTS),” the CMA said.
The PTS had encouraged the Swedish Urban Networks Association (mainly municipal fibre network operators) to set up a fully automated dark fibre trading platform that national operators could buy from.
“The impact can be measured in enterprise growth, job creation and significantly reduced costs for businesses that are, in network revenue terms, more than made up through growth of the economy,” the CMA said.
Ofcom said it had obliged BT to allow other providers to get access to its infrastructure (ie ducts and poles) to deliver superfast broadband. “We expect BT to publish further information on prices for these products shortly,” an Ofcom spokesman said.
Hand-out to BT
The CMA also criticised the BDUK process for expanding access to high speed broadband mainly in rural areas, which could disburse £830m over the next five years. It seemed likely to give most of it to BT “to provide minimal broadband to the unserved areas of the country, and on BT’s terms”, it said.
“The current rules perversely penalise those areas which show initiative,” the CMA said. “The single biggest issue in attracting new private investors to the infrastructure market is a fear that, once planned, their investment will be subverted by aggressive BT tactical responses, even in areas where (BT has) previously shown no commitment to invest.”
Ofcom expected infrastructure access to support the government’s broadband delivery programme. This would extend “superfast broadband services” to consumers and businesses in areas where it was economically risky to invest, the spokesman said.
Split Openreach from BT
The CMA called for the government to follow the New Zealand example and impose full structural separation on BT and Openreach, which builds and operates BT’s physical infrastructure.
“While this would pose new regulatory challenges (and further interminable delaying arguments) the prospects facing business users could hardly be worse than they are now,” it said.
The Ofcom spokesperson said the undertakings Ofcom had accepted from BT in 2005 were in lieu of a reference to the Competition Commission. They led to functional separation and the creation of Openreach.
“We agreed to functional separation as we considered it the right way to address our competition concerns,” she said. “It has helped create one of the most competitive and dynamic broadband markets in the world with choice and cheaper prices leading to significant levels of consumer take-up.”
The CMA said business users were irritated by the “creeping delays” to the 4G spectrum auction. “We see this as a toxic combination of regulatory timidity and the powerful self-interest of licence holders,” it said.
It said the UK was unlikely to get widespread 4G access until the middle of the decade, but it seemed Ofcom was not considering allowing roaming on 3G networks. Nor was it helping mobile network operators to rent dark fibre, as they did in Sweden, to speed up 4G roll-outs and reduce congestion in the airwaves.
“Ofcom must mandate access sharing as a licence obligation,” it said. “The regulator could thus eliminate once and for all the disease of ‘roaming’ from the mobile communications landscape, whilst reducing notspots, improving customer service and reducing required capital investment for operators collectively.”
Ofcom said it was “very keen” to see the 800MHz and 2.6GHz spectrum awarded as soon as possible, so that operators could roll out 4G mobile networks as soon as the frequencies became available in 2013.
“We hope that all stakeholders will accept the outcome of the discussions around this process without further challenge, and allow the UK’s citizens and consumers to enjoy the benefits of 4G services as soon as possible,” Ofcom’s spokesman said.