BDUK to preserve BT’s rural monopoly

Many suspected but there was no proof until now: Broadband Delivery UK, the government body charged with procuring the “best superfast broadband network in Europe” by 2015, intends to preserve BT’s monopoly on physical communications networks throughout most of geographic Britain.

This means service providers who want to deliver terrestrial services to rural areas will have to use the physical network owned and run by BT’s Openreach. End users’ choices will be determined exclusively by Openreach’s capabilities and willingness to do business with service providers.

This was revealed in the document in which BDUK outlined its delivery model, dated May and published last month.

In it the agency said, “The primary focus of BDUK is on stimulating private sector investment in the data transport and local access elements of the UK’s broadband communications infrastructure in areas of the county that the private sector, by itself, will not deliver.”

The key part of that statement is “data transport”. In the OSI seven layer standards model of networks, this is Layer 2, immediately above the standards for physical items such as cables, fibres, routers and electricity (see picture).

BDUK’s statement means that all its efforts and money will be directed at encouraging service providers to rent their access to end users from Openreach. This means BT will continue to have the final say over who can sell what to whom, despite Openreach’s “functional separation” from the rest of BT.

Openreach (and Ofcom) will argue that it has “Chinese walls” in place to ensure that other BT divisions do not become aware of competitors’ plans. But a study by Berec, the European communications regulators, published in February noted a number of problems with the results of Openreach’s alleged isolation. These include:

• late delivery of products to a lower specification than promised
• delays in developing a “commercial” attitude to customers
• separating Openreach’s systems (e.g. sales orders) from BT’s was still “extremely challenging”
• Openreach was slower to separate business-oriented systems from residential ones.

Commenting on Berec’s case study of the impact of Openreach’s functional separation, Telefonica said it “seems to convey the impression that FS has been a complete success in UK, when there are evident signs that the case is not so clear.”

To be fair, Openreach does have competitors. These include the mobile network operators, satellite operator BSkyB, wireless broadband operators such as Kijoma in Sussex, who control their own wireless access to end users, and scores of operators who have taken advantage of local loop unbundling.

But these firms mostly need to use Openreach for “middle mile” backhaul to the core national networks and are therefore competitively vulnerable.

BT’s most dangerous competitor is cable TV operator Virgin Media, whose core fibre network, coupled with coaxial cable from the street cabinet to premises, covers about two-thirds of the population and offers higher speeds and better reliability.

There are a few tiny community-based initiatives, such as B4RN, which is seeking private funding to build a 1Gbps fibre to the home network for up to several hundred homes and farms in rural Lancashire. They plan this network to be completely independent of BT.

The people behind B4RN are right to pursue private funding. The BDUK delivery model document, and the qualification thresholds of the broadband procurement framework it is developing, makes it clear that B4RN will never receive any of the £830m seed money BDUK has to achieve it’s top priority of stimulating investment in the UK’s broadband infrastructure. It might get a slice of the £20m that Defra has, but pinning their hopes on that would be foolish.

If this was not enough, the prices, terms and conditions of Openreach’s revised reference offer for renting its physical infrastructure (poles, ducts, floor space in exchanges and street cabinets etc, aka physical infrastructure access or PIA) should leave no doubt. BT halved some prices but introduced new ones and raised others.

BT spokesmen say there are “no restrictions” on what end users or businesses may do with any copper cables they add to Openreach’s ducts, but any fibre they put in may be used only to service homes.

Update

After some discussion on the uses of fibre under PIA, a BT spokesman says, “It’s more accurate to say that CPs can’t offer business services such as leased lines using PIA and it’s certainly inaccurate to claim that a CP buying PIA is not able to compete with BT for wholesale access. CPs will be free to provide wholesale access to other companies.”

BT’s offer is subject to negotiation. But there is some confusion as to who should rule on what Openreach must do. Ofcom, the communications regulator, insisted that Openreach produce the PIA offer. But BDUK says “The broadband policy team in DCMS (the department of culture media an sport) is responsible for the development of the government’s policy on broadband, creating a level playing field between incumbents and new providers, and the deregulation of access to infrastructure to facilitate superfast broadband.”

DCMS minister Jeremy Hunt has already made public his displeasure at the length of time Ofcom has allowed Openreach to revise its initial offer. It took Openreach three months from October 2010 to the end of January 2011 to produce its initial reference offer. This was rejected almost at once by its potential PIA customers as being too expensive and restrictive. It then took nine months until October to produce the revision.

BT argues that it wanted potential customers to test the system; critics such as the Communications Management Association, which speaks for business users, say the trials were an irrelevant delaying tactic aimed at introducing uncertainty to competitors’ bids for BDUK money.

BT says it can get copper to go faster. It might. But it would appear that people living at the end of long local copper loops will never enjoy those speeds from BT. Obviously, not many people will suffer this. Why then are they not allowed, even encouraged, to find their own solutions?

The apparent lack of official concern about BT stonewalling, the impunity with which BT has been able to stifle community or competitor broadband projects, and BT statements in Europe about its commitment to copper amount to one thing: some people in high places have been convinced that BT is too big to fail. Like the iniquitous business rates tax, that amounts to yet another tax on Britain’s economic capacity. Can the country really afford it at this time?

Update

B4RN’s Chris Conder points out that B4RN is offering subscribers a 1Gbps service from the start, and that although the first phase is expected to service 1,300 homes, the network is specified to 200,000. This leaves plenty of room for the several thousand homes within B4RN’s reach. I have corrected the speed figure in the article above.