Proposed variation to BT’s Undertakings under the Enterprise Act 2002 related to Fibre-to-the-Cabinet

  • Start: 03 March 2009
  • Status: Closed
  • End: 17 April 2009

1. On 22 September 2005 British Telecommunications plc ("BT") offered, and Ofcom accepted, undertakings ("the Undertakings") pursuant to section 154 of the Enterprise Act 2002. The Undertakings were accepted by Ofcom in lieu of making a market investigation reference to the Competition Commission in relation to the provision of fixed telecommunications. Ofcom's reasons for accepting the Undertakings are set out in full in the document entitled Final statements on the Strategic Review of Telecommunications, and undertakings in lieu of a reference under the Enterprise Act 2002. A copy of the Undertakings, as amended, is available at: the Undertakings.

2. Section 18.1 of the Undertakings allows BT and Ofcom to agree to vary and amend the Undertakings. Following a consultation with stakeholders, on 11 June 2009, BT and Ofcom agreed to a variation (the "FTTC Variation") to allow Openreach to control and operate electronic equipment necessary to provide super-fast broadband services using Fibre-to-the-Cabinet ("FTTC") technology. Prior to the FTTC Variation, the Undertakings did not permit Openreach to control and operate such equipment. Ofcom agreed to the FTTC Variation to deliver benefits to consumers by supporting early investment in super-fast broadband and, where appropriate, promoting competition.

3. As part of the FTTC Variation, section 5.59 of the Undertakings introduced an obligation for BT to review, by 31 December 2011, with Ofcom whether sections 5.52-5.58 of the Undertakings, i.e. those that relate to FTTC, need to be varied, superseded or released in the light of FTTC deployment, as well as relevant market and technological developments. Section 5.59 enables BT and Ofcom to agree that: (i) no such changes are required; or (ii) that additional commitments, variations to, or release of, existing obligations in the relevant sections, are required.

4. We are publishing this Update to inform stakeholders that, in accordance with section 5.59, we are not proposing that any changes be made to sections 5.52-5.58 of the Undertakings. The purpose of section 5.59 was to consider the obligations in the Undertakings related to the FTTC variation. It was not intended to require a comprehensive analysis of the market for super-fast broadband services including FTTC. In reaching this conclusion we have considered the development, provision and operation of FTTC and other technological developments since the FTTC Variation and the outcome of the Openreach's recent consultation pursuant to Section 5.56 of the Undertakings.

Policy developments since the FTTC Variation

5. Since the FTTC Variation was agreed, Ofcom has reviewed the market and technological developments related to super-fast broadband services in the context of the Review of the Wholesale Local Access market ("WLA Review") in 2010. The WLA Review considered FTTC, maintained an obligation on BT to supply Sub-Loop Unbundling ("SLU") and also imposed a number of additional regulatory obligations on BT, such as the provision of Physical Infrastructure Access ("PIA"). The WLA Review considered whether BT should be required to consume PIA or SLU in the provision of its own Active FTTC Product. The WLA Review concluded that this was not necessary, but required BT to publish internal reference offers for SLU and PIA.

6. The WLA Review also required Openreach to supply SLU and PIA on a cost-orientated basis and we recently considered whether the charges set by Openreach for three of its SLU products met this requirement, when we issued a determination on a dispute related to SLU charges.

Openreach consultation on FTTC Passive Inputs

7. Under section 5.56 of the Undertakings, Openreach is required to conduct a consultation with industry in order to assess the demand for and Communications Providers' ("CPs") views on the design of FTTC Passive Inputs and Backhaul Products provided over the optical fibre part of FTTC.

8. Openreach published its consultation on 10 October 2011 and received a single joint response from Digital Region Limited ("DRL") and Thales.

9. The DRL/Thales joint response expressed concerns in relation to the SLU product development processes and Openreach's obligations under the Undertakings to use similar components, systems and processes in the provision of FTTC Passive Inputs as it uses for its Active FTTC Product (i.e. Generic Ethernet Access ("GEA")), where reasonably practicable and on the most cost-efficient basis. DRL and Thales consider in their joint response that it is difficult for CPs to judge whether Openreach is complying with its regulatory obligations because there is insufficient information to assess compliance. Openreach is of the view that the views expressed by DRL/Thales on the SLU product attributes and SLU provisioning processes are better addressed through the working group process.

10. Openreach has concluded its consultation and informed us that it is not seeking any changes to sections 5.52-5.58 of the Undertakings for the purposes of the review under section 5.59.

Conclusion and recommendation

11. For the purposes of section 5.59 of the Undertakings, we have considered with BT whether sections 5.52-5.58 of the Undertakings need to be varied, superseded or released in the light of FTTC deployment, and relevant market and technological developments.

12. Given the response to BT's consultation, the fact that BT is not seeking any changes to the FTTC Variation and that regulation in this area has been reviewed by Ofcom recently and comprehensively by the WLA Review in 2010, we are not proposing that any changes be made to sections 5.52-5.58 of the Undertakings. In our view, any future changes to regulation in this area, including in relation to the development, provision and operation of FTTC, are most appropriately considered as part of the next WLA market review, which is due to commence in 2012. This will ensure that all regulation and related products in relation to super-fast broadband can be considered together in a comprehensive review of the relevant markets.

13. Regarding the specific comments made by DRL/Thales in response to the Openreach consultation, we note that the Undertakings place a requirement on Openreach to use the same component, processes and systems in the provision of FTTC Passive Inputs as it uses itself for the Active FTTC Product where reasonably practicable and on the most cost-efficient basis. The Equality of Access Board ("EAB") is tasked with monitoring the provision of FTTC Passive inputs and we consider that if DRL/Thales or other stakeholders have concerns with Openreach's approach to meeting these obligations, they should raise these with the EAB in the first instance. In relation to the SLU product development process, we note that the Undertakings oblige Openreach to consider statements of requirements submitted by CPs and to ensure that it meets CPs' reasonable demand for FTTC Passive Inputs. Therefore, we consider that these issues are best addressed through industry working groups, subject to our recommendation in this regard set out below.

14. Developments to GEA-FTTC are currently reviewed through the GEA Trialist Working Group with attendance and input from CPs and Office of the Telecommunications Adjudicator ("OTA"). In addition, Openreach leads monthly "open to all" industry calls to review "in-life" issues. CPs can also make use of the Statement of Requirements ("SoR") process to submit new requirements to Openreach. In our view, these arrangements are appropriate given the current stage of the product lifecycle and super-fast broadband deployment in the UK. However, Ofcom considers that, in due course, an industry-led working group (rather than Openreach-led) for FTTC products could be beneficial to further product development and deployment of FTTC. Such a working group may be considered a more transparent process by the CPs and give them further confidence that their concerns and requirements could be discussed with the wider industry, while Openreach retains control of the investment decision. We recommend that Openreach should review with OTA its working group structure for FTTC products during the course of 2012 and, more specifically, when further CPs (other than BT's downstream divisions) deploy Openreach's FTTC-based super-fast broadband services at reasonable volumes.


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