Ofcom announced last month that it would be putting forward a proposal to give BT’s competitors access to its fibre optics, which has been unsurprisingly welcomed by communications providers. Access to high-speed backhaul, which for the most part means fibre, is a critical component underpinning the service quality and competitive economics of next generation networks, and with BT being the dominant, and sometimes only, provider of fibre across the country, other players have found themselves at a disadvantage. Although leased lines are regulated, these are “lit fibre” services offered by BT, meaning that the opportunity to take the fundamental carriage medium “dark fibre” and add value to it is not available.
Ofcom knows that real competition in infrastructure requires alternative providers to be able to differentiate at the deepest level, and have access to the economics at the lowest level. With this proposal, Ofcom is recognising that to be a viable national next generation network competitor, you will need to have access to backhaul on a national basis at the dark fibre level. Their proposal acknowledges that there isn’t a sufficiently competitive market in national fibre backhaul, so they are proposing to give communications providers access to “dark” fibre rather than “lit” fibre. This means the competitor gets access to the fundamental infrastructure, similar to local loop unbundling. This will be at a lower cost to rent than “lit” fibre, and will also allow the competitor to add their own electronics, providing more scope to differentiate their services to customers.
This regulatory intervention as it applies to national fibre routes will be of primary value to mobile operators, who need it to backhaul high-speed data from their radio networks. It does not, however, address the issue of high-speed data to the home, which refers to the routes from the exchange to the street cabinet, and from the cabinet to the house. Providing access to the high speed “last mile” is what the major ISPs need.
However, giving access to the high speed last mile is fraught with a number of practical and technical issues, and is not as simple as doing another copper local loop unbundling intervention, which is what originally turbo charged Broadband competition. In addition, providing access to BT’s last, high-speed mile is problematic from an implementation perspective. The last mile is, in reality, fibre from the exchange to the cabinet and copper from the cabinet to the home, meaning that there is no room in a cabinet to give other providers access and space, as there was in the exchange with local loop unbundling.
For Sky and TalkTalk, who need to upgrade their Broadband offers to higher speeds and maintain the margin on their Broadband services, having regulated access to the local high-speed loop is ideally what they need. However, if this proves to be difficult to implement, then to stay in the market for high speed Broadband and replicate the differentiation and cost structure of local loop unbundling may require the ISPs dependent on BT’s last mile to invest in their own infrastructure, which is a completely different ball game.
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