Consultation questions Market questionnaire
Thank you for the opportunity to respond to this market review.
Yours sincerely
Mike Kiely, Founder, The Bit Commons.
Question 1: Is your organisation active in the provision of leased lines and related services?
Would you be willing to help Ofcom with its analysis of the leased lines markets by
completing a questionnaire?
The Bit Commons is assisting Business Parks, Multi-tenanted buildings, and Local
Authorities seek solutions for areas where good connectivity remains elusive. Most of the
current challenges arise from long copper loops. For instance it is taken for granted that
companies who cannot get the broadband service they need due to line length will be sold a
business communications product as a means of overcoming a distance problem. A
significant industry has built up around this practice. This particular ’solution’ due to the
revenue it creates then acts as a barrier to a VDSL FTTC or FTTP solution being deployed.
The Bit Commons is grateful that Ofcom is open to change the cost recovery regime midterm for the fixed line access market (2014-2017) to accommodate mediums other than
metal paths should there be an economic case and demand to do so.
Conducting a consultation on a market review where the market definition excludes
reference to the access medium and the distance over which it functions is problematic, but
BT’s Group recent portfolio re-positioning of FTTP in response to its decision to switch its
available investment to rights to broadcast live sport may force the issue.
At the PICFOR conference at the House of Commons in late October 2013, the CEO of
Ofcom Mr Ed Richards announced that the current markets definitions were out of date. He
did not specify which definitions but the topics under discussions were generic connectivity
and convergence. The Bit Commons hopes some of the observations, arising from working
with SME’s and Business Parks made in this response may contribute to providing a more
appropriate set of market definitions, product definitions and change in incentives during this
review cycle. We hope due consideration is also given to Landlords, Tenants Association
and Local Authorities who may need to become owners of the passive components on their
land so they can connect to the fibres which are increasingly available on the customer side
of BT’s exchanges. The latter is needed as BT has more economic incentive to protect the
status quo that to invest in infrastructure which has a negative impact on legacy revenue
streams.
Proposed approach to the review
Question 2: Are there any developments since the last BCMR or prospective developments
that may be material to our analysis of competition in this market? Please identify specific
developments, explaining why they may be material.
The last review did not fully consider the impact or growth of the need for generic ubiquitous
connectivity and its impact on the market definitions under consideration in this review and in
other market reviews be it fixed line access market or wholesale broadband access.
Ofcoms powers use market definitions and assessments based on whether an operator has
significant market power or not in these ‘markets’. The UK communications market
continues to develop and change very rapidly as customers’ expectations of their devices
and their connectivity grows. Some legacy services have an endurance based on a specific
purpose but it only appears to be a matter of time before a software application using
general computing devices can be deployed to supersede services reliant on old purpose
built computing. These general devices use IP Networking as rule and thus are using the
same internet technologies used in the public internet and Next Generation Access
networks. Some equipment may be hardened with better engineered components but the
underlying operational principles and standards are the same.
The challenge in many cases is that customers have to buy an access product not for the
properties of that product but for the medium used, be it coaxial cable, fibre, or wireless as
they provide the additional bandwidth and throughput needed.
This suggests we re-examine the properties of the Metal Path facility and ask the question
whether the ‘telephony service’ based definition is adequate for todays connectivity usage
and if not, are other types of ‘path facility’s’ needed and who is liable to provide them. Thus
significant market power is less about an SMP in a particular product but almost entirely
geographic and distance from exchange related and whether some alternative is available. It
would also suggest that removal of an SMP label ought to be tied to the availability of an
alternative access medium in the geography where the product is available. In short SMP
categories are retained where FTTP service (or fixed wireless) is not available to order, or
the means and industry agreements do not exist for customers to create an alternative in
some way. It would appear we need a new market definition to support pro-competitive
access to 1 Gigabit networking capability.
There are two major changes which support the switch to generic high throughput
connectivity and one which is fundamentally at odds with these trends. The latter if
understood properly, or more appropriately fully accepted would lead to Ofcom having to
consider significant more activity in passive infrastructure access, the mutualisation of those
assets where no investment is forthcoming, and the promotion of a policy where passive
infrastructure on private land is owned and managed by the Landlord, Tenants Association
or Local Authority responsible for maintaining infrastructure in Business Parks.
The major changes which reinforce the customers need and expectation for connectivity is
the UK Governments investment of £1.2bn in rural fibre deployment and the release of 4G
spectrum including a detailed coverage obligation on one spectrum holding. Populating the
customer side of every exchange area out to most PCPs(street or hamlet) with fibre will
provide ample opportunity to push that fibre further so problems arising from long copper
loops can be addressed.
The most surprising and indeed peculiar change is BT Groups decision to position fibre to
the premise access from Openreach as a premium product. The notion of fibre access itself
carrying a premium as opposed to a service having a premium is strange in terms of the
consequences for all UK users. The strangeness is best seen when fibre when used in the
core network or in submarine cables is not considered a premium, it is just a way of carrying
more bits for a lower cost. The BCMR need to confirm with Openreach its plans and
positioning of FTTP for business. If fibre access is being presented as a premium service,
then perhaps better access to BT passives is needed at rates which will permit a market to
develop for those who have a different perspective.
In most multi-tenanted and business park environments, the nature and type of access is
not the source of value unless it is made scarce by portfolio considerations, but the
management and maintenance of service levels for a multitude of services using the
infrastructure creates value.
This presents another possibility. If incumbents cannot make the business case to invest, in
the case of Business Parks and multi-tenanted complexes, perhaps a different set of
incentives or requirements are put in place which would cause this to occur. Perhaps it is
the landlord or collection of tenants that put in place the necessary passive infrastructure
(tubes fibres, fibre rings and patch panels) with a network maintenance agreement. This is
then made available for Openreach and others to provide service by using the fibres on site.
This solves the cost of the final drop and increases competitive tension. It will require Ofcom
to assist in putting in place an industry agreement to help overcome the stranglehold
imposed by BT wayleave agreements but there are precedents in other markets, most
notably France. This is not campus networking but an open passive networking designed to
maximise customer choice and competition.
It may require Ofcom and indeed Government to define a Gigabit capable access as a new
market distinct from one defined by the current Metal Path Facility – (whose properties are
defined by the need to support a distinct PSTN voice service); where the obligation is not on
BT but on the land owner to provide competition ready passive infrastructure ready for
network providers to connect too. DCMS super connected voucher scheme is allowing
some Landlords to test this possibility and where it can be used in this manner, then
customers can gain access to 1Gig capable infrastructure and a choice of service providers
where the wholesale rates are less than £20 a month for retails products of 30-100Mbps plus
for £30-£80 a month rentals. This has to form part of any definition for best superfast
connectivity in Europe.
The relevance to this market review is that it permits mis-sold private circuits to be replaced
with an appropriate pro-competitive infrastructure which reduces dependency on BT
Openreach’s enduring monopoly in the local loop. Rather that defining a new passive
infrastructure access product, we create a new open access product by placing the
requirement on the Landowner/Tenants Association and Local Authorities to makes their
properties ready to access 1Gbps services from a range of providers using industry
standards for duct, fibre, and patch panels.
The limits of BT’s ambition (or business model) has been defined by the provision of a VDSL
cabinet (heavily subsided in rural urban in-fill, and entrances to many business parks) as a
pre-requirement to provide a wholesale fibre on demand product costing £750 to connect
and a £100 a month wholesale rental. This probably reflects the absolute economic reality
for BT. This is a useful demarcation point from which to seek something better for the UK
consumer.
So perhaps Ofcom could ask the following question as part of this review. Given the market
of itself is unlikely to provide direct access to all fibre services for generic connectivity,
should additional steps be taken to promote a model where Landlords, Tenants Association
and Local Authorities are obliged or just told that access to 1Gbps capable networks at
affordable rates will be dependent on them to ready their properties for that purpose? The
market as it is currently structured while delivering a great deal will be unlikely to get that far
without a change in how these services are bought and provisioned.
This is not a big change in itself as landlords purchase structured cabling systems all the
time. It would amount to a buying and adjusting cabling systems for a new purpose but with
industry agreement and some co-ordination of purpose and intent reflecting the reality that
the incumbent just cannot be expected to invest to at best keeps its wholesale revenues flat.
Quality of service – section not responded too.
Question 3: What is your experience of the quality of BT’s provision and repair of wholesale
leased line services? Are there any consistent trends? Can you provide evidence to support
your views?
Question 4: Do the KPIs that BT publishes / shares with industry give you sufficient visibility
of its performance? If not, please explain what further information should be provided and
why.
Question 5: If there are quality or timeliness concerns, how do these affect your business
and how do they affect your customers? Please provide evidence to support your views.
Question 6: Do BT’s current provision and repair services for wholesale leased lines meet
your customers’ needs, for example in relation to lead times, keeping appointments or
adhering to agreed delivery dates? If not what changes do you think BT should make to its
provision and repair services?
Question 7: Do you consider BT has appropriate incentives to provide the quality of service
which you and your customers require? If not, what changes do you think should be made to
BT’s incentives?
Broadband substitution
Question 8: Can broadband, particularly NGA-based services be used effectively for the
delivery of business connectivity? Has this changed over the last three years? How do you
think this might change over the coming three years?
The FTTC rollout brings fibre services deep into the customer side of the BT exchange of the
network to the PCP or street level. As a medium and a resource then there is no reason this
resource cannot be used for Business Connectivity if configured by service providers to do
so.
It is especially relevant to SME customers who have been sold a private circuit or a partial
private circuit as a solution to a poor broadband service where the issue is line length,
particularly where a customer site is more than 2 kilometres from the exchange. Across
some 500 tenants in three business parks some 26 have purchased a partial private circuit
to an internet node for the purposes of solving a broadband throughput issue. The extra
construction charges and on-going rentals while relevant to private circuits seem irrelevant if
the available access product definitions were constructed about generic networking capable
of supporting best in Europe access speeds. I reached an initial conclusion earlier that it
might be better to treat direct fibre access as an entirely new access market with new
demarcation points for multi-tenanted buildings and private land.
For single small businesses the approach of selling a partial circuit to fix a line length issue
looks dated given the possible re-use of the cost recovery available on the d-side and drop
wire for mediums other than copper. The drop-wire costs are recovered over ten years and
are some £17 per annum of the £90+ permitted. The notion of being un-able to re-use fibres
on the customer and street level and using the available cost recovery on the d side and
dropwire to encourage fibre access does seem out of date. This is more so where
Government funding is providing some 77% of the funding in what were considered NGA
white areas.
The real changes in three years is the volume and quality of connectable devices, which
has driven expectations for ubiquitous high throughput connectivity.
Perhaps Ofcom should ask the following question. Given the level of private and public
investment in getting fibres into our streets, villages and hamlets, how do we best support
companies and businesses to directly connect to these facilities? How do we complete the
most difficult parts of the jigsaw which would allow SMP obligations to be removed from TI
and AI business communication products?
Question 9: Are new business customers that would traditionally have taken leased line
products now opting for a broadband service? If yes, what type of broadband service are
these business customers taking.
Most business applications are not dependent on micro-second or sub 200 milli-second
delays. The need for generic speeds of 10-30Mbps with the capacity to periodically access
several hundred Mbps is important. The clients I am serving would be expecting to pay less
than £100 a month for 100Mbps where SLA are available for key applications, the tighter
the SLA the greater the premium, but best effort networking is typically delivering adequate
packet loss, delay and jitter in the busy period for most applications. In addition they would
expect the SP to be able to extend capacity to 1Gbps without being punished with ECC or
connection fees. SME would expect to pay for all other value added services including
voice, conferencing, security, and cloud services as part of an enhanced package.
If a customer application needs the low loss and delay characteristics of a private circuit then
they should and can pay a premium. The decision on this could be better informed if the
notion of best effort networking was itself bound or defined within accepted budgets for
packet loss, delay and jitter in the peak periods for traffic to and from internet peering points.
These properties already exist and should be revealed so customers become more aware of
the nature of the products we purchase.
Question 10: Are existing business customers actively migrating from leased lines to
broadband products? If yes:
• which types of business customer are migrating?
Where the customer was sold a partial private circuit to solve a distance related problem, the
arrival of an improved Broadband service does create the opportunity to migrate from a
private circuit when contracts come up for renewal. The ability to buy an all fibre access
product will increase the likelihood of this change. The emergence of a range VLAN based
services off wholesale platforms will increase this trend further.
Those with the highest propensity to migrate are those in the media sector. Increasingly to
remain competitive in this sector, requires you use your connectivity to approve and then
distribute photographs, to re-touch and approve digital imagery, and to re-purpose content.
This is now extending to every studio becoming part of an extended broadcast facility, which
means there is a demand for on-site passive fibres.
• which types of leased line product (interface and bandwidth) are they migrating from?
My clients are mostly migrating from EAD to Broadband. Customers with TI tend typically to
need to re-write the application software which then includes the consequent change in
networking when the application is ready to deployed.
• which types of broadband service are they migrating to?
If the opportunity exists they switch to an FTTP solution, 100Mbps symmetric service with a
capacity to burst by a factor of three. Customers are expecting less than a £100 a month for
a lowly contended service. For customers on less than 10Mbps a second they perceive the
need to upgrade and some are beginning to invest.
• does switching vary between different areas of the country (e.g. depending on NGA
availability, the number of broadband providers present or other factors)?
The customer need is beginning to standardise, or at least the underlying aspiration is
finding expression in a proposition, but the meeting of that need currently relies on someone
other than BT to be present to trigger the solution need. Where no competition is present
BT is likely to provide a gap funded VDSL solution and an already uncompetitive Fibre on
Demand product. The latter is more designed to absorb public subsidy that it is to meet
customer need.
• What are the barriers (if any) to switching from leased lines to broadband products?
Largely it is availability, but TI tend to be built using legacy components and using software
which has to be re-written and tested before a full replacement can begin. In some cases
the TI based application is also reliant on some physical element of the telephony
infrastructure.
Passives
Question 11: Do you have any comments about the scope of our planned work on passive
remedies?
BT has re-positioned fibre access as a premium product. This is quite odd given LRIC is
lower for fibre, but understandable if legacy revenues are to be protected. This change
presents Ofcom little option but to re-test the appetite for PIA for business usage as well
encouraging new pro-competitive models where the landlord may need to own the on-site
passive infrastructure if they are to gain access to the most affordable offers. There is a
particular need to pursue this in business parks and in towns and city centres where the
business customers served by direct exchange lines have been by-passed by the VDSL
cabinet rollout.
Question 12: Which of the following types of passive remedy might be technically feasible
and suitable for leased lines?
• Physical Infrastructure Access (i.e. duct and pole sharing);
• Dark fibre;
PIA and DARK Fibre should be considered. However if BT considers fibre itself as a
premium access product, then access to passives should be focused upon.
If however fibre is treated in the same manner as copper is for cost recovery under a
modified settlement for fixed line access cost recovery, then dark fibre could work more
simple. A fibre path facility to a handover point would be a very interesting addition to a
access portfolio. This would then permit SMP to be removed from existing TI as the
opportunity to replace the legacy service would appear in time. This might more suitable for
businesses who are isolated and not clustered together.
Writing this as a requirement just shows how far the market is advancing and how perhaps
how far behind the market definitions appear to be.
A re-examination of PIA therefore should include the assessment of the builder operator
model described earlier.
• Wavelength unbundling; I will interested in reading inputs from manufacturers.
• Other passive remedies (please specify).
The ownership of any new passives designed for competition at multi-tenanted sites and
business parks should be examined with a view to establishing new pro-competitive
approach to on site access. To date the BT way leave dominates the access discussion and
prevents direct access competition from developing.
It would be very helpful to new site owners and for those refurbishing sites or buildings if
industry agreed that the on-site passive infrastructure remains the property of the deed
holder, and thus any new fibres including duct and patch panels are the property of the deed
holder, who permits that passive infrastructure to be shared amongst those wishing to
provide services on-site.
This has been tested in a recent example in Shoreditch and several other landlords are
attempting to follow this example.
Question 13: For what applications could communications providers use each of the types of
passive remedy listed in question 12 above?
Passive infrastructure assists the customer make a complete transition from copper to fibre
based access, thus it is the accumulated need of the applications combined which is driving
the change.
Question 14: How might passive remedies extend the geographic reach of infrastructure
competition?
The change in ownership of the on site passives for fibre access would encourage
competition to use BT passives and OLO’s to extend their own networks. I would expect
some reciprocal sharing arrangement would eventually emerge amongst the main players
and this would account for most of what would be needed.
Ofcom would still need to support a passive product or dark fibre for smaller CPs until these
industry agreements emerged.
Question 15: Would the presence of physical infrastructure belonging to other CPs affect
usage of passive remedies? For example would you expect passive remedies to be used
only or mainly in areas where only BT has passive infrastructure or would you also expect
passive remedies to be used in areas where other CPs have passive infrastructure?
Access to all providers is needed but there could some choice in how this is supported as
long as the passive components on sale permitted a wholesale fibre access line to emerge
at c£12-£20 a month to be re-sold. The latter is an emerging international benchmark.
The notion of reciprocal infrastructure sharing would only take hold if there was a supporting
effort by landlords and local authorities to ready their buildings to access gigabit ready
networks.
Question 16: What are the benefits that passive remedies might offer in comparison to active
remedies? Please consider specifically:
• Service innovation benefits e.g. the ability to differentiate service features and functionality
(such as fault finding, configuration options, etc.)
• Network innovation benefits e.g. the ability to configure the network in a different way to
BT’s network configuration.
The use of symmetrical services for uploading is an obvious one. The use of multiple VLANs
will bring cheap innovative services, particularly the remote monitoring of networked
devices.
• Technology innovation benefits e.g. the ability to adopt new technologies, or introduce new
technologies earlier than they might otherwise have been introduced.
The availability of fibres for onsite use means studio space can be readily used for
Broadcast functions. It will also permit the formation of collaborations amongst SME.
• Avoiding duplication e.g. the ability to avoid the duplication of network elements for network
monitoring purposes.
The Building Operating model which establishes a common and shared set of onsite
passives reduces greatly the amount of duplication and clutter.
• Other benefits (please specify)
We are still discovering the potential of connectivity so the removal of any barrier to
discovering that potential is worth consideration.
Question 17: How valuable would the innovation benefits of passive remedies be?
Would they be sufficient for you to choose passive remedies if there was no overall cost
advantage compared with active remedies (i.e. if the price of the passive remedy was
exactly equal to the price of the active remedy less the cost of the network components that
you would need to provide)?
BT Groups performance in its response to the Governments Rural NGA programme,
documented by the NAO and PAC makes clear that relying on one approach is to be
avoided and alternative models which provide customer choice need to be actively pursued.
Question 18: What are technical and operational challenges associated with deploying and
using passive remedies and how might these be addressed?
It is inevitable BT will drag its heels on this matter so perhaps testing the building operator
model used in combination with a proposal for reciprocal access might bring the necessary
impetus to increase overall investment and competition.
Mike Kiely
Founder, The Bit Commons