OFCOM’s CEO Ed Richards has told MPs on the Culture Media & Sport Committee that if BT doesn’t come up with a commercially acceptable proposal for sharing its Ducts and Telegraph Poles with rivals, OFCOM will force it to do so:
“If after there is no agreement, and there is a dispute brought to us, we will end up setting a price,” Ed Richards said.
The warning comes after Executives at BT rivals Fujitsu, Virgin Media, TalkTalk, Geo and Vtesse Networks signed a letter to Culture Minister Ed Vaizey warning that BT’s proposed prices for Infrastructure Access were commercially unattractive. The providers claimed that it would be cheaper for them to build their own duct and pole networks than to use BT’s.
A side letter set to BT CEO Iain Livingston showed Fujitsu’s calculations of what a fair market price would be for access to BT’s assets.
Industry analysts believe BT is likely to cut its proposed prices soon in response to OFCOM’s threats. This would cut the cost of rolling out broadband to rural areas.
BT inherited an unrivalled network of ducts and poles that were previously owned by the UK Government. This makes it far cheaper for BT to lay fibre in some areas than for its competitors to do so. OFCOM is keen to ensure that BT cannot exploit this cost advantage to maintain a near monopoly in rural areas. It has therefore asked BT to open up ducts and poles to competitors, to help level the playing field.
BT has agreed to do so, but has set prices that few rivals are willing to pay.
At stake is the profit BT will make on government initiatives aimed at helping the third of the population who are poorly served by existing broadband networks. Once the BBC has completed the switch from analogue transmissions to digital, millions in BBC Licence-fee income will be diverted to funding initiatives aimed at improving rural broadband.
Fujitsu, Talk Talk and others are keen to bid for these lucrative projects, because of the substantial sums being spent, and the relatively small number of bids that would need to be submitted in order to win hundreds of millions of pounds worth of business.
Duct & Pole pricing doesn’t just affect broadband. It also affects the prices of Business Leased Lines. By re-using existing ducts and poles, leased line providers would be able to roll out fibre-optic circuits faster and more cheaply, in rural areas, and everywhere else.
So many leased line providers will be watching BT’s response with interest, and OFCOM’s response with greater interest still.