Thursday, February 03, 2011

Ofcom update - WLA, SLU, LLU, PIA, VULA, GEA, ALA and WBA in support of NGA - so that's all clear then?

I never followed up my post last March on Ofcom's two consultations on ways to encourage investment in next generation access (NGA) - on wholesale local access (WLA) and wholesale broadband access (WBA) - with details of their outcomes. This post relates to the WLA consultation and developments since, I'll cover the WBA one separately. So here goes, let the TLA-fest commence...

The WLA consultation (where WLA relates to fixed telecommunications infrastructure - the physical connection between a consumer's premises and the local telephone exchange) covered a range of proposals to encourage NGA deployments, including physical infrastructure access (PIA), more commonly referred to as duct and pole sharing. The idea here that access infrastructure (principally BT's), in the form of underground ducts and telegraph poles, should be opened up for use by other communications providers (CPs) to reduce the cost of deploying fibre. The consultation also described a new mechanism called virtual unbundled local access (VULA) designed to replicate local loop unbundling (LLU) in an NGA (fibre) context, as well as considering existing mechanisms like LLU and sub-loop unbundling (SLU).

Following the consultation Ofcom announced its WLA proposals in a summary statement on 7th October 2010 (press release here and full document here). In addition to requiring BT to continue to offer its existing access mechanisms, the bulk of this statement set out how the two new interventions, PIA and VULA, should be provided. As part of the consultation, Ofcom commissioned an analysis of how PIA costs compared with deployment based on a wholesale NGA product such as BT’s Generic Ethernet Access (GEA) product:
"The modelling showed that a shared infrastructure NGA network deployment would have significantly higher fixed costs than the GEA product at current prices even under very favourable assumptions about infrastructure sharing. These fixed costs mean that a shared infrastructure based NGA network deployment would be more expensive for a CP than GEA at all but high customer penetration. This suggests that it may be a less attractive option for CPs in areas where BT has deployed its own NGA network, at least while demand for NGA services remains uncertain. A PIA obligation looks to be a much more attractive option for areas where BT has not deployed an NGA network. In these areas a PIA obligation would make entry easier by reducing CPs’ costs and putting them on a more equal footing with BT. This could speed up the initial NGA network deployment.”
Which suggests PIA may be less of a silver bullet than it's been hailed as in some quarters perhaps? Ofcom's statement also noted that in future PIA obligations won't solely fall on incumbents with significant market power (SMP):
“…the EU regulatory framework has recently been amended and the amendments have to be translated into UK law by May 2011. One of the amendments relates to infrastructure sharing, widening NRAs’ powers so that they can require any CP to share its physical infrastructure rather than just CPs designated as having SMP. We plan to undertake some scoping work and expect to announce in the near future how we propose to consider the case for exercising the new infrastructure sharing powers.”
 ...where NRA stands for national regulatory authority. Ofcom's statement required BT to provide a reference offer (RO) within three months of its statement, to be followed by a review process before launching. Openreach published its RO together with indicative pricing (£21 per pole and 95p per metre) on 14th January 2011 (related Ofcom annoucement here). A service launch is due in February 2012 if Ofcom's timeline is followed (and my maths is correct). Ofcom’s statement acknowledged that “that defining access arrangements for poles is likely to be more complex and more time consuming than for ducts”, and therefore granted BT six months to produce an RO for poles, as opposed to the three it was allowed for ducts – so is this due in April/May 2011? Interestingly, the related BT press release mentioned that a commercial launch is expected is summer 2011, which is ahead of Ofcom’s schedule. Computer Weekly reported a mixed reception to Openreach's offer, so it will be interesting to see how the review process develops.

The most contentious aspect of PIA seems to be its scope, or the purposes for which it can, or in this context, can't be used. This scope was set out on page 117 of Ofcom's March 2010 WLA consultation:
“The purpose of the proposed remedy is to promote competition and infrastructure investment in the deployment of both FTTC and FTTP NGA access networks. We therefore propose that the geographic scope and the allowed uses of the remedy should be limited to this purpose. We are therefore proposing that the scope of the remedy should encompass all infrastructure in BT’s access network (i.e., ducts, poles and associated infrastructure such as chambers), where the access network is defined as the network between business and residential end users premises and their serving BT exchange. Physical infrastructure beyond serving exchanges would fall outside this scope. Thus, CPs would not be able to install cables in sections of BT’s network outside the access network, for instance between local exchanges and metro-nodes. We are proposing that use of the remedy should be limited to the deployment of access networks for: Broadband and telephony services; and SLU backhaul services between cabinets and serving MDF sites. Thus operators would not be able to use the remedy to install cables for other purposes. The installation of cables for backhaul circuits or leased lines would not be permitted. We would consider whether it would be appropriate to extend the scope of the remedy to other services in the relevant market reviews.”
These limitations on PIA have brought criticism, particularly from Geo which published this briefing paper on the matter. CEO Chris Smedley also addressed this in his presentation to NextGen10 in November 2010. From Geo's briefing paper:
"The limitations on duct and pole access will severely harm investment and limit returns to public  and private investors. It is short sighted to restrict an investor from exploiting the full capabilities of  the access network in this manner. Further, it perpetuates BT’s monopoly, gives it an unfair  advantage over other operators, as it is not subject to these restrictions, and it is free to fully  commercialise its network. The restrictions will be particularly detrimental in rural and remote areas where wireless and  mobile technologies will be, or form part of, an effective broadband solution, together with VDSL  and fibre roll-outs. By excluding these technologies it will eliminate any “village pump” investment  models or hybrid fibre/wireless or mobile deployments."
Ofcom's justification for their approach is set out on page 110 of their statement, in relation to the limitations on geographic scope:
“We have proposed PIA as a remedy to promote effective competition in the WLA market and therefore the geographic scope of the remedy that we can impose is restricted to the WLA market, i.e., local access networks. It would not therefore be possible to extend the scope of PIA to include backhaul or core network infrastructure as part of this market review. However, we recognise that fibre NGA networks will be free from the copper network transmission limitations and may therefore adopt a different topology, particularly in relation to their reach (i.e., the area served from the access nodes) which in some cases may be larger than for copper local access networks…we consider it would be appropriate to allow PIA to be used over an area that more accurately reflects local access in the NGA context. We have therefore modified the SMP condition (FAA12) to allow PIA to be used in infrastructure between end user premises and the serving BT NGA exchange (existing and planned) or other BT exchanges that are broadly equivalent in terms of distance from the end user premises and level of aggregation… It is important to note that the geographic scope is intended only to limit use of PIA to local access deployments, and does not imply a requirement for CPs to serve premises from BT’s NGA exchanges (though they could if they wished to), and will allow them to serve end user premises from their own exchanges and to ‘break-out’ from the BT duct/pole network at intermediate points before the BT NGA exchange to connect to their own networks.”
And the justification for the limitations on the purposes PIA can be used for is on page 111:
"Leased line and backhaul services are currently regulated under the business connectivity market, where BT is required to provide these products on a cost orientated basis and in many cases in accordance with a specific charge control. We, therefore, consider that introducing PIA as a remedy into the business connectivity market could undermine the remedies that we have already imposed in that is our view that it would be inappropriate for us to extend the scope of PIA without assessing the need for and impact of a PIA remedy in the business connectivity market. We have therefore decided to maintain the scope of PIA as proposed in the consultation document, allowing it to be used for the deployment of access networks for broadband and telephony services and also for SLU backhaul services between cabinets and the local NGA exchange. We will consider the case for allowing PIA to be used for leased lines in the next business connectivity market review, which we intend to commence in the first half of our view, extending the scope of PIA to include leased lines would be unlikely to stimulate much additional investment in NGA networks in the short term.”
 ...which rather suggests to me that it would perhaps have been more sensible (and in keeping with the wishes of the industry) to consider PIA more broadly in the first instance, as a mechanism cutting across all market sectors, not just in relation to the local access market?

Moving on to VULA, the other new intervention, here's what Ofcom concluded:
“…BT will be required to provide VULA services on fair and reasonable terms, conditions and charges as soon as reasonably practicable to all CPs who reasonably request in writing such services. Further, we conclude that the key characteristics that we set out in the consultation document should be maintained, noting that there are likely to be many additional considerations when developing and implementing the detailed product specifications. We also conclude that we should implement our proposed specific form of no undue discrimination. Finally, we conclude that there should be no explicit price regulation of the VULA products and that instead BT should be given pricing flexibility. However, we consider that the requirement on BT to provide VULA on fair and reasonable terms, conditions and charges may be important to ensure that BT does not introduce inappropriate pricing structures.”
So no regulated pricing for VULA products is currently proposed. Ofcom also acknowledged BT's development of its Generic Ethernet Access (GEA) NGA wholesale products for CPs, which will be the means through which it addresses its VULA obligations, though some concerns still remain over these and there doesn't yet appear to be a definite timetable for availability. From the next steps section of Ofcom's WLA statement:
"It is clear from the responses, and from general discussion with industry, that further development of BT’s GEA products is needed to meet the demands of BT’s CP customers. We consider that these developments should be considered and progressed by the industry working groups, with the facilitation of the OTA (Office of the Telecommunications Adjudicator), in the first instance. We would however note that BT is under a general obligation to provide network access on reasonable request. CPs can therefore formalise there requirements under this requirement and if BT and CPs are unable to agree there is the option for the matter to be submitted to us as a dispute."
So VULA's a goer, but there's a way to go before it's a reality. The recently finalised active line access (ALA) documents prepared by NICC (commentaries here and here) should assist with bringing products to market?

Whew. Right, next up: the outcomes from the WBA consultation...but not just yet.

1 comment:

  1. I had assumed that the PIA sharing was limited to the access market as that's the one with SMP where OFCOM can mandate sharing in the first place ?

    The widened powers to include non-SMP could change that of course.