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BT and Openreach sway Ofcom on wholesale prices for duct-sharing

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The UK regulator has changed the way it plans to calculate costs for duct-sharing, following an intervention from Openreach and its owner.

The change comes in the latest version of Ofcom’s consultation on its review of the wholesale fixed market.

Ofcom put its proposals to the industry in January 2020, and its new ideas reflect mainly objections from Openreach, the last-mile fibre and copper provider that is owned by BT, and from BT itself.

The new regulations, which will affect all operators using BT and other carriers’ ducts, are due to come into force in April 2021.

In the original plan Ofcom looked at physical infrastructure access (PIA), dark fibre access (DFA) and dark fibre inter-exchange connectivity (DFX). The regulator initially wanted to base costs for PIA “on utilisation at a particular point in time”, says today’s document.

Now Ofcom said it plans “to base the contributions that PIA customers should make for multi-bore duct and chamber products using a simple percentage figure”.

Ofcom said it received only two responses to its January proposals, from Openreach and from BT Group, which owns Openreach.

“BT Group referred to Openreach’s response and made the same arguments,” said Ofcom. But they were clearly enough to sway Ofcom.

“Openreach agreed with our objectives but argued that basing the shares of unit costs on the latest utilisation data (ie average number of 25mm diameter sub-duct equivalents in the relevant duct) was not appropriate and would lead to pricing instability.”

In some cases, Openreach told Ofcom, “utilisations had increased reflecting its own FTTP [fibre-to-the-premises] network deployment and would rise further in the short term as more fibre is deployed and fibre and copper networks are run concurrently”.

That would mean PIA users pay “a falling share of unit costs” over time, “with Openreach being asked to contribute an increasing share of costs even though its share of value (in terms of the proportion of potential customers it could connect to) remained unchanged”.

It also notes that as copper cables are retired, long-term utilisations are likely to fall.

As a result of Openreach and BT’s arguments, there will be “a simple percentage figure” for the cost of duct access.

“We think this sends a clearer signal to all stakeholders that the share of unit costs will not automatically change (ie, fall) as a result of Openreach or rival telecoms providers deploying more network in BT’s physical infrastructure,” said Ofcom.

The proposal is still a consultation, and interested parties can comment to Ofcom by 8 December. “We expect to publish our final decision relating to the wholesale fixed telecoms market review by 31 March 2021.”