BT to retain more control over fibre networks
'Virtual unbundling' must be temporary, warns EU
BT will have tighter control over competitors' access to its new faster broadband infrastructure than it has over the old copper network, after the European Commission today approved new regulations.
Rather than the existing system of Local Loop Unbundling (LLU), competitors will access new fibre-to-the-cabinet and fibre-to-the-premises deployments via "Virtual Unbundled Local Access" (VULA). The arrangement was proposed to European regulators by Ofcom.
Under LLU, BT's competitors take physical control of the last mile of copper wire between premises and the local exchange, where they install their own equipment. This allows them to pass on large savings on the cost of transferring traffic from BT's network to theirs.
VULA will differ in that competitors will only get virtual control of customer lines, relying on BT's equipment in exchanges. The likes of TalkTalk and Sky - the most aggressive unbundlers on the copper network - would get some control over the configuration of the equipment.
Further, under VULA, Ofcom will not restrict the prices BT is able to charge competitors, claiming caps would stifle investment in fibre rollout. LLU charges are capped.
In its consultation on the plans, Ofcom said: "With regard to our proposals to allow BT flexibility in the pricing of its VULA products, we consider that this gives BT the opportunity to promote the efficient deployment and use of its new NGA network (and thereby recover the costs of developing it)."
BT has so far pledged £2.5bn to roll out faster broadband to two thirds of the country by 2015.
Ofcom said it expects VULA to last for "at least four years". Today the European Commission insisted it must be a temporary prelude to full LLU.
"In this specific instance, virtual unbundling seems the best option to safeguard competition and enable consumers to benefit from a wider range of services provided over next generation fibre infrastructure," said competition commissioner Neelie Kroes.
"However, this interim solution is not a long term alternative to physical fibre unbundling, which should be imposed as soon as possible."
Currently no major consumer ISPs except BT are offering broadband via the new infrastructure. The cheapest package on BT Infinity - its "up to" 40Mbit/s service, based on fibre-to-the-cabinet technology, which will cover about 75 per cent of the overall upgrade programme - costs £19.99 per month plus £50 connection. ®
Bad me, I read it wrong, I am seeing extra V's now!
Couldn't we have just got Virgin to LLU their existing FTTC infrastructure and avoided this whole cost? I'm all for competing infrastructures to drive down cost but having 40-60% of the populace covered by two systems whilst the rest are covered by none seems a bit silly.
BT's standpoint, a little history
I used to work for a subcontractor doing work for BT, I was speaking to one of the senior managers in BT's Technical Development team one day (he was on the first FTTC trials as a BT senior staff member) since I was curious I asked him why BT had not shifted over to a total fibre network (bare in mind this was about 6-7yrs ago now). His response was: They had done a cost benefit analysis and the total cost to do a complete fibre roll out to most major metropolitan areas would span into Billions of invested revenue. At the time there was not the call or demand for the levels of services that could be made available. Also they would be forced to give other providers equal access to the network with no renumeration for the initial setup costs which would mean the competition would see massive benefit from the network upgrades where as BT would be running at a heavy loss for quite some time.
You can see their point really, why invest a huge amount of capital into upgrades which your competition will benefit from by being able to offer next-gen services without having any of the financial cost of setting up the network. At the time BT were looking at having to foot the entire bill for the roll out which simply did not make it financially viable.
I know a lot of people rag on BT all the time, myselt included; for their general inneptitude in customer service and inter-departmental communication (not to mention the carosel-o-death that is their IVR). However, from a standpoint of a business that survives from making a profit, most sensible people would understand that huge cost in the face of minimum returns simply does not make business sense.