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Variation to BT’s Undertakings under the Enterprise Act 2002 related to Fibre-to-the-Cabinet

Statement published 11|06|09

Summary

1.1 This Statement relates to BT’s investment in super-fast broadband using Fibre-to-the-Cabinet technology (“FTTC”). It sets out and explains our decision to agree to a variation to BT’s Undertakings under the Enterprise Act 2002 in relation to that investment.

1.2 The variation allows BT’s Openreach division to control and operate electronic equipment necessary to provide super-fast broadband services using FTTC. Before this variation came into effect Openreach was not allowed to control and operate electronic equipment in BT’s access network.

1.3 On 3 March 2009 we published a consultation document(-1-) describing the variation proposal and explaining why we were inclined to agree to it. The document launched a consultation (“the Consultation”) and invited comments on our reasoning and on our initial conclusions. The Consultation closed on 17 April 2009.

1.4 We received 12 written responses. None opposed in principle the proposition that Openreach should be able to control and operate the electronic equipment necessary to provide services using FTTC. However, a number of concerns were raised, particularly about the adequacy of BT’s proposed commitments as they related to its wholesale active products and to the passive inputs it would make available, in the event of reasonable demand, to allow CPs to build their own FTTC-based network by deploying equipment in street cabinets.

1.5 Before agreeing the variation we considered each of the issues and concerns raised by the responses. Where appropriate, we have sought modifications to the variation that BT subsequently agreed. We explain our considerations in this Statement.

1.6 Respondents raised a number of points about Openreach’s FTTC Generic Ethernet Access (“GEA”) wholesale product. We consider that this active (or electronic) wholesale product could be important in enabling effective competition in the provision of super-fast broadband services to consumers. One concern raised was the possibility that GEA may not offer sufficient flexibility to allow CPs to differentiate their retail propositions. We agree that such flexibility is important to enable effective downstream competition, and have previously consulted on technical requirements which set out the goals that an active wholesale product should achieve(-2-). BT has confirmed to us that it intends that GEA will reflect fully the goals described in those requirements. We have therefore agreed with BT a change to the variation to make this intention manifest. We recognise that this change does not provide detailed product specifications, and consider that the appropriate process for their development is engagement between Openreach and CPs.

1.7 We have also considered requests to make Openreach’s obligations in respect of its consultation more explicit, and to assure further transparency in Openreach’s approach to its consultations. Following these considerations, we have agreed with BT changes to the variation which commit Openreach more explicitly to develop its product roadmap by consulting with its customers and to document clearly the reasons for the decisions it takes on questions put forward in its consultations on active FTTC products.

1.8 Some respondents were concerned that the proposed deadline of 2011 for Openreach to consult on the demand for and design of FTTC passive inputs and related backhaul products was too late. They argued that Openreach should consult before BT’s FTTC deployment begins in order to ensure that the needs of CPs wishing to build their own FTTC equipment in street cabinets are taken into account in the full extent of the deployed network. We acknowledge CPs’ concerns regarding the proposed timing of Openreach’s consultation on the demand for passive inputs and on its FTTC solution design. BT has argued that a consultation now would be premature, since there does not appear to be clear demand for passive products and stakeholders will not have had any practical experience of FTTC products and deployments. BT also points out that CPs with near-term requirement for passive inputs can submit Statements of Requirements (“SoR”) to Openreach.

1.9 Nevertheless, we consider it important that CPs have an early opportunity to express their views, and have therefore started discussions with CPs to update our view of the level of interest in investment in super-fast broadband based on Openreach’s passive inputs and to elicit CPs’ considered views on the requirements for FTTC passive inputs and related backhaul products. Depending on the merits of any proposals emerging from these discussions, they may feed into our review of the wholesale local access market, which we expect to initiate later this year.

1.10 A number of respondents wanted to see greater clarity in BT’s commitments concerning co-location of CPs’ equipment in BT’s street cabinets. We intend them to mean that CPs should be able to co-locate their street FTTC equipment with BT’s. and that where such an arrangement is contemplated it would need to address, in addition to commercial and technical feasibility, any legitimate concerns by Openreach in respect of the security of its own electronic and related equipment. BT has represented to us that, if demand for passive products materialises, Openreach will seek to deploy, where commercially viable, solutions which permit the use of cabinet designs which meet such concerns. This could be achieved for example by using either a common shell or a modular design which allows for separate access to electronics with sufficient security, common power feeds and additional fibres where required. In addition, following further review, we have also agreed with BT a clarification of the legal wording to the effect that, subject to reasonable demand, a CP’s FTTC equipment should only be located in the vicinity of BT’s street cabinet where it is not commercially or technically feasible (for example due to planning constraints) to attach it to, or otherwise integrate it with, BT’s cabinet.

1.11 Some respondents also wanted to see greater assurance in the variation about equality of access to Openreach’s passive inputs for FTTC. Following discussion with BT, we have agreed that the Equality of Access Board (EAB) will monitor Openreach’s provisions of such inputs according to metrics to be agreed between BT and Ofcom.

1.12 We consider that the agreed changes to the legal text of the variation, while providing clarification to the proposals presented in the Consultation, are not material and we therefore do not consider it necessary to consult again. In light of these changes and of our considerations in relation to the other concerns raised by respondents to the Consultation, we have decided that it is appropriate for us to agree to the modified variation. This Statement sets out the considerations that led us to this decision. The legal agreement between BT and Ofcom giving effect to the variation is at Annex 1. This variation does not prejudice the outcome of our forthcoming reviews of the wholesale broadband access and wholesale local access markets and any remedies we may impose pursuant to any findings of significant market power in those reviews.

Footnotes:

  1.- Proposed variation to BT’s Undertakings under the Enterprise Act 2002 related to Fibre-to-the-Cabinet, see http://www.ofcom.org.uk/consult/condocs/fttc/

  2.- Ethernet Active Line Access: Updated Technical Requirements, see http://www.ofcom.org.uk/telecoms/discussnga/eala/updated/updated.pdf

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