Telecoms infrastructure competition regulationMarkham Sivak Principal Competition Policy,...

PROMOTING CHOICE • SECURING STANDARDS • PREVENTING HARM

Telecoms infrastructure competition regulationMarkham SivakPrincipal Competition Policy, Competition Group

PROMOTING CHOICE • SECURING STANDARDS • PREVENTING HARM 2

Our strategy is to support fibre investment

• We want to support investment in more fibre rich networks

• We want to make these investments as contestable as possible

• Resulting in the establishment of competing networks, in some areas

by promoting competition


The story, so far… February 2016 Strategic Review of Digital Communications. Commitment to ultrafast networks and more fibre,

supporting investment and promoting competition

March 2017 Legal separation of Openreach agreed. Giving Openreach greater independence to serve all customers equally and to take investment decisions on behalf of the whole industry

March 2018 WLA Statement. Pricing freedom for higher speed products to support commercial investment (superfast anchor introduced) and an improved duct and pole access product to promote competitive investment

July 2018 Regulatory Certainty to Support Investment in Fibre. Network based approach to regulation. Supporting unrestricted duct and pole access. Having different regulatory approach in different areas. Longer term certainty. Assisting a smooth transition from copper to fibre. Preserving incentives to invest (for both Openreach and other providers)

November 2018 Physical Infrastructure Review, proposing unrestricted duct and pole access and Business Connectivity Review, proposals to bridge gap to Mar 2021 and preserving our future approach

December 2018

March 2019

May 2019

Consultation on potential geographic market structure (ie different regulation in different parts of the country)

Consultation on how remedies might vary by geographic markets

Draft statement on Physical Infrastructure and Business Connectivity Reviews


…and what’s coming next

End of 2019 Proposals for integrated market review

March 2021 Integrated market review implemented (runs until 2026)


Our regulatory approach is to put DPA first

• Duct and pole access (DPA) lowers the barriers for new entrant investment

• However, we are conscious that:

– today there is not a lot of network competition; and

– there will be some areas where competitive investment is unlikely

• The regulatory framework needs to reflect this

and de-regulate where there is effective network competition


Access to Physical Infrastructure Market (Upstream)

Competitive Area

Potentially Competitive

Area

Non-Competitive

Area

No Remedy Selective Remedies

Full suite of Remedies

Duct Access Remedy in all markets

Provides support for investment and deregulation downstream

Current market review programme outline plan

Local access (broadband) and business connectivity (high capacity line) markets considered together

(Downstream)

Aim to have new structure in place by April 2021


Geographically targeted regulation

• Prospects for network competition will vary across UK due to population density and build costs

• Intend to vary regulation on Openreach in three broad geographic areas:

• Public intervention likely to also be required in non-competitive areas

Regulatory approach Likely policy proposals

Competitive areas Deregulation as areas become effectively competitive

• Continued duct and pole access and consumer protection, but no access regulation ie no requirement on Openreach to provide wholesale services

Potentially competitive areas Build on existing wholesale local access (broadband) and business line approach supporting network investment, by Openreach and new entrants

• Anchor product regulation will considecompetitor build costs, Openreach legacy investments and fibre premium

• Continued pricing flexibility for higher value services

Non-competitive areas Focus on most upstream remedy that will support competition and innovation

• Wholesale access regulation - Potential for dark fibre

• Support Openreach investment in fibre


2018 Physical Infrastructure Market Review (2 year duration – to be renewed in 2021)


Summary of remedies

• Unrestricted PIA: PIA remedy that can be used for any purpose and anywhere in the UK except the Hull Area

– Will therefore allow, inter alia, the following uses compared to the current obligation supporting just local access services:

• Backhaul for broadband, business and mobile networks• Dedicated leased line use• Support for fixed wireless access networks

• No undue discrimination: Same as existing restricted obligation – requires strict equivalence in respect of all processes and sub-products that contribute to the supply and consumption of network access services in the Physical Infrastructure markets, unless BT can demonstrate that a difference is justified ie the way BT and Openreach consume their own duct should as far a possible be on the same basis as third parties.

• Cost recovery for repair and enabling works: Costs recovered from all users of the infrastructure, up to the same financial limit of £4750 per km, which we consider will cover the vast majority cases as it can be treated as it can be averaged over an order.

• PIA pricing: Price cap on PIA prices.


2018 Business Connectivity Market Review (2 year duration – to be renewed in 2021)


2019 BCMRContext• 2016 BCMR market definition, which found a single wholesale market at all bandwidths, was

successfully appealed by BT• Ofcom imposed Temporary Conditions in Nov 2017, which end 31 Mar 2019• Currently, there is no regulation for very high bandwidth (above 1Gbit/s) servicesTiming• Two-year forward look as we transition to a new regulatory approach set out in slides above• Proposed regulation in place from spring 2019 to March 2021Markets• We propose to identify two product markets – Contemporary Interface Access services and CI

Inter-exchange connectivity services (backhaul/core)• In each of these product markets, we propose to find a single product market at all bandwidths


2019 BCMR key findingsContemporary Interfaces (CI) Services• We have found that BT has market power everywhere, except in the Central London Area (CLA)

in CI Access services and exchanges where there are two or more rivals present in CI Inter-exchange connectivity services

• For access and inter-exchange, we have differentiated our “active” remedies to reflect differing competitive conditions, with lighter remedies in areas where competition is emerging and CPI-CPI price caps in less competitive areas

• For inter-exchange circuits only, dark fibre where only BT is present and we do not expect competition to emerge, even with unrestricted DPA available

• We propose to maintain the existing Quality of Service regime, with minor adjustments to service levels

Traditional Interface services• We propose to de-regulate TI low bandwidth services as customers migrate off legacy

platforms


2018 Geographic markets green consultation


Geographic analysis – overview of approach

Existing broadband

network coverage(From Connected

Nations)

Existing leased lines network

coverage (From BCMR)

Network operator plans

Potential areas of future economic deployment

Area 1: effectively competitive

Area 2: potentially competitive/prospect of

network rollout

Area 3: limited prospects of

network rollout


Identify “urban” UK postcodes – initial modelling based on postcodes with area less than 100,000m2

Create “clusters” of “urban” postcodes

Identify postcode sectors where at least 65% of premises within the postcode sector fall in the clusters

Identify clusters with more than 20,000 premises (based on data on number of premises per postcode)

Process to identify areas where build could be economic


Geographic analysis illustration

Number of postcode sectors

Number of premises (millions)

Percentage of all UK premises

Competitive areas 0 0 0%

Potentially competitive areas

Existing network presence

3,599 13.5 46%

Plus planned networks

4,665 17 58%

Plus potential rollout 6,116 20.4 69%

Non-competitive areas 3,912 9.1 31%


2019 Remedies green consultation


Access Review – Initial proposals

Geographic area 2 (potentially competitive) Geographic area 3 (non-competitive)

Our focus is to bring about consumer benefits by means of network competition through unrestricted access to

Openreach’s duct and pole infrastructure and wholesale remedies aimed at promoting investment in rival networks

Our focus is to bring about consumer benefits through wholesale access regulation to Openreach’s network and by

incentivising Openreach to invest in full fibre networks

WLA servicesBroad continuation of our current approach to charge

controlling anchor product (MPF+FTTC 40/10) at level to support investment in FTTP

No charge control of higher bandwidth services

Fair-bet approach with rival fibre investment expected to incentivise BT to invest in FTTP

WLA servicesCost-based charge control across all bandwidths

No rival fibre investment is expected so fair-bet approach will not provide trigger for BT to invest. Proposal for Regulatory

Assess Base (RAB) approach to encourage BT to invest in FTTP (with costs being recovered across fibre and copper services in

area 3)

Leased line services

No dark fibre requirement

No charge control on VHB circuits

Cap on up to 1Gbit/s circuits to ensure stable prices (in support of network investment)

Leased line services

Dark fibre at cost for high capacity services (seen as primary remedy)

Cap on VHB circuits to ensure stable prices to provide customer protection as transition to dark fibre

Cap on up to 1Gbit/s circuits to ensure stable prices to provide customer protection as transition to dark fibre


We have used the March remedies consultation to signal the potential changes to regulation to support copper retirement

Initial changes

• We will consult on modifying the general access regulation to remove the Openreach obligation to develop new copper based access services

Changes which FTTP coverage of a full exchange area would potentially trigger (either immediately or after some defined period). Note there may be some G’Fast use where FTTP is not possible

• Remove the obligation to supply copper for new lines in a given exchange area.

• Remove the charge control on copper based services subject to regulations on, or commitment from, Openreach on the treatment of existing customers

• But impose a new anchor charge control on FTTP (with a small premium to reflect improved quality)

• Modify QoS regulation to make any necessary allowance replacement rather than repair in specified circumstances


Progress on duct and pole access


While some of the negotiations were strained we now have a significantly improved PIA reference offer

• Improved systems and interfaces available to telecoms providers to view maps and place orders

• Investment by Openreach in new service management centres and more civils direct labour

• Flexibility / structure of how the Network Adjustments fund should operate

With more improvements to come over the next six months • KPIs and other measure to ensure no undue discrimination• Moving towards a more streamlined process for the verification of requests for network

adjustments• Appropriate SLAs; and• Appropriate Service Level Guarantees (SLGs) and link to forecasting accuracy

Telecoms infrastructure competition regulationMarkham Sivak Principal Competition Policy,...

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