UKCTA Review of Business Broadband – Call for Evidence

Introduction
1. UKCTA is a trade association promoting the interests of competitive fixed-line telecommunications companies competing against BT, as well as each other, in the residential and business markets. Its role is to develop and promote the interests of its members to Ofcom and the Government. Details of membership of UKCTA can be found at www.ukcta.com. UKCTA welcomes the opportunity to respond to this consultation since the subject matters which it encompasses are of fundamental importance to our member companies.

2. The views expressed in this response do not necessarily reflect those of Virgin Media, which will be making its own submission.

3. Digital connectivity is clearly vital for businesses and BT is the dominant provider operating the only national network. The UK should set its sights high; UKCTA believes we should aim for a “gigabit society” by 2030 with both consumers and businesses having access to 1Gb/s technology.

4. UKCTA believes that the current regulatory framework has failed to foster appropriate broadband solutions for a significant proportion of businesses. The regulator’s predominant focus on the residential rather than the business sector has been to the detriment of business, particularly SMEs. UKCTA commissioned a report in November 2014 which highlighted many concerns such as the way that many business parks have been neglected in the rollout of superfast broadband which has been targeted on residential customers.

5. This requires investment in passive remedies and FTTP, as is happening in many other leading industrial economies. Experience from other countries has been that mandating passive access to the incumbent’s infrastructure has led to increased innovation and investment in much the same way as ordering BT to unbundle its exchanges in the 1990s led to the substantial UK investment in broadband which delivered one of the most competitive residential broadband markets in Europe.

6. While UK wide FTTP is many years away there is much that can be done now to open up what infrastructure we do have to competition and to drive down the cost of direct fibre business connectivity. UKCTA is disappointed that the recent Ofcom “Business Connectivity Market Review” was a missed an opportunity. Of particular concern was Ofcom’s failure to enable access to BT’s ducts in business connectivity markets, setting the price for access to BT’s dark fibre at a retail minus level (before the addition of business rates). These two decisions will severely restrict the ability of BT’s rivals to use dark fibre.

7. These restrictions and shortcomings need to be addressed. Ofcom should set a cost orientated price for dark fibre making it applicable for connecting far more customers at are range of lower bandwidths. BT’s current attempts to restrict the commercial utility of the service by for example offering it only on longer term contracts ought to be rejected. Ofcom should mandate that BT provides handover in a range of options to meet customer demand for example in carrier neutral locations (patch panels) as well as in locations such as footway boxes provided by BT’s customers. Ofcom should extend the benefits of dark fibre to users requiring 100Mbit/s of bandwidth since this currently makes up over 70% of the customer demand in the market.

8. Copper can only be considered as a stepping stone to an all fibre network and is not considered a viable on-going solution for Broadband delivery. G.Fast is being touted by BT and other incumbents around the world as a solution yet it is still unproven and does not overcome the fundamental problems of quality of connection between cabinet and the home. Ofcom’s recent DCR confirmed the points raised in UKCTA’ s November 2014 report (copies of which were provided to DCMS) about the way in which SMEs in particular suffer under current arrangements, particularly in terms of quality of service.

9. Reform of Openreach also has to be considered. Ofcom is looking at how to do this and UKCTA is pleased that Ofcom is committed to an open, transparent and inclusive approach to this reform process. Too often in the past any examination of BT’s structure has been conducted using a closed door negotiation with BT.

10. In particular, we believe that there is a pressing need for greater consideration of the most appropriate regulatory remedies for business customers. Ofcom is about to begin consulting on two key market reviews that will directly impact consumers and businesses alike, setting the regulatory environment for the next three years in the narrowband (fixed calls) and Wholesale Local access (copper exchange lines) markets. It is vital that these market reviews do not neglect the needs of business consumers by concentrating solely on the needs of consumers. Business consumers have specific needs and often buy a different mix of services than residential consumers, for example they are far more likely to purchase retail services that rely on Wholesale Line Rental (WLR) and have greater need for better quality of service provisions given that they rely in their broadband connection to a much greater degree than domestic customers.

11. Too often in the past Ofcom has either ignored or paid lip service to the needs of UK businesses. Ofcom must bear in mind the needs of business customers when setting remedies in both the Wholesale Local Access and Narrowband markets. While it may be appropriate to use the same remedies for both types of customer, this should not be an automatic presumption. Business should not be an afterthought. Care is needed to ensure that the appropriate market definitions are used and that remedies are accessible and targeted to address both the business and the consumer market. This means ensuring that passive remedies such as PIA (duct and pole access) are not unduly restricted and are permitted for use in serving business customers.

12. The focus on residential customer requirements is typified by the current BT NGA product range. This was designed and developed purely for the residential market. UKCTA believes that there is a pressing need for business grade NGA products with acceptable upload speeds and appropriate SLAs. Furthermore, the cost issue highlighted by the Government could be partially addressed by removing the mandatory PSTN line, which is an unnecessary cost for the vast majority of enterprise customers.

13. Finally, some UKCTA members are concerned about getting access to Openreach’s NGA data. Openreach holds data about NGA availability (i.e. data indicating which areas, buildings in the UK NGA is available). Openreach refuses to make this available to any provider that has not already bought NGA services. It is not possible to work out what is available to buy unless it has already been bought. This is nonsensical and in effect presents a significant barrier to entry to any communications provider seeking to purchase NGA services. Ofcom should require Openreach to make available NGA product availability data to CPs that can demonstrate a legitimate business requirement and sufficient national presence in the market, not just those with a presence in a BT local exchange and which already purchase NGA services. Such a model would increase competition and provide additional choice to consumers (one of the objectives of the Government).

14. UKCTA welcomes any increased policy focus on the connectivity needs of business customers since these have long formed the Cinderella of UK telecoms regulation despite the business benefits of broadband regularly being used as the justification for public investment in residential broadband. UKCTA would welcome changes which would foster a better environment for investment in services to better meet the needs of business customers. We hope that the suggestions set out in this response will be adopted by Government in order to help create such an environment in the UK.