Ofcom publishes consultation on Wholesale Broadband Access Market Review

On 22 June Ofcom issued its consultation on wholesale broadband access. The consultation reviews the market in light of Ofcom's strategic review of digital communications which was published on 25 February 2016. The strategy aims to:

• Encourage the large-scale deployment of new ultrafast broadband networks
• Reform Openreach to ensure greater independence from BT
• Make decent, affordable broadband a universal right for every home and small business in the UK through investment and innovation
• Empower consumers to make informed choices
• Improvements in the quality of service

Initiatives such as the Wholesale Local Access ("WLA") market review are also being employed to deliver Ofcom's strategy.

The use of broadband has increased significantly as consumers now access the internet from a variety of devices and for a range of activities. Indeed 78% of all UK premises now access a fixed broadband service and usage has increased from 58GB to 132GB per month per residential connection in the last two years.

This huge growth has been facilitated by effective retail competition within the market. Competition encourages innovation and fair pricing making broadband accessible to a wider range of individuals. Since BT has the largest fixed telecoms network in the UK the use of BT's network by other telecoms providers plays a key role in promoting and maintaining effective retail competition in broadband. Historically regulation in wholesale markets has been used to ensure this access for competing telecoms operators, allowing telecoms providers to offer broadband services without having to invest in their own equipment.

However the use of WBA products by non-BT telecoms providers has consistently fallen over the last decade. This is likely due to the fact that the larger telecoms providers have unbundled BT's exchanges (using LLU) and invested in their own equipment. These providers now use LLU to supply retail broadband services across the UK. The effect fo this is that various parts of the UK now have several operators present, giving consumers a choice of several broadband providers. This choice negates the need for regulation that promotes competition, accordingly Ofcom has consistently deregulated the WBA market in those parts of the UK where this is the case.

After all these development the number of areas of little or no broadband competition is now only around 2% of the country. Retail competition in this area is still limited however Ofcom does not expect that putting in place provisions to promote entry or expansion in this market would be likely to have any significance positive effect on competition. This is because the main telecoms providers who operate nationally have told Ofcom that they have either stopped operating in the 2% of the UK or are not offering services to new customers. This is likely due to the prohibitive cost of serving these customers. Instead Ofcom have proposed the below.

Market definition and market power assessment:

• Copper, cable and fibre access networks all fall within the same market
• All broadband speeds are in the same market
• BT has SMP in 2% of the UK
• No other operator has SMP in the rest of the UK

Proposed regulation

• A requirement to:
  • provide network access on reasonable request and on fair and reasonable terms, conditions and charge
  • publish a reference offer
  • notify changes  to terms, conditions or charges
  • changes to technical information
  • publish quality of service information
• A prohibition against unfairly discriminating in the supply of services
• An accounting separation obligation
• A cost accounting obligations

The deadline for responses is 14 September 2017 with Ofcom planning to publish final conclusions in March 2018.

To access the full consultation click here.