Ofcom Boss Anticipates Regulation Of Duct Pricing

In a new twist to the rollout of a superfast fibre network in the UK, the boss of Ofcom has admitted that it may be necessary to regulate the prices that BT charges for access to its ducts and telegraph poles.

Under an agreement worked out with Ofcom in February 2010, BT agreed to open up its ducting and telegraph poles so that rival ISPs could install their own fibre cables, rather than relying on BT’s cabling infrastructure.

And in January this year, BT revealed the draft pricing and design proposal for its duct and pole sharing products, known as Physical Infrastructure Access (PIA).

Some ISPs Unhappy

But in early April a number of ISPs (TalkTalk, Virgin Media, Fujitsu, Geo and Vtesse Networks) wrote to communications minister Ed Vaizey, warning of a possible boycott of the government’s £830 million investment in rural broadband pilots, because they felt BT’s charges were unreasonable.

Despite this, so far at least one major ISP (Sky) has signed a deal with BT (admittedly for three months only) that will allow Sky to access BT’s PIA product. Another company, Call Flow, has also signed a similar three month deal with BT.

But the disagreement with other ISPs shows no sign of slowing, and this has forced Ofcom’s hand.

Speaking to a House of Commons Select Committee, Ofcom chief executive Ed Richards admitted that BT is unlikely to set an acceptable price for other operators to access its network of telegraph poles and underground ducts.

Therefore Richards said he “anticipates” regulating the market so that it is economically viable for other operators to compete with BT.

Select Committee Transcript

Richards was quizzed by Damian Collins, Conservative MP for Folkestone & Hythe, on the matter.

“Is BT charging too much to allow other companies to use its ducts and poles? Virgin Media have said it’d be cheaper to build a whole new network than use the one BT currently operates. What’s your view on this?” asked Collins.

“We don’t have a settled view on this because I anticipate we’ll have to consider it in considerable detail in due course and we expect it to be appealed to the courts. The reason for that is that it’s a polarised issue; if price goes up its obviously good for BT and if it goes down its good for everyone else, so you have to make a judgement,” said Ofcom’s Richards.

“Where we are at the moment is that we required BT to make the poles and ducts available through regulatory intervention. They are required, also by us, to put a reference offer in the market which they have done on time. And what we’re now in the process of doing is seeing if there is a commercial negotiation which can agree a price. That’s what we tend to try and do. We don’t go around looking for things to regulate. It’d be much better if the parties can agree a commercial rate and we don’t have to do anything,” said Richards.

“However, if you’re asking me straight now if that will happen I think it’s unlikely they will agree a rate,” warned Richards. “There is a timetable for that which I think concludes in June and if it hasn’t been set we will examine the detailed economics of the cost of providing ducts and poles and what a regulated price should be. But until then we couldn’t give you a view on whether they are more or less highly priced.”

“If Ofcom sets a regulated price will it be that process be completed done by the end of the year?” asked Collins.

“Probably unlikely to be concluded by then as we need to do detailed economic analysis then its appealable in court but we would expect to have consulted on a range of prices we would be looking at by then so anyone bidding would have a good idea of the areas they would be in,” said Richards.

“I think that’s consistent for govt’s timetable for spending on rural broadband. We are very mindful of that and want to connect them and be aware of that timetable, but not do something that would just get turned over in court,” he added.

BT Response

Meanwhile BT felt that it was too early to start speculating over possible Ofcom involvement.

“Trials of duct and pole access only began last week so it is extremely early to speculate that Ofcom might need to become involved,” said BT in an emailed statement to eWEEK Europe UK. “This is new ground for all of us and so we are working closely with both Ofcom and industry to ensure the final prices reflect the true costs.”

“Our current analysis shows our draft prices compare well with those in Europe but the trial will help us see if we can go even further,” BT said. “We are keen to agree the final prices with industry and so we would encourage more companies to join the trial, particularly those who claim such access is essential to their business plans. It is our hope that we can reach agreement with industry on this issue”.