BT Press Releases

DC11-240                                                                                October 7, 2011

Openreach reveals new prices for pole and duct access

Prices fall significantly following trials and discussions with Ofcom
Ovum says new prices are up to 38 per cent below the European average 1
Products broken down so others only pay for what they use

Openreach today issued revised prices for pole and duct access (PIA) 2 as well as breaking down many of those products into their component parts. Both moves will assist other companies who are keen to use such infrastructure to deliver fibre broadband to rural areas.

The new prices are significantly lower – in some cases more than 60 per cent lower - than the draft ones issued in January when there was a limited understanding of the costs and challenges incurred with providing such access. They are up to 38 per cent below the European average for rural areas – according to independent research firm Ovum – and will come into force in November.

The lower prices reflect an improved understanding of the relevant costs – gained through trials which are ongoing – as well as detailed discussions with Ofcom over which of those costs, and how much of them, Openreach is allowed to recover from PIA. Openreach believes the new prices are fair, strictly cost-orientated and in line with Ofcom guidance.

As well as revising the prices, Openreach has broken down some products into their component parts. This will allow Communications Providers (CPs) to “pick and mix” which services they buy from Openreach and which they deliver themselves. As a result, CPs will enjoy greater flexibility and choice.

Openreach chief executive Liv Garfield said today: “I'm pleased to be able to bring down these prices. A lot of hard work has gone into revising them and we have ended up with prices that are up to 38 per cent below the European average. Other companies now have the certainty and low prices they need to build a business case and bid for BDUK funds.

“No-one is keener than myself to bring superfast broadband to rural areas but it is an enormous challenge. These prices will hopefully unlock some much needed investment from others but we will have to wait and see. Openreach has largely bankrolled Broadband Britain by getting fibre to more than five million homes but it’s time for others to help us with the heavy lifting.”

Andy Conibere at Call Flow Solutions, one of the triallist companies, said “The trial itself has been a triumph of collaborative working and has produced many valuable learning opportunities for all parties. PIA is undoubtedly a significant advancement in enabling Communications Providers, such as CFS, to deliver much needed superfast broadband in rural areas.”

There are more than one hundred PIA products and services but the most important ones relate to access to spine ducts and drop poles. Spine ducts typically run from a BT exchange to the kerb and are capable of carrying new fibre depending on how much spare capacity there is. Drop poles are the most common final pole that can connect multiple premises.

Openreach’s original five year draft price for spine duct access was £1.16 per metre but it has now revised its approach so that the price is based on the number of cables a duct can carry. This methodology will see the price fall to as little as 44 pence per metre, a saving of more than 60 per cent, for the largest ducts that BDUK bidders are expected to want to use. The price for a lead-in duct, the last few metres to the premises, is falling by roughly a third from £2.12 per metre to £1.34.

The price for pole access is also falling significantly which should be of particular benefit to companies aiming to supply rural areas. The price for access to a drop pole is roughly halving from £21 per attachment to around £11 or less where several drop-wires are fixed to each pole.

Openreach believes the new prices meet all of its specific regulatory requirements on PIA. However, the business notes that an adjustment to the value of Openreach’s regulatory asset base, included in Ofcom’s ongoing WLR/LLU charge control consultation, may be applied to some of these PIA prices 3 .

Openreach disagrees with Ofcom on this issue and may appeal any eventual ruling. However, it has today said that in the event of Ofcom pushing such a change through, it would be prepared to apply such an adjustment to PIA prices in cases where CPs are bidding for BDUK funds rather than hold up the whole process pending any appeal. This process should ensure the BDUK process runs as smoothly as possible.

In the event of Ofcom applying such an adjustment and Openreach being successful in its appeal, Openreach would revert to the duct prices outlined today for BDUK bids.

The new prices announced today can be viewed at
http://www.openreach.co.uk/orpg/home/products/ductandpolesharing/ductandpolesharing/ductandpolesharing.do

Ends

1 Ovum report on duct and pole prices, October 7 2011

2 Physical Infrastructure Access

3 It is difficult to be precise about the impact of the Regulatory Asset Value (RAV) adjustment without seeing Ofcom’s final decision once it has concluded the charge control consultation. It will also depend on the mix of PIA products that a CP chooses to use but we estimate that applying the RAV adjustment could reduce a CPs PIA charges by up to 15-20%. The actual impact varies by product, with reductions of up to around 15-30% for different spine duct, joint box and manhole rentals and up to 35% for lead-in duct. Prices for poles access and ancillary charges are not affected by any RAV adjustment