Business Connectivity Market Review

Business Connectivity Market Review

Review of the retail leased lines, wholesale symmetric broadband origination and wholesale trunk segments markets

Issued 27 March 2008

Executive summary

Suppliers of business connectivity services are meeting the requirements of UK business by investments in infrastructure and product/service development in order to provide innovative solutions based on a range of technologies. Ofcom’s data indicates that in the four years to 2006, 75% of low bandwidth circuits migrated to other connectivity solutions such as VPNs – often using DSL tails – and Ethernet-based services.

Regulation must facilitate this customer-led competition by taking a forward-looking view of markets and avoid introducing interventions which impede this competitive dynamic. BT therefore fully supports Ofcom’s proposal to remove certain wholesale regulation in key business districts in London and for very high bandwidth services nationwide. However, we are concerned that elsewhere, Ofcom’s other proposals would result in the application of inappropriate and disproportionate regulation which threatens the development of the market.

We would highlight the following key messages from our response:

• Ofcom should remove all regulation on BT at the retail level: The proposed market for retail low bandwidth leased lines is too narrowly defined given the range of alternative services available to businesses. Coupled with BT’s offer of voluntary commitments regarding future provision of legacy products, this makes regulation of BT’s activities at this level unnecessary and disproportionate. We believe concerns with the “replicability” of Partial Private Circuits will have been addressed before Ofcom concludes this review and do not justify the continuation of retail regulation.
• Ofcom’s analysis has understated the degree of wholesale level competition: There is extensive alternative infrastructure in the provision of wholesale business connectivity services within many business areas – including, but not limited to, the defined Central and East London Area – and on many routes at the trunk layer. There is, therefore, further scope for Ofcom to remove regulatory obligations altogether.
• A lighter touch and a more flexible approach to regulation is needed at the wholesale level, particularly in relation to the provision of wholesale Ethernet services and trunk segments: The overall impact of the proposed deregulation in certain areas is outweighed by Ofcom’s proposals to extend the scope of charge control regulation to lower bandwidth wholesale Ethernet services and trunk segments. Rigid charge controls generally risk distorting providers’ investment decisions and delaying customers’ take-up of more efficient services. BT considers that voluntary commitments are often a more effective way of addressing specific concerns.
• It is time to close down the debate on dark fibre: BT does not believe there is a case for mandating the provision of dark fibre and Ofcom should not proceed with a separate consultation.

We would welcome the opportunity to discuss our views with Ofcom and other stakeholders.

Download the full response as a PDF document

BT welcomes comments on the content of this document. Comments should be addressed to Mike Fox, BT Group Regulatory Affairs.