The EU has stepped into the on-going battle over the margin squeeze test for the GEA-FTTC fibre based services that are sold by a myriad of providers along with the usual big names of BT, Sky, TalkTalk, PlusNet and EE. The result is that Ofcom has issued an update to its VULA Margin statement which comes into effect on 1st April 2015.
While Ofcom has found in its investigations to date that BT Retail is maintaining a sufficient margin and this is around £22-£25 per month on its fibre and phone bundles currently. The involvement of the EU appears to be such that if on the regular six monthly reviews the margin test has been found to be failing then the remedy will be to reduce the wholesale cost rather than the previously expected remedy of increasing the retail cost.
Keeping the overall retail costs low is a victory for the consumer and is a sign of the on-going price battles across Europe, but it should be remembered that if Openreach when doing its calculations on further investment, was to find payback periods extended from 15 years to 20 years, we might find them less willing to invest in faster services than the current up to 76 Mbps VDSL2 products.
While most of the infrastructure competitors to Openreach are vertically integrated operations, one side other side-effect that we can see is that for any public investment projects that require wholesale access to be made available may find it harder to bid against Openreach infrastructure.
Ofcom recognises that the next three years are pivotal for the take-up of the current generation of fibre based services, and this mirrors the picture some ten years ago when LLU ADSL2+ services were just starting to become big news.
The proposed 5 Mbps Universal Service Obligation has thrown a little more complication into the regulatory picture in the last week too, so while Ofcom has moved to try and introduce stability political ambitions have just rocked the boat a little more.
TalkTalk and Sky have done well with the prospect of a guaranteed ability to undercut BT Retail pricing and the new Migration Process that is coming soon will see the old MAC vanish, and a simpler but slower Notification of Transfer process become the norm. This change is a big blow for the smaller more agile providers who could migrate a customer within a couple of days of getting the MAC, but is preferred solution for full LLU providers since this is how they've operated for years.