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Ofcom rewords fibre margin squeeze test after EU input
Sunday 22 March 2015 11:49:19 by Andrew Ferguson

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.


Posted by TheEulerID over 2 years ago
I'd be somewhat surprised if BT hadn't already factored in a reducing wholesale price for VULA products given that Ofcom have only allowed a limited time window before looking at full price regulation (which would mean something like LLU rules).

It will also have been factored into BDUK bids as they explicitly put the risk of regulatory reduced wholesale pricing on the supplier.

In any event, reduced wholesale prices would squeeze alternative infrastructure providers.
Posted by kraftman over 2 years ago

"the previously expected remember" - what does this even mean?

"one side other side-effect"
Posted by TheEulerID over 2 years ago
For "remember" read "remedy".

Posted by chilting over 2 years ago
Yes, the Surrey BDUK scheme has really delivered, however, just south over the border in West Sussex we are still in the dark ages.
True, we started later than you and the funding was less but I don't see the West Sussex BDUK achieving the same goals.
We have to wait until May to see details for the next phase but I am not hopeful unless they find more investment.
Posted by andrew (Favicon staff member) over 2 years ago
I think I had a type and an auto correct grabbed the wrong word, but brain missed it
Posted by Blackmamba over 2 years ago
Hi Chil.
Just watch the long lines that are in Surrey on the Exchange Rudgwick West Sussex there are a few which are under the 15 meg they may be upgraded if there is money in the ( pot + clawback) after September.
Posted by chilting over 2 years ago
Presumably these lines from Rudgewick are funded by Surrey for Surrey residents.
In West Chiltington we still have no news on if and when any of our long lines will be upgraded. In my case it is just about switching copper lines to a closer cabinet.
Posted by Blackmamba over 2 years ago
Hi Chi
Sam Knows has updated many Exchanges in Surrey to FTTC/P over the weekend check out your area.
Posted by andrew (Favicon staff member) over 2 years ago
Can people try and keep on topic to the actual news item, rather than a scatter gain approach to posting.
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