Does Fibre on Demand break Ofcom rules on broadband contracts?
The Fibre on Demand product has generated a lot of interest, though probably very little from those who are looking for the cheapest broadband deal, most interest is coming from those who work from home and businesses who want the reliability of a full fibre connection, in addition to the improved speeds and at a price point considerably less than current Ethernet and leased line services.
There are some points often missed when talking about the new Fibre on Demand service and a big gotcha is that Openreach has a three year minimum term for the product and is only offering the 330/30 GEA-FTTP product currently. The three year contract appears to breach Ofcom guidelines that say that for consumers the longest broadband contract should be two years.
So is Ofcom likely to step in and force a change? Well we would be very surprised, Openreach has been pretty clear when talking about Fibre on Demand that they are aiming it at the business community, which is more used to longer term contracts for various services. We asked Openreach about the minimum term, and they pointed out that communication providers can repackage the product, so that a two year term is possible by structuring the monthly rental price accordingly.
There are some common questions about Fibre on Demand, which we put to Openreach:
- My cab is not FTTC enabled, but next door is on a different cab
that offers FTTC, can I order FoD?
When CPs (Communication Providers) check the availability of FoD for a premise the Openreach systems will check whether the premise is served by an FTTC enabled cabinet. If the premise is not served by an FTTC enabled cabinet then the CP will not be able to raise an order for FoD.
- I am on an exchange only line near to a street cabinet will I be
able to order it?
Exchange Only lines are not served by FTTC enabled cabinets, so your CP would not be able to place an order for FoD to be delivered to your premise. We are of course exploring alternative solutions for exchange only lines that currently cannot support fibre broadband.
- There are two cabs offering FTTC in my area, but I am served by one
that is a 1km away, when a closer one is available, will FoD be run from the
To provide FoD we build the fibre network from the NGA Aggregation Node to the premise, not from a cabinet. We will build from the nearest Aggregation Node to the premise.
The high costs on installing fibre on demand are obviously a barrier to many, but the long minimum term may also dissuade many small businesses that only have short term leases on premises. The monthly costs are not going to be small either, the price cut of the 330/30 service to £38+VAT from Openreach will help, but we will be very surprised if any provider offers the product for less than £80+VAT a month, this is because of all the other costs involved such as the wholesale network between the fibre handover node (exchange) and the providers own network, and the extra admin of handling the original installation. We would not be unduly surprised if we saw monthly prices of £130+VAT and that would still include usage limits.
The hope that Fibre on Demand might lead to full FTTP becoming more widespread amongst the home worker and tech startup community may fade once the reality of the costs become apparent, the general economic climate means that many people are reluctant to avoid long term financial commitments. Perhaps in 5 years time the picture will be different, as Openreach may be seeing enough take-up that prices can be nudged down, and by 2028 we just might be seeing FTTP becoming a price option that is very close to the cost of a new copper based line.
We sincerely hope the politicians do not use Fibre on Demand to claim the UK has full fibre (FTTP) access (once fully FoD launched will be available to over half the UK, and two-thirds in 2014, rising to something like 85% to 90% in 2015). If the install fee was in the £150 to £250 region with monthly costs in the £40 to £50 region and a more standard 18 to 24 month term applied we might support their claim, but as the new product stands it is just another option alongside Ethernet based services, beyond the reach of the normal household budget and many non-IT related small firms.