Ofcom publishes new Wholesale Broadband Access Market Review
The Wholesale Broadband Access market review is what ensures that BT Group keeps providing a set of wholesale services in areas where competition from other infrastructure providers is minimal or non-existent. The last review was in 2014 and things have changed massively since then in the UK broadband market, but interestingly the FTTP market does not seem significant enough yet to be taken into account, though with the growth in the GEA-FTTP footprint in areas like rural Wales we suspect that if the lengthy exercise was repeated from scratch today there may be some different conclusions.
The conclusion is that excluding the Hull area, Market A now comprises 0.9% of premises and market B 98.5% of premises (the gap to 100% is Hull). For an exchange to be Market A is it defined as just BT Wholesale or BT Wholesale and 1 other operator, Market B exchanges need to have at least 2 other operators.
We will confess to finding the review paperwork a long and hard read, but in the process there are some interesting snippets e.g. as of December 2017 there was 145,000 live FTTP lines. Openreach in the last financial results reported a footprint of 560,000 FTTP premises passed and while there is a three month difference between those figures this tells us the take-up of GEA-FTTP is running at around 1 in 4 premises and lagging behind the take-up of FTTC based services. Some of this lag may be that a good chunk of the FTTP roll-out was only built in 2017 and with limited retailer choice and marketing by comparison sites public awareness of availability may be behind the curve of the services that are advertised on TV.
A big change explored a lot in the review is the changes in the off-net market for the MPF LLU operators, and perhaps one of the clearer explanations of the footprint workings for the LLU operators i.e. who can and cannot order FTTC was provided.
4.81 Sky stated that while it prefers to use MPF+GEA in exchange areas it has unbundled, it is willing to serve customers using WLR+GEA in off-net areas.
4.82 TalkTalk told us that it does not offer FTTC-based retail broadband services to areas outside its MPF LLU footprint and therefore considered that it should not be included as a PO when assessing the level of competition in these areas.
4.83 On the basis of TalkTalk’s submissions to us we recognise that it only offers broadband services to retail customers that it can serve using MPF LLU, in other words, where it has unbundled the copper exchange. However, in relation to wholesale sales, TalkTalk is prepared to use its interconnection to BT’s fibre exchanges to reach beyond premises only attainable from a copper exchange that TalkTalk has unbundled.Footprint of FTTC services for LLU operators
Fixed wireless services which with AirBand and UK Broadband (Relish) now winning some BDUK contracts and the expectation that FWA is going to play a role in the USO got a mention but this seems to confirm what we have been seeing from analysis of speed tests.
As we set out in Section 3, the low take-up of LoS FWA, even in the areas where available, suggests that existing FWA services are not a close substitute for broadband services over a copper/fibre or cable connection. It is more likely that, as we considered in previous reviews, these LoS FWA services are generally considered as an ‘in-fill’ technology that can be used to provide services in ‘not-spots’ where cable and ADSL technologies cannot provide satisfactory services due to technical and/or economic reasons. This suggests that the number of consumers who would switch from broadband services over copper/fibre or cable to services over LoS FWA is unlikely to be material, even in Market A.
As in the rest of the UK, for the great majority of customers, mobile services are used in addition to services over a copper/fibre or cable connection, rather than as a substitute. Mobile broadband service characteristics and prices suggest that the great majority of fixed broadband customers are unlikely to view these as an adequate substitute. Whilst it is possible that mobile services may become a stronger substitute in future (with the development of services over 5G wireless networks), the timing and extent to which this happens are uncertain. Furthermore, mobile coverage in rural areas (where most Market A exchanges are located) is likely to be worse than the national average, especially when taking into account indoor coverage. This will further reduce the extent of the constraint from mobile services on fixed line broadband in Market A areas.Extract from Ofcom WBA Market Review
Our monthly speed test roundup does usually include a few of the wireless providers (if take-up and therefore test volumes were to increase they would feature more) but we would word things differently to Ofcom, i.e. fixed wireless while in the median result scenario is not challenging the best fixed line superfast services it is positioning itself well above the copper exchange based services such as ADSL and ADSL2+ and for those premises connected to a VDSL2 but suffering distance loses it can provide the best service.
So the main change appears to be the shrinking footprint of Market A where BT is deemed to still hold a position of significant market power in the wholesale broadband market for fixed location services and in Market B no provider holds significant market power.
If we assume that the next WBA review is 4 years away, i.e. 2022 then if all the FTTP roll-out promised is delivered (and the Project Lightning roll-out, plus their shift to Gigabit DOCSIS 3.1) there is likely to be some major changes, and new market definitions are likely with potential for additional categories.