U.K. Compels Utilities to Open Up to ISPs for Fiber Deployment

LONDON, June 17, 2010 – The recently elected U.K. government plans to extent the scope of fiber unbundling by compelling gas, electricity and water utilities as well as the incumbent operator BT to open up their ducts to ISPs for fiber-to-the-home deployment.

The move is both a response to pressure from the European Union to go faster toward complete fiber unbundling, and a practical way of reducing the digital divide by stimulating deployment of fiber in rural locations to reach current “not-spots.”

BT welcomed the scheme, just announced by U.K. Culture Secretary Jeremy Hunt, with a statement that the sharing of underground ducts could significantly lower the cost of extending fiber to rural locations. It was also welcomed by the U.K. Broadband Stakeholders Group, an industry-government forum, but with the caveat that legislation should be a last resort. Group CEO Antony Walker said he would prefer utilities to open their ducts on a voluntary basis in a spirit of co-operation with ISPs under joint business plans.

BT already has started working along these lines by cooperating with ISPs in rural parts of Wales. The European Commission earlier this month accepted proposals from U.K. regulator Ofcom to oblige BT to provide “virtual” access to its optical fiber at this stage rather than access to the physical cable. Under this arrangement, ISPs would be allowed to offer services running over fiber networks still fully managed by BT, as a concession aimed at compensating BT for its investment in further fiber roll out. BT likely could recoup some additional revenues in return for its investment in the infrastructure.

The European Union has accepted this as a temporary arrangement, but insists that the United Kingdom must ultimately proceed to full unbundling giving ISPs access to the physical infrastructure, because only then can they offer a full range of retail services including applications that may intimately depend on levels of quality of service impossible to guarantee without direct management of the network.

EU Digital Agenda Commissioner Neelie Kroes said: “In this specific instance, virtual unbundling seems the best option to safeguard competition and enable consumers to benefit from a wider range of services provided over next generation fiber infrastructure. However, this interim solution is not a long term alternative to physical fiber unbundling, which should be imposed as soon as possible.”

The United Kingdom’s latest announcement about duct unbundling coming about a week later goes further still by providing ISPs with access to ducts from both BT and other utilities to build their own networks. It exceeds the scope of a draft consultation issued by the European Union in September 2008 recommending that new entrants to high-speed broadband services should be allowed to use cable ducts, but only those of telecom operators that hold significant market power. This was recognition of the high cost of trenching for fiber, which can be 80 percent of the total capital expenditure of a new fiber deployment.

However, the European Union also has recommended that where existing ducts cannot be accessed or where it is otherwise economically unviable for ISPs to deploy their own fiber, sharing of dark (unlit) fiber should occur. This is similar to how local loop unbundling works by sharing of the copper access network.