Government fibre drive threatened by BT prices, ISPs say

The government's drive to roll out next-generation broadband in the UK is in jeopardy because BT is setting infrastructure access prices too high, ISPs have complained.

The ISPs wrote to communications minister Ed Vaizey on Monday to protest that the telecoms giant's pricing for access to its poles and ducts, so they can lay fibre, is unfair. The letter, seen by ZDNet UK, was signed by Fujitsu, Virgin Media, TalkTalk, Geo and Vtesse Networks.

The letter calls on Vaizey to force BT to lower its charges and to revise the terms for its Physical Infrastructure Access (PIA) product, through which other providers can put their network cables on BT's poles and in BT's ducts. PIA is crucial to fibre-rollout pilot schemes planned by Broadband Delivery UK (BDUK), the agency overseeing the government's £830m push to ensure the UK has the "best super-fast broadband network in Europe by 2015".

ISPs have written to minister Ed Vaizey to protest BT's pricing on its poles and ducts. Photo credit: David Meyer

"Without [more reasonable PIA terms], we believe that the BDUK process risks a lack of vigorous competition and as a result, will fail to deliver the investment, quality, speed of rollout, innovation and value for money, that industry is capable of delivering and that taxpayers deserve," the ISPs said in the letter.

Bidding boycott

If BT is not forced to offer more reasonable terms for PIA, there may be a de facto boycott of the BDUK pilot bidding process, which is currently in its early stages, sources within the industry have told ZDNet UK.

"The playing field is not level. If there is a situation where operators do not have access to those facilities on the same terms and conditions as BT, it is impossible to win, and therefore there is no point in bidding," one industry source said on Tuesday.

"We might be forced to boycott it because at those cost levels, there is no way you can run a successful business," another source said.

BT set proposed levels of pricing for access to its numerous ducts and poles in January, having been forced to do so by Ofcom. The regulator, which is keen to promote the rollout of super-fast broadband in rural areas, has noted that the former near-monopoly still has significant market power. It has, therefore, made sure that BT will have to let its rivals use key parts of its infrastructure so as to ensure competition in the new generation of broadband.

Having now had time to examine BT's proposals, the letter's signatories have decided the former incumbent is offering unfair terms. According to the letter, BT wants to charge other ISPs four to five times its underlying costs for access to poles and ducts. For example, BT wants to charge £21 per pole attachment, although BT itself only pays around £4 for the same. One ISP representative noted it would make more economic sense for BT's rivals to just put up new poles.

Only one ISP has fully signed up to BT's PIA terms, BT confirmed on Tuesday, although the name of that ISP is being withheld for now.

A second letter protesting the access prices, signed by the same companies plus Sky, was sent on Monday to BT chief executive Ian Livingston.

"We are unanimous in the belief that PIA will be a commercial and policy failure if Openreach does not revise its prices," reads the letter, also seen by ZDNet UK. "Moreover, we are united in the view that the product is unfit to proceed into commercial use."

Industry sources told ZDNet UK that the terms and conditions for signing up to a PIA trial include giving BT the right to "come in and inspect the business" of the potential partner. Complaints have also arisen over BT's desire to have access to other ISPs' infrastructure. As those ISPs point out, Ofcom has mandated no such thing, as it is BT — not its rivals — that has the significant market power.

BT's trials

BT said in a statement it is "disappointed" the Vaizey letter was seen by the media before BT had a chance to see it. However, a company spokesperson conceded that some of the ISPs involved had previously raised the issues directly with BT.

"The fact is our proposed prices for duct access compare very well with European averages, while our plans for pole access have been held up due to others delaying our trials," BT said in its statement.

Our proposed prices for duct access compare very well with European averages. Our plans for pole access have been held up due to others delaying our trials.

– BT

"Once those trials are underway, we will be in a far better position to understand the costs involved, and so we would encourage these companies to start trialling with us as soon as possible," it added.

One ISP source took issue with the idea that the pilot costs are temporary, noting that companies have to bid for BDUK funding based on the prices they see now.

"BT can't say 'go into a bid on these prices, but they might be different later'," the source told ZDNet UK. "Saying 'it might be different tomorrow' is a bit of [nonsense]. It [BT] knows enough to change the prices today."