Broadband News
News, views and analysis
BT gets go ahead for virtual unbundling
03 Jun 2010 | 19.12 Europe/London
The European Commission has approved a proposal from Ofcom that would allow BT to provide virtual rather than physical access to its new fibre infrastructure, which includes both fibre-to-the-premises (FTTP) and fibre-to-the-cabinet (FTTC) networks.
BT’s new fibre networks have a point-to-multipoint topology; part of the network is a single fibre that is shared between several end users. Physical unbundling – giving alternative operators a point to connect to the infrastructure – would need to take place at street cabinets rather than at the telephone exchange, leading to a proliferation of green boxes around British towns and villages. This is generally considered very costly and difficult to implement from a technical point of view.
As a result, BT proposed an alternative product, which it calls Virtual Unbundled Local Access (VULA), and Ofcom submitted the proposal to the European Commission, in accordance with the Article 7 procedure, which requires regulators to notify the Commission of its draft regulatory plans.
The upshot is that the Commission is happy with VULA because it offers many features which indicate that, in terms of functionality, are similar to physical local loop unbundling (LLU). “In particular, VULA should allow product differentiation and innovation similar to LLU and thus give access-seekers a sufficient degree of control, including quality of service, over the local connection to the end-user,” says the notification.
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 fibre infrastructure. However, this interim solution is not a long term alternative to physical fibre unbundling, which should be imposed as soon as possible."
But BT and Ofcom didn’t get things entirely their own way. The Commission wants pricing for VULA to be cost-oriented, which means that the wholesale prices BT can charge to other communications providers must be based upon the costs of operating and maintaining the network, with an adjustment to take into account the investment risk. Ofcom had not been planning to set regulated prices for VULA, even though it expects VULA to become the main source of competition in next-generation access networks.
The Commission pointed out that this is the first time that a national regulator in the EU has proposed a practical solution for providing access to point-to-multi-point fibre infrastructures. With regulatory consistency across Europe being one of the Commission’s top priorities, it is likely that other incumbent telcos will find themselves being forced to open up their fibre networks to competitors in future whether they like it or not.
BT’s new fibre networks have a point-to-multipoint topology; part of the network is a single fibre that is shared between several end users. Physical unbundling – giving alternative operators a point to connect to the infrastructure – would need to take place at street cabinets rather than at the telephone exchange, leading to a proliferation of green boxes around British towns and villages. This is generally considered very costly and difficult to implement from a technical point of view.
As a result, BT proposed an alternative product, which it calls Virtual Unbundled Local Access (VULA), and Ofcom submitted the proposal to the European Commission, in accordance with the Article 7 procedure, which requires regulators to notify the Commission of its draft regulatory plans.
The upshot is that the Commission is happy with VULA because it offers many features which indicate that, in terms of functionality, are similar to physical local loop unbundling (LLU). “In particular, VULA should allow product differentiation and innovation similar to LLU and thus give access-seekers a sufficient degree of control, including quality of service, over the local connection to the end-user,” says the notification.
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 fibre infrastructure. However, this interim solution is not a long term alternative to physical fibre unbundling, which should be imposed as soon as possible."
But BT and Ofcom didn’t get things entirely their own way. The Commission wants pricing for VULA to be cost-oriented, which means that the wholesale prices BT can charge to other communications providers must be based upon the costs of operating and maintaining the network, with an adjustment to take into account the investment risk. Ofcom had not been planning to set regulated prices for VULA, even though it expects VULA to become the main source of competition in next-generation access networks.
The Commission pointed out that this is the first time that a national regulator in the EU has proposed a practical solution for providing access to point-to-multi-point fibre infrastructures. With regulatory consistency across Europe being one of the Commission’s top priorities, it is likely that other incumbent telcos will find themselves being forced to open up their fibre networks to competitors in future whether they like it or not.