UK broadband prices could drop after regulator announces wholesale price cut

The UK telecoms regulator Ofcom has said it will be forcing down the prices that Openreach, the wholesale division of incumbent BT, can charge for broadband and telephone rental. However, BT intends to contest the decision.

The proposed charge controls would reduce the cost of a “fully unbundled line” from £91.50 to £87.41, while a shared unbundled line, where an ISP uses the line just to provide broadband, would drop from £14.70 to £11.92. The cost for phone rental services would drop from £103.68 to £98.81.

Ofcom said it has provided the European Commission with a draft of its decision, which it deems necessary due to Openreach’s significant market power. The charges would be imposed for the 2012/13 financial year and would run until 31 March 2014. Prices could decrease further in line with the Retail Price Index. The charges will only kick-in once they have been approved by the European Commission, which Ofcom said would occur in March.

How this will affect consumers is unclear as the Ofcom proposals do not force the purchasers of Openreach’s wholesale services to pass on savings to their customers. If they do however, it could mean customers of Openreach based broadband would see price drops.

However, BT has hit back at Ofcom over the decision, issuing a statement of its intentions, which could include appealing the decision.

“We disagree with some of the underlying assumptions that they have used to determine these charge controls. Our primary concern throughout this process is to ensure that we are able to achieve a fair rate of return in order to continue our investment in the future of the UK’s communications infrastructure,” read the statement.

“We will consider all options available to us, including appealing, after Ofcom confirms its final decisions.”

Last week, Openreach announced that it would make Fibre-to-the-Premises (FTTP) services available in six locations in the UK from late October, making download speeds of up to 110Mbps available, with 300Mbps upgrades coming by spring 2013.

The Broadband MEA conference is taking place on the 25-27th March 2012, at the Westin Mina Seyahi Beach Resort and Marina, Dubai, UAE. Go to the website now to register your interest.

London will host 2012's Olympics

UK regulator Ofcom has outlined plans to temporarily use spectrum from the public sector to cope with increased demand for airwaves during the London 2012 Olympics.

The authority said that it will borrow spectrum on a short-term basis from the Ministry of Defence and other public sector bodies, make unused frequencies available, such as the spectrum that will shortly be auctioned by Ofcom, but is currently not being used, and will use spectrum made available by the country’s digital television switchover, as well as spectrum that is available without the need for a licence.

The body anticipates an increase in demand for bandwidth, caused by increased use of wireless cameras to achieve more dramatic and close-up action shots, more wireless microphones to add flexibility in capturing the sounds of the Games, wireless location, timing and scoring technology to give more detailed and immediate information about the event as it happens and wireless communications used by team members, sports officials, organisers and support staff.

In addition, sports commentaries will be distributed wirelessly to the venue audience for the benefit of hearing and visually impaired spectators and the use of wireless communications by security and emergency staff will be use to keep everyone at the event safe.

The decision to borrow spectrum from public bodies and use temporarily available airwaves was arrived at because spectrum within London is already being used at full capacity for many applications that will be used at the London 2012 Games, Ofcom said.

“In preparation for the increased demand for spectrum during the Games, Ofcom has been running a series of test events during 2011 and 2012. These have taken place at high profile events such as the royal wedding of Prince William and Catherine Middleton at Westminster Abbey, the Formula 1 Grand Prix at Silverstone and the Sail for Gold event at Weymouth,” the body said in a statement. Ofcom will also be responsible for managing the airwaves during the Queen’s Diamond Jubilee, which will take place in June this year.

Ofcom has also built a state-of-the-art spectrum assignment system that will manage access to spectrum, keeping it free for those who need it and free from interference, in order to ensure spectrum is efficiently used, carefully allocated and to ensure that interference is minimised. The regulator will also be deploying an especially large team of radio engineers to track down and deal with any cases of interference that do occur.

“The UK’s airwaves are already among the most intensively used in the world. The London 2012 Games will significantly increase demand,” said Ofcom’s chief operating officer, Jill Ainscough.

“Ready and prepared for this challenge, Ofcom recognises that there is no room for complacency. We are working behind the scenes to make this capacity available, to ensure that this demand is met.”

Ofcom has proposed revised plans for the UK 4G auction scheduled for the end of the year

UK regulator Ofcom has announced revised plans to promote competition in the country ahead of the country’s 4G spectrum auction.

The spectrum in the 800MHz band that is becoming available, freed up from the nationwide switchover from analogue to digital TV,  is equivalent to three quarters of the mobile spectrum in use today. The refarmed 800MHz band will be auctioned along with higher frequency airwaves in the 2.6GHz band at the end of 2012.

Ofcom believes that consumers are likely to receive better services at lower prices in the future if there are at least four operators in the market and without the right quality and mix of spectrum, an operator might struggle to compete with other national wholesale providers. So ahead of the second round of consultation with telcos, Telecoms.com takes a look at the impact Ofcom’s revised plans will have on operators in the UK.

Everything Everywhere

Everything Everywhere, the company formed by the merger of T-Mobile and Orange in the UK, currently has no spectrum in the 900MHz band, but owns a lot of spectrum in the 1800MHz bands, which it is currently using for 2G services.

When the two firms decided to merge, the European Commission (EC) assessed the merger and one of the conditions  proposed in order for the deal to get the go-ahead was that the operator had to give up some of the 1800MHz spectrum that the two firms owned – a total of 2x15MHz of 1800MHz spectrum.

Ofcom had previously said that it would guarantee both Everything Everywhere and 3UK, or a new entrant to the market, sub-1GHz spectrum in order for them to deploy LTE. However, the new proposals see the regulator withdraw that guarantee from Everything Everywhere.

“Ofcom had to do something to make everyone else happier and Everything Everywhere less happy, so that they could get this through without legal challenge,” said Matthew Howett, analyst at Ovum.

“On balance, Ofcom decided that Everything Everywhere’s holding of 1800MHz is sufficient for the operator to use in order to deploy LTE, rather than worry about it getting access to 800MHz for that. Ofcom has said it believes the benefits of operating LTE at 1800MHz, in some instances, are higher than operating at 800MHz. That’s because 1800MHz allows more capacity, which is important.”

Of course the operator itself was not happy to hear the news and a spokesperson told Telecoms.com: “Everything Everywhere is very disappointed to see that Ofcom has again reversed its proposal to ensure all mobile operators hold a minimum amount of sub 1GHz spectrum. Ofcom is missing a huge opportunity for the UK to address the imbalance in sub 1GHz spectrum holdings, which has damaged consumer interests for the last 20 years, and is a situation which is now threatening to continue.”

The company argued that the importance of sub 1GHz spectrum has been recognised by other regulators across Europe and supported by economic analysis.

“All of the regulators bar Ofcom have made vigorous efforts to support healthy and sustainable competition by ensuring that the imbalance of sub 1GHz holdings is redressed,” said the spokesperson.

However, it should be stressed that things could yet change if Everything Everywhere decides to divest its 1800MHz spectrum before the auction, rather than during it.

According to Howett: “If this spectrum is auctioned before the joint award of 800MHz and 2.6GHz it could remove the need for any spectrum reservation. This is not insignificant given the growing interest in launching LTE at 1800MHz.”

3UK

3UK is likely to be quite happy with the new proposals because either it or potentially a new entrant to the market, is guaranteed spectrum in the sub 1GHz band. However, if 3UK, or a new entrant acquires some of the 1800MHz from Everything Everywhere before the spectrum auction, Ofcom would not necessarily guarantee them spectrum in the 800MHz band.

“It’s up to 3UK to decide whether it values spectrum in the 1800MHz band more than the 800MHz band and decide whether it participates in the bidding of Everything Everywhere’s 1800MHz band before the auction,” said Howett.

“It needs to spend time doing cost benefit analysis to find out what works for its business. However, if a new entrant comes along and secures some 1800MHz spectrum, which is not very likely but still a risk nonetheless, 3UK can mitigate the risk by bidding for 1800MHz or by bidding aggressively for 800MHz. Ofcom can’t be any more fair to 3UK than it is being.”

O2 and Vodafone

Vodafone and O2 are likely to be the happiest to hear of Ofcom’s revised proposals. Everything Everywhere has been disadvantaged by the revisions, and there has been no decision by Ofcom to take back any 900MHz spectrum from the two companies.

A Vodafone spokesperson told Telecoms.com that the revisions bring the UK closer to a “fair and open auction that will benefit the wider economy, increase competition and ultimately lead to the creation of innovative new services for consumers”.

However, the firm said that it still does not completely understand the regulator’s rationale for protecting a fourth operator.

The spokesperson also outlined its plans for rolling out LTE, and suggested that the company will be ready to roll out the technology when bidding is over.

“In the UK, Vodafone has already moved well beyond the testing phase for 4G. We have run three trials of the technology in the UK over the last three years and the international team of engineers who launched Vodafone’s 4G network in Germany over a year ago are already in this country, working closely with our own technical specialists.”

So, Ofcom has been in an unenviable position to try to remain fair to each of the operators but also promote competition and conclude the auction as speedily as possible. However, according to Howett, the regulator has not done a bad job.

“The decisions Ofcom takes now are likely to affect the level of competition in the sector for at least a decade. Striking a balance was never going to be easy. The set of proposals now on the table appear to leave everyone with something to be optimistic about, but at the same time requires compromises to be made. Perhaps Ofcom have got it right?”

Ofcom outlines new proposals to get 4G to rural areas

UK telecoms regulator Ofcom has outlined new proposals to extend 4G coverage to at least 98 per cent of the population.

Last year, Ofcom proposed that a condition should be attached to one of the 800MHz licences up for grabs, which would oblige the holder to roll out a 4G network that provides coverage to 95 per cent of the UK population.

Now, following news that the government will invest £150m to boost mobile coverage in areas with poor or no mobile service – with part of that figure to be spent on building new mobile infrastructure in areas where there is little or no commercial incentive for operators to do so – Ofcom believes that this condition can be strengthened in one of two ways.

The first option is to increase the obligation for coverage to 98 per cent of the UK population. The second and, in Ofcom’s view a potentially more effective option, is to require that one of the 800MHz spectrum licenses has a condition that forces the buyer to provide 4G coverage that not only matches existing 2G coverage but also extends into mobile ‘not spot’ areas of the UK where the £150m will provide infrastructure capable of supporting 4G coverage.

This may have the potential to extend 4G mobile coverage even further than to 98 per cent of the population, according to Ofcom.

“This second option would make it more likely that mobile broadband services would be provided in locations where they could be most valued by consumers, rather than in those areas where it is easiest for a licensee to meet the obligation,” the regulator wrote in a statement.

Arqiva owns all of the UK’s terrestrial TV and radio networks and around 20 per cent of the mobile network infrastructure in the country. It will likely play a major role in getting 4G to not-spots in the UK, as it aims to act as a neutral host for operators to provide broadband, and hopes to give a choice of providers to those living in rural areas. Alastair Davidson, director of mobile, said he was very encouraged by Ofcom’s proposal, hailing it as a “significant milestone”.

However, he suggested that Ofcom should make sure the 98 per cent coverage obligation is applied to all the operators who win 800 MHz spectrum.

“If Ofcom decides to place the coverage obligation on only one operator, many consumers in rural areas will receive a second-tier broadband service, denied the benefits of competition available to those who live elsewhere,” he said.

But he added: “This auction provides an opportunity for the whole country to benefit from high-speed data networks and we very much hope that it can now proceed without further delay.” The UK is trailing behind many other mature markets, especially in Europe, that have already auctioned 4G spectrum.

Ofcom hopes to be ready for spectrum auction by end of 2012

UK regulator Ofcom has announced that it will delay the 4G spectrum auction until the final quarter of 2012, at the earliest.

Ofcom said that it received a number of “substantial and strongly argued responses” to its initial plans and will undertake a further round of consultation to address issues raised.

“In light of these responses, and the significance of the decisions that we need to take—decisions that are likely to shape the future of the mobile sector in the UK for the next decade or more—we have decided to undertake a further round of consultation on these issues,” the regulator explained.

Ofcom said that it plans to publish a further consultation document around the end of 2011 and will then give stakeholders another opportunity to comment and respond to its revised proposals—a period that is likely to be at least eight weeks.

“Our aim will then be to make our decision and publish a statement in the summer of 2012. The auction itself would then follow a few months later – perhaps starting in Q4 2012,” the body said.

Ofcom tried to dismiss speculation about an impending delay to the auction as irrelevant last month, claiming that operators will not be able to roll out 4G LTE services until 2013 at the earliest, due to technical issues. However, through Ofcom pushing back the auction even further, operators could lose valuable time in their attempts to bring LTE to the UK at the beginning of 2013.

Vodafone, Everything Everywhere and O2 had each denied claims that they had been trying to stall the UK spectrum auction that is scheduled for 2012, following accusations from 3UK’s new chief executive David Dyson.

Responding to the latest development, a 3UK spokesperson told Telecoms.com that the company understands Ofcom’s desire to get this competitive issue right, but that its UK competitors will gain from the regulator’s tardiness.

“This delay extends to 2013 the massive competitive and commercial imbalance created by the decision in January 2011 to enable the use of existing 2G spectrum for 3G data services,” said the spokesperson.

“Operators that currently rent low frequency spectrum for a fraction of its fair value will continue to get a free ride at the expense of UK taxpayers as prices for rented low-frequency spectrum will only be re-balanced at the time of the auction.”

Automatically Renewable Contracts will be banned in the UK from the end of the year, says Ofcom

Ofcom, the UK telecoms regulator, has announced that it has banned contracts that automatically tie customers into new contracts if they fail to opt out. The new rules, which come into force from 31^st December, will ban Automatically Renewable Contracts (ARC), which commit customers to a new minimum term for their broadband, and impose penalties for leaving.

According to Ofcom, UK incumbent BT is the largest provider of these types of contract with 15 per cent of its customers signed up to them. TalkTalk Business, Titan Telecoms, and Optimum Calls were singled out as offering these to business users. Ofcom said that companies are required to move all customers on such contracts to alternatives by the 31^st December 2011 deadline.

Ofcom Chief Executive, Ed Richards, said in a statement that: “Ofcom’s evidence shows that ARCs raise barriers to effective competition by locking customers into long term deals with little additional benefit. Our concern about the effect of ARCs and other ‘lock in’ mechanisms led to our decision to ban them in the communications sector.”

Chairman of the Communications Consumer Panel, Bob Warner, commented on the announcement saying: “”This is really good news for consumers. It will prevent residential and small business customers getting stuck with fixed landline and broadband contracts that no longer meet their needs because contracts have been extended for another year without their active consent.”

“This won’t have a major effect on BT’s subscriber numbers, as operators have long had to charm, rather than strong-arm, UK customers into subscribing and staying”, commented Rob Gallagher, principal analyst at Informa Telecoms & Media.

“The principal tool they can employ is bundles and BT appears to have some particularly attractive ones in its fixed-telephony and broadband packages. The incumbent has taken the majority of net new fixed-broadband subscribers for some quarters now, outpacing even Sky with its phenomenally successful TV and fixed-broadband packages. BT will continually need to review and refresh its bundles to remain competitive, but it already faced this challenge long before the ARC ban.”

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Ofcom claimed that mobile operators will not be able to roll out LTE until 2013

Mobile network operators will not be able to roll out 4G LTE services until 2013 at the earliest, due to technical issues, according to UK regulatory body Ofcom, rendering speculation about whether the spectrum auction will be delayed as irrelevant.

The regulator has altered its forecast for the timing of the auction from 1Q12 to the “first half of 2012”, whilst admitting that it could yet happen in the first quarter of the year.

“It is a very complex programme with a number of different parts and processes and all of them have to happen at the same time, which makes it difficult to judge at this point when the auction will take place,” said an Ofcom spokesperson.

“We don’t want to say that it will definitely happen in the first quarter, but it might. It will happen in the first half though, and we’ve actually told operators this over the past three or four months.”

The spokesperson added that the UK’s mobile operators would not be ready to roll out the service until 2013 anyway as spectrum needs to be made available, and there are currently stumbling blocks in place.

Part of the 800MHz spectrum that is required for 4G is currently being occupied by digital terrestrial television and there are issues with 4G interfering with neighbouring bands, which need to be mitigated. Until these issues are resolved, operators will not be able to use the spectrum, and the earliest would happen is in 2013. Therefore, Ofcom argues that any issues with the timing of the auction will have no impact on operators’ plans.

The spokesperson added that speculation that the delay was caused by legal threats from mobile operators is “not true at all”. Everything Everywhere, Vodafone and O2 have each recently denied that they had attempted to delay the auction.

UK consumers are rapidly becoming enthusiast of superfast broadband

An Ofcom report on the transformation of the UK’s communications market during the last decade has revealed consumers are adopting superfast broadband connections at a rapid clip, with 500,000 households now connected to speeds of 30Mbps or higher – a fivefold increase from 2010.

An estimated 57 per cent of UK homes are now passed by superfast broadband, either through Virgin Media’s cable service or BT’s Infinity product. Nearly two-thirds (63 per cent) of the survey’s respondents with a superfast connection say they are now more likely to download HD films or TV programmes on the internet.

Satisfaction with superfast broadband was also found to be high, with 80 per cent of respondents with a superfast connection reporting that they are satisfied with the service (compared to 57 per cent satisfied with their previous broadband service), and a third (33 per cent) saying download speeds exceeded their expectations.

The majority of UK homes (76 per cent) are now connected to the Internet, compared with just 25 per cent in 2000, and there was found to be evidence that older age groups are catching up in the adoption of technology: for the first time, over half (55 per cent) of UK residents aged 65-74 have access to the Internet at home. Nine out of ten adults (90 per cent) aged 35-44 have the Internet at home, but this falls to just a quarter (26 per cent) of over 75s.

The take-up of broadband continues to vary markedly in the different regions of the UK, with just 61 per cent of Scottish homes having a broadband connection, compared to 71 per cent in Wales and 75 per cent in Northern Ireland. Total take-up of broadband across all regions reached 74 per cent by the end of the first quarter of this year.

Over a quarter (26 per cent) of UK advertising spend is now on the internet, marginally ahead of television; internet advertising spend grew by 16 per cent in 2010 to over GB£4 billion ($6.5 billion).

UK consumers are enjoying ever-higher broadband speeds, though ISPs continue to underdeliver on advertised speeds

UK consumers are enjoying a boost in their average broadband speeds, but the gap between actual and advertised speeds has also increased, according to new findings from communications regulator Ofcom.

The average UK broadband speed increased by 10 per cent in the first half of this year from 6.2 Mbps in November/December 2010 to 6.8 Mbps in May 2011. Nearly half (47 per cent) of UK residential broadband users were on packages with advertised speeds above 10 Mbps in May 2011, compared to 42 per cent in November 2010 and just 8 per cent in April 2009.

However, the average advertised speed in May of this year was 15 Mbps – 8.2 Mbps higher than the average actual speed of 6.8 Mbps. In November/December 2010 the average actual speed was 6.2 Mbps and the average advertised speed was 13.8 Mbps, giving a gap of 7.6 Mbps.

Superfast broadband services are now available to most UK homes, according to Ofcom, with 57 per cent of homes now being within Virgin Media’s cabled areas or served by a superfast-enabled telephone exchange.

These superfast services were found to have much smaller differences between the headline speed claims and the actual speeds: the average download speed on Virgin Media’s 30 Mbps service offered average speeds of 31 Mbps, and its 50 Mbps service offered average speeds of 48 Mbps, according to Ofcom.

BT’s Infinity service, which has a headline speed of 40 Mbps, was found to provide average speeds of 34 Mbps.

In spite of this advance of superfast broadband services, ADSL technology still dominates in the UK, with over 75 per cent of residential broadband connections currently being delivered by copper ADSL telephone lines. The average download speed received for ADSL ‘up to’ 20 Mbps and 24 Mbps ADSL services was 6.6 Mbps, and more than a third of customers (37 per cent) on these packages received average speeds of 4 Mbps or less, according to Ofcom.

Although fewer UK Internet Service Providers (ISPs) now advertise their services by headline speed, Ofcom reports that it continues to be concerned that theoretical ‘up to’ speeds have the potential to mislead customers. The regulatory body recommended earlier this year that a Typical Speeds Range (TSR) should be included in adverts by ISPs which advertise based on the speed of their service, and this recommendation is currently being considered by CAP and BCAP, the committees that write the advertising codes administered by the Advertising Standards Authority, with a decision expected in the early autumn.

A number of changes to Ofcom’s Code of Practice came into effect today (July 27th, 2011), with the key changes being firstly that instead of receiving a single point estimate of the maximum speed on their line, consumers will be given a speed range based on customers with similar line lengths, and secondly that there is a new option for customers to leave their provider without penalty if they receive a maximum line speed which is “significantly” lower than the bottom of the estimated range.

Operators should be forced to enhance UK coverage an advisory board is telling regulator Ofcom

An advisory group is calling on the UK telecoms regulator Ofcom to ensure that the LTE spectrum auction scheduled for 2013 deals with coverage ‘not-spots’ across the country.

The Communications Consumer Panel is asking Ofcom to enforce coverage obligations on the operators taking part in next year’s LTE spectrum auction for each of the four UK nations; England, Scotland, Wales and Northern Ireland. The suggestion is that money be retained from the spectrum auction and a reverse auction run in order to provide upgraded rural coverage.

The panel said that the patchy coverage in many places is causing problems for small businesses, consumers and those passing through the affected areas. It also highlighted poor coverage for rail users across the country.

Bob Warner, panel chair, said in a statement that, “This is a critical moment, and we have a unique opportunity to resolve the persistent problem of inadequate mobile coverage.  Most places that were mobile coverage not-spots ten years ago are still not-spots today, and the spectrum auction presents perhaps the only chance we have in the next decade to improve coverage in the nations and for rural communities.”

The panel’s reasoning is that regular market forces are not enough to ensure mobile coverage is extended beyond current 2G/3G areas, thus leaving many areas fallow when it comes to broadband connectivity.

“Effective mobile communication is essential for the growth of rural communities and businesses, and we now need an intervention to improve rural services. The potential significant windfall to the Treasury from the spectrum auction presents us with the opportunity to do something about it,” Warner said.

In Germany the winner of the 800MHz digital dividend was required to roll out coverage to rural areas and Hartmut Kremling, CTO of Vodafone Germany recently told Telecoms.com that, “LTE 800 is a perfect technology to cover these wide areas quickly and efficiently and we really have great feedback from the people there”.

In the US, Verizon Wireless said it was working with a number of rural carriers to roll out LTE to remote areas as part of the Rural America Program.