WIREDGOV

•  New rules to underpin Openreach performance on repairs and installations
•  Separate measures to promote competition in superfast broadband
•  Lower wholesale charges for standard broadband and phone calls

Telephone and broadband customers can expect improved line repairs and installations, under draft decisions which Ofcom has notified to the European Commission.

Under the changes, the vast majority of phone and broadband faults would have to be repaired within two working days, while most customers wanting a new line must receive an appointment within 12 working days.

These targets are expected to apply from this summer and are set out in new minimum performance standards for Openreach, the company that installs and maintains connections to BT’s network on behalf of competing providers.

Should Openreach fail to meet the new targets, it would face sanctions from Ofcom, which could include fines.

New performance targets

The new targets are designed to ensure better service for telephone and broadband customers in future. Ofcom will monitor Openreach’s performance closely and intervene further if required.

Under the draft measures, Openreach must in future:

• complete around 80% of fault repairs within one to two working days of being notified;
• provide an appointment for around 80% of new line installations within 12 working days of being notified;
• report publicly on its performance, which will allow Ofcom to monitor and intervene further if required; and
• make clear the timeframe in which it is currently completing any remaining jobs, to provide reassurance to consumers about how long the work is likely to take.

The targets escalate over three years, reaching their full level in April 2016.

Separately, Ofcom will also review the standards of redress, which could include compensation, that landline and broadband providers offer to consumers when things go wrong.

Boosting superfast broadband competition

Today’s draft statement is part of Ofcom’s Fixed Access Market Reviews, a wide-ranging set of decisions in the wholesale telecoms markets used by companies to offer telephone and broadband services to UK consumers. Different broadband providers sell superfast services over BT’s network. There are now around 2.7m such connections in the UK.

Currently, if a consumer wishes to change superfast broadband provider, the company they are switching to must pay a £50 fee to Openreach – which is often passed on to the customer. Ofcom intends to cut this wholesale fee to £11, which would allow providers to offer lower retail start-up fees.

Also, where an existing superfast customer switches to a different supplier, the minimum length of the wholesale contract between BT and the new supplier would reduce from a year to one month. This gives flexibility for telecoms providers to offer shorter retail contracts.

Ofcom is not intending to set the level of wholesale prices for Openreach’s fibre service, as it believes the price of fibre broadband is currently constrained by the availability of standard broadband services, and by competition from Virgin Media’s cable network. Ofcom will soon propose new guidance on its future approach to the ‘margin’ that BT sets between its wholesale and retail fibre prices.

Prices for traditional services

Ofcom has also today notified draft controls on the prices that Openreach can charge other telecoms providers for some of its standard broadband, wholesale services.

These ‘charge controls’ make reference to the consumer price index (CPI) measure of inflation, an approach which incentivises Openreach to become more efficient. They can bring about price cuts where providers pass on savings to retail customers.

The charge controls would come into effect on 1 July 2014 and run until 31 March 2017. They cover wholesale charges for telephone and standard broadband services delivered to homes and businesses over Openreach’s copper network in three ways:

• A ‘shared unbundled’ line to a property. This allows telecoms providers to provide broadband services to their customers by installing their own equipment in Openreach’s telephone exchanges, while BT provides the voice connection. In March 2014, the wholesale cost for this service was £9.89 per year. Ofcom intends to set a cap on this charge, reducing it to £5.54 from 1 July and then in real terms by
  CPI -33.4% each year from March 2015 to 2017;
• A ‘fully unbundled’ line to a property. Again, the telecoms provider uses its own equipment in the exchange, but this time it takes full control of the line to offer both broadband and voice. In March 2014, the wholesale cost for this service was £83.92 per year. Ofcom intends to allow this to increase slightly in real terms to £86.10 from 1 July, and then by CPI +0.3% each year from March 2015 to 2017; and
• Wholesale line rental, which is used by communications companies to offer voice telephone services to consumers using lines rented from Openreach. In March 2014, this cost £93.32 per year. Ofcom intends for this to fall to £91.04 from 1 July, and then in real terms by CPI -3.0% each year from March 2015 to 2017.

All of today’s draft decisions are subject to review by the European Commission, following which Ofcom expects to publish final statements in June.

Further work

Ofcom conducts these reviews every three years under the European telecoms framework. In the UK, there are also legally-binding undertakings that were agreed between Ofcom and BT in 2005. These resulted in the ‘functional separation’ of BT and the creation of Openreach to provide access for competitors to the telecoms network. This combination of regulation has resulted in strong competition in the supply of broadband and telephone services, which has benefited consumers.

As next year is the tenth anniversary of the undertakings with BT, Ofcom anticipates that this will provide a sensible opportunity to take stock of their effectiveness in light of general market developments.

NOTES FOR EDITORS

1. Openreach targets will be adjusted slightly to deal with instances where external factors beyond Openreach’s reasonable control (such as extreme weather) mean it is not possible to meet the service standard. The targets will allow that up to 3% of repairs and 1% of installations in a typical year might be delayed due to such factors.
2. Around 25-30% of new line orders typically require an engineer visit. The new target of 12 working days would apply to these jobs. Installations not requiring a visit are almost always completed within two working days.
3. The draft targets apply to the two main Openreach services, which allow competing providers to access BT’s network: wholesale line rental and fully unbundled lines. The targets will not apply to other products – such as fibre broadband, where BT has generally met or exceeded its service level agreements. However, Ofcom may set targets for other services in future if performance were to become a concern.
4. Ofcom has today also notified its Wholesale Broadband Access review to the European Commission, which looks at competition in the market for wholesale broadband products that telecoms operators provide to themselves and sell to each other. The review finds that the area of the UK that benefits from effective competition (three or more providers) has grown in the last three years from 78% to 90%.
5. Under the revised European Framework that was transposed into UK law in May 2011, Ofcom is required to submit certain regulatory proposals to the European Commission for their review. The European Commission has one month to review the draft decision, during which it can comment or initiate further examination. The Body of European Regulators for Electronic Communications (BEREC) and other equivalent EU Member State national regulatory authorities also have the opportunity to comment during this one month period.