Select Committee on Trade and Industry First Special Report


Current Oftel Work and Investigations on BT's Terms of Supply of Unbundling Facilities

Cost of Physical and Distant Location

Oftel has opened two investigations, one to examine the charges made by BT for physical co-location and the other to examine charges for distant location. We have employed external consultants to conduct a detailed analysis of BT's costs in relation to both of these cases. In addition, we have also employed separate external consultants to conduct a benchmarking study of prices charged for physical co-location by incumbents in other countries. The aim of both these investigations is to determine whether the cost elements that BT has included in its final estimate for distant and physical location charges are cost oriented as required by the EC Regulation.

As a result of our distant location investigation BT has agreed to significantly reduce its charges for distant location facilities. BT has also reduced its charges for escorted access for operators' staff in BT exchanges. In addition Oftel has recently issued a draft direction stating that BT should only charge operators the lower of the market based or non-discriminatory rent for physical co-location space and should not at the same time raise a separate one-off charge for site clearance and asbestos removal. Oftel has also recently started a new investigation to examine whether the design and implementation of the hostel product is cost-effective.

Duct Sharing

Oftel has received a complaint regarding BT's refusal to share duct space with operators in the provision of distant location services.

This complaint has now been closed. Oftel found that there would be serious network integrity concerns for BT's public telephone network if BT was obliged to provide the duct sharing products described in the complaint.


In a response to an operator's request for co-mingling, BT has advised that the operator should instead use an alternative hostel based solution. The nature of the response suggests a refusal to offer a co-mingled solution. Oftel opened an investigation into the apparent refusal by BT to offer co-mingling BT. It is Oftel's view that where a reasonable request is made, the requirements of the EC Regulations are such that BT cannot refuse a reasonable request for co-location unless refusal is technically justified or is necessary to maintain network integrity. Further, any co-mingling provided to an LLU operator must be provided on a non-discriminatory basis. Oftel is currently consulting on a draft Direction to this effect, published on 27th June 2001.

Contractual Terms in the Access Network Facilities Agreement

In response to the ANF agreement determination dated 21 February, BT published a revised reference offer for 31 March as required by that determination. Oftel had concerns that the revised offer was not fully compliant with the determination and discussed a number of possible further revisions with BT. Following those discussions BT published a revised offer on 4 May for all parts of the agreement except service levels. The operators have since referred to Oftel for resolution a further dispute on service levels - in particular on the level of automatic compensation to be paid by BT if it fails to perform its contractual obligations e.g. failure to meet the dates for delivery of LLU products. This dispute is being considered.

Discrimination Complaint

Oftel examined a number of issues raised during the course of this investigation with regard to BT's DSL roll out. We have now published our conclusions in a statement dated 11July 2001. The statement concluded that there was no evidence of a breach by BT of its regulatory obligations. However Oftel has taken a number of steps to address issues raised through publication of a draft direction on co-mingling and Guidelines on co-location, both dated 27 June 2001. In addition Oftel is proposing a number of further steps to ensure accounting transparency of the services that BT provides to itself.

Cost of Backhaul Services

Oftel expects to publish a consultation document on backhaul services that are used to connect to LLU installations in August 2001. It will consider whether BT ought to be required to provide certain types of backhaul circuits (for connection between the competitor's equipment in or nearby BT's exchange building and the nearest point of presence of the competitor's network), and if so, whether they should be provided at cost-oriented prices.

Flexibility in Providing Physical Co-location

Oftel has continued to look at the possibilities of providing co-location facilities in sites where there is low demand. The development, by the industry group, of a 'mini-hostel' specification is one element of this work.

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Prepared 20 July 2001