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UK Backhaul Regulation Will Hinder 5G, Say Telcos

The UK regulator's failure to open up BT's networks could have damaging consequences for the 5G market.

Iain Morris

September 18, 2017

5 Min Read
UK Backhaul Regulation Will Hinder 5G, Say Telcos

A handful of the UK's biggest telcos have rounded on regulatory authority Ofcom, saying its failure to open up fiber networks owned by fixed-line incumbent BT could hinder the rollout of mobile services based on the next-generation 5G standard. (See Europe's Backhaul Black Hole Looms Above 5G.)

Mobile operators 3, Telefónica and Vodafone, as well as enterprise-focused Colt, have become increasingly frustrated that they cannot use BT's networks for mobile "backhaul" -- the process of ferrying mobile traffic from basestations to their core network systems.

Unless regulations change, the operators fear the backhaul portion of the network will become a business-damaging bottleneck with the rollout of higher-speed 5G services, which could start to appear in some countries in 2019.

Currently, mobile operators either buy traditional "leased line" services from BT Group plc (NYSE: BT; London: BTA) or use wireless "microwave" technology to support their backhaul needs. But there is widespread unhappiness about BT's prices and service levels and concern that microwave technology will not be able to cope with 5G demands.

Instead, 3, Telefónica and Vodafone Group plc (NYSE: VOD) have all expressed interest in using ducts and poles owned by Openreach, BT's infrastructure business, to roll out their own fiber networks. Colt Technology Services Group Ltd also wants access to Openreach facilities so that it can better compete against the incumbent in the wholesale market, selling backhaul services to mobile operators.

Under current regulations, however, BT is not required to provide duct and pole access in the business connectivity market, which covers the sale of mobile backhaul services.

"There is no provision for opening up the duct and pole network for operators who wish to invest mainly in mobile backhaul and fixed wireless access," said a spokesperson for Three UK in comments emailed to Light Reading. "This is an oversight by the regulator which must be remedied."

Yet despite pressure from 3 and other operators, there seems little prospect of any change in the regulatory position.

Light Reading recently asked Ofcom why it would not make BT open up ducts and poles for mobile backhaul purposes. In response, a spokesperson directed your correspondent to documentation justifying Ofcom's opposition to any such move.

The regulatory authority's principal concern appears to be that a methodology used to calculate prices for duct and pole access would be incompatible with its methodology for pricing other services in the business connectivity market, such as BT's leased lines.

But Colt insists that Ofcom is "quite transparently wrong" in its approach. For several years, Barney Lane, Colt's director of UK regulatory affairs, has been urging it to use an entirely different methodology that would scrap the distinctions it has drawn between the business connectivity market and the residential one, in which duct and pole access is available.

"There is always an alternative cost methodology they could use but they just haven't ever done it," he says.

The European Commission has also taken issue with Ofcom's stance. In a clause in its business connectivity market review, Ofcom acknowledges that: "The Commission did not share Ofcom's view that imposing universal duct access would create undue implementation risks … The Commission considered that the risks could be mitigated by the use of a uniform costing methodology."

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Ofcom's regulations are also at odds with those in some other European markets, where mobile operators now say they can use ducts and poles owned by incumbents to develop their own backhaul networks.

"In Spain and Portugal, Vodafone has demonstrated that a regulatory regime that gives challenger operators access to an incumbent's ducts and poles boost competition and encourages investment in ultrafast networks," said a spokesperson for Vodafone.

Telefónica, the Spanish incumbent, acknowledges that regulatory measures have spurred investment by its rivals. "Mobile operators have used ducts and poles intensively for connecting mobile basestations," said a Telefónica spokesperson.

Ofcom believes that instead of being forced to open up its ducts and poles BT should have to provide "dark fiber" to wholesale customers in the business market.

Dark fiber, it is believed, will give wholesale customers more control over services than operators have seen with traditional leased line products.

Unfortunately, for mobile operators, Ofcom's plans to open up BT's dark fiber were dealt a blow this summer when -- following a BT appeal -- a UK court said the regulator had erred in its definition of the dark fiber market, sending Ofcom back to the drawing board.

"It seems likely that Openreach … will not provide a dark fiber product in October 2017, either on a regulated basis or voluntarily," said 3's spokesperson. "Dark fiber is essential to 5G rollout and the ruling will significantly impact the economics of 5G rollout."

When it comes to 5G, much of the mainstream press focus has been on the issue of spectrum, and whether frequency disputes will hold up the government's sale of licenses. But the lack of suitable backhaul networks and arrangements could be just as damaging to the 5G business case in some of Europe's biggest markets.

For more on the 5G backhaul issue, see this just-published special report from Light Reading.

— Iain Morris, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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