BT has lashed out angrily after the UK's national regulator said the operator would be forced to provide dark fiber services to other companies under forthcoming rules.

In a statement provided to Light Reading, the operator said that "mandating dark fiber risks favoring a few companies that have the greatest capability to deploy it, to the disadvantage of all other firms."

"It will undermine investment -- as a number of service providers have warned -- and it would also increase costs, divert resources and add more complexity just when we're beginning to make progress on improving service," added BT Group plc (NYSE: BT; London: BTA).

Besides requiring BT to provide dark fiber services, regulatory authority Ofcom also plans to impose tougher quality-of-service requirements on Openreach , accusing the BT access division of dragging its heels on service rollout.

The moves follow the recent launch by Ofcom of its first major strategic review of the sector in a decade and indicate a willingness on the regulator's part to take a much harder line with the incumbent amid the current market shake-up. (See Eurobites: Ofcom Assesses State of the Digital Nation and Eurobites: Ofcom Puts the Squeeze on BT.)

BT is set to become even more dominant if it completes its £12.5 billion ($19.7 billion) takeover of EE , the country's biggest mobile phone business, while a separate merger between Telefónica UK Ltd. and Three UK -- the UK's second- and fourth-biggest mobile operators -- would further reduce competition in the mobile market. (See BT Locks Down £12.5B EE Takeover Deal and Telefónica Seals $15.2B O2 Sale to Hutchison.)

Ofcom believes the dark fiber regulations would spur competition in the market for leased lines, which currently generates £2 billion ($3.14 billion) in revenues each year.

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Leased lines provide dedicated, high-speed connections and are used by businesses, mobile operators and public sector institutions, such as schools and libraries.

Through wholesale arrangements with BT, other service providers are currently able to provide leased-line services but must rely on BT's electronic equipment. The new regime would let them take control of the connection and install their own equipment at each end.

The move would allow BT's competitors to innovate and develop new services in a way they cannot at the moment -- much as the introduction of local loop unbundling gave a boost to broadband rivals that had previously been resellers of BT products.

Openreach would also have to pick up the pace at which it installs leased lines under the new rules. According to Ofcom, the average time it takes for a leased line to become ready from the time of the order has grown from 40 to 46 working days since 2011. Openreach will be penalized if the average exceeds 40 from 2017 onwards.

Moreover, it will have to meet dates it promises customers in 80% of cases by 2016 and 90% by 2018, having last year failed to complete around half of the installations on time, according to the regulator.

Next page: Vigorous defense

Vigorous defense
One move that is likely to be welcomed by the incumbent is a planned deregulation of the leased lines market in central London, where Ofcom believes there is now sufficient competition for it to lift most supply and pricing requirements on BT.

But the operator is sure to mount a vigorous defense of the current set-up elsewhere, with all of the plans subject to a period of consultation. "Openreach's current offer creates a level playing field and a vibrant, competitive market, with hundreds of competing companies, large and small," it said.

Stakeholders will have until the end of July to respond to the proposals and Ofcom plans to publish its final decisions early next year.

Assuming the regulator decides to press ahead with the dark fiber plans, BT would then have to publish a draft reference offer, containing details of wholesale pricing and access terms, in mid-2016.

Following negotiations between BT and other providers, a final reference offer would be made available by the end of the 2016, with dark fiber access becoming a reality from April 2017.

In responding to Ofcom, BT will undoubtedly insist the new rules would force it to invest in developing new processes and systems, diverting its resources away from making service improvements.

Ofcom appeared to share some of BT's concerns back in 2012, when it decided not to mandate dark fiber access during a review of the business connectivity sector, but it says "the market has moved on since the last review."

"As these lines become increasingly critical to businesses, communications providers are looking for a range of technical options and features," an Ofcom spokesperson told Light Reading. "We now believe that competition could be dampened if providers don't have the flexibility they need to deliver services of their choice at their own pace."

Indeed, many of BT's rivals will naturally applaud the regulator's latest move, having previously complained about the lack of dark fiber services in the UK market.

But one that has greeted it with some degree of wariness is CityFibre , which is rolling out fiber networks across a number of UK cities and eager to provide dark fiber services to the country's mobile network operators. (See Split BT to Lessen Regulation, Says CityFibre, CityFibre Sees Backhaul Interest From O2, Vodafone and CityFibre Aims for BT's Wholesale Business.)

"While CityFibre welcomes Ofcom's decision as a clear validation of our business model, we urge it in the strongest possible terms to ensure that any future approach to pricing in no way distorts the market or discourages investment by independent infrastructure builders," said Greg Mesch, CityFibre's CEO, in an emailed statement.

"The task of redressing the legacy of decades of underinvestment in the UK for fiber infrastructure is too large and important to be left to solely one monopoly provider, and the role of smaller, entrepreneurial players must not be underestimated or undervalued," he added.

— Iain Morris, , News Editor, Light Reading