Business Connectivity Market Review

The UK communications regulator Ofcom has published a final statement on its Business Connectivity Market review.

Following comments from the European Commission on a draft statement published on 25 February, Ofcom is confirming its decisions. These are designed to promote competition and help ensure the UK has a backbone of high-speed networks capable of supporting the future data demands of businesses and consumers.

Leased lines provide dedicated symmetric transmission capacity between fixed locations, and their overall value exceeds £2bn per annum in the UK. They play an important role in business communications services and are used to support a wide variety of applications, both in the private and public sectors. They also play a significant role in delivering fixed and mobile broadband services to consumers, because communications providers (CPs) use them extensively in their networks.

Superfast Broadband, Business Connectivity Market ReviewBT remains by far the largest wholesale supplier of leased lines in the UK. For illustrative purposes, if we consider all wholesale circuits, we estimate that BT has a share of 82% of volumes. The majority of CPs remain reliant on BT's network in providing services to their customers.

Ofcom's decisions are designed to promote competition in the provision of leased lines and the services which use them, and will affect the availability, choice, price, quality and value for money of data-transfer services throughout the UK. They are therefore important in furthering the interests of citizens and consumers.

Key trends in the market

The Business Connectivity Market Review has identified the following key trends in the communications market

  • Leased lines: The demand for leased lines bandwidth has increased steadily in the last few years, driven by sustained increases in both the penetration and the speed of business and consumer data services. The growth in demand for leased lines capacity seems set to continue as businesses demand more bandwidth, and as providers of mass market broadband services invest in fixed super-fast services and mobile next-generation (4G) services.
  • Bandwidth: The adoption of remotely hosted computing applications (often known as 'cloud computing'), growing consumption of video content, and the rapid growth of e-commerce and of internet applications have all added to businesses' bandwidth demands. At the same time, providers of consumer broadband services, both fixed and mobile, have required steadily increasing bandwidth to support the growth in traffic from their end-users.
  • Unit costs: Modern technologies are driving down the unit costs of leased lines bandwidth. The number of services which use legacy time-division multiplex (TDM) technologies has been declining, although they still account for most installed leased lines. Modern Ethernet transmission equipment is now preferred in most new installations because it costs less and supports higher bandwidths.
  • WDM techology: The trend to lower unit costs is particularly evident in the increasing adoption of wavelength-division multiplex (WDM) technology. This technology can multiply by several times the bandwidth transmissible in an optical fibre. WDM equipment allows CPs to aggregate traffic from different services and to use optical fibres efficiently in the core of their networks as demand for bandwidth continues to increase. CPs are also deploying WDM equipment increasingly at their customers' premises if very high bandwidths are required.

Strategic Review and BT

In a separate statement today, Ofcom has also decided to grant a request by BT for an exemption from certain obligations which Ofcom accepted as part of the Strategic Review of Telecommunications. The obligations relate to high-bandwidth leased line services within a geographically limited area, which have been the subject of detailed analysis within the Business Connectivity Market Review.

Further information