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Telefónica O2 Uk Limited Response To: “Review of The

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Telefónica O2 Uk Limited Response To: “Review of The TELEFÓNICA O2 UK LIMITED RESPONSE TO: “REVIEW OF THE WHOLESALE LOCAL ACCESS MARKET” PUBLISHED BY OFCOM JUNE 2010 Telefónica O2 UK Limited Wellington Street Slough Berkshire SL1 1YP UK t +44 (0)113 272 2000 www.o2.com Telefónica O2 UK Limited Registered in England & Wales no. 1743099 Registered Office: 260 Bath Road Slough Berkshire SL1 4DX UK TABLE OF CONTENTS SECTION 1: EXECUTIVE SUMMARY.................................................................................................................... 4 INTRODUCTION .....................................................................................................................................4 THE IMPORTANCE OF A BALANCED REGULATORY REGIME ....................................................................5 MAKING IT ALL WORK FOR CUSTOMERS................................................................................................5 PROMOTING COMPETITIVE DIFFERENTIATION FOR CUSTOMERS.............................................................6 ARTIFICIALLY CONSTRAINING THE PRODUCT SET WILL LIMIT THE ROLLOUT OF NGA ..........................6 O2 RECOMMENDATIONS........................................................................................................................7 General ............................................................................................................................................7 The risk of gaming ...........................................................................................................................7 Improve VULA.................................................................................................................................9 The risk of margin squeeze on VULA ............................................................................................10 Improve the outlook for physical infrastructure access.................................................................11 CONCLUDING INTRODUCTORY REMARKS ............................................................................................12 SECTION 2: THE WHOLESALE LOCAL ACCESS MARKET REVIEW ........................................................ 15 IMPORTANCE OF THE MARKET REVIEW (AND PROPOSED REMEDIES) ...................................................15 OVERALL, O2 SEES OFCOM’S PROPOSALS AS GENERALLY POSITIVE ...................................................15 CURRENT GENERATION BROADBAND – LESSONS LEARNT ..................................................................16 OFCOM’S MARKET ANALYSIS..............................................................................................................18 OFCOM’S PROPOSALS..........................................................................................................................20 THE COMBINATION OF REMEDIES ........................................................................................................22 SECTION 3: OFCOM’S PROPOSALS IN RESPECT OF VIRTUAL UNBUNDLED LOCAL ACCESS (VULA) ........................................................................................................................................................ 24 GENERAL ............................................................................................................................................24 VULA KEY CHARACTERISTICS ...........................................................................................................24 WIRES ONLY .......................................................................................................................................25 VIRTUALISATION/ SERVICE FUNCTIONALITY ATTRIBUTES ..................................................................27 “STAND ALONE” VULA......................................................................................................................27 OPEN ATA..........................................................................................................................................27 SYSTEM INTERFACES...........................................................................................................................28 OFCOM’S ASSESSMENT OF GEA VS VULA.........................................................................................28 General ..........................................................................................................................................28 Service agnostic.............................................................................................................................29 Un-contended access .....................................................................................................................29 Control of CPE equipment.............................................................................................................29 Roadmap for evolution of GEA to VULA.......................................................................................29 PRICING OF OPENREACH’S GENERIC ETHERNET ACCESS (GEA) PRODUCTS.......................................30 General ..........................................................................................................................................30 Risk of margin squeeze between VULA and downstream products ...............................................30 Discriminatory pricing ..................................................................................................................31 2 of 58 Migration and switching................................................................................................................32 REMEDIES ...........................................................................................................................................33 SECTION 4: PASSIVE ACCESS REMEDIES ........................................................................................................ 34 GENERAL ............................................................................................................................................34 CURRENT GENERATION ACCESS .........................................................................................................35 NEXT GENERATION ACCESS ...............................................................................................................36 Opportunities for a mixed economy of access products.................................................................36 SLU and PIA remedies are positive steps – but they need to be complemented by cabinet access arrangements and allow flexibility ................................................................................................37 BT’s cost structure for SLU continues to make self build challenging ..........................................37 Opportunities for sharing space in BT’s active FTTC cabinets.....................................................39 The use of PIA should not be restricted to certain services and architectures ..............................40 Exchange only lines .......................................................................................................................41 FTTP..............................................................................................................................................42 Roadmap for PIA – Reference Offer remedy .................................................................................43 SLU PRICING ......................................................................................................................................44 SECTION 5: CONCLUDING COMMENTS ........................................................................................................... 47 ANNEX A..................................................................................................................................................................... 48 GENERIC BENEFITS THAT ACCRUE FROM A “WIRES ONLY” OPTION......................................................48 ANNEX B ..................................................................................................................................................................... 50 FTTC “WIRES-ONLY” STATUS.............................................................................................................50 FTTP “WIRES-ONLY” STATUS .............................................................................................................51 ANNEX C..................................................................................................................................................................... 53 BT’S GEA PRODUCTS AND THE PROPOSED VULA CHARACTERISTICS – GAP ANALYSIS .....................53 3 of 58 TELEFÓNICA O2 UK LIMITED RESPONSE – OFCOM REVIEW OF THE WHOLESALE LOCAL ACCESS MARKET SECTION 1: EXECUTIVE SUMMARY Introduction 1. Telefónica O2 UK Limited (O2)1 welcomes the opportunity to respond to Ofcom’s Review of the Wholesale Local Access Market (the WLA Market Review). 2. O2 is a leading communications company for consumers and businesses in the UK, with 21.299 million mobile customers and over 591,500 fixed broadband23 customers as at 31 December 2009. 3. O2 agrees with Ofcom that this is an important market review. Ofcom’s proposals (in respect of both current and next generation broadband) matter for consumers because: “...ultimately they will affect the price, choice and availability of critically important retail services ...” 4. It is important to keep this customer focus in mind when considering the remedies Ofcom proposes.
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