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Trade and Industry committee report on Ofcom review
Thursday 07 April 2005 10:11:00 by Andrew Ferguson

The Select Committee on Trade and Industry (TISC) has issued its latest report on the strategic review of the Telecommunications market by the industry regulator Ofcom. The HTML version of the report can be read here. For those that found the recent Ofcom report hard work and lengthy, this TISC report is much more to the point and makes easier to follow points.

The report is mainly concerned with the two aspects of the UK broadband market, Local Loop Unbundling (LLU) and Equality of Access. We found the comments in section 2.12 very interesting and have reproduced it below:

"12. NTL warned us of the need for caution in the regulatory treatment of these enduring bottlenecks. They pointed out that cable already provided infrastructural competition over the last mile to BT's local loop in much of the country and highlighted the dynamism that they thought this has brought to the market. The danger was that, having identified the access network as an enduring bottleneck, Ofcom would attempt to mimic competition and regulate to keep access as cheap as possible. In keeping the price low, and limiting BT's returns, NTL argued, regulation risked deterring BT from investing further in their access network and, perhaps more importantly, deterred investment in alternative access networks by competitors. Consequently, there was a risk that in identifying and regulating for economic bottlenecks, Ofcom would ensure, and indeed reinforce, their continued existence. To add to those concerns, NTL worried that Ofcom have not set out a clear methodology for identifying an enduring economic bottleneck. "

Extract from TISC Thirteenth Report on Ofcom's Strategic Review of Telecommunications

A while ago, we reported on a plan by BT Wholesale to provide a rebate on the exchanges where it is making cost savings due to the high demand in an area, the rebate was something like 8% to the ISPs, i.e. around £1 per month. The TISC in section 2.21 raises a concern that has been voiced in our forums, that this may actually harm the chances of real competition to BT. It seems amazing that what looks like a relatively small reduction could cause so many problems, but this highlights the uncertainty in investing in LLU services. Perhaps the UK will only see wide-spread LLU on 1000+ exchanges if a foreign teleco comes to these shores to escape its own regulator.

The report also comments on the reliance in the UK on the current BT Wholesale IPStream products, which are the core of the 5 million ADSL users in the UK. This has to a great deal of similarity between providers broadband services, though in terms of quality of service there is still plenty of variation. Though the last 12 months has seen products diverging slowly, as providers explore different niches, e.g. bolt-on VoIP (Voice over IP ) options, extra broadband content subscriptions, metered packages as a way to lower basic monthly fee, user selectable speeds of service. As yet the providers using BT Datastream services have done little to set them apart from the BT IPstream users. The small but growing band of LLU providers are starting to make larger ripples, but currently there is only 40,000 LLU lines in the UK, which is a very small percentage.

At the end of the day, for all the regulation, prodding and poking by Ofcom, LLU is only going to succeed if people buy it, and for this to happen the providers need to ensure that their quality of service at least matches the IPStream products and often exceeds them. It is most likely that the early adopters of LLU services at 4Mbps, 8Mbps and maybe faster later in 2005, will be the most vocal, and thus form a core that will then encourage others to sign up.


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