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Wholesale broadband market viewed as four sectors by Ofcom
Tuesday 21 November 2006 15:34:00 by Andrew Ferguson

Ofcom has published a consultation document that looks into the state of play in the UK wholesale broadband access markets in 2006 and 2007. The documents and details of how to respond to the consultation are located at

Two years is a long time in a rapidly growing market and at the last review in 2004 there was around four million broadband connections, now as 2006 comes to a close there are almost 12 million broadband connections, and the unbundled market sector is increasing its share very quickly. These rapid changes have the potential to upset the relatively stable markets that have prevailed in most of the country - and it is in this light Ofcom are considering what to do to regulate the market. The regulation work of Ofcom needs to ensure that while we have widespread competition at the retail level, that broadband providers will have choice at the wholesale level to ensure a continuing diversity of service packages.

A key realisation from Ofcom is that a 'one size fits all' approach will not work across the whole UK, and has identified four main market sectors.

  1. Exchanges where Kingston is the only operator (“the Hull area”) which covers 0.7% of the UK population;
  2. Market 1. Exchanges where BT is the only operator (“Market 1”) which covers 24% population;
  3. Market 2. Exchanges where there are 2 or 3 operators (inc BT and ntl:Telewest) AND exchanges where there are 4 or more operators (inc BT and ntl:Telewest) but where the exchange serves less than 10,000 homes and businesses (“Market 2”) which covers 21% population;
  4. Market 3. exchanges where there are 4 or more operators (inc BT and ntl:Telewest) and where the exchange serves 10,000 or more homes and businesses (“Market 3”) which covers 54% population.

While Market 1 lists BT as the only operator, it should be made clear it is referring to the wholesale market, at the retail level this 24% of households have a myriad of choices for who will be their broadband provider.

To this extent Ofcom will be assessing which company has Significant Market Power (SMP) in each sector and use its regulatory powers appropriately to ensure a provider does not exploit its position. On current evidence, Kingston has SMP in the Hull area, and the BT Group in Market 1 & 2. Given the rapid level of changes that unbundling is fueling, the decision on who has SMP in Market 3 is going to be much harder. Which may mean that the SMP the BT Group is deemed to have in Market 3 currently may dissappear with no-one having this power, or the crown being handed to another provider.


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