Agreement Seen Unlikely to Roll Back Need for Rules
Far from scaling back regulation, the U.K. telecom regulator will have to be more vigilant, having accepted a British Telecom (BT) plan to open its network to rivals to fend off an antitrust probe, competitive telcos said Thurs. Amid a flurry of consultations, the Office of Communications (Ofcom) yesterday unveiled more details of a tentative pact with BT, saying it thinks the incumbent’s undertakings likely will address key competition problems. Competitors, still pondering the complex settlement, said they worry BT will have to be muscled into making good on its promises.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Ofcom said it suspects BT of restricting competition in the markets for wholesale access, backhaul network services and downstream retail. Instead of referring BT to the Competition Commission, Ofcom warned the incumbent to play nicely with rivals or face an inquiry (CD Nov 19 p. 5).
BT then proffered concessions, including: (1) “Equivalence of inputs,” meaning BT will supply a range of products in relevant wholesale markets to all communications providers, including its own downstream operations on the same timescales, conditions, and price and via the same systems and processes. That includes wholesale line rental and local loop unbundling (LLU). (2) Creation of an Access Services Division, separate from the BT group, to control and operate physical network assets comprising BT’s local access and backhaul networks. (3) An organizational separation between BT’s wholesale and retail arms. (4) Establishment of a new internal compliance board to monitor compliance with its undertakings.
With regard to its next-generation network (NGN), which it calls the 21st Century Network (21CN), BT said it will ensure other providers can buy unbundled network access products. The incumbent vowed to design 21CN as efficiently as reasonably possible, so it can deliver equivalence of inputs with regard to products in which it holds significant market power (SMP). BT also agreed not to launch new retail products based on 21CN before downstream competitors have access to a suitable upstream wholesale SMP product, and to participate in a multilateral industry forum responsible for managing the transition to NGNs.
One key Ofcom goal in scrutinizing the U.K. telecom industry was “to create a stable regulatory environment and then scale down regulatory activities,” said a spokesman for the U.K. Competitive Telecoms Assn. (UKCTA). What seems clear to UKCTA, he said, is that because the settlement is between Ofcom and BT, the regulator will have to pay close heed to the incumbent’s compliance. “It seems that rather than being able to step back from regulating the industry, Ofcom will have to put on its policeman’s hat and start patrolling the perimeter,” the spokesman said.
Last week, U.K. ISPs said they are pleased Ofcom has gone for equality of access rather than breaking up BT. However, they said they await details of the proposal to see how effectively Ofcom deals with industry concerns. “We hope we won’t be disappointed with the new rules,” said ISPA U.K. Council Chmn. Jessica Hendrie-Llano. “Even if the rules meet our expectations, Ofcom must maintain a keen eye on levels of competition in the Internet industry for a long time to come.” Yesterday an ISPA U.K. spokesman said the organization is analyzing the proposal.
A 2nd consultation opened yesterday seeks a policy framework to address potential regulatory issues raised by the shift to NGNs. It looks at the investment climate for NGNs, policies for existing SMP products and NGN SMP products and consumer protection. The consultation calls for continuation of BT’s Consult 21 -- an industry liaison program for smoothing the transition to 21CN -- and creation of a new industry group to handle the actual shift to NGN.
Ofcom said despite some forward momentum, LLU remains “relatively embryonic today with only about 70,000 unbundled loops,” representing about one percent of the U.K. broadband market. Earlier this month, BT agreed not to cut connection or rental prices on its ADSL broadband products until 1.5 million lines have been unbundled. Upon hitting that mark, BT said, the rental price of the ADSL end-user connection will drop slightly. Ofcom said those measures, together with its plan to review the broadband market regularly and BT’s vow to deliver LLU equivalence of input, will give LLU operators a basis for commercial plans and more competition.
Ofcom also is reviewing the scope of the universal service obligations (USOs) of BT and Kingston and yesterday sought input on several proposals, including: (1) Beefing up assistance to low-income consumers by targeting a new low-use plan for those receiving income support or pension and housing benefits. (2) Requiring BT to meet, by 2006, a goal of at least 180,000 customers to be offered pre-pay accounts instead of being disconnected for non-payment of phone bills. (3) Creating a stakeholder advisory panel to monitor BT and Kingston delivery and performance on obligations to provide services for people with disabilities. BT and Kingston now fund the USO, and Ofcom said there’s no need to change that arrangement now.
Finally, Ofcom is studying how to investigate alleged breaches of a requirement it places on some companies not to discriminate unduly between customers.