OFCOM PRESSES BT FOR FASTER LOCAL LOOP UNBUNDLING

OFCOM’s decision to push for more competition in broadband was sparked by “emerging changes in the architecture of the U.K.’s telecoms networks,” it said. Now, it said, operators can connect to BT’s network by: (1) Purchasing products such as IPStream that run from a customer’s premises through BT’s broadband network to the operator’s broadband network. (2) Buying products such as DataStream, which connect to the main network switches at the core of BT’s transmission infrastructure before routing data onto the operator’s broadband network. (3) Connecting BT’s copper local loops in the exchange. But because Internet Protocol networks will increasingly replace older networks, OFCOM said, “a renewed focus on the local loop will be critical in ensuring a fully competitive telecoms market for the long term.”

OFCOM acknowledged the U.K., with only some 11,000 unbundled lines, has fallen “some way behind” France, Germany and other European countries in both takeup and level of charges for LLU. LLU operators cater to metropolitan business and high-end consumers, OFCOM said, leaving small business and residential consumer market prices “significantly adrift from European best practice.”

In its consultation reviewing the wholesale local access market, OFCOM picked 2 markets for the purpose of gauging competition and imposing appropriate regulation. One is wholesale local access in the U.K. excluding the Hull area in northeast England; the other is wholesale local access in the Hull area. OFCOM has preliminarily concluded that BT holds significant market power (SMP) nationally outside Hull, while Kingston has SMP in Hull. OFCOM proposed to require, among other things, that both telcos: (1) Provide network access upon reasonable request. (2) Refrain from undue discrimination against competitors. (3) Make available their charges, terms and conditions and technical information. OFCOM further proposed to subject both companies to regulatory financial reporting obligations.

OFCOM praised BT’s decision to cut its LLU prices as much as 70%. Monthly rental prices and connection fees for the existing shared LLU product will drop 35% June 1 and will drop further when the product’s cost benefits of the product and scale economies filter through, BT said.

In a final statement on the wholesale broadband access market, OFCOM confirmed it will order BT to make DataStream available to operators, under a retail-minus pricing regime. DataStream or similar products will “continue to play an important role for several years to come,” the regulator said, and they will also fulfill a purpose in areas outside metropolitan exchanges longer term. Where LLU competition emerges, the need for DataStrean will be transitional, OFCOM said, adding it will perform a further early market review next year. “OFCOM’s aim is to ensure that operators dependent on DataStream to attain reach and scale during this transition benefit from the certainty of a defined margin, whilst simultaneously removing the barriers to adoption of the local loop as the primary point of infrastructure competition for the long-term,” the regulator said.

BT’s statement, issued in advance of OFCOM’s, said it will adjust the price of elements of its BT DataStream products at the end of the month to ensure sufficient margins between that product and its IPStream, Home 500 service. The company said it’s aiming to ensure products such as BT DataStream are “subject to less regulation in areas where LLU has been a success.”

The final statement confirms OFCOM’s earlier finding that BT has SMP in the asymmetric broadband origination market outside Hull, and in the broadband conveyance market throughout the U.K. Kingston was found to have SMP in the asymmetric broadband origination market in Hull. Again, the regulator imposed competition requirements on both companies.

OFCOM also proposed to establish the post of telecom adjudicator. The adjudicator -- who would be independent of both OFCOM and industry -- would “facilitate swift implementation of the processes necessary to enable competitors to gain access to BT’s local loop on an equivalent basis to that enjoyed by BT’s own businesses,” the regulator said.

OFCOM also announced steps to spur competition in narrowband voice services. A consultation document in the works will consider changes to the current carrier preselect regulations (CPS) to include a local calls product bundle for CPS operators connecting to local exchanges. The proposal should provide incentives for competitors to build out their infrastructure to BT’s local exchanges, OFCOM said. The regulator welcomed BT’s proposal to introduce a new wholesale call product for CPS operators that have invested in connections to a local exchange. The product will let competitors use BT directly for on-switch or inter-local exchange calls at a price that will significantly reduce their overall costs, BT said.

BT is pleased OFCOM recognized its commitment to fostering competition, a company spokeswoman said. The regulator acknowledged, she said, that if BT’s price cuts benefit consumers, regulation will be reduced and investors’ confidence will grow.

The Broadband Industry Group (BIG) called OFCOM’s announcements “a good day for Broadband Britain.” The regulator has taken positive steps that will take operators “significantly along the road towards a competitive broadband market,” said the group, whose members are Cable & Wireless, Centrica, Energis, Tiscali, Wanadoo and Brightview. Now that the policy is clear, BIG said, “the next steps are all about getting things done.”

Telenet, which has its own network, won’t be directly affected by OFCOM’s actions. OFCOM’s decision to require BT to broaden the margin between its DataStream and IPStream products (by Pounds 1) “implies that 3rd party network operators will earn a slightly higher margin and could provide more flexibility on pricing,” a spokeswoman said. Whether the saving is passed on the consumers “remains to be seen,” she said, but even if it is, Telewest’s broadband services are “very competitive.”