UK telecoms operators blast Ofcom's broadcast bias

CommunicationsWeek International, April 1, 2002 by Michelle Donegan

Alternative telecoms operators in the United Kingdom believe they will become the "poor relation" to the broadcasting industry under the new converged regulator Office of Communications (Ofcom). And they believe that the advent of Ofcom will make structural separation of incumbent BT, deemed by them as critical for effective competition, even less likely.

"You can see the huge disproportionate focus on broadcast issues," said David McConnell, director of public policy and political liaison for Cable & Wireless plc, of London, speaking at a meeting of the Telecom Executive Network "There is a fear that regulation will become ineffective [under Ofcom]."

The U.K. television market was worth a total of [pounds sterling]7.9 billion in 2001, according to the Independent Tele vision Commission (ITC). The U.K. telecoms market was worth more than [pounds sterling]40 billion.

"It's important to note that our voices could be diminished," said Jonathan Watts, managing director of Colt Telecom, of London.

Ofcom will merge five U.K. regulatory bodies: the Broadcasting Standards Commission, the ITC, the Office of Telecommunications (Oftel), the Radiocommunications Agency and the Radio Authority. But telecoms operators believe the government is preoccupied with broadcast, threatening their competition with BT.

Furthermore, alternative operators are still saying that the only way to ensure competition is to separate BT's network from its service business, and they want this discussed by the government in a public forum, such as an investigation by the Competition Commission (see CWI, 21 May 2001, p. 1).

"I want the government to look at structural separation," said Colt's Watts. "I would like the government to refer BT to the Competition Commission. [Otherwise] BT has won. They have the market all to themselves,"

But the chances for separation are diminishing as the agenda for Ofcom is being dictated by broadcasters, say telecoms operators. Issues like local loop competition are in danger of being forgotten by U.K. policymakers. The operators cite news coverage of Ofcom, which has been dominated by the implications for broadcasters since the new regulator was proposed.

"It's extremely worrying what Ofcom's policy is going to be at the moment," said Collin Long, a partner in the law firm Olswaing, in London. "There is a great danger of an atrophy of policy...and a great deal of uncertainty while policy freezes in the transition [to Ofcom]."

Other competitive operators in the U.K. say that the questions surrounding Ofcom are due to a general lack of "clarity" from the government. "The lack of regulatory certainty is holding back this industry," explained Ian El-Mokadem, managing director of Centrica Telecommunications plc, based in Windsor, England. "We just don't know what the vision is in five years' time."

In an earlier interview, David Edmonds, director general of Oftel, told CWI that, he is a "passionate advocate" of Ofcom. But he noted that the regulatory principles would be the same whether BT's local network was separated or not.

"The advantages of splitting [BT] are much more to do with the transparency of pricing," said Edmonds. "In management terms, there is a very clear division between [BT] wholesale and retail. My aspiration would be any competitor buying from BT wholesale would be getting the same terms that BT Retail would begetting."

But some competitors say BT's current separate structure isn't good enough.

"Like hell [BT] wholesale is separate from retail," said Watts at Colt. "Edmonds says he can't do more...but we don't believe him."

Olswang's Long argues that Oftel already has "tremendous powers" under the Competition Act. There have been 12 cases taken up by Oftel under the Act, but none of them was successful in allegations against BT. "Oftel doesn't believe BT has abused its power," he said.

This is why operators are concluding that structural separation is the only way to ensure a level playing field, particularly in the local loop.

"It's the last mile that's killing [this industry]," said John Wheeler, chief executive of U.K. fiber network operator Neos Networks. "We can't reach the end customer."

Cable & Wireless says the failure of competition in the local loop is the most compelling argument for separating out BT's local access network. "It's not the fault of the regulator," said McConnell. "It's a demonstration of BT's ability to leverage its dominance into the retail market."

But Oftel's thoughts on structural separation remain its own because it believes it is unrealistic to think that the separation of BT will be discussed in public unless it was in the context of an official government study.

"We're not ever going to have a debate in public about BT and structural separation," said Peter Waller, the newly appointed director of operations at Oftel. "You can't imagine that we haven't considered it, but we never will comment on that in public."

But the mechanism for a public debate does exist, say operators. The Secretary of State has the power to refer such analysis to the Competition Commission, according to Cable & Wireless, and the structural separation issue has been raised in the Ofcom select committee hearings in Parliament.