Edmonds: 'I have not given up on unbundling' - Face to Face

CommunicationsWeek International, Feb 4, 2002 by David Edmonds

David Edmonds grimaces when he hears the words "local loop unbundling."

It hasn't been his best experience during four years as director general of the United Kingdom regulator, the Office of Telecommunications (Oftel). British Telecom has unbundled only 140 lines since Edmonds first suggested in 1998 that the incumbent ought to open its local network, and only three or four of the original 40 competitive operators are now participating in the process.

Having faced calls for his resignation from within the industry, a parliamentary investigation and widespread industry criticism, Edmonds does not count Unbundling as something he'd ever like to do again. But he contests cries of regulatory failure where broadband is concerned.

"What would people like us to do that we haven't done?" Edmonds asks. He says Oftel's introduction of flat-rate Internet access was ahead of its time. "It takes time, but within two years we moved from no unmetered Internet access to 4 million [households using flat-rate access]. Now that's solely due to regulation action. Is that regulatory failure? No, give me a break. Do I get any credit? No. But if we hadn't done that, [flat-rate Internet access] wouldn't be there."

Although Edmonds is initially defensive about his handling of unbundling, he admits there are things he would have done differently if he were to do it again.

"If I were to start it again now, I would have tougher timetables. I would certainly leave less to the industry in terms of co-regulation." says Edmonds. "I would be much tougher in the direction that we gave. But I couldn't have invented a system for local loop unbundling three years ago: the regulator neither here nor in America nor in Germany has the experience or the ability."

In fact, Edmonds says you would be pushed to find a more competitive market in Europe than in the U.K. "After 18 years [of competition in the U.K.], 80% of the local access is still provided by ET. Now, where is it better?" he asks.

Oftel's co-regulation style, where competitive operators and BT negotiate the details of Oftel directives-- such as terms and conditions of wholesale products--almost backfired with Oftel's partial private circuit (PPC) directive last March.

Not all competitors could agree on the terms and conditions, and so in August, they had to request a decision from Oftel. Even though BT has offered PPCs since August, some operators are not taking part because they're still waiting for Oftel's decision, expected in the next few weeks.

The turmoil last year certainly put Oftel on a steep learning curve. Regular decisions on unbundling were designed to keep BT from overcharging for local loops and delaying the provisioning process. In October, Oftel set service levels for BT and fines for not meeting delivery times, as well as lowering BT's annual local loop rental charge.

The most significant of these decisions was Oftel's draft determination to require BT to offer ADSL and SDSL interconnection at its ATM switches. (see SDSL story, p.9). Oftel hopes BT will be offering these new interconnection products later this year, giving competitive operators more options to offer their own DSL services.

"BT's behavior through much of the [unbundling] process was not designed to be helpful, certainly," says Edmonds.

Edmonds has started 2002 on a stronger note. Two weeks ago, he formally presented his reference to the U.K. Competition Commission to investigate whether the four U.K. mobile operators charge too much for terminating calls on their networks. The only other time Edmonds has made a referral to the Competition Commission was for the same issue ten days after he arrived on the job in March 1998.

Some critics say Edmonds is too wary of using such referral powers and still doesn't act strongly enough against ST.

"I'm not averse to going to the Competition Commission--when the issues are big enough," he says. "I could have used it with BT on local loop unbundling, but I persuaded them to go for a voluntary license amendment."

Oftel also has the power to fine BT up to 10% of its revenues under the U.K.'s Competition Act, but so far this power has not been invoked.

"I'm perfectly happy to use the Competition Act, but you can't find somebody guilty until you've gone through due process," says Edmonds. "And so far, BT or any other telecoms company hasn't been in breach of the Competition Act in a way that would justify me fining them."

Edmonds even received critical fire from the former U.K. gas regulator, Claire Spottiswoode, who purported in newspaper interviews that telecoms regulation in the U.K. was fundamentally flawed and that Oftel could do a better job.

"My understanding was that she was trying to be helpful in contributing to a debate about the future of regulation. I think she knows a lot about gas regulation, but she doesn't fully understand the complexities of the telecoms sector," Edmonds says in response.

Most of Edmonds' time this year will be spent on preparations to set up converged regulator Ofcom by the end of 2003 and working with the new telecoms directives from the European Commission.