Ofcom, the newly established converged regulatory authority in the UK, has today published a first formal consultation document as part of its much-anticipated "Strategic Review of Telecommunications", which it aims to conclude by the end of 2004.
The consultation document contains 5 "fundamental questions", and 15 "phase 1 questions", which can be accessed by clicking here.
As Ofcom formulates it, the "phase 1" questions are for Ofcom, with the assistance of its stakeholders, to gain as full an understanding as possible of the prospects and challenges for the sector "between now and the end of the decade".
A key citation from the foreword of the consultation document is as follows:
"Our starting point, therefore, is to ask the question: "Why regulate at all?" Although it is unlikely to be desirable in the short term to withdraw completely from sector regulation, we do want to develop a strategy which could lead, over time, to substantial scaling down of regulation".
Unsurprisingly, the Ofcom consultation addresses the issue of structural separation, with a question formulated as follows: "At varying times since 1984, the case has been made for structural or operational separation of BT, or the delivery of full functional equivalence. Are these still relevant questions?"
The Deadline for responses to the "phase 1" consultation is 22 June 2004.
Update: In the afternoon of 28 April 2004, Stephen Carter, Ofcom's Chief Executive gave a briefing, which is reproduced on the Ofcom website. It can be accessed by clicking here.
The Stephen Carter briefing is worth reading in its own right.
Particular points which stand out are quoted below:
- Nuancing of the importance of structural separation
"Note the phrasing of that last question and that it comes last. That is deliberate. Since 1984 that question has been the elephant in the corner of the room. And if there is an elephant in the corner, we think it better to acknowledge that fact rather than try to pretend it does not exist.
But on this question Ofcom is genuinely agnostic. And we strongly hope that it will not be the focus of everyone's input to the Review. As we all know, today's telecommunications market is many layered and complex and is unlikely to become less so in the coming years. Indeed, some of the forces we identify in the Report could make the market more competitive. So we should be cautious in reaching for any single, magic-bullet solutions.
I repeat, on this issue Ofcom is agnostic."
- Remarks on Ofcom's approach to IPStream, DataStream and Local Loop Unbundling, indicating that the next step would be taken on 10 May 2004, and suggesting future substitutability between bitstream access and unbundling.
"At present, Local Loop Unbundling and DataStream/ATM Interconnect have some complementary features for competition. LLU allows a high degree of product and price differentiation. But it requires significant investment and competition is likely, for some time to come, to be focused on metropolitan/larger urban areas with high population density and shorter distances from the local exchange to the core network.
DataStream allows less product and price differentiation than LLU (but more than IPStream) and is dependent on the current configuration of BT's data transport network. It does however allow competitors more rapid entry to the market, is less capital intensive and complements national broadband competition by providing economic access in rural and less densely populated areas. Some operators also see DataStream as a route to customer volume - effectively, a migration path towards a mass market approach to LLU either separately or in tandem.
Ofcom therefore intends for the time being to maintain regulation at both the ATM Interconnection level and in LLU. However, in line with the overall principles I set out some moments ago, were significant price reductions and equally significant process improvements to lead to the development of thriving LLU-based competition, then Ofcom would, on the basis of hard evidence of such successful competition, revisit the need to retain regulation of DataStream in those areas where LLU had taken off. Trigger points could be some combination of price, process, numbers of operators or numbers of users."
So, in other words, our timetable is:
- in the week beginning 10 May we will publish our final statement on the wholesale broadband access market review and consult on the principles of the LLU Market Review
- In the week beginning 31 May we will consult on the retail minus margin between DataStream and IPStream.
- In week beginning 7 June - and this is relevant to business users - we will publish our decision on the Leased Lines Market Review and the initial consultation on Partial Private Circuit price control
- In August we will consult on the detailed market review and pricing issues in LLU, leading to a decision on that before the year end.