- The outgoing UK telecommunications regulator Oftel
and the incoming converged communications regulator Ofcom today
agreed on a joint draft decision on the regulation of the UK's
wholesale broadband access market.
The decision follows the publication earlier this year of a
consultation document setting out the terms of a market review of
wholesale broadband services. The scope of that review included
proposed definitions of broadband and an analysis of the extent of
competition in the wholesale market.
Given the fact that the broadband wholesale access market review
coincided with the transition to Ofcom, and given the strategic
importance of broadband to the communications sector as a whole, the
draft decisions set out in this proposals were jointly reviewed by
both the Director General of Oftel and the Ofcom Board.
It was clear to both regulators that the market has moved
significantly in the last two years, with the emergence of a widening
market offering both alternative technologies and alternative
However, it is also clear that at this point in time there is a
national and distinct market in wholesale broadband services, and
that BT is the dominant provider of those services. As such, both
Oftel and Ofcom found that BT had Significant Market Power (SMP).
The Director General of Oftel, David Edmonds, said: "These
proposals will address a competition deficit. They will bring clarity
and predictability to a strategically important and distinct market,
enabling other network operators to compete effectively against BT
and, in turn, leading to greater choice and value for the consumer."
The Chief Executive of Ofcom, Stephen Carter, said: "Broadband
Britain needs broadband competition at the wholesale level as well as
the retail level. Ofcom believes that these proposals will create the
right balance of certainty, alternative supply and incentives to
This is the seventh of ten major market reviews undertaken by
Oftel. The remaining three reviews will be completed by the new
communications regulator Ofcom during 2004.
The market reviews are conducted under the terms of the EU
Regulatory Framework for electronic networks and services and replace
the existing regulatory regime for telecommunications.
Background on wholesale broadband access
The large majority of UK Internet Service Providers (ISPs) are
dependent upon suppliers of wholesale broadband access in order to
deliver the benefits of high-speed, always-on connections to their
domestic and business customers.
BT is the predominant supplier of wholesale broadband access to
ISPs, most of whom use a family of BT broadband products called
IPStream to connect their customers directly to BT's network. BT's
IPStream products are known as intermediate services, enabling ISPs
to sell broadband connections to consumers at the retail level.
BT's network operator competitors also sell wholesale broadband
access to ISPs. However, those network operators do not bypass BT's
infrastructure altogether. They make use of BT's broadband-enabled
local loops and, typically, a significant amount of BT's routing
They therefore connect to BT's network backbone (via what is known
as an ATM Interconnection) using a family of BT products called
Datastream. Those network operators then build their own broadband
access products for ISPs on top of BT's Datastream products.
If the Datastream price is too close to the IPStream price, BT's
network operator competitors cannot make sufficient margin on their
activities, and therefore cannot compete effectively with BT in the
wholesale market providing services to ISPs.
The decision framework
Oftel and Ofcom have found that:
1. The market for broadband internet services is distinct from
that for dial-up internet access. The wholesale broadband market
should therefore be considered in its own right rather than as a
sub-set of another market. The regulators also found that the
wholesale broadband market is national in nature.
2. BT has Significant Market Power (SMP) in the UK wholesale
broadband market (excluding Hull). Oftel and Ofcom are therefore
proposing the following regulatory obligations on BT:
- requirement to provide Network Access on reasonable request;
- requirement not to unduly discriminate;
- requirement to publish a refere-ce offer;
- requirement to notify terms and conditions;
- requirement to notify technical information;
- requirement to provide quality of service information;
- requirement to establish a statement of requirements for new
- requirement to have accounting separation
A clear and predictable margin for alternative network operators
Oftel and Ofcom also found that BT should be required to provide
its Datastream products on a retail minus basis.
A requirement to offer Datastream at a retail minus price means in
particular that BT must allow sufficient margin between the price it
charges for its IPStream products and the price charged for the
The actual retail minus margin will be set following consultation
in the first quarter of 2004.
Oftel and Ofcom explored the option of requiring BT to offer its
Datastream products on a cost plus basis. Under a cost plus ruling,
BT would only be able to recover its costs plus a reasonable return
on investment when setting the price of a product.
However Oftel and Ofcom concluded that such a ruling could act as
a disincentive to further network investment and as such could
inhibit the growth of the broadband market as a whole.
The regulators also considered options including the withdrawal of
regulation in this market, but concluded regulatory obligations
remained necessary to ensure fair and effective competition.
UK individuals and organisations with an interest in the wholesale
broadband market have until 6 February to comment on the draft
decision document. The proposals will also be considered by the
Full details of the draft decision can be found online at
Notes for Editors and CSEs
The Office of Telecommunications (Oftel) is the regulator for the
UK telecommunications industry. Oftel was set up under the
Telecommunications Act 1984. Oftel's powers and responsibilities will
pass to Ofcom on 29 December 2003.
Ofcom will be the UK's new communications industry regulator with
wide-ranging responsibilities across the UK's communications markets
when it assumes its powers at the end of the year.
Ofcom will inherit the duties of the five existing regulators it
will replace - the Broadcasting Standards Commission, the Independent
Television Commission, Oftel, the Radio Authority and the
An independent regulatory body, Ofcom will also fulfil the
additional duties enacted in the provisions laid down in the
Communications Act 2003.
For further details please visit www.ofcom.org.uk
This information is provided by RNS
The company news service from the London Stock Exchange
ots Original Text Service: Ofcom
Ofcom Media Office