Ofcom is in the middle of a year-long review of the industry and
in April launched a consultation examining the prospects and
challenges for the sector now and over the next ten years.
According to David McConnell, chairman of the UK Competitive
Telecommunications Association, which numbers AT&T, Centrica,
ntl and Tiscali among its members, "British consumers have waited
too long for true competition and hopefully that wait will shortly
be over."
In the UKCTA's view, the way forward for the industry lies in
the creation of a regulatory system that prevents BT from both
abusing its dominance in upstream access markets and leveraging its
market power into downstream wholesale and retail markets.
This regulatory system would be founded upon the objective of
"equivalence": where BT is required to provide its access products
to all market entrants, including its own downstream
operations, to the same specification, at the same price and using
the same processes.
To achieve equivalence, said UKCTA, Ofcom will need to require BT
to demonstrate a far greater degree of transparency within its
various operating divisions, to ensure that transactions between
them and with BT's competitors are conducted on identical
(equivalent) terms and conditions. This model is known as
"transactional transparency".
However, the Association warns that implementation of transactional
transparency will require some degree of organisational and
structural reform, likely to involve improved accounting separation
between BT divisions and possibly legal separation of the
entities.
UKCTA fell short of recommending the separation of BT's
residential service from its wholesale business, as has been put
forward by other commentators. It explained: "In terms of creating
the correct incentives for the regulated entity to treat all its
customers equally, this structure would be optimal. However, it
would be slow and difficult to achieve in the face of BT
opposition."
Instead, said UKCTA, its proposals would result in a healthier,
more competitive and dynamic telecommunications market. Regulation
and the role of Ofcom should also become simpler and less intrusive
than in recent years as competition flourishes, supported by a
regulatory framework that prevents anti-competitive behaviour
occurring.
BT has also revealed details of its submissions to the
consultation, urging Ofcom to take a more targeted approach to
regulation.
This, said BT, would move away from micro-regulation and would
focus far more on bottlenecks and barriers to entry than on market
share. It would also seek to encourage infrastructure investment
instead of relying on mandated access to networks.
According to BT Chief Executive Ben Verwaayen: "Many markets are
now extremely competitive and so there should be a relaxation of
complex regulation particularly when new services are introduced
and there are no barriers to entry. In return, BT accepts that
there will need to be clear and focused regulation where genuine
economic bottlenecks occur."
"Regulation has to reflect the realities of the market," he
said. "Convergence is coming and consumers will soon make no
distinction between fixed and mobile services for their voice
calls, e-mails, text messages or use of the internet. Regulation of
the fixed line market on its own is simply not relevant
anymore."
