A response to the Oftel Consultative Document issued in July 1999
By the Service Providers Interest Group
The Service Providers interest Group, SPIG, represents the interests of businesses that provide content, data, Internet and mobile telecommunications services. It promotes the value of services competition and seeks a fair competitive environment for services provision.
SPIG members believe that the principle of unbundling all network elements, not just those needed to deliver "higher bandwidth", is essential in order to bring real diversity into the marketplace and to encourage new entrants to supply services without an excess of environmental disruption.
SPIG applauds OFTEL's conclusion that BT should be mandated to provide access to its so-called local loop and co-location facilities in order that other companies can connect equipment and provide service using that part of BT's infrastructure. (It is assumed that the Director General will confirm the proposals in this Consultative Document in OFTEL's October statement.)
Although it is likely that some SPIG members would not want to deploy their own infrastructure, preferring instead to buy an equivalent to the "option 4" service outlined in OFTEL's previous Consultation "Access To Bandwidth", access to the local loop will ensure there are competing suppliers of an "option 4" service.
With competition between "option 4" suppliers, Service Providers can be more assured that they will be able to purchase an "option 4" service that meets their needs, at a competitive price and at the best possible quality - something that is unlikely to evolve if there were a monopoly supplier of "option 4" service.
The presence of competition in the supply of "option 4" services will in turn stimulate a vibrant Service Provision business, leading to innovation and competition between Service Providers along with its consequent benefits to consumers and the UK economy. SPIG notes with interest and endorses the recommendations of the e-commerce report by the Performance and Innovation Unit, reporting to the Cabinet Office, dated September 1999, which call for:
The PIU report calls the timetable ‘demanding’. SPIG’s view on the contrary is that the timetable is not aggressive enough, and urges OFTEL to use its best endeavours to bring forward the July 2001 date for access to the BT local loop by competing operators.
Accurate local loop and co-location pricing is an essential element for the creation of a Service Provider’s business case and an early determination is vital. The process SPIG proposes is:
SPIG suggests that this process be completed as early as possible but in any case by no later than end-June 2000.
In the interest of brevity, this submission will avoid restating points already adequately covered in SPIG's response in March 1999 to OFTEL's previous Consultative Document Access To Bandwidth Consultation: bringing higher bandwidth services to the consumer, December 1998, which can be seen on the SPIG web site, http://www.spig.org.uk/papers/accessto.html. Instead we will focus on issues worthy of particular mention in the current Consultative Document.
References to particular points in the Consultative Document are prefaced by their paragraph number in the document.
1.11 It is unclear why BT's views are being given such particular note throughout this Consultative Document. Surely the job of the regulator is to set up a level playing field so that commercial decisions can be made by all of the companies that choose to compete, rather than having any special regard for the plans of one or more of them? If BT have plans for their DSL rollout all well and good, but what do those plans particularly have to do with the outcome of this Consultation?
2.1 While OFTEL is to be applauded for basing its decision upon factors such as consumer benefit, promoting investment and encouraging competition, the Consultative Document does not address the question of how allowing BT to proceed with an effective monopoly over the supply of DSL services until mid-2001 will be beneficial to any of these factors.
2.5 While it is true that the provision of low cost DSL-based services will stimulate the use of the Internet and Internet-based services such as e-commerce, this is only part of the picture, and cost of leased lines in the UK still also needs to be addressed.
Much of the bandwidth demand created by DSL connections will still need to be backhauled to the Internet via leased lines, and this will present a significant part of the cost of the service to Service Providers (as the initial pricing for BT's current ADSL service shows). Lower cost leased lines would present a direct benefit to consumers in the form of lower cost DSL services.
3.3 Although this Consultation is not concerned directly with access to cable modem infrastructure by Service Providers, as cable coverage continues to expand this issue will need to be tackled by OFTEL sooner rather than later.
3.8 Mass-market demand for high bandwidth services will grow, as shown in the USA. However, the residential market is extremely price sensitive, and penetration will be greatly influenced by the price level achievable by Service Providers. This in turn will be influenced by the level of competition in the marketplace (hence the requirement to examine the cable modem market) and the costs of providing the service (hence the requirement to examine leased line prices, among other things).
4.4 (and 4.8) Although it is accepted that "option 2" may not deliver mass-market rollout to residential customers immediately, it is difficult to see how the adoption of a BT monopoly over the supply of "option 4" would assure this, as paragraph 4.8 suggests. Indeed, in BT's service announcements to date there is nothing to suggest any wholesale product that could supply residential access at anywhere near a price that would be considered affordable by ordinary individuals.
4.8 It is difficult to see how a single monopoly supplier selling wholesale access to exactly the same service at exactly the same price to a range of service providers could provide an environment that stimulated the supply of innovative services.
4.9 Indeed, at no point, either in this Consultative Document, or in any of the presentations given by OFTEL to Service Providers, has it even been suggested that possibly the most significant disadvantage of opting for "option 4" as the sole outcome to the "Access To Bandwidth" consultation would be the presentation to BT of a monopoly of supply of high bandwidth services. Given the significance of this point and the disadvantages to consumers of a supplier having a monopoly in any marketplace it could be considered surprising that OFTEL have not chosen to specifically list this issue as a factor in their deliberations.
4.10 Once again, it is a matter of concern that OFTEL should give such prominence to BT's assessments, particularly those that suggest that BT's might withhold the supply of DSL services if its monopoly on supply of such services is removed. Of course an incumbent monopolist can be expected to be unhappy about a situation where its monopoly might be removed, but those opinions would seem to have no part in an impartial Consultation.
5.5 The manner in which the issue of spectrum management has been tackled is of particular concern, since the proposals seem neither transparent or truly impartial. Throughout OFTEL's consultation process it has repeatedly asserted that BT is the best, and perhaps the only, organisation able to solve the complex issues of spectrum management for unbundled loops. Although the NICC xDSL Task Group is now looking at the issues, they have also repeated the view (at a recent OFTEL forum) that if BT alone were left to address the spectrum issues the process would be concluded much faster.
In fact, although BT certainly have extensive knowledge of the characteristics of their network it is hard to believe that their overall knowledge of DSL technology and equipment could surpass that of a committee comprising of many network operators, equipment manufacturers.
The constant repetition of the viewpoint that BT alone are best placed to solve the issues, and the appointment of a BT-employed chair for this group presents a possible question mark over its true impartiality and how "open" and "technology neutral" the results may be. For this reason a completely independent body with knowledge of the technical issues should closely monitor the work of the group.
5.10 There is some concern that BT may not be able to keep to the timescales laid down by OFTEL. Given that BT would stand to make considerable commercial gains if it missed the deadlines given (by effectively extending its monopoly head start on ADSL deployment and narrowing the window of opportunity for new entrants to deploy infrastructure), measures may be needed to ensure the timescales are kept to. It is unclear what, if any, action OFTEL could take should BT not meet the timescales listed in the Consultative Document or deploy appropriate resources to properly service its Service Provider customers.
Although a commitment from BT to take appropriate action is welcomed, OFTEL should immediately implement changes to BT's licence so that BT can be compelled to meet the timescales given and penalised, and/or restrictions placed on them, should the timescales not be met. Relying on existing conditions and goodwill is not enough, as the recent situation with BT's Calls & Access service (which is covered by licence conditions) has shown.
6.3 It is important that OFTEL seriously considers the likelihood that ADSL-based services (at least) could have telephony provided by one Service Provider and ADSL data access provided by another. ADSL was designed to operate alongside telephony service without affecting it, so there should be no significant technical issues to address.
This is an important issue - forcing a data Service Provider who may have no experience of, or infrastructure for, providing telephony services to take on telephony as part of taking on the customer's loop presents a significant (and unnecessary) barrier to entry by new and innovative data Service Providers. Also, if the only way for a Service Provider to avoid taking on responsibility for telephony service was to effectively have the user install a second line purely for data access, this would lead either to a shortage of lines in some areas or present a need for BT to invest in laying more lines, something that would be uneconomic and a situation which ADSL was designed to avoid by coexisting with telephony service.
6.4 Although the provision of two different services over the same loop presents some potential issues, paragraph 5.7 already points out that there are other process issues to address as part of the unbundling process, and enabling the split of data and telephony should not present a significant extra overhead. There are precedents; for example, indirect access (and shortly carrier preselection) presents a situation where customers use a BT line but their calls are made via another company. Surely there is a relatively straightforward way to separate processes for the telephony and data parts of a service, especially since BT must effectively have processes in place whereby they are sharing the line with themselves?
Indeed, in a recent Federal Communications Commission document (Deployment of Wireline Services Offering Advanced Telecommunications Capability, First Report And Order And Further Notice Of Proposed Rulemaking; CC Docket No. 98-147; Web URL http://www.fcc.gov/Bureaus/Common_Carrier/Orders/1999/fcc99048.txt), the Commission reports "we find nothing... to persuade us that line sharing is not technically feasible." This document also contains a number of useful observations in regard to unbundling local loops and provision of co-location space, which we assume OFTEL are already aware of.
Given all this, it is surprising that OFTEL have repeatedly postulated that there are significant problems with separating telephony and data provision over the same loop but have so far not specified what these issues are. It is important that this question be addressed quickly so that a spectrum management plan can be created that allows for voice to be used in parallel with any current or future DSL technology, if required, and processes formulated to enable the separation to take place from "day one".
The suggestion of Calls & Access as a solution to this problem deserves special mention: Calls & Access has already caused significant problems for some SPIG members and its pricing and process issues would need extensive overhaul before it could be seriously considered. Even then, new processes would have to be evolved to enable BT to continue providing telephony services via Calls & Access at the same time as another Service Provider took control of the loop to offer data access - precisely what is being requested anyway.
It is disappointing that BT have, in effect, been given a monopoly head start in the supply of DSL services. Given that this situation has arisen it is suggested that the following steps be taken to encourage entry to the market now, and minimise impact on later entrants: