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SPIG

Communications Reform White Paper

Input paper from the Service Provider Interest Group

July 2000

1.  Introduction

i. The Service Providers Interest Group, SPIG, represents the interests of businesses that provide content, data, Internet and mobile telecommunication services. It promotes the value of services competition and seeks a fair competitive environment for services competition. Information on our members and our views can be found on the SPIG website, www.spig.org.uk.
ii. We welcome the opportunity to provide input to the communications reform team and the forthcoming Communications White Paper. We have structured our comments along the lines set out in the letter from David Lumley to the telecommunications industry earlier this year.

2.  Pace and direction of change of communications markets

iii. SPIG recognises growth and diversity evolving in the communications markets and sees convergence within the platforms, networks and terminals through which services are delivered. This is an agent for economic growth by reducing the cost of providing services.
iv. The potential for new start up companies, as well as existing providers, to develop new services and compete to drive down prices is evident. However, the reality is that with incomplete regulatory effectiveness, the UK consumer has been losing out. Internationally the UK is falling behind its competitors in several markets e.g. national 2 Mbit/sec leased lines.
v. For example, competition to BT from Calls and Access service providers could have been more effective at launch in October 1998, had the regulator recognised and acted at an earlier stage in response to service provider concerns. These have included the lack of readiness of the product from BT, the aggressive winback policy to BT's own retail business and prices to SPs. As a consequence, service providers have experienced considerable difficulties with the Calls and Access product due to BT's systems and processes. This has led to:
  • Enforcement action by OFTEL upon BT;
  • The pursuit of claims by several service providers;
  • Ultimately some service providers seriously considering the option of withdrawal, Ecosse Telecom for example.
These factors are undermining the ability of service providers to provide a high level of service to their customers, thus damaging the credibility of the competitive telecoms market. More detail on these issues will be explained in responses by service providers in the Calls and Access Interest Group to the OFTEL consultative document, Public consultation on quality of service standards for BT's Calls and Access product - June 2000.
vi. In the mobile communications sector the operators have been permitted to vertically integrate their businesses from access to radio spectrum or infrastructure through to point of sale, limiting competition in access, market diversification, delivery and pricing. This has the effect of squeezing out competition, particularly the smaller independent mobile service providers, which is not in the interest of mobile telephone consumers.

3.  Needs and demands of consumers

vii. Consumers, either individuals or organisations, seek a fair competitive environment to drive down prices and introduce innovation. Our customers require a clear understanding of services on offer and an ability to compare offerings. Customers demand a choice of supply and supplier, for example the opportunity to have self-provided services as well as third party provision.

4.  Objectives and principles of the system for economic regulation

viii. In the converged communications world, economic regulation will need to draw together under one umbrella the varying regimes inherent in the separate sectors of telecommunications, radio spectrum management, broadcasting, Internet and publishing.
ix. SPIG believes that a major objective of future communications regulation will be establishing fair competition in communications services provision. Customers buy services and not networks, since access to a network is of little value to the customer on its own. E-commerce will be an essential element of the future UK economy, where the cost and quality of the conveyance system will underpin the UK's economic framework.
x. In introducing new communications legislation the Government can reflect the importance to the country of the new economic order by establishing an effective, independent and adequately resourced regulator that has the responsibility to delivering the competitive market place.
xi. The principles underlying the new regulatory regime, which must be seen to be delivered, in our view will be:
  • Regulation to achieve a fair competitive environment and access to networks;
  • Proportionality- regulation applied where it is needed but not a burden for the smaller operators and players that have less power in the market;
  • A focus on the abuse of dominance and market power;
  • Speed in resolution of complaints and abuses;
  • Effective proactive investigation of complaints and alleged abuses;
  • Compensation for injured parties;
  • Transparency in operation;
  • Objective performance measures of the regulator's effectiveness.
xii. There are deficiencies now. Contrary to OFTEL's indications, the pace towards effective competition is slow in many market sectors and there is need for greater regulatory intervention and not less in the immediate and longer-term future. Regulatory intervention needs to create the conditions that will allow competition to be effective across all parts of the market, not just particular segments. In this way, consumers will benefit from greater choice, more innovation, lower prices and high quality services. The focus for regulation will be on fair competition in delivery of services and access to networks including regulating for abuses of dominance and SMP and leverage of dominance from one sector to another. The primary focus needs to be on freeing up access bottlenecks, particularly in respect of BT, and the greater separation of dominant integrated operators so as to ensure a level playing field for competition. OFTEL now and the future regulator must forcefully regulate and not draw back only to competition law. Self and co-regulatory initiatives, while appropriate in certain circumstances, can only be developed on a more significant basis once regulatory intervention has delivered all the necessary changes to allow competition to flourish.
xiii. The independence of the regulator is crucial for public confidence- currently OFTEL and BT seem to be increasingly indistinguishable from each other.
xiv. Central to an effective regulatory regime will be a proactive focus on the regulation of dominance and market power, and specifically an authoritative complaints handling mechanism. SPIG is particularly concerned that current examples of OFTEL complaints handling have involved delay, changes of case officers, all of which feed into the hands of the operator under investigation and deny a " natural justice " to other industry players. Associated with an improved regime will be adequate staff resources in terms of quality and remuneration and a new charter for telecommunications complainants.
xv. We have noted that the European Commission has started legal proceedings against the UK Government over its regulation of the telecommunications industry and, as reported in the Financial Times on 23 May 2000, "Regulator admits decision delay broke EC rules". This is an embarrassing position for the UK, which requires immediate resolution and a new focus in future.
xvi. The new economic regulatory regime will need to be more flexible and responsive than today. For example currently SPIG sees that deals between mobile network operators and content providers will lock up access to service by customers, for example the BT Cellnet Genie wireless portal has an exclusive arrangement offering BBC news. There is as yet no regulatory acknowledgement that this is taking place and that these uncompetitive practices must be dealt with.
xvii. The lack of recognition for service providers must be changed within the new legislation. Service providers should have a greater voice and proper attention should be paid to the issues they face. There is a huge wealth of experience and knowledge to be utilised, however this is of limited use if their views are not acted upon.
xviii. The mechanism of regulation, now and in the future requires the inclusion of:
  • International comparisons for all communications market sectors, as UK customers and suppliers are increasingly affected by EU and international markets;
  • Transparent methodology for setting prices, which includes international benchmarking to set price caps.

5.  Content regulation

xix. SPIG recommends that there is a separate body from delivery regulation that looks after inter alia content, censorship, applying UK law in these areas, and looks at cross border issues.

6.  Regulation of public service broadcasters

xx. We acknowledge the continuing national need for public service broadcasting in the immediate future.

7.  Spectrum management

xxi. We recognise the increasing importance of radio frequency spectrum management and the need to retain the Radiocommunications Agency, RA, as the civil spectrum manager, with adequate resources commensurate with the complexity of the task. Its role should be expanded to provide independent management of spectrum issues associated with xDSL. The RA will inevitably be linked into the new communications regulator over time.

8&nbps; Organisational structure of regulation

xxii. SPIG believes that there should be a move to setting up one UK national regulator mirroring EU structures, that looks after all communications, telecoms, Internet, and broadcasting delivery. The single regulator would be built up over time from the existing bodies, such as OFTEL and the ITC, ensuring co-operation, co-ordination and authority in the interim.
xxiii. Because of their different requirements competition and consumer issues should be treated separately within the new regulator.
xxiv. An overall board rather than an individual regulator, which adjudicates on policy and judges complaints and abuses, would best serve the new regulatory structure.
xxv. SPIG recommends that the complaints function within the new regulator provides a judicial approach to its work, which includes:
  • Independent research;
  • Establishment and maintenance of timescales for complaints resolution;
  • Employee rewards commensurate with a high calibre organisation- to stop staff movement to companies under investigation, which can undermine confidence of other industry players.

9  EU policy

xxvi. All UK policy needs to be in line with EU and UK structures complimentary.

10  Dealing with today's issues

xxvii. Although this response looks to the future Communications regime, we expect that this will not be in place before at least 2002. We urge Government to take action now to address many of the concerns with the current system identified in this document, including tackling the complaints regime and resource deficiencies in OFTEL. These can be achieved without the need for immediate primary legislation and taking action now will not compromise future legislative plans.

11  Self and co regulation

xxviii. OFTEL has recently issued a consultation document, Self and co-regulation in telecoms- June 2000 indicating its desire to move significantly towards a regulatory regime which is increasingly dependent upon a self and co-regulatory framework. Although there is a place for self- and co-regulation initiatives, it is too early for OFTEL to countenance the sort of withdrawal from formal regulation that the self- and co-regulation end game implies.
xxix. Regulatory intervention is urgently required in a number of areas, and in a significant form, to remove structural barriers, and address behavioural issues, etc. Until this is done, the scope for self- and co-regulation is limited. Further, given OFTEL's resource deficiencies, we are concerned that self- and co-regulation initiatives is being given undue prominence as a means to resolve resource conflicts.
xxx. In principle, SPIG supports the initiative, but is concerned that this does not divert attention away from those areas where commercial and competition issues prevail. Indeed, there is some evidence that, in the right place, self and co-regulation is an appropriate solution. Examples of self-regulation in mobile industry developed by co-operative effort include the FCS Crime Prevention Scheme and the Cellular Service Provider Consumer Code of Practice.

12  Consultation bodies with input from consumers and service providers

xxxi. SPIG recommends that an independent consultative body, reporting to Ministers, is set up to provide independent commentary and analysis to policy making and regulation from the consumer perspective. Service providers should also be formally consulted with views sought from relevant industry groups such as SPIG. Service providers will have an increasingly important contribution to make to the whole communications market in future and their input on an equivalent footing to that of the network operators, will be essential to ensure balance. This will require a change in regulatory attitude towards service providers.

Keswick House
207 Anerley Road, London, SE20 8ER
Tel: 020 8778 5656 Fax: 020 8778 8402 Email: spig@fcs.org.uk Web: www.spig.org.uk

 

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