The Service Provider Interest Group represents businesses that provide content, Internet, mobile and fixed telephony services to customers. Over 30 companies and sectoral representative bodies, including IBM, Reuters, Motorola Telco and the Internet Service Providers Association, ISPA, work within SPIG to promote the value of services competition in telecommunications.

The UK has introduced liberalisation into telecommunications by licensing operators to compete with the incumbent dominant operator, BT, in fixed telephony and by issuing four licences to access scarce radio spectrum for the mobile market.

In the fixed market, after nearly 20 years of "liberalisation", competition is largely ineffective across the UK. For many rural and urban areas, outside the City of London, customers still have only one supplier, BT. SPIG believes that this failure is due to the persistent regulatory focus on licensing competing networks. Customers buy services and services competition should be the priority for regulatory action.

At the outset mobile operators were obliged to deal with service providers, who provided real competition in supply to customers and contributed significantly to the dramatic growth in mobile phone ownership. Recent decisions by Oftel to remove the obligation to deal with service providers from the licences of Orange and One 2 One and a proposed review of the requirements for Cellnet and Vodafone are causing concern among established service provider businesses. This is having the effect of discouraging investment in service provision, particularly by independent companies, thereby damaging the competitiveness of the sector.

The success of electronic commerce in the UK will be dependent on the UK's ability to attract business here. Competitively priced telecommunications and diversity of supply will be essential elements. Already the UK is losing out in the race.

Many SPIG members route their Internet traffic via the USA because of the lower costs of leased circuits. As an example the costs to business for a 2Mbit/sec circuit are on average 17.5 times higher in Europe than in the US if the European circuit runs between cities in two adjacent countries.

Within Europe, despite the earlier start for liberalisation, the UK leased line price is 1.6 times the German price. Unless action is taken to significantly reduce charges to business users, the UK will be left on the sidelines in the provision of e-commerce.

SPIG believes that the lack of competition in the local loop is keeping UK prices high. Today BT has 90% of the local loop market. Competition can be introduced by access to fully unbundled operator telephony elements by independent service providers in competition with operator owned service providers. This has already been done successfully elsewhere in Europe.

Key to this route is:

• Introduction of regulation to require unbundling of all network elements
• Complete accounting separation between network operation and service provision of vertically integrated/dominant operator businesses
• Rigorous, effective and speedy regulation of accounting separation to prohibit cross subsidy and unfair practices.

The convergence of fixed and mobile telecommunications, broadcasting and IT as a result of digital conveyance is an opportunity to introduce economies of scale, innovation and diversity.

SPIG believes that regulation of convergence should be strong enough to inhibit an alignment of a dominant provider in telecoms with a dominant broadcasting provider that could crush smaller and independent suppliers.

UMTS, the third generation mobile technology that will facilitate transmission and interactive services, risks becoming supplied to consumers solely by the 3-5 organisations winning licences in the spectrum auction unless the telecommunications regulatory environment, controlled by Oftel, provides:

• Continuity and certainty of supply of conveyance (airtime) services for independent service providers
• Assurance that mobile licensees will supply service to all service providers on equal terms to those which they provide services to their own service provision businesses
• Access for service providers to unbundled network elements supplied without unwanted service surround or other retail components.

• UK does not yet have effective telecommunications competition and strong regulation is necessary to counter the effects of dominance in telecommunications markets or the converged environment.
• Currently, Oftel's policies for mobile communications are introducing major uncertainty for independent service providers and their future investment in the UK economy particularly in UMTS provision.
• Independent service providers offer a mechanism for fair and effective competition at the services level
• Access to unbundled network elements by service providers is an essential step to introducing fair and effective competition in telecommunications.

SPIG would like to encourage the Trade and Industry Committee to ask the Director General of Oftel for his commitment to support the service provision sector.