Broadband: My Questions to OFCOM
20 Sep 2004
Angry Phone Man - logo of my broadband campaign
Angry Phone Man - logo of my broadband campaign
I've written twice now to OFCOM (who regulate the telecommunications market) about concerns raised with me by Internet Service Providers and their representatives, asking for an early response to what seems to be a rather time sensitive situation.

Having now had an opportunity to hear the views of bt as well as their ISP customers and others there does appear to be a prima facie case suggesting that OFCOM may have misjudged the market implications of its decision on an obscure bit of jargon called the 'margin squeeze test' and related rulings as applied to bt's pricing and product packaging in the wholesale ADSL market.

What's happened could have a dire effect on small service providers and their customers - including in particular small firms that have built a high dependence on the web and the Internet into their business activities. bt announced, at only 28 days' notice, dramatic changes in their pricing structure for wholesale adsl broadband.

While in most market conditions there might not be a case for protecting the interests of resuppliers who are not in direct competition with bt, such as the smaller ISPs who are most affected by the capacity pricing bands and rates, I believe the present UK broadband market to be different in several respects. For example:

1. For a very high proportion of retail and business consumers - all those without the choice of cable - ADSL is the only effective option;

2. For any company wishing to provide broadband to customers, bt is therefore the only available primary supplier;

3. In an evolving market the wide range of ISPs offering different types of product and services packages to customers is important in securing a high level of innovation in market, product and service developments;

4. In particular, the smaller ISPs add value in their services to small- and medium-sized firms in ways that are not open to the largest suppliers, as well as providing close-up and localised support and assistance to small firms, consumers and community organisations. While these smaller ISPs might in principle get a better deal from a bulk consolidator than from bt, the same bulk consolidator relies on bt, so that somewhere in the process either an artificial margin or two sets of costs are being added before the product reaches the consumer.

Given that (according to bt) it is OFCOM's regulatory position that has led to the price and product changes and to the need for them to be rushed through at the minimum 28 days' notice, I now regard it as very urgent to have a clear statement from OFCOM that recognises the issues brought forward by ISPs and their representative organisations and explains how the margin squeeze test and other relevant decisions and rulings are intended to benefit the industry and its customers. Perhaps this is a matter of timing; there may be sound strategic reasons for moving in this direction, but the abruptness of the change appears to deliver no benefits, only negative effects.

I'll report further developments here. The issues are obscure, but we mustn't allow that to damage our opportunities in the use of broadband.

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