Ofcom wants you to thank it for resurrecting the spectre of BT's 1980s monopoly

Years ago, we used to mock Ofcom for its Ofcom-branded bottled water, and its tediously technocratic “evidence based” approach, something which is actually enshrined in the 2002 Act that created it. Throughout its first decade, Ofcom chief execs stood regally above the fray, knowing that a regulator’s decision must be …

[Oh Matron!]

Hypocrisy?

Why was it okay to go from 5 to 4 networks when T-Mob and Orange merged, but it's not okay to go from 4 to 3?

Isn't there something enshrined in the conditions of the 3G licenses that should have prevented the T-Mob / Orange merger in the first place?

Answers on a postcard.....

[Anonymous Coward]

Re: Hypocrisy?

Does the post card look like this:

http://www.theguardian.com/business/2013/jun/19/bt-chief-executive-ian-livingston-leaves

[Alan Denman]

Three and O2 still a minnow combibed!

all because Ofom ekther fucked up, or couldn't give a, over that most bizarre BT calamity deision !

[Charlie Clark]

This is all a bit weird

IANAL but my understanding is that there is nothing preventing either OFCOM or the Monopolies Commission from adding riders to any telco merger, as long as they don't contravene EU competition rules: basically no state aid.

Still, it's always nice to have someone else to blame.

[jfw25]

"sole broadband wholesaler"

I managed to misread that as "sole broadband molester", and I'm trying to figure out if that means that I need more coffee this morning or if I have had exactly enough...

[Steven Jones]

Wholesale Broadband Operator

The simple reason that BT is the country's only (actually almost) broadband wholesaler is simply because Ofcom don't require it of any other network operator. Of course it's completely pointless if there's no local competition anyway. That really means only in areas where VM operate might it be possible, and given the marginal state of their finances, it's not something Ofcom have chosen to push.

You might compare this with the US where network operators are being allowed a long period of grace to implement NGAs without wholesaling requirements. The principle is to encourage investment and not fragment the income to make this viable. The position in the UK is much more hostile if your the incumbent.

In any event, BT taking over EE makes zero difference to the fixed line business and retail market save mobile backhaul where, presumably EE will be favouring OR/BTW fibre over alternatives. As OR (and BTW) have to offer the same products to all customers on the same terms it makes little difference. There is no way at all this returns the market position to that prior to Ofcom being created. Not even close.

[Arthur the cat]

Mild understatement

The BT of the 1970s (and 1980s) evokes little affection with punters who can remember those days.

Sadly, I do. Months to get a domestic line installed. Got two buildings either side of a road and want to connect between them? That'll be an arm, a leg and your firstborn child and their firstborn as well, all for 1200 baud.

And then came computer networking - X bloody 25! Design by politicised international committee, making camels look like a utopian dream. Valid implementations that c/wouldn't interoperate. Network addresses as BCD encoded telephone numbers, with up to 100 extension numbers ports available.

Some things I'd happily accept a bit of memory loss to forget.

[captain veg]

Re: Mild understatement

I continued to have little affection for them into the 1990s. In 1992 I bought a newly built flat in Sarf Lumdum. The builders had already wired it for telephones, so all BT had to do was make a connection in the cabinet next to the street entrance. For which they wanted 150 quid! No negotiation, no reasoning, no choice. Or no telephone.

When the guy turned up to do the necessary, I timed him. Less than 15 minutes from arrival to departure. Surprised me that he contrived to take so long.

-A.

[Anonymous Coward]

Re: Mild understatement

"When the guy turned up to do the necessary, I timed him. Less than 15 minutes from arrival to departure."

There is more to telephone line provision than what you saw out of your window. There's also a reasonable amount of work to do in the exchange.

But, regardless, that fee was set as an average across the whole country. A pre-cabled flat in South London and a farm cottage in the Scottish Highlands both pay the same as part of the Universal Service Obligation.

[teebie]

Re: Mild understatement

When I worked at BT, I was told that the idea with the £150 is that they put some work into cabling all the new builds in an area, and have to scrape back the costs with the large price to activation the line.

So you were paying for 15 minutes at your house on the day, and unknown amount of time elsewhere on the day, and an unknown amount of time cabling the house some time beforehand. Also maybe the cabling for upstairs (plus an unknown amount of profit. It wouldn't surprise me if this part was extortionate)

[Chands]

Re: Mild understatement

When I joined Ericsson in 1992 I was appalled to find that to activate a phone line for a customer was a one line Operation & Maintenance command that a BT engineer had to enter into a console at the local exchange. I think BT charged £90 for that.

An Engineer would probably have a work order of activations and just enter them one by one, taking minutes to complete/verify each one.

[captain veg]

Re: Mild understatement

To be honest, I had issues with the very idea of having to pay them anything at all -- let alone most of a month's disposable income at the time -- for the privilege of becoming a paying customer. Especially with that monthly standing charge malarkey.

-A.

[Gordon 10]

I also love the way they are raising the spectre of lack of price competition when the evidence to this point has been that Hutch/Three are consistently the lowest prices - for me for the last 5 years at least. YMMV.

[John Smith 3862]

Services not infrastructure

It seems to me that Ofcom and the CMA are backing the use of an extremely blunt instrument (ie the number of network infrastructures) as a tool for delivering suitable competition in mobile services. The mobile user in the street wouldn't recognise infrastructure if it fell on him, what he understands is services, and he doesn't give a monkey's about the number of networks.

Why can't these very clever economists understand that it's about competition between multiple service providers, not how many of them own a network? Do they also not understand economic efficiency? What is the cost to UK consumers in requiring multiple duplication of networks when, for technical and resilience purposes, two would do? It looks more like these high falutin' regulators cannot think up suitable mechanisms to regulate a services based market and are falling back on the old "make 'em build it" approach. Have we learned nothing in 30 years?

PS suggestion for new BT/EE/Or brand name: BTeehemoth

[Anonymous Coward]

Re: Services not infrastructure

The problem with adopting services competition rather than infrastructure competition John is that you end up with the situation that everyone complains about in fixed line broadband. It tends to create a wholesale monopoly that has such large scale efficiencies that it's very hard for a new entrant to profitably take them on.

Virgin only exists today because it got to buy up all the cable TV companies assets in fire sales - if it had paid full value for those assets it would be broke too.

I think you're mostly right on the economics of it, but the consequence is monopoly.

[Roland6]

Re: Services not infrastructure

"Virgin only exists today because it got to buy up all the cable TV companies assets in fire sales"

Additionally, it was a private company and not a PLC with all the distractions of quarterly reporting to the stockmarkets and so could afford a different approach to investment and attitude to debt.

[Anonymous Coward]

Re: Services not infrastructure

I don't think they understood spectrum allocations either.

[Roland6]

Re: Services not infrastructure

Re: "I don't think they understood spectrum allocations either."

It is going to be 'fun' to see how Ofcom go about the relicensing of spectrum in a few years. I can't see them wanting to run an auction where today's spectrum bundles are simply offered for sale, as I suspect the existing operators will simply bid for the spectrum bundles they are already using, resulting in an auction where there is only one bidder for each bundle...

[Alan Brown]

Monopolies and market leverage.

"It tends to create a wholesale monopoly that has such large scale efficiencies that it's very hard for a new entrant to profitably take them on."

The problem is _not_ a single large infrastructure provider. National Grid is a very good example of one such entity.

The problem is a single large infrastructure provider (the others are collectively so small they don't count) who ALSO runs a wholesale and retail operation and leverages the infrastructure monpoly to tilt the playing field in favour of its in-house operations.

BT may _claim_ that Openreach is operated as a separate entity, but apart from the "chinese walls" between BTOR and BT retail/wholesale, all BTOR operations are bundled into the parent ship and BT head office looks over all the walls, directing Openreach to operate in ways that best suit head office (and therefore the retail/wholesale arms too)

Splitting Openreach off from BT is conceptually no different from what's already done in the energy sector (gas and electricity).

The BT/openreach model was specifically looked at by New Zealand regulators looking to deal with telco problems there (the Telco had preemptively split itself in order to avoid regulatory intervention) and it was concluded that the model facilities ongoing market abuse by the dominant telco, that such behaviour is ongoing in the UK and the only way forward was full operation and financial separation.

It's worth noting that much of the push to break up TelecomNZ came from the NZ Ministry of Commerce, on the basis that ongoing telco market abuse had already caused significant damage to the economy and GDP, quantified at something around 5%. It was calculated that going by the UK market experience, adopting the BT/OR model would not result in much difference, with the monopoly provider still able to abuse the market and leverage its dominance to enter other markets (In particular, TelecomNZ's systematic attacks on NZ ISPs put almost all competition out of business during the 1990s)

The NZ version of Ofcom was about as much of a chocolate teapot as Ofcom is, with people coming and going from the telco sector and therefore not wishing to rock the boat in case it affected their future employability.