Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


Memorandum submitted by the Fixed Network Operators Group

  1.  This short-form response to the Committee is submitted on behalf of the Fixed Network Operators' Group, comprising Cable & Wireless plc, Colt Telecommunications plc, Energis plc, and WorldCom Inc.

  2.  All four operators are pan-European or global communications companies, with European operations headquartered in the UK. Their combined turnover in 2002 is in the multi-billions of pounds.

  3.  The operators' primary business activities are in voice and data communication, web hosting and Internet Service Provision. Their primary customers are businesses, for whom the companies provide the path for their customers' contribution to the Information Society and electronic commerce.


  4.  We welcome the Culture and Media Select Committee's interest in the forthcoming Communications Bill, and particularly in OFCOM's role in broadband Internet deployment in the UK (point iv in the current Inquiry).

  5.  We note that the OFCOM Bill is a paving Bill with little detail as to budget, funding or organisation of OFCOM beyond the establishment of Board and Chief Executive. While this is inevitable in a paving Bill, we consider it regrettable that so few of the details of the new OFCOM structure, powers and funding have yet been published by government (discounting the Towers Perrin Report commissioned by the G5 regulators' group).

  6.  As providers of the carriage through which Information Society content flows, we consider it of paramount importance that the conditions for providing the government's goal of "the most extensive and competitive broadband market in the world" by 2005 are met. In our view this goal requires radical regulatory surgery.

  7.  Bottlenecks in the carriage market in the UK are restricting growth of broadband deployment, e-commerce and content production. It is currently the responsibility of Oftel to "unblock" these bottlenecks.


  8.  Oftel is the UK regulator charged with implementing the European Commission's Communications Directives, including the new Directives which will be implemented in the UK in mid-late 2003, shortly before the anticipated launch of OFCOM. It will be the key task of "shadow OFCOM" to implement the Directives effectively and efficiently.

  9.  Without ex ante regulation of dominant operators, there is no opportunity for effective regulation in the market. OFCOM will be a toothless regulator with no emerging content industry, and no real competition in carriage.

  10.  We understand these issues are not the central priority for the Culture and Media Select Committee. However, we insist that they are a pre-requisite for the content and e-commerce industries in the UK to flourish.

  11.  Oftel currently has ex ante regulatory powers under UK and European telecoms law, and concurrent powers under the Competition Act.

  12.  Oftel also has suffered 47 per cent turnover in key regulatory staff in 2000, and 27 per cent in calendar 2001. Competition and regulatory economists and analysts are in extremely short supply. Oftel has taken measures in its draft 2002-03 Management Plan to address pay, training and conditions.

  13.  Operators are concerned to keep the cost of OFCOM below that of the existing content and carriage regulators, but to enable it to perform both existing ex ante duties more efficiently, and new Competition Act and EU Directive powers in addition.


  14.  Consider the lessons of local loop unbundling in 2000-01. The requirement for "lighter touch" but effective regulation of BT is to monitor its performance both towards its own retail division, and to current and potential competitors such as ourselves. The requirement to master the "devil in the details" required resources which the regulator could not initially provide. In consequence, competition suffered, and ultimately consumers received broadband more slowly and at greater cost than otherwise.

  15.  Learning from the LLU mistakes is an essential requirement. Oftel is showing signs in its inquiry into business broadband (leased lines) of learning the lessons of detail, of requiring BT to monitor its performance. This requires technical and economic skillsets that are in short supply.

  16.  Regulatory resourcing is a zero-sum game. In order to minimise costs and head-count, it is necessary to prioritise objectives.


  17.  We believe that OFCOM in 2003-04 can have only one central objective: to unblock gateways owned by dominant companies, in order to allow the benefits of the Information Society to flow to businesses, households, content producers, broadcasters and citizens.

  18.  In order to create the conditions for gateway regulation—ex ante regulation— OFCOM needs the tools for the job. Without regulatory concentration, British Telecom and its mobile and pay-TV equivalents will be able to abuse their dominant position to the detriment of consumers and citizens.

  19.  We urge the Select Committee to call oral evidence to explore the central priorities for OFCOM going forward. Without effective ex ante carriage regulation, there is no opportunity to select a diversity of media and cultures, or of owners.

  We would welcome the opportunity to address and expand upon these points before the Committee. Individual detailed submissions by signatories to this letter also inform our recommendations to the Select Committee. We look forward with great interest to the Committee's deliberations on the Bill that will define regulation of the communications industry in the broadband future.

11 January 2002

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