Joint Committee on The Draft Communications Bill Appendices to the Minutes of Evidence


APPENDIX 64

Memorandum submitted by Tiscali UK Limited

INTRODUCTION

  Tiscali UK Limited is an Internet Service Provider with a Public Telecommunications Operator licence and an interconnected network. The company is part of Tiscali sPa, the leading European Internet and telecommunications service provider, that has evolved from being a national operator primarily focused on Internet access and voice services for the Italian market, into an integrated pan-European ISP with a presence in 15 European Countries and a 16 per cent market share with 7.3 million active users.

  Tiscali is independent from incumbent operators and keen to take advantage of new technologies that enable it to offer exciting new services to consumers and businesses. Tiscali believes that a level playing field is crucial for the success of the European Telecoms Market. The company hopes that the implementation of new European Framework for Telecoms in the UK and the creation of the Office of Communications will enable it to deliver innovative communications solutions in this country.

SUMMARY OF RESPONSE

  Tiscali understands that the new regulator, OFCOM, intends to promote competition, in much the same way that Oftel has done for the telecoms market. Tiscali believes that there have been many recent examples of anti-competitive behaviour in the telecoms sector, especially in the broadband market, which Oftel admits that it has failed to address satisfactorily. The company is concerned that OFCOM will also have difficulties in preventing abuses of dominant positions, if it is not structured in such a way so as to ensure that it is able to intervene to promote competition and use the Competition Act to take swift action to stamp out anti-competitive behaviour. Tiscali is concerned that the Government's current proposals for the creation of a new regulator may require some adaptation if it wants to achieve its goals to make the UK home to the most dynamic and competitive communications and media market in the world.

  Tiscali understands that the current licensing system for networks, services and associated facilities will be replaced with general conditions of entitlement for all communications providers. This should result in a lighter regulatory burden for licensed telcos, although ISPs will almost certainly be subject to more regulation than was previously the case.

  Tiscali accepts that there are some markets within the communications sector which are competitive today and which would benefit from a relaxing of regulations. However, there are other areas such as the broadband market, where we believe that further intervention and action from the regulator is required to ensure that alternative carriers can compete with BT.

  It will undoubtedly be hard for the new regulator to tackle all of the issues that are facing the telecoms and broadcasting sectors. Tiscali is concerned about the number of functions and duties that the new regulator will have to manage particularly in relation to broadcasting and seeks assurances that the issues facing the telecoms sector will be addressed promptly and by persons with expertise and understanding of network regulation.

  Tiscali appreciates that OFCOM will also be required to ensure that consumers' interests are protected and believes that the most effective way to provide consumers with protection is through the delivery of competition in the communications industry and choice in communications services.

  With regards to Content regulation, Tiscali appreciates that regulation that protects the quality, diversity and impartiality of programming needs to be retained, but hopes that this will not have an impact on the Internet industry since ISPs have very little control over the content that is transported over, and hosted on, their networks.

  Tiscali welcomes the introduction of rights of appeal against the regulator's decisions and hopes that this will result in greater accountability and transparency in relation to Ofcom's decisions and not in further delay and uncertainty for alternative providers.


PART 1

FUNCTIONS AND GENERAL DUTIES OF OFCOM

1.1.   Structure and expertise

  Tiscali understands that OFCOM will be required to take over regulation of the broadcasting and telecommunications sectors from Oftel, the Radiocommunications Agency, the Independent Television Commission, Broadcasting Standards Commission, and the Radio Authority. Although there is certainly increasing degree of overlap between the two industries, we believe that there are still considerable differences between the two sectors and the task of regulating these industries and understanding the markets that exist and are developing will be a significant challenge. Whether OFCOM succeeds in its key aims of promoting competition and protecting consumers will undoubtedly depend on whether the regulator has sufficient resources, the right expertise and the confidence to tackle anti-competitive behaviour. We trust that the Government will do its utmost to ensure that those persons who are appointed to OFCOM are capable of carrying out the wide range of functions that are to be assigned to the new regulator, and the challenges that lie ahead. We would ask in particular for reassurances that the Government will ensure that persons with experience and understanding of both sectors are appointed to the board so as to ensure that sufficient attention is devoted to telecoms. We believe that in addition to the establishment of a Content Board, that OFCOM should also establish an Economic Policy Board to advise on economic regulation of networks.

1.2  Duties

  We are concerned that OFCOM will be required to fulfil rather many duties, which will also require balancing. We believe that it would be beneficial for duties to be simplified so that it is easier for OFCOM to manage and balance this workload.

1.3  Importance of Long term outlook

  We are concerned that there could be a potential conflict of interest between the requirement to protect consumer interests and the requirement to promote competition, if the regulator is not minded to take a long-term outlook. Consumers are best served by a competitive environment. We would suggest that the regulator is specifically instructed to take a long-term approach in the regulation of these sectors to ensure that alternative suppliers of communications services and networks have the opportunity to compete and provide consumers with real choice in these services.

1.4  Functions of promoting media literacy and the Content Board

  Tiscali would request that the Government clarifies how these functions will be applied to the Internet and how this will affect ISPs. Tiscali supports the development of a content rating scheme and is a member of ICRA, the Internet Content Rating Association. Tiscali believes that self-regulatory measures such as ICRA are the most effective way of managing content issues and hopes that the Government will continue to work with the industry within the context of ICRA on content issues. With this in mind Tiscali would like clarification on the role of the board in relation to regulation of content on the Internet.

PART 2 CHAPTER 1

2. 1  Definitions of electronic communications networks and services and requirement to notify OFCOM.

  It is not clear from the definitions that have been provided whether provision of Internet access would be classified as an electronic communications service. We would like to understand whether ISPs who provide access to the Internet either via a third party's networking facilities or via a third party's core network together with some of its own additional facilities would need to notify OFCOM that it wished to provide, or was already involved in the provision of, Electronic Communications Services. There are many ISPs who do not own or operate an interconnected network or modems which are required to deliver Internet access but who do have servers and are involved in the provision of additional services. There are other Virtual ISPs who do not own any infrastructure and who outsource the entire technical function to an operator who manages the service, which they essentially market, on their behalf. We would appreciate clarification as to whether these ISPs will be regulated by OFCOM and to what degree.

  We believe that it is possible that the services provided by ISPs may be classified as associated facilities but would appreciate clarification on this point and on the implications that would follow on from this.

  Furthermore with regards to the definition of a content service, we would appreciate clarification as to whether ISPs who provide access to content which is provided to them by other third parties would be deemed to provide a content service, if they do not edit this content.

2.2  Separation of BT's Network and Retail businesses

  We understand that OFCOM plans to set access-related conditions and impose privileged supplier conditions. Significant intervention will be required from OFCOM in the setting of these conditions for the telecoms sector if BT's network business is still linked with its retail arm. Alternative operators have recently experienced considerable difficulty in getting access to network facilities that are required from BT to deliver competitive services to BT's retail arm. We believe that we would not have encountered these difficulties such as protracted discussions over the terms, conditions and pricing of the services if BT's network business operated as a separate entity. We appreciate that Oftel wants new services delivered to the market as soon as possible, however, without competition in these services, consumers are going to be disadvantaged if not in the short term then in the medium to long term. We would urge OFCOM to consider a proper separation of BT's Network and Retail arms. We believe this would solve many of the current problems that are faced by alternate operators in the telecoms sector and enable them to compete on a level-playing field with BT. Furthermore, we believe that the incumbent operator also needs to be given a clear message that abuses of dominant positions will not be tolerated and that they will have to pay a hefty fine and compensate other operators, if it is found that breaches of this nature have occurred and that this activity has had a detrimental effect on competitors' businesses.

2.3  Conditions for provision of networks and services and regulatory burden on non-dominant players

  We have read with interest Oftel's consultation on the general conditions of entitlement together with the draft Communications bill. The Government has stated that the introduction of OFCOM should lead to a lighter regulatory burden for the industry. We are concerned however that the proposed new regime will result in many new conditions and regulatory requirements being imposed on non-dominant players like ISPs who were not previously regulated. In particular we are concerned that the proposed regulations relating to provision of information on pricing will result in a significant increase in non-dominant players workload, especially when you consider how fast the market moves and how rapidly prices change. We understand that OFCOM is required to protect consumers, however, we would question whether these regulations are proportionate and necessary where a market is competitive.

2.4  Dealing with disputes over access

  We note that OFCOM will be required to establish "promptness standards" and trust that the deadline for issuing a determination on a dispute will be set at no later than 4 months after a complaint is lodged, in accordance with the EC Framework Directive. We hope that this will result in a significant improvement on the current situation whereby the regulator can take at least six months or even longer to reach a decision on cases referred by alternate operators. With regards to these standards we would like some assurances and safeguards that they will be met. We believe that OFCOM should be required to publish details on its performance to timescale targets. We would also suggest that complainants should have the opportunity to refer cases to a higher authority, if OFCOM is not able to reach a decision within the set deadline. We would expect that timescales for decisions to be made on appeals should be set at no more than three months.

June 2002


 
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