3 The role of the regulator |
24. Ofcom is the independent regulator and competition
authority for the UK communications industries. It last reviewed
the wholesale broadband market in 2010 and is reviewing the market
again this year.
We heard concerns from the witnesses representing the UK broadband
industry about the scope for effective competition in the broadband
market, and put these concerns to Ofcom.
25. TalkTalk has lodged a Competition Act complaint
with Ofcom due to its concern that the margin between BT Openreach's
wholesale price and BT's retail price is so squeezed that other
suppliers cannot sell the product profitably at the same price,
thus restricting competition.
Ofcom told us that, when it reviewed the market in 2010, it had
decided not to set a wholesale price; in part because it did not
want to reduce incentives to invest in upgrading the UK's network.
At that time, Ofcom also concluded that superfast broadband was
not a separate economic market to existing broadband services,
and expected prices for superfast broadband to be constrained
by existing prices for lower speed services. Ofcom told us that,
three years on, the premium being charged for superfast services
had proved to be relatively modest. Ofcom also told us that it
had recently issued the consultation for its current review of
the market, which specifically sought views from the industry
on whether Ofcom should be doing more on the issue of 'margin
squeeze' between wholesale and retail prices.
26. INCA told us that there should be much greater
access for others to BT's infrastructure. It said that the conditions
attached to others using the existing ducts in the ground and
telegraph poles were too restrictive for example, not being
able to use them for business-grade services, or to run mobile
phone masts, and having short notice periods for termination.
Ofcom told us that it had introduced a requirement for BT to
provide access to its physical infrastructure.
However, the NAO reported that, while Ofcom had indeed introduced
this requirementto allow competitors to deploy their own
broadband wholesale infrastructure using BT's ducts and poles
- in fact no provider had gone beyond trials and actually deployed
any new network assets using this access.
Ofcom also told us it was aware of BT competitors' concerns about
restrictions on being able to access BT infrastructure, and that
Ofcom had invited them to submit evidence and analysis to support
these concerns. However, Ofcom said that so far it had not received
enough information or evidence to enable it to consider a change
to the regulations.
27. In support of there being effective competition
in the UK broadband retail market, Ofcom told us that the regulatory
framework had helped produce one of the most competitive broadband
markets in Europereflected in availability, price and the
incumbent (BT) operator's relatively low share of the market (30%).
Ofcom said that the way it had applied regulation had made it
possible for companies like TalkTalk and Sky to build businesses
based on the incumbent's infrastructure and become major players
in the provision of broadband. Ofcom reported that the majority
of customers taking up superfast broadband services are on the
Virgin network, not the BT network.
Ofcom also said that it considered the regulatory regime to be
doing well in protecting consumers, with strong evidence that
prices in the UK compared favourably with other leading markets
35 Q 346; C&AG's Report, paras 1.15-1.17 Back
Qq 11, 24-25 Back
Qq 24-25, 348 Back
Qq 346-348; C&AG's Report, para 1.15 Back
Qq 11, 351-354 Back
C&AG's Report, para 1.17 Back
Q 355 Back
Qq 32, 345-349 Back
Qq 358-359 Back