Tuesday, February 08, 2011

Ofcom update part 2: wholesale broadband access (WBA) developments

Further to my post last week on Ofcom's intentions in relation to wholesale local access (WLA), here's the companion post on recent developments in relation to wholesale broadband access (WBA).

Just to refresh, WBA relates to the wholesale broadband products communications providers (CPs) provide for themselves and sell to each other, whereas The WLA market concerns access to fixed telecommunications infrastructure - the connection between the consumer and the telecommunications network. WBA offerings are therefore based on one or more WLA services, with the WBA market sitting between the WLA market and the retail broadband market providing the services that consumers purchase.

Ofcom's WBA consultation was published in March 2010, alongside the WLA consultation, and was followed by a second consultation in August 2010. This further consultation considered, in particular, geographic market definition. Ofcom published a statement following the two consultations at the beginning of December 2010 (full version here). In summary, Ofcom found that while there is effective competition across most of the UK, there remain a number of areas where this is not the case:
"We have found that there is effective competition in almost 80 per cent of the UK. However, in just over one-fifth of the UK - covered by what we have called Market 1 and Market 2 - we have concluded that there is not sufficient competition and so we have imposed regulation to protect consumers. Market 1 is made up of exchange areas in which BT is currently the only provider of wholesale broadband services, whereas Market 2 comprises exchange areas with two significant providers, or with three significant providers where BT's market share is 50 per cent or more. BT has Significant Market Power (SMP) in both of these markets and will be subject to a range of regulatory obligations, including general access and non-discrimination obligations and a requirement for charges to be cost oriented. In Market 1 we have decided that BT should also be subject to a charge control, the details of which will be the subject of a separate consultation."
This separate consultation was announced last month under the banner of "better value broadband in rural areas". From the press release:
"Ofcom has proposed significant reductions in the prices that BT Wholesale can charge internet service providers (ISPs) in parts of the country where it is the sole provider of wholesale broadband services – mainly in rural areas. The proposed price reductions are between 10.75% and 14.75% below inflation. As a result, Ofcom expects competition between retail ISPs, who will benefit from the lower wholesale prices, to lead to reductions in retail prices which will benefit consumers. The changes may also lead to better quality services by enabling ISPs to allocate more bandwidth per customer which could deliver faster broadband services. This could benefit nearly 12% of UK households or around 3 million homes and businesses. These are mostly in rural areas including parts of Scotland, Wales and Northern Ireland as well as the South West of England, Norfolk, Yorkshire, Cumbria, Northumberland and other areas. In other areas of the country where there is some wholesale broadband competition delivered by local loop unbundling, Ofcom is not proposing any charge controls."
In a nutshell, Ofcom found that there is not sufficient competition in just over one fifth of the UK, so has imposed regulation to protect consumers. The full consultation (which explains Ofcom's proposals for the WBA charge control in Market 1 exchange areas) is available here with a summary here. Specifcally, Ofcom are proposing charge controls for BT’s 8Mbit/s IPStream Connect product:
"In Market 1 BT sells several WBA products, each with different speed options. However, we propose to charge control only BT’s 8Mbit/s IPStream Connect product. CPs use this product to supply 86% of WBA services in Market 1. Therefore, controlling IPStream Connect directly protects most consumers in Market 1 and constrains BT from excessive charging on the other products. Also, 8Mbit/s is the maximum downstream speed available in Market 1 and the most used by end users in Market 1."
Ofcom currently define market 1, 2 and 3 exchange areas as follows:
"...there are four separate geographic markets in the UK as follows:
  • Hull Area: 0.7% of the UK premises;
  • Market 1: exchanges where only BT is present (11.7% of premises);
  • Market 2: exchanges where two Principal Operators (POs) are present or forecast and exchanges where three POs are present or forecast but where BT’s share is greater than or equal to 50% (10.0% of premises); and
  • Market 3: exchanges where four or more POs are present or forecast and exchanges where three POs are present or forecast but where BT’s share is less than 50% (77.6% of premises)."
Following the consultation (which closes at the end of March 2011) Ofcom expects to publish a statement in the summer. The charge controls are planned to come into effect shortly after publication of the statement.

I'll let you know (as I live in a Market 1 exchange area) if/when my bill goes down and/or my bandwidth goes up (my downstream rate is currently 1568 Kbps with 128 Kbps upstream according to my router, despite close proximity to the serving exchange)...but again, I shan't be holding my breath.

1 comment:

  1. 128k upstream ? you should get that fixed.