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6.1 This Phase 1 consultation will last until Tuesday 22 June. During this period, Ofcom will be engaging fully with stakeholders to understand their views on the issues raised in this document.

6.2 As mentioned in Section 3, the Telecoms Review will be in three phases, and this document is the output
of Phase 1 of the Review. The phases are:

• Phase 1: current position and prospects for the telecoms sector;
• Phase 2: options for Ofcom's strategic approach
  to telecoms regulation; and
• Phase 3: proposals.

6.3 As discussed in Section 3, the responses that Ofcom receives to this Phase 1 consultation document will form an important input to Phase 2. The regulatory options that Ofcom should be considering for the future regulation of the UK telecoms sector, and the assessment of those options, depend critically on how the sector is likely to evolve. The responses that we receive to this consultation document will enable us to make much better judgements about this future evolution of the sector.

6.4 Phase 2 of the Review will assess the scope for effective competition at relevant levels in the telecoms markets, and the extent to which it is likely to be sustainable in the foreseeable future. In the light of that assessment, Phase 2 will identify alternative approaches to regulating telecoms markets and analyse their strengths and weaknesses. It will then set out initial options for Ofcom's future approach to telecoms regulation. This phase will result in a further consultation document.

6.5 Ofcom will be analysing a number of areas during Phase 2. In particular, we will:

• carefully analyse the submissions received from the current consultation;
• carry out cost and business modelling of different combinations of networks, services, customer types
  and value chain elements in order to determine where competition is likely to be sustainable in the future, and where supply of services displays natural monopoly characteristics;
• undertake a more detailed review of trends in demand and consumers' behaviour; and
• review the lessons to be learnt from regulatory approaches in other sectors and from telecoms regulation in other countries.

6.6 Phase 3 will consist of further analysis of the options presented in the Phase 2 report, in the light of comments received during the consultation. It will develop clear proposals for Ofcom's regulatory approach, and develop an implementation plan for these proposals. The outcome of this phase will be a new settlement for telecoms regulation, which will be published by the end of 2004.

The timescale for the Telecoms Review

6.7 Ofcom's intended timescale for the Telecoms Review is shown in Figure 5 below.

Figure 5: Telecoms review overall timescale

6.8 Ofcom aims to have completed the Review by the end of 2004, because in such a rapidly changing sector as telecoms, it is important that the conclusions of the Review can quickly be put into practice. This means that the overall timescale for the Review is very tight indeed. In order to allow a full ten weeks for the Phase 2 consultation (which will contain important policy options), we have kept the consultation period for Phase 1 (which does not) to eight weeks. This is less than Ofcom's standard ten-week consultation period, and represents a trade-off. We recognise that a longer period would give our stakeholders more time to consult within their organisations and prepare thorough responses. Conversely, if we were to make the consultation period for this first phase longer than eight weeks, we would not have time to give the responses the consideration they deserve before publishing the Phase 2 consultation paper and hit our year-end objective.

6.9 Even with this short Phase 1 consultation period, it will be necessary for us to work actively with stakeholders during the Phase 2 consultation, so that we can incorporate the main elements of the Phase 2 responses into our analysis prior to the end of the Phase 2 consultation period.

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