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15|11|07

Ofcom proposes wholesale broadband deregulation in newly competitive markets

Ofcom today published a consultation on the wholesale broadband market, setting out its proposed approach for future regulation of this sector.

The proposals include the removal of regulatory obligations in areas of the country where strong competition is now a reality. Ofcom’s approach protects consumers in those parts of the UK where competition in the provision of wholesale broadband is still weak.

The retail broadband market in the UK is already performing well, with healthy competition between a range of providers giving consumers choice. Broadband is available to 99.6% of UK households and more than 80% can choose between two or more wholesale providers. 65% of homes have the choice of 4 or more wholesale providers. In many areas consumers can choose between 8 providers.

Ofcom’s approach to supporting a competitive retail broadband market has two parts:-

1. Local Loop Unbundling: to encourage competition between networks by giving all communications providers access to BT’s local exchanges on a fair and equivalent basis. There are now more than 3 million unbundled lines in the UK.

2. Wholesale broadband: where local loop unbundling is not economically viable, to promote active competition in the supply of wholesale broadband services. Providers can buy these services to support their retail offering.

Today’s market review covers the second of these two markets.

Ofcom’s regulatory approach aims to deliver sustainable competition in the wholesale broadband market and to protect consumers in areas of the country where wholesale competition has not yet developed.

Ofcom previously recognised that competition in the supply of wholesale broadband services has matured at different rates across the country. In its November 2006 consultation, Ofcom proposed four distinct sub-national markets for wholesale broadband, according to the level of competition prevailing, to allow regulation to be tailored to local conditions. Ofcom maintains a similar approach in the consultation published today.

The proposed sub national markets are:-

• Hull – those areas covered by exchanges where KCOM is the only operator. This market covers 0.7% of U.K premises.
• Market 1 – those areas covered by exchanges where BT is the only wholesale operator. This market covers 19.2% of U.K premises.
• Market 2 – those areas covered by exchanges where there are 2 or 3 wholesale operators. This market covers 15.7% of U.K premises.
• Market 3 – those areas covered by exchanges where there are 4 or more wholesale operators. This market covers 64.4% of U.K premises.

Proposed regulatory approach for Hull and Market 1 and Market 2.

Ofcom has found that KCOM’s position in the Hull market gives it a dominant market position. Ofcom reached a similar conclusion in relation to BT’s position in Market 1 and Market 2. Accordingly Ofcom will continue to protect consumers by keeping existing rules that are designed to promote retail competition in these markets.

These rules require KCOM and BT to open up their networks to other providers on a fair and equivalent basis and provide a wholesale product on which retail services can be built.

Proposed regulatory approach for Market 3

Ofcom believes the supply of wholesale broadband services in Market 3 is increasingly competitive and that no organisation enjoys significant market power there. Consumers have sufficient choice and are therefore protected by competition.

For this reason Ofcom proposes to remove regulation currently imposed on BT in this market.

Whilst lifting the requirement on BT to provide wholesale broadband access products in Market 3, a 12 months notice period will be applied to allow any affected parties to make alternative arrangements.

The consultation closes on 7 February 2008

See Related Items for the full document.

Ends.

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