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| David
Edmonds Speech to the Leeds Woodhouse Group Wednesday 9 February 2000 |
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Check against Delivery Big Opportunities
for Small, Medium and Large Businesses: Businesses need to make effective use of telecoms and the internet, small businesses are lagging behind larger businesses in doing this but all could do more, there are initiatives and Oftel policies to help, but more needs to be done, we need more expert small business telecoms purchasers and more business users willing to make competition work more effectively in telecoms. Slide 3 - Oftel’s goal and the business customer Slide 4 - UK Telecoms market: Big money , rapid growth Slide 5 - Whats happening on telecommunications for businesses ? Slide 6 - Internet and small businesses - some observations Slide 7 - How businesses can get a better deal from telecoms Slide 8 - Oftel initiatives that can help business grow Slide 9 - How do businesses get an even better deal Introduction Good evening . Thanks for invitation . I was invited here to talk about the opportunities for businesses to get a better deal from telecoms. I am delighted to do so . It is a key issue for Oftel in its role of regulating the UK telecoms market. I will cover why it matters to Oftel what happens to business telecoms customers, a summary of what is happening in the telecoms market overall and some observations on business consumers, how businesses can get a better deal and how Oftel is working with the industry and others to achieve this and what more needs to be done. Slide 3 - Oftel’s goal and the business customer Why is Oftel interested in businesses? Two reasons:
Slide 4 - UK Telecoms market: Big money , rapid growth Overview of UK telecoms market UK can be summed up as ‘Big market – rapid growth’ - market worth £28bn 60% of which is fixed line. Some areas have experienced huge growth - 100% increase in mobile customers and 200% increase in Internet customers. UK reaping the benefits of 16 years of deregulated telecoms market and has brought many benefits for consumers.
And what is happening for businesses?
a 1999 survey of advanced telecoms service commissioned by Oftel showed small businesses have lower levels of take up of telecoms technology and of the opportunities provided by competition than larger businesses Slide 5 - Whats happening on telecommunications for businesses ?
Reasons for not changing supplier – generally small and large businesses find similar reasons not to change:
So at an overall level small businesses are less likely than large businesses to use alternative suppliers, less aware of advanced services, and less likely to use newer telecoms services. What about if we focus on a specific but important area - the Internet. Critical to UK future, target of the government's aim to make UK best place to do electronic-business. For large and medium sized businesses, we are kept informed of their concerns and issues on telecoms through input from organisations such as Telecoms Managers’ Association and Telecoms User Association. For small businesses tomorrow's big businesses – it is less easy to access their views so Oftel needs to understand more about their relationship with the telecoms market. Slide 6 - Internet and small businesses - some observations What do we find here - another smaller survey we commissioned through the Forum for Private Business and UK 200 Group - currently being written up for publication - shows a fair number of small businesses have got Internet access but they are not exploiting it to best effect as yet. It would be interesting to know if any of you here tonight from medium or large businesses have similar issues to those in the small businesses surveyed – for example:
……while around 6 in 10 achieved what they sought from the net for purchasing activities such as finding new suppliers or reducing the costs of purchasing – better but still significant scope for improvement
Slide 7 - How businesses can get a better deal from telecoms How businesses can get a better deal Firstly whats the 'vision' in prospect for businesses? From where Oftel stands, it is healthy. More communications channels to the customer - copper, fibre, terrestrial radio and satellite - all increasingly able to carry more data, pictures, whatever and competing with each other. So instead of a choice for the out of town business – whether a branch of a multi-chain store or a single outlet business - of 'BT or nothing', more and more businesses will have BT or cable or wideband mobile or fixed radio broadband or interactive broadcasting. All these communication channels in competition with each other. What is Oftel doing? We are helping to make it happen - reducing barriers to competition where necessary, but also stepping back from regulation where too much regulation could delay the delivery of innovative products and the developments of sustainable, effective competition.
Slide 8 - Oftel initiatives that can help business grow So Oftel policies that can help businesses. I would like to focus on the first two listed – local loop unbundling and 3rd generation mobile – and mention a few aspects of the others listed Local loop unbundling
New technology is making big changes to the types of services that can be delivered to homes and businesses over the normal telephone line. - high speed Internet access, video/TV on demand, cable television or a number of telephone lines can be provided to consumers over existing, standard telephone lines. This has significant implications for the way people will use telecoms in the future. We consider it important that consumers in the UK can have access to these information age services at reasonable prices. A number of avenues are emerging in the UK now, such as cable, fixed radio links and satellite access that will enable these new information society services to be delivered to consumers. But in the near future, Oftel has concluded that access for most people is likely to be through the local telephone line, upgraded to provide higher bandwidth capability. Currently, BT supplies over 85% of these local access lines. There is therefore a risk that BT’s position could create a bottleneck in the delivery of higher bandwidth services. Oftel has therefore decided that to promote competition, BT should make its local loops available to other operators, who will then be able to upgrade them to provide higher bandwidth access to customers. This will mean that, rather than relying on BT to provide high bandwidth, other access operators can also determine when and where to rollout, and which form of the technology to use. This decision fits in with Oftel’s long term strategy – the minimum regulation necessary to achieve the best deal for consumers - because the local market is dominated by one operator – therefore we need to regulate to encourage competition. Once competition has taken off, then we can withdraw from regulating. I believe that taking action to ensure that competition develops at this stage will, in the long-run, create less of a regulatory burden. Rather than Oftel needing to constantly monitor the products that BT offers, this should allow us to step back from detailed controls on BT. Instead, BT will be exposed to competition and free to use its own commercial judgement as to how to respond. We also expect that taking action to open the local loop to other operators will be a spur to competition in the delivery of higher bandwidth access and services. This should in turn lead to prices falling and the overall market expanding, which could help other delivery routes, such as cable. Our objective is a fully competitive market in higher bandwidth access and services. Ultimately, the path should become clear for us to withdraw from regulation in this area. Third generation mobile phones
The mobile market is a key area for Oftel at the moment. In the UK, we’ve seen tremendous growth over the past year with over 20 million people in the UK now having mobile phones. Growth has been especially driven by pre-pay, which is estimated to have accounted for up to 80% of growth in the last year. We’ve got four competing operators, a number of independent service providers and the prospect of a fifth network operator with third generation mobile. The significant development in the mobile market is the emergence of additional service opportunities, particularly in respect of data, Internet and e-commerce. We know that third generation technology offers an exciting world of surfing and shopping on the move, and we see a potential explosion of new services for the mobile customer. The provision of content for these new services over the mobile phone is set to be a huge area of growth and competition – again, with the customer being the clear winner. I’ve already said that securing customer benefits is key in Oftel’s work, and that wherever possible our goal is delivered through competition. We also seek to withdraw from regulation as markets become more competitive. But there is a tension for us here; on the one hand, the mobile market is becoming competitive. On the other, we have pressures both from consumers and industry to intervene in the market. In many respects, the mobile market presents a positive picture to the regulator. There is a high degree of competition at both network and service level. We have seen prices fall by something like 75% in real terms since 1990, with falls between 5% and 15% this year. However, despite the positive signs from the market, it’s not there yet. I do have concerns over pricing, over coverage and about quality of service. Oftel receives a very high level of complaints about mobile phone companies – over 40% of our total complaints. In some respects, this is not unexpected, given the huge increase in customer numbers. Most of the queries Oftel gets relate to customer service issues like not being able to get connected, billing problems and so on. As well as these practical issues from a customer perspective, Oftel is also analysing trends in the market to see how competition is developing. We’ll be carrying out a comprehensive review of competitiveness in the mobile market, starting later this year. This review will allow us assess to what extent the customer is getting a good deal, and whether we can withdraw from regulation in mobile. One thing we have done is strongly support the government’s intention to encourage a new entrant to the market when 3G licences are awarded. We saw very positive effects in terms of pricing and services when one2one and Orange came into the market. The UK plans to auction five 3G licences, with the largest block of spectrum reserved for a new entrant. The government has now announced that 13 consortia have applied to take part in the spectrum action, which will take place in March this year. Amongst these consortia are companies new to the mobile market in the UK, and we are very encouraged by the prospects for competition in the mobile market. Number portability
Unmetered internet access
Price comparisons between suppliers
Comparing quality of service
In several of the above examples, it is the industry that is acting, although with a bit of encouragement from us. Oftel has also assembled a Small Business Task Force - small business organisations, telcos, other suppliers, other parts of government - and it is playing its role. Task Force outputs so far
And the prospect is of 3rd party service providers helping small businesses to buy bundles of telecoms/Internet services from different suppliers to meet their needs. For large businesses, Oftel has a panel which meets 3 or 4 times a year and gives us their views on how competition is developing – and their reaction to policy developments. So they give us their reaction on issues ranging from leased lines prices to problems they have with telecoms company billing systems ! Slide 9 - How do businesses get an even better deal But we, the telecoms industry, to business user groups and businesses themselves need to do more … by encouraging
We need to debate the opportunities and how businesses can help themselves – and how Oftel can make sure barriers to better purchasing of telecoms are removed. Thank you. Questions
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