This fact sheet provides a history of the rollout of Digital Subscriber Line (DSL) products and gives an update on current progress and upcoming developments.

Contents

Progress update – an update of the major advances over the past month and upcoming developments.

Annex A – History of ADSL

Annex B – Products

Annex C – Technology

Annex D – Investigations

Progress update - March 2002

This update focuses on progress made in the last month and is not intended as a complete overview of ADSL roll-out. References to operators (OLOs) are to companies, other than BT or Kingston, which operate telecommunications systems. Service Providers (SPs) are companies that provide telecommunications services to third parties, eg consumers. The Annexes attached to this fact sheet give further information on DSL and are arranged according to subject area.

1. Roll-out:

BT:

Kingston:

All of Kingston’s exchanges in the Hull area are now enabled to deliver ADSL.

2. Take up (as at end of March):

BT: ~165,000

Kingston: ~11,000

3. Developments

Increased exchange roll-out: BT announced plans on 8 April to enable a further 100 exchanges to deliver broadband services by the end of May. This should increase BT’s broadband coverage to around two thirds of UK households. BT is also reviewing a further 500 exchanges, which may be next to be upgraded.

Introduction of self-install for BT DataStream Home & Office and BT VideoStream Plus: Self-install versions of BT’s DataStream Home & Office and VideoStream Plus wholesale products will become available from 29 April. This will lead to a reduction in the rental and connection charges for the products (see below) as it will no longer be necessary for an engineer to install the services. End users will be responsible for the purchase and installation of their own modems and microfilters.

Central Plus Trial: BT started trialling BT Central Plus from 11 March 2002. BT Central Plus is an enhancement to the BT IPStream portfolio, that will allow Service Providers to connect their End Users directly to the Internet. A full launch of the product is targeted for May 2002. The product will be sold in blocks of 5,000 ports and BT has proposed pricing of £50,000 for connection and £165,000 for annual rental.

BT IP Stream Service Provider transfer pilot: BT is developing a new process to allow consumers to transfer between service providers without the need for their service to be ceased and re-provided, as is required at present. BT is currently piloting this process and a full launch of the service is due to follow if the pilot is successful. For the period of the pilot, BT will not be levying a charge for transferring consumers between service providers.

BT IPStream 500 withdrawal: BT has announced that it plans to withdraw its IPStream 500 product from new supply in August 2002. BT plans to support existing IPStream 500 users for at least a year, though plans to migrate them to IPStream Home thereafter.

Annex A - History

BT took a commercial decision to roll out ADSL products. Oftel has been involved in monitoring rollout to ensure that BT complies with its legal obligations under the Competition Act 1998 and the terms of its Licence. BT must not, for example, unduly prefer its own SP business.

Kingston took a similar decision at the start of October to roll out ADSL products. All of Kingston’s exchanges in the Hull area are enabled to deliver ADSL and Oftel will ensure that Kingston complies with its legal obligations under the Competition Act 1998 and the terms of its Licence when offering ADSL products.

Annex B - Products

1. BT Wholesale Products

2. Kingston Wholesale Products

Product and launch date	Product Description	Prices (ex VAT)
Wholesale product (4/10/00)	ADSL service aimed at residential customers.	£60 installation charge £40pm rental per EU
Total end users (late-March)		~ 11,000

There are currently around 200 customers taking these products from BT and Kingston. These include local authorities and large firms who are using the products as part of their internal networks as well as service providers and other operators who are using the products to offer services to residential and business customers. There are approximately 40 service providers offering services to residential customers and 70 offering services to business customers.

Annex C - Technology

ADSL:

Asymmetric Digital Subscriber Line (ADSL) technology transforms a normal telephone line into a high-speed digital line that enables access to telephony services and the Internet at the same time. ADSL provides always-on, always-available access to the Internet at speeds that are 10 to 40 times faster than a standard 56k modem.

Rate Adaption:

ADSL is normally only available to those living within 3.5km of an ADSL-enabled local exchange, but this can be extended to 5.5km for rate adaptive variants of the products. Rate-adaption is achieved through relaxing the line qualification limits, enabling the upstream path (away from the End User) to rate adapt to between 64kbit/s and 250kbit/s depending on distance from the exchange and traffic levels. The downstream speed (into the End User) remains the same at up to 500kbit/s, providing continued high speed Internet downloads.

Wires-only (G.DMT):

G.DMT services are ‘wires-only’ variants of wholesale DSL products. BT will continue to provide the network elements, ie the wires, with the service provider supplying the end-user equipment, such as the modem. This is one step towards an ‘off-the-shelf’ modem/CPE product.

Self-install:

Self-install products are the step beyond G.DMT. They will enable end-users to purchase CPE ‘off-the-shelf’ and install it themselves, eliminating the need for engineer installations.

Annex D - Investigations

BT’s ADSL roll-out was a commercial decision. However, since BT announced its roll-out plans, Oftel has been involved in monitoring roll-out to ensure that BT complies with its legal obligations under its Licence and the Competition Act 1998. This monitoring process involves having weekly working level meetings and monthly high-level meetings with BT. Kingston has also introduced retail and wholesale ADSL products.

Oftel has also conducted a number of investigations into allegations of anti-competitive behaviour. Some investigations were the result of industry complaints, others have been initiated by Oftel itself. More detailed descriptions of most of these cases can be found in Oftel’s Competition Bulletin, which is published on a quarterly basis. Click on the case title to view the respective Competition Bulletin entry. (Please note, not all cases will have been published in the Bulletin yet).

Current cases:

(i) DSL ATM Interconnection

Energis and Thus referred a dispute with BT concerning an ATM-level interconnection product to us for determination. We have been asked to undertake a market review, and to determine the prices and terms and conditions for the product, including service level agreements/guarantees. Oftel published a draft Determination on 21 December 2001 setting out its proposed interconnection arrangements. Oftel is proposing to require BT to provide two new interconnection services, using both ADSL and SDSL technology, which should increase the type of broadband access services offered in the market. Oftel will ensure that prices for these new services are set at a level that encourages competition between the different providers of broadband services. The consultation on Oftel’s proposals for the new broadband interconnection products closed on 25 January 2002 and the final Determination is expected to be published during April 2002.

Contact: Sara Elgstrand (8976)

(ii) BT's wholesale prices

Following the receipt of a complaint, Oftel has been investigating allegations that the special offers and price cuts introduced in October last year on BT's wholesale products were below cost and therefore anti-competitive. Oftel has collated and analysed detailed cost information from BT to see whether prices were anti-competitive. We have also considered the impact of BT’s latest wholesale ADSL price cuts (effective from 1 and 29 April 2002, depending upon the product concerned). We have now completed our investigation, and have concluded that BT’s IPStream and DataStream pricing is not anti-competitive. The full decision can be found on the OFT Competition Act Register at:

www.oft.gov.uk/Business/Competition+Act/Decisions/BTs+wholesale+DSL+products.htm

We are continuing to investigate the VideoStream product, for which new prices have recently been notified to us.

Contact: Naaz Rashid (8849)

Closed cases:

(iii) Alleged Margin Squeeze

Last year, we investigated allegations that BT was cross-subsidising its service provider, BTOpenworld. In January 2001, we decided that BTOpenworld's original business case was not implausible and therefore, that there was no evidence of a cross-subsidy. We decided, however, to monitor and review the situation after six months to see whether anticipated revenues from e-commerce and advertising were realised. This review has now concluded with Oftel finding no evidence of a breach warranting any enforcement action.

Contact: Naaz Rashid (8849)

(iv) DataStream Pricing

Oftel has investigated whether BT's prices for DataStream Home and Office are too low, following concerns that the prices might be designed to reduce or eliminate competition from LLU operators. We also considered the impact of BT’s new proposed prices for DataStream (effective 29 April 2002). We have now completed our investigation, and have concluded that BT’s DataStream pricing is not anti-competitive. The full decision can be found on the OFT Competition Act Register at:

www.oft.gov.uk/Business/Competition+Act/Decisions/BTs+wholesale+DSL+products.htm

Contact: Sam Parr (5360)

(v) Alleged margin squeeze on the business products

Further to the complaint concerning the special offer on the installation charges for BTOpenworld’s Business 500Plus product (case viii), we investigated whether there was a margin squeeze on BTOpenworld’s ‘business’ products. This investigation had strong links with the review of the alleged margin squeeze on BTOpenworld’s ‘At Home’ residential product (case iii). After analysing all the relevant information, we satisfied ourselves that no margin squeeze was taking place. Accordingly, we have now closed the case.

Contact: Sam Parr (5360)

(vi) Wholesale DSL Terms and Conditions & Service Level Agreements

Oftel examined an industry complaint regarding BT’s contract terms for its wholesale DSL products. The xDSL industry group argued that the original terms, (which did not include Service Level Agreements (SLAs) or Service Level Guarantees (SLGs)), were so unreasonable as to represent an abuse of a dominant position, given that BT is currently the only supplier of wholesale ADSL products.

Following consultation with industry, BT introduced a new version of its terms and conditions, including SLAs, which came into effect on 1 September 2001. BT

introduced SLGs on 31 December 2001. Oftel has now concluded that BT’s wholesale terms and conditions did not have a material effect on competition and has issued a non-infringement decision to this effect.

Contact: Steve Burniston (5361)

(vii) Rate Adaption

(viii) Special offer investigation

(ix) Alleged passing of confidential information to BT Openworld

(x) BT ADSL installations

(xi) BT Openworld marketing