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.

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 - July 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 July):

BT: ~320,000

Kingston: ~10,000

3. Developments

ADSL Registration scheme: BT has introduced a new ADSL order registration system that enables consumers and ISPs to register interest in receiving ADSL services. The registration system covers all exchanges in the UK, though target demand levels will only be published for the 900 exchanges that BT has reviewed the cost of enabling. Should the demand levels for other exchanges be high enough, BT will review the cost of enabling those exchanges. Depending on the exchange, 200-500 end users will need to register interest before BT will enable the exchange.

BT IPStream 500 withdrawal - update: BT previously announced plans to withdraw its IPStream 500 product from new supply in August 2002. In light of continuing demand, BT has now decided to delay this withdrawal from new supply until Q3 of 2002/03. BT plans to support existing IPStream 500 users for at least a year, though plans to migrate them to IPStream Home thereafter.

TotalCare/CustomCare Trial: BT has begun the trial of a chargeable enhanced maintenance option for end users, offering extended working hours and committed fault response timescales. Phase one of the trial will cover CustomCare, offering repair visits between 8:00-20:00 (Mon-Sat). Phase two will cover TotalCare, offering 24 hour coverage, 7 days a week. The care options will be available on BT IPStream S and Office and BT DataStream Home and Office for a charge of £10 per end user per month. There will be no charge during the first month of the trial. The trial is due to last for six months, with the service due for full launch early next year.

Satellite Trial: BT is currently trialing a one-to-many high-speed Internet satellite service that allows Service Providers to reach customers who are out of range of normal ADSL services. The service provides download speeds of up to 256kbits/s via a satellite dish, with higher speeds of up to 4Mbit/s available on demand.

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.

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-June)	s	~ 10,000

There are currently over 280 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. ADSL service is specific to an individual line therefore if an end user moves address, they will need to take a new ADSL service – it cannot be transferred.

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:

Oftel currently has no ADSL cases under investigation.

Closed cases:

(i) DSL ATM Interconnection

Energis and Thus referred a dispute with BT concerning ATM-level interconnection services to Oftel for determination. Oftel was 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 final Direction on 21 June 2002 (http://www.oftel.gov.uk/publications/broadband/dsl/atmi0602.htm) requiring BT to offer ADSL interconnection services and additional technical functionality. This will allow operators to connect to BT’s network, enabling them to provide wholesale products in competition with BT, as well as retail services. BT must set prices for these interconnection services on a non-discriminatory basis at a level that allows other broadband providers to compete.

BT is also required to begin a trial for an interconnection product based on Symmetric Digital Subscriber Line (SDSL) technology, following consultation with the operators. In addition, Oftel requires BT to offer service level agreements for the ADSL services and the additional functionality, including compensation payments in the event that BT fails to meet the service levels specified.

Contact: Tim Cross (020 7634 8798)

(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

Oftel has ceased its investigation into the VideoStream prices after the complaint was withdrawn.

Contact: Naaz Rashid (020 7634 8849)

(iii) BT’s DSL Marketing

Freeserve made a number of complaints regarding BT's marketing and pricing of its ADSL services. In summary, the information supplied by Freeserve for the complaint did not provide evidence of anti-competitive behaviour by BT and the Director does not consider that these issues warrant further investigation. Therefore Oftel has closed this case. Oftel’s findings are set out below. A more detailed summary of these findings is available from the case officer on request:

Cross marketing

Freeserve expressed concerns that BT’s ‘Broadband Briton’ newspaper adverts were intended to make BT synonymous with ADSL to the exclusion of other Service Providers. Oftel’s view is that there is no prohibition on BT advertising its brand and services collectively or individually. BT is entitled to trade on its brand awareness and use that to promote its Internet services. Other ISPs can also advertise their services to create awareness of themselves as broadband service providers.

BT Openworld’s notification of wholesale price reductions

Freeserve alleged that the speed with which BT Openworld began marketing its reduced price broadband service meant it must have had advanced notice from within BT of wholesale DSL price cuts. Oftel found no evidence to support this claim. Many of BT’s marketing initiatives date from the earlier introduction of self install ADSL services.

Cross subsidy

Freeserve claimed that BT was unfairly cross subsidising BT Openworld. Oftel has recently closed detailed investigations into allegations of cross subsidy and margin squeeze of Openworld. Oftel concluded that there was no evidence to suggest a margin squeeze was currently in operation. Oftel does not intend to re-investigate this issue. It should also be noted that several SPs are undercutting Openworld’s new monthly rental price (£29.99) indicating that there is a sufficient retail margin to allow competition with Openworld.

Telephone Census

BT has sent a questionnaire to its customer base called a ‘telephone census’ which asks for information on their use of telephony, tv and Internet services. Freeserve believes that this market information results solely from BT Retail’s dominance in retail telephony and will allow it to abuse that dominant position. Oftel believes that it is legitimate commercial activity for BT to collect this information as long the questionnaires are not targeted on the basis of customer calling information. Other companies can undertake similar exercises using their customer address lists or by buying in such information. Oftel has recently published a statement setting out its policy on BT’s marketing of Internet services. This is available from Oftel’s website at http://www.oftel.gov.uk/publications/ind_guidelines/mark0502.htm.

Contact: John Russell (020 7634 8830)

(iv) Alleged Margin Squeeze

(v) DataStream Pricing

(vi) Alleged margin squeeze on the business products

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

(viii) Rate Adaption

(ix) Special offer investigation

(x) Alleged passing of confidential information to BT Openworld

(xi) BT ADSL installations

(xii) BT Openworld marketing