EON Communications Ltd Response To The 3.4 GHz Consultation Document

EON submits that:-

1. this frequency should, in future, be made available as seven regional licences as this will sustain a greater level of competition, creating more consumer choice, particularly in sub-urban and rural areas.

2. given the rapid advances in technology, the frequency should not be restricted to voice only services. Rather licensees should have the freedom to deliver multi-media services, where technically possible, that satisfy the needs of residential and business customers within a licence area.

Detailed arguments to support these submissions, along with other comments on the Radiocommunication Agency's (RA) consultative document, are set out below.

About EON Communications

EON Communications is a new Company formed to fund and develop the LDO franchises covering Ayrshire, Cumbria, Dumfries & Galloway and Northumberland.

It is a market led Company that will deliver voice, data and entertainment services. It views technology as the enabler to deliver choice, in both content and quality of service delivery, to the widest potential audience.

The potential availability of radio spectrum for wireless local loop applications in conjunction with wireline technology is attractive to the Company for two reasons.

1 . Such technology fits well with the need to reach rural and semi-rural areas of the Company's franchise in the north of England and South West Scotland, using a multi-technology approach.

2. The Company believes that technical developments in communication delivery, made possible by using radio, create further competition with the dominant incumbent telecom providers, particularly outside the major conurbations.

DETAILED RESPONSES

1.1 Fixed Wireless Access

EON supports the use of all available technologies to achieve greater, in time universal, access to advanced telecommunication services.

It is the Company's belief that the "last mile" to the consumer offers the greatest obstacle to eventual universal access. As a consequence the Company wholeheartedly embraces the use of radio as an enabling tool in the creation of greater competition across the whole populace not just for the urban dweller or business.

1.2 Demand

EON's own investigations confirm that demand for FWA is strong, particularly in those areas not served by cable or by another fixed line operator.

1.3 Competition

The re-allocation of, and an open competition for, the 3.4GHz spectrum is welcomed. The Company is aware that the allocation is assigned to the MOD and that the usage negotiated by the Radiocommunications Agency is for FWA voice applications. However, we suggest that the differentiation between voice and other communication services is fast becoming more difficult to define. Indeed, it will continue to do so given the continuing advances in digital compression and data transfer techniques.

EON believes such technical advances will enable products and services to cross the historical (and increasingly artificial) boundaries of voice, data and video. Moreover, we believe that FWA, if it is to remain an economically viable medium, will necessarily form part of what will become a transparent, non-service specific, transport mechanism.

2.1 Greater Access to Advanced Telecoms

To date simple competition on price, within high density urban areas, has been the main driver for the development of competitive telecoms in the UK. However, to a large extent lower density districts have been excluded from the benefits of telecoms competition. Of the 45 percent or so of the UK population with access to cable services, very little is outside established urban areas. Such areas will not, therefore, enjoy the economic and social benefits that may be available to their urban neighbours.

EON believes the provision of high quality communications services will only become available to all parts of the UK if the competitive driver becomes the provision of telephone service by a choice of service providers that are differentiated by content, quality and range of services as well as price.

The Company also believes that the increase in home working and the small-office, home-office (SoHo) employment across the country has been overlooked by the incumbent operators, who have mainly focussed on serving the needs of the corporate user.

3.1 3.4GHz spectrum

If EON were to be an applicant for the proposed licences the operational limitations associated with the available spectrum are understood and would be fully recognised in any application that might be made. We could also assure the Radiocommunications Agency that operation in this band would be structured not to cause any undue interference to other operators within the band. The Company acknowledges the guidance offered by the Radiocommunications Agency and would ensure any technical proposals met such requirements.

3.2 Equipment standards

Requirements are recognised and understood.

4.1 FWA Market segmentation

EON Communications does not believe that markets should be segmented by virtue of the delivery technology or bandwidth employed. We are of the opinion that services are the measure by which products may be differentiated and markets segmented.

We believe this view properly reflects the technical developments of recent years where compression and signal processing have created a seamless transition between products and their delivery. A clearly demonstrable example of this trend is the deployment of ADSL on local loop copper pairs, and its capability to deliver video over a medium that not long ago was viewed as having only low speed, transmission capability.

This confidence in future developments, therefore, fundamentally questions the continuing relationship of a specific allocation of FWA spectrum to a specific product or service. As greater capability is developed over smaller bandwidths, licensing spectrum to a particular product family or service will, in our view, become unsupportable.

4.2 Services definition

EON Communications believes the re-allocation of this radio spectrum should not be related to the provision of voice only services but could be expressed as;

"A local loop delivery mechanism capable of supporting communication
services to both residential and business customers"

The technical limitations associated with the defined radio frequency and available bandwidth which are, in general terms, in published specifications, should then set the boundaries for the capability of the deployed systems.

Our proposed generic description would enable an operator to offer voice services but also Intemet access and similar data based products if appropriate to the market.

Consequently EON Communications would fully support and welcome the proposal to remove the restriction on type of service to be delivered over the FWA system.

5 Number of Operators

The proposal to consider the re-allocation of the available spectrum offers an opportunity for Government to review and develop the competitive status of the UK telecommunications industry.

EON Communications believes the current status of a major incumbent supplier and a small number of new fixed line operators to be unsatisfactory. According to Oftel's latest Market Report (November 1999) BT still controls 76 percent of the market, with the balance split between the cable companies 16 percent and others (Colt, Energis, Racal, WorldCom etc) 8 percent. (See Table 1 below)

Table 1

Source: Oftel Market Report November 1999

The deployment of FWA could provide for residents of urban UK a third direct provider and, for the first time, for over half the UK population, the choice of a second direct provider. What's more with only 49 percent of homes passed by cable systems and many operators only achieving 25 percent penetration, much of Britain has still to sample the benefits of true competitive choice. This is especially true outside the urban areas. (See Table 2 below)

Table 2

Source: ITC Report September 1999 - July Data *Who's Who in Cable July 1999
**including Eon Communications

This lack of competition and development is in danger of creating communications "haves and have-nots".

Given that the existing fixed line operators have yet to deliver the full promise of competition and choice we believe it would be inappropriate to make the 3.4GHz spectrum available as a national licence. Indeed, were this to be the case, we foresee a new entrant 'cherry-picking' high spending residential and business areas of the major conurbations once again to the detriment of the rest of the UK.

It is EON's submission that the action most likely to meet the Govermnent's choice and competitive criteria, and address the underlying concerns about a communications underclass, would be the allocation of 3.4GHz frequency to seven regional licences.

We propose that the UK be divided into regions as follows (subject to any radio planning condsiderations which might alter reception boundaries):-

North (Government Office Regions (GOR) North East, North West, Yorkshire & Humberside)

Midland (GORs Eastern, East Midlands, West Midlands)

Southern (GORs South East, South West)

London    GOR

Scotland

Wales

Northern Ireland

We believe this split acknowledges devolutionary and political reality (in England at least) yet creates areas of sufficient size and economic resource. (See table 3)

Table 3

Source : Regional Trends 1999

Proposed 3.4GHz FWA Regions

Regional Boundaries based on GOR.

There are a number of reasons for this approach:-

1. These fundable regions are, in our opinion, of critical mass and thus are capable of supporting telecoms businesses that will be sustainable and profitable. (A pro-forma example of such a business is submitted in confidence in section 2.) These businesses will, we consider, be readily fundable and network deployment can be achieved across their areas within four to five years of licence award.

2. This is an approach which we believe enables controls and milestones with long term objectives to be established by the DTI and the Radiocommunications Agency to ensure service is offered across the whole populace, thus preventing the simple 'cherry picking' of urban conurbations.

3. The regional approach is consistent with the EU wide trend for strong economic regions. Having a regional telecom provider adds to the economic potential of that region in that an operator's best interests must (in part) run in line with the interests of the region.

4. Many businesses see their natural markets as regional, although clearly the Intemet has the potential to change this. Also, as well many govermnent, local government, health and public services are predicated on regional delivery. A regional operator can benefit from serving these regional needs

5. In tenns of policing the usage of the radio spectrum and the avoidance of mutual interference between regions, we see this as part of the responsibility of the licence holder with the Radiocommunications Agency as the final determinant.

6. We also believe the collapse of lonica is indicative of the scale of the task required to deploy a new system across the whole UK, and the strain that imposes in terms of funding and managerial skills. Regional businesses are more easily funded and managed.

7. The success of Atlantic Telecom demonstrates that regional and sub-regional FWA telecoms businesses can succeed.

8. EON believes that provision of high quality communications services will only become available to all parts of the UK if the competitive driver becomes the provision of a choice of service providers that are differentiated by content, quality and range of services - not just price.

EON Communications believes the allocation of a single licence across the UK to one operator would be a retrograde step, could lead to the sterilisation of a market opportunity and inhibit the development of choice for a considerable proportion of the population.

EON Communications does not support the view that a single operator would offer the maximum benefit to competition. Rather, we believe it would create a scramble for the same potential urban customers without extending choice to those many homes and businesses who have none at present.

EON Communications would welcome the development of a regional approach to the licensing of FWA operators.

6 Other related issues

EON Communications has already submitted its views on the consultation document "Delivering Interactive Multimedia to Workplace and Home".

At that time our submission also supported the development of a regional approach to the deployment of these higher bandwidth frequencies.

7 Test and Development trials

EON Communications could be interested in the deployment of trial systems on a regional basis. However, would be unlikely to undertake such activities if the Agency chose to opt for a single national licence.

Alan Burgess or David Sheppard
EON Communications Ltd
1 Telford Court
Morpeth
Northumberland
NE61 2B

Tel: 01670 513344
Fax 01670 513355

e-mail: Alan Burgess           Agb5O@aol.com

            David Sheppard      david.sheppard@davidsheppard.com

www.eon-communications.co.uk

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