Mae'r cynnwys hwn ar gael yn Saesneg yn unig.

Oftel's Internet and Broadband Brief

01 Rhagfyr 2004

Contents


1. Key headline statistics

2. Oftel's aims

3. Definitions

4. Monitoring the narrowband and broadband Internet markets

5. Key developments since the previous brief

6. Oftel's narrowband Internet access policy

7. Overview of the UK narrowband market

8. Availability

9. Take-up

10. Prices (October 2003 international benchmarking survey, prices as at August 2003)

11. Current narrowband products

12. Alternative means of narrowband Internet access

13. What is Oftel doing to promote competition in the narrowband market?

14. Oftel's broadband strategy

15. Overview of the UK broadband market

16. Availability

17. Take-up

18. Prices (October 2003 international benchmarking survey, prices as at August 2003)

19. Current broadband products (retail and wholesale) and what Oftel is doing in these areas to promote competition

20. Review of the broadband market

Notes

Key headline statistics

Internet access (as at August 2003)

% UK homes with Internet access

50%

% UK SMEs1 with Internet access

65%

% UK homes connected to the Internet using a narrowband unmetered service

34% 2

% UK SMEs connected to the Internet using a narrowband unmetered service

30% 2

Broadband access (as at end November 2003)

Total broadband subscribers

3 million

DSL:

End-users of ADSL services

1,674,000

Availability of ADSL

80% of UK homes and businesses 4

Number of ISPs offering ADSL services

100 +

Cable modems:

End-users of cable modem services

(Oftel estimate) 1,331,000

Availability of cable modems

45% of UK homes and businesses

 

2. Oftel's aims

Oftel supports the Government’s targets;

  • to ensure that everyone who wants it has access to the Internet by 2005; and
  • to have the most extensive and competitive broadband market in the G7 by 2005.

Oftel wants to see the best deal for all consumers in terms of quality, choice and value for money. This includes choice of access speed (high and low-speed access) and services offered. Oftel believes that competition is the most effective way of achieving these goals. Competition is working:

  • In narrowband, UK consumers now have a wide variety of tariffs for dial-up Internet access. This includes both pay-as-you-go tariffs and unmetered packages. UK Internet access prices for residential consumers continue to be among the lowest in the world.
  • In broadband, there is competition at the infrastructure level between cable modem providers and DSL, and numerous service providers competing with BT to provide retail DSL services to consumers. Take-up of broadband continues to increase substantially and prices compare well with elsewhere. Oftel is playing an active role in setting the regulatory framework for the broadband market, and is working closely with industry to pre-empt and resolve disputes.

On 29 December 2003 the duties of Oftel and all responsibility for regulating telecommunications will transfer to Ofcom, the new converged regulator for the communications sector.

3. Definitions

This brief summarises the key developments in the market for Internet and broadband services in the UK, and describes Oftel’s involvement in these markets.

  • ‘Dial-up’ or ‘narrowband’ Internet access is used in this brief for access speeds up to and including 128 kilobits per second (kbps).
  • 'Broadband' is used in this brief to refer to higher bandwidth, always-on services, offering data rates of 128 kbps and above.

This definition of broadband is used by Oftel for the purposes of measuring take-up in order to capture the dynamic range of services available to residential and business consumers that are classed by the industry as broadband. This definition gives Oftel data that is comparable with broadband take-up figures published by other countries in Europe.

4. Monitoring the narrowband and broadband Internet markets

Oftel has continued to monitor the UK narrowband and broadband markets. Oftel’s International benchmarking study takes place every 6 months. The latest set of results published in October 2003 (based on services available in August 2003) includes the UK, France, Germany, Sweden, and the US states of Ohio and California. The latest report, which explains Oftel’s methodology in detail, is available at http://www.ofcom.org.uk/static/archive/oftel/press/releases/2003/pr32_03.htm

Oftel’s quarterly market research surveys ask residential and SME Internet users about their use and experience of the Internet, as well as measuring consumer awareness and use of broadband technologies. The latest reports (based on surveys undertaken in August 2003) were published in October 2003. This and previous surveys can be found at
http://www.ofcom.org.uk/static/archive/oftel/consumer/research/research_index.htm

5. Key developments since the previous brief

  • On 17 November 2003, BT announced it was extending its demand registration scheme for ADSL broadband by setting triggers for a further 2,300 exchanges, serving two million homes and businesses.
  • On 11 November 2003, Oftel, the DTI and industry representatives gave evidence to the Trade and Industry Committee on the development of broadband in the UK. A transcript of the oral evidence can be found at Transcript 1 and Transcript 2
  • On 4 November 2003, Oftel published informal guidance for companies using Voice over Internet Protocol (VoIP) to deliver communications services to customers.
  • On 28 and 29 October 2003, over 300 people attended the BSG Broadband Britain Conference in London.
  • On 27 October, Oftel published its latest quarterly research into residential consumers' use of Internet services and the results of its International benchmarking study of narrowband and broadband services.
    http://www.ofcom.org.uk/static/archive/oftel/publications/research/2003/q14intres1003.pdf
    http://www.ofcom.org.uk/static/archive/oftel/publications/research/2003/benc_doc1003.pdf

Narrowband

6. Oftel's narrowband Internet access policy

Oftel’s approach is to promote competition in the provision of access to Internet services, thereby giving consumers greater choice, better value and higher quality, and spurring take up. Oftel seeks to ensure that the level of regulation is proportionate given the level of competition in the market, while protecting and informing consumers where the market does not do so.

7. Overview of the UK narrowband market

The UK has a competitive retail dial-up (also known as ‘narrowband’) ISP market with both pay-as-you-go and unmetered packages available to consumers. Unlike much of the rest of Europe (including Germany and France), an offshoot of the incumbent telecoms operator does not dominate the UK dial-up retail market.

8. Availability

Dial-up Internet access is available to all UK households and businesses with a fixed telephone line. The vast majority of UK Internet service providers (ISPs) are available to consumers nationwide.

9. Take-up

Exhibit 1 Use of narrowband and broadband Internet packages (residential) August 2003

 

Aug 02

Nov 02

Feb 03

May 03

Aug 03

UK homes connected to the Internet, of which:

42%

42%

45%

47%

50%

- connected using narrowband

87%

83%

79%

77%

76%

-connected using a narrowband unmetered service

38%

35%

38%

32%

34%

-connected using a narrowband metered service

29%

28%

25%

28%

28%

-connected using a narrowband service (but are unsure whether metered or unmetered)

18%

16%

16%

16%

17%

August 2003 figures are based on Oftel market research and a total sample size of 2099 UK homes.

Source: Consumers' use of Internet, Oftel residential survey – August 2003 –

http://www.ofcom.org.uk/static/archive/oftel/publications/research/2003/q14intres1003.pdf

Exhibit 2 Use of narrowband and broadband Internet packages (business) August 2003

 

Aug 02

Nov 02

Feb 03

*May 03

Aug 03

SMEs connected to the Internet, of which:

67%

67%

65%

65%

65%

- connected to the Internet using narrowband

86%

83%

79%

73%

66%

- connected to the Internet using ISDN

32%

26%

23%

22%

22%

- connected to the Internet using narrowband unmetered

37%

35%

35%

33%

30%

- connected to the Internet using narrowband metered

29%

28%

30%

32%

27%

- connected to the Internet using narrowband (unsure whether metered or unmetered)

19%

20%

15%

3%

5%

August 2003 figures are based on Oftel market research and a total sample size of 802 UK SMEs.

Source: Oftel small and medium business survey - August 2003 –
http://www.ofcom.org.uk/static/archive/oftel/publications/research/2003/q14intbus1003.pdf

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10. Prices (October 2003 international benchmarking survey, prices as at August 2003)

The results in exhibit 3 and 4 show that, based on the sample of service providers selected for residential and business consumers, UK prices are cheaper than all other countries for basic Internet access.


Exhibit 3 Comparison of residential Internet access prices as at August 2003

Residential prices - click for text version
Source: Oftel International benchmarking report, published October 2003


Exhibit 4 Comparison of business Internet access prices as at August 2003

Business prices - click for text version

Source: Oftel International benchmarking report, published October 2003

11. Current narrowband products

There are a number of dial-up Internet access packages available to both residential and business consumers. These include:

  • Metered ('pay-as-you-go')

Subscription + cost of calls or
No subscription - cost of calls only

  • Partly unmetered Subscription

Subscription + free usage at certain times/for a certain amount of time + call costs at other times

  • Fully unmetered

Subscription + unlimited free usage + no call costs

11.1 Metered

In August 2003, 28% of Internet households were using narrowband metered packages to access the Internet (see table above).

The UK pioneered the pay-as-you-go model, which has been copied by many other countries. Packages are now available which offer consumers Internet access at rates below the price of local-rate voice calls. Some packages include a monthly subscription fee in addition to the cost of calls, whereas others are ‘subscription-free’.

Subscription-free Internet access led to a rapid growth in the number of Internet users in the UK, and is likely to remain a good option for occasional or light users, and those who do not want to commit to a contract. However, the proportion of consumers using pay-as-you-go packages has fallen as more unmetered services have become available.

11.2 Unmetered

Fully or partly unmetered packages are widely available and used. In August 2003, 34% of Internet homes claimed to use some type of narrowband unmetered access (see table above). Oftel estimates that around four million Internet homes subscribe to narrowband unmetered packages.

This is partly the result of Oftel’s directions requiring BT to make available unmetered wholesale Internet access products (called FRIACO, see paragraph 13.2 below). This has allowed more ISPs to compete in offering unmetered access and offer greater choice to consumers. Many ISPs offer FRIACO-based, unmetered retail packages for around £13 - £16 a month. The cable operators, NTL and Telewest, also offer their customers unmetered Internet access.

BT’s SurfTime Evening and Weekend Internet access product includes free evening and weekend Internet calls for a fixed monthly fee. However, in addition to SurfTime, consumers need to purchase Internet service provision from a participating ISP.

BT also offers a Midband dial up product. The BT Midband service is provided over Home Highway lines to residential users and over Business Highway / ISDN2/2e lines to business users. BT Midband customers pay a flat-rate payment of £35 a month for line rental and 150 hours per month at 64 kbps, or 75 hours at 128 kbps.

12. Alternative means of narrowband Internet access

Most people use a PC and fixed telephone line for narrowband access, but other methods are also possible.

12.1 Mobile

The mobile phone is likely to be another way of accessing the Internet (around 75% of the UK population are mobile subscribers). With the introduction of 2.5 G technologies, such as General Packet Radio Service (GPRS), which provide higher data rate communications, WAP services have become faster and therefore more user-friendly. It is also possible to get mobile access to ‘real’ Internet pages (like those available using a PC) by combining a GPRS phone and a laptop or personal digital assistant (PDA)

All four existing mobile networks have deployed GPRS, although T-Mobile’s GPRS service currently covers only picture messaging. Orange also offers another 2½ G product, High-Speed Circuit Switched Data (HSCSD).

Third generation (3G) mobile technology is covered in paragraph 19.5 below.

12.2 Television

Internet access through the TV set is being offered by the cable operators. It is also possible to use TV set-top boxes to gain dial-up access to the Internet and some TVs have built-in Internet access. These and other means of access, such as games consoles, could become a popular means of Internet access in the future.

Accessing the Internet in these ways may be more convenient for some people who cannot afford, or do not want to use a computer. However, Internet access through the TV is not widely used at the moment.

Earlier this year the Office of the e-Envoy concluded a consultation on the potential for digital television to offer wider Internet access and to enable more people to access Government services electronically. The final policy paper 'Digital Television. A policy framework for accessing e-government services' will be published, via a Parliamentary Statement, in mid December 2003.

13. What is Oftel doing to promote competition in the narrowband market?

Oftel is taking action in a number of areas relating to dial-up Internet access to ensure fair competition:

13.1 Market reviews

The new EC regulatory framework requires Member States to review the main electronic communications markets by July 2003, in order to ensure that regulation remains proportionate in the light of changing market conditions.

One of the reviews has looked at the market for 'wholesale unmetered narrowband Internet termination' - the services used by ISPs to provide retail unmetered services. Oftel's conclusion is that this market (outside the Hull area) is now effectively competitive and has recently de-regulated this market

http://www.ofcom.org.uk/consult/condocs/narrowband_mkt_rvw/fixednarrowbandrsm.pdf.

Oftel has also reviewed relevant call origination remedies, including FRIACO and Number Translation Services (NTS).

13.2 FRIACO (Flat Rate Internet Access Call Origination)

FRIACO is an unmetered wholesale product that allows other network operators to offer their own unmetered Internet access products in competition with BT. The UK was the first European country to introduce FRIACO, following a direction by Oftel in May 2000, and it has led to some of the cheapest prices for Internet access in the world. Around four million UK homes now use unmetered Internet access.

There are two variants of FRIACO available. DLE FRIACO coveys Internet calls to BT's local exchanges and Single Tandem FRIACO (ST FRIACO) conveys Internet traffic to BT's main regional exchanges.

Oftel has issued a number of directions relating to FRIACO including a requirement to allow operators to pay monthly in arrears rather than in advance (May 2002), and a review of traffic patterns leading a price reduction of approximately 8.5% for DLE FRIACO (July 2002).

On 21 July 2003, Oftel ordered BT to reduce its charges for wholesale unmetered Internet access. Following an investigation and proposals set out earlier this year, Oftel concluded that BT has been charging operators for certain call routing and call management measures that are no longer necessary. As a result, BT’s wholesale charge has been reduced by 17 per cent and backdated to June 2002, the date from when these additional measures were not needed.

In the EU market reviews (November 2003), Oftel decided that the current restrictions on the supply of ST FRIACO be lifted. Previously, users of ST FRIACO had to bear the risk of the additional investment in capacity being ‘stranded’ before the full costs have been recovered.

13.3 NTS (Number Translation Services)

Oftel has estimated that 93% (i.e. the vast majority) of NTS call volumes are data calls for dial-up Internet access services (source: Oftel’s Market Information Fixed Update Quarter 4 2002/3). The majority of these use 0845 local rate numbers. Despite the growth in alternative methods of Internet access such as broadband, it is clear that narrowband metered ‘pay-as-you-go’ services remain a very important mechanism for Internet access in the UK.

On 26 September 2003, Oftel published a consultation document called '0845 and 0870 numbers: Review of retail price and numbering arrangements'. http://www.ofcom.org.uk/static/archive/oftel/publications/numbering/2003/0845condoc0903.pdf

Oftel has published this consultation document for two reasons:

  • First, Oftel has had concerns for some time that the designation of 0845 numbers as 'local rate' and 0870 numbers as 'national rate' could potentially be misleading for consumers. This is because many phone companies do not align their geographic and non-geographic local and national prices, and because of the increasing use of inclusive call allowances and other discount schemes which make the concept of local and national rate calls less relevant.
  • Second, BT has proposed reduced termination payments for 0845 and 0870 calls (with knock-on effects on the revenues of NTS Service Providers including ISPs) as a result of BT's decision to reduce the standard retail prices for evening local calls (and hence 0845 calls) from 1.5ppm to 1ppm and for weekend national calls (and hence 0870 calls) from 2ppm to 1.5ppm from 1 June 2003 . Amongst other things, this calls into the question the sustainability of metered Internet access services using 0845 and 0870 numbers.

The consultation document examines whether the link between the retail prices for 0845 and 0870 numbers and the retail prices for geographic local and national calls should continue, and, if it is removed, other options for establishing the retail prices for calls to 0845 and 0870 numbers. One of the options considered is to allow those allocated 0845 and 0870 numbers to choose the retail price for their services, subject to a price ceiling. Oftel's proposed criteria for assessing these options are the interests of consumers and the promotion of competition.

The closing date for comments is 30 December 2003.

Broadband

14. Oftel's broadband strategy

In order to provide a focal point for its work on regulation in broadband markets going forward, Oftel has established a broadband programme to develop and apply Oftel’s strategy in relation to broadband and co-ordinate Oftel’s approach to broadband to ensure that all decisions made are coherent and contribute to Oftel’s overall aim of achieving effective competition in broadband markets.

Oftel’s broadband objectives are:

  • effective and sustainable competition in the provision of broadband access and services (evidenced by no operators having significant market power in broadband markets);
  • swift and firm corrective action in the event of anti-competitive practices;
  • a high level of consumer awareness of the nature of broadband services and choices available; and
  • a regulatory framework which is conducive to further investment in broadband and roll-out to remote areas of the country.

Oftel's broadband strategy statement is available at
http://www.ofcom.org.uk/static/archive/oftel/publications/broadband/other/stratb1201.htm

Details of open compliance cases are available in:

15. Overview of the UK broadband market

The UK has one of the most competitive marketplaces in Europe for broadband, with competition at the infrastructure level between cable providers and DSL and numerous service providers competing with BT to provide retail DSL services to customers. So as to stimulate further competition at the infrastructure level, Oftel has required BT to provide local loop unbundling, shared access and ATM interconnection. In doing so, however, we have been careful to ensure that incentives to invest in alternative infrastructure are not undermined. We are also keen to ensure that BT has an incentive to invest and innovate.

There is also some limited provision by fixed radio that, together with mobile radio and satellite technologies, should in future be able to deliver broadband services more widely. Larger business users access broadband services via leased lines.

16. Availability

Around 80% of the UK has access to broadband via DSL and around 45% via cable modem. Broadband fixed wireless access offers broadband to around 12% of the UK and satellite, though not currently a mass-market product, has the potential to deliver broadband across the UK.

16.1 Cable modems

Cable networks pass around 50% of UK homes. ntl and Telewest are both working to upgrade their networks so that they can provide broadband services to consumers in all the areas covered by cable networks. Telewest services are available to 4.9 million homes, of which 96% are broadband capable. NTL services are available to 8.4 million homes, of which 79% are broadband capable.

At present, 45% of UK homes (around 11 million) have access to broadband via cable.

On 12 September, Telewest announced it is to upgrade the last remaining analogue part of its network in Birmingham, bringing high speed internet and digital TV services to an additional 60,000 homes. The company is beginning its programme of expansion in October 2003, which will continue, on a street by street basis, until April 2004.

16.2 DSL

Exhibit 5 DSL availability across UK

 

Number of DSL -enabled exchanges

% of UK consumers and businesses within the area of a DSL enabled exchange

July 00

516

35%

Sep 00

619

40%

Mar 01

839

50%

Sep 01

1,000

60%

Mar 02

1,010

60%

May 02

1,115

66%

Aug 02

1,116

66%

Sep 02

1,119

66%

Nov 02

1,120

66%

Mar 03

1,167

67%

May 03

1,322

69%

July 03

1,507

71%

Sep 03

1,708

80%

Nov 03

Data to be made available shortly

Over 80% 5

  • BT's ADSL registration scheme

On 17 November 2003, BT announced that it was extending its demand registration scheme for ADSL broadband by setting triggers for a further 2,300 exchanges, serving two million homes and businesses.
When all these exchanges are enabled more than 99 per cent of UK homes and businesses would be within the area of a broadband enabled exchange.

Since the web-based registration scheme was launched, more than 630,000 customers have recorded their interest in getting ADSL broadband. By the end of November 2003, around 826 exchanges had been upgraded as a direct result of the scheme. A further 446 exchanges are in build. This leaves 600 of the very smallest exchanges without a trigger level. These exchanges serve around 100,000 households in total and have less than 300 customers each.

BT’s aim is, with the help of regional and local partnerships, to roll out broadband to 100% of the UK by 2005.

Further information about BT’s DSL rollout is available at www.bt.com/broadband

  • Extending the reach of ADSL

On 24 September 2003 BT announced that the reach of broadband in enabled exchanges would be extended to homes within approximately 6km line length of the exchange, subject to a line test.

This move, extending the previous limit of approximately 5.5km line length, has increased the proportion of people who can receive broadband in enabled areas from approximately 94 per cent to 96 per cent. This puts an estimated 600,000 new households in reach of ADSL. The distance restriction on ADSL coverage comes about because the strength of the signal gradually reduces due to electrical resistance in the cables.

  • Bypassing optical fibre

BT is also looking at people who cannot get broadband because they are connected to their exchange by optical fibre, which cannot support ADSL technology. The problem has typically affected households living on new housing developments built during the 1980s. BT's solution is to use copper cables to bypass the fibre. An ongoing build programme will increase ADSL availability over the next 12 months to fibre customers who are served within an ADSL enabled exchange area. BT began taking orders from 31 July 2003.

  • BT's mini-DSLAMs trial ('exchange activate')

ADSL Exchange Activate, available commercially since 21 July 2003, is designed to deliver ADSL from small exchanges where it would otherwise not be commercially viable.

Exchange Activate makes use of smaller exchange equipment (known as mini DSLAMs) and the existing copper links between smaller exchanges and BT’s backbone network to provide ADSL service in blocks of 30 end users. The product requires a ‘sponsor’ to purchase a 30 end user block for £45,000, which covers rental costs for three years. The sponsor is then responsible for selecting an ISP to provide service to the end users. Each exchange with a mini-DSLAM can support up to four service providers.

16.3 Wireless networks (including satellite)

  • Broadband fixed wireless access (BFWA)

Current broadband fixed wireless access base stations have the potential to cover around 12% of the UK. These are mainly in urban areas where line of site is needed from the base station to a customer's premises.

  • Community wireless networks

At a regional level, a growing number of groups are developing community wireless networks in areas where ADSL and cable modems are not available. These services are being used by both residential and business users.

  • Wi-Fi hot spots

Wi-Fi hotspots are based on the 802.11b standard, and allow anyone with a wireless-enabled PDA or laptop to surf the Internet and send e-mail at high speed, without having to plug into a network. Wi-Fi hotspots are being built throughout the UK and Ireland at locations such as railway stations, airports, business parks and coffee shops. Currently there are over 100 operational Wi-Fi sites in the UK and a number of operators offering services, including BT Openzone, Starbucks, Megabeam and UK Explorer.

  • Satellite

Two-way and one-way satellite access is also available throughout the UK, offering the potential to reach those parts of the UK outside of the reach of ADSL or cable modem services.

For a list of satellite and wireless service providers in the UK, visit the Remote Area BroadBand Inclusion Trial at http://www.rabbit-broadband.org.uk/solutions/supplier-list.asp.

16.4 Extending availability

Oftel’s primary focus is to meet the needs of consumers through promoting competition at all levels of the value chain. For broadband, this means effective and sustainable competition in the provision of broadband networks and services, and a regulatory framework that is conducive to further investment in broadband and rollout to remote areas of the country.

Oftel aims to assist the Government as necessary in meeting the reasonable needs of consumers outside areas addressable where broadband is currently available. In so doing, Oftel aims to ensure that any measures are technologically neutral and, as far as possible, have no detrimental effect on the development of competition in general.

Oftel contributes to the development and implementation of the Government’s broadband policy, working with the DTI, English RDAs and the devolved administrations to help foster a competitive and extensive broadband market. Oftel is also contributing to the work of the Broadband Stakeholders' Group (BSG), which has an important role to play in extending broadband rollout and take-up.

  • UK Broadband Taskforce

The UK Broadband Taskforce was formally launched at the Building Broadband Britain conference in November 2002. The aim of the Taskforce is to bring together work focused on public sector procurement with work focused on increasing availability in the private sector, by stimulating economic development and enhancing the delivery of public services through extending broadband services at the regional and local level.

The Taskforce includes a team of regional broadband co-ordinators from DTI who will ensure that public sector broadband procurement has the maximum impact on regional economic development, and a team from OGC to provide procurement assistance.

On 31 July, Stephen Timms announced the setting up of nine new bodies from October in each of the English regions - Regional Aggregation Bodies (RABs). Set up in partnership with the RDAs the RABs will be responsible for:

The RABs will be responsible for buying broadband services for public sector organisations
cutting costs for public sector customers, particularly schools.

RABs will join up individual public sector broadband requirements and present them as one bigger package to the market. This is intended to deliver better value deals and drive up availability by making it more attractive to telecoms companies to make the capital investment necessary to provide broadband in new areas.

  • Broadband Stakeholder Group

The Broadband Stakeholder Group (BSG) is Government's key advisory group on Broadband. It provides advice on the Government strategy to meet its target for the UK to have the most extensive and competitive Broadband market in the G7 by 2005.

At the end of October 2003, over 300 people attended the BSG Broadband Britain Conference in London. The event was themed around realising the value of broadband: how it is starting to provide real benefits for users and how this growing broadband value proposition can be translated into real commercial success for the companies and organisations that make up the broadband value chain.

Video links to the sessions are available at http://www.broadbanduk.org/news/bsg_news_03_11_03.htm

17. Take-up

Exhibit 6 Broadband take-up at end November 2003

Total broadband

3,021,000

 

DSL

Total

1,674,000

 

BT Wholesale

1,664,000

 

Kingston

10,000

Cable modem

Total

(Oftel estimate) 1,331,000

 

NTL

931,000

 

Telewest

(Oftel estimate) over 400,000

Fixed wireless access

 

6 Over 2,500

Satellite

 

6 Over 6,000

LLU

 

7,800

 

Number of new connections a week

 

Over 40,000

 

% UK homes with broadband

 

7 10%

 

These figures are based on data collected by Oftel directly from service providers.


Exhibit 7 UK broadband users as at end November 2003


Growth of Broadband users to Nov 2003 - click for text version

Source: Oftel (Underlying figures are confidential)

18. Prices (October 2003 international benchmarking survey, prices as at August 2003)

Oftel's latest international benchmarking report looks at prices for services offering speeds of 257 kbps and above. An additional “entry level” always-on residential basket has also been included to take into account the low speed always on services with a minimum speed of 128 kbps, available in most benchmarked countries.

For the residential broadband basket (i.e. where the consumer has a minimum bandwidth requirement of 257 kbps downstream):

– when cable modems are included prices in the UK are significantly cheaper than Germany and the US, similar to France and only in Sweden are prices cheaper; and
– when cable modems are excluded the UK is similar to France and cheaper than all other countries.

For the “entry level” residential basket (i.e. when there consumer has a minimum bandwidth requirement of 128 kbps downstream):

-when cable modems are included, UK prices are significantly cheaper
than Germany and the US and more expensive than France and
Sweden; and
-when cable modems are excluded only in France are prices cheaper than the UK.

Exhibit 8 Comparison of residential broadband prices, August 2003

Residential Broadband Prices - click for text version
Source: Oftel International Benchmarking study published October 2003

For business broadband users:

  • for the most basic services available to business (i.e. where the business has a minimum bandwidth requirement of 257 kbps downstream), only in France are prices cheaper; and
  • for business services where a minimum geometric mean bandwidth of 500 kbps was required, UK prices are more expensive than the other countries benchmarked.

UK prices have remained relatively stable over the period August 2002 to February 2003 but prices have fallen significantly in France, Germany and Sweden. This has had a negative impact on the relative position of the UK and results in the UK having the highest prices for services with a minimum speed of 500 kbps. This will change if BT’s wholesale price cuts are fed through to the end user, these price cuts will being UK prices more inline with other countries.

Exhibit 9 Comparison of business broadband prices, August 2003 (minimum bandwidth of 129 kbps)

Comparison of Business prices - click for text version

Source: Oftel International Benchmarking study published October 2003

19. Current broadband products (retail and wholesale) and what Oftel is doing in these areas to promote competition

19.1 Broadband cable

Both ntl and Telewest offer high-speed Internet access over their cable networks via cable modems. Telewest charges £50 for connection, reduced to £25 for customers subscribing to Telewest's telephone and TV services as well. The standard cost of installation for new ntl customers is £75 and £50 for existing customers.

Exhibit 10 Retail cable modem services on offer

 

NTL

Telewest

150 kbps

£17.99/month

-

500-600 kbps

£24.99/month for 600 kbps

£25/month for 512 kbps

1 mbps

£34.99/month

£35/month

2 mbps

-

£50/month


On 8 July 2003, AOL announced the roll out of its broadband service on NTL's cable network infrastructure.

19.2 Digital subscriber line (DSL)

DSL creates a high-speed digital connection over an existing telephone line using a pair of modems, one at the user end and the other at the local exchange. The downstream data rate of ADSL is much higher than the upstream data rate. DSL is a distance-dependant technology, which means that it is normally available to those consumers who live within 5.5km of their local exchange (but see Extending the reach of ADSL, above).

  • Retail DSL services

There are over 100 ISPs offering retail services based on BT’s wholesale ADSL products (see below), including BT’s own service providers, BTOpenworld and BT Retail. Oftel estimates that BT's ISPs have around 50% of the retail DSL market.

Increasingly, ISPs are beginning to offer DSL services using ATM interconnection and over unbundled loops (see also below) giving them the freedom to provide innovative products e.g. with lower contention rates or symmetrical bandwidth.

  • 256 kbps > 2 mbps and more

A number of ISPs have recently announced higher bandwidth ADSL services offering speeds of up to 1mbps, 2mbps and beyond, available to residential and business users.

  • SDSL

SDSL typically appeals to small and medium sized businesses, which need to both receive and transmit data at high speeds.

A number of ISPs are promoting SDSL to their business customers in areas that have SDSL coverage. These packages are based around LLU products (e.g. from Easynet and Bulldog) as well as BT Wholesale's own symmetric products which it launched commercially on 8 September.

  • BT’s wholesale Asymmetric Digital Subscriber Line (ADSL) Service

BT offers a number of wholesale products, which are available to all service providers on the same terms and conditions. They are:

Exhibit 11 BT's wholesale DSL products

IPStream 500

An entry-level ADSL product aimed at the residential market. It uses rate-adaptive technology to extend the range from 3.5km to 5.5km from the local exchange at the expense of slower upstream speeds.

IPStream Home

A self-install version of IPStream 500, offering lower connection and rental charges.

IPStream Home 1000

A self install product aimed at the residential market. Customers who are on the IP Stream Home 500 service will be able to re-grade and there will be a re-grade charge of £35.

IPStream S

Available in 500, 1000 and 2000 kbps variants. Its higher prices and better service quality means that it is aimed at the SME market. The S500 product uses rate-adaptive technology to extend the range from 3.5km to 5.5km from the local exchange at the expense of slower upstream speeds.

IPStream Office

Self-install versions of IPStream S products, offering lower connection and rental charges.

VideoStream

Enables the provision of video-on-demand services.

VideoStream Plus

Enables the provision of video-on-demand services and can be self-installed.

DataStream

Enables the provision of IP-based networks, such as corporate intranets.

DataStream Home & Office

Self-install versions of the DataStream products, offering lower connection and rental charges


BT Wholesale is set to trial a new 1 mbps consumer ADSL service in September 2003, with the intention of a commercial launch by the end of the year. Prices and other details will be announced later in the summer. BT has dropped plans to launch an entry-level wholesale 256 kbps ADSL product.

Exhibit 12 Price of BT's wholesale DSL products

1 September 2001

BT reduced its wholesale monthly rental charge for IP Stream 500 from £35 to £30 a month. The connection charge for VideoStream was also reduced from £625 to £50 for 6 months from 1 October 2001.

15 January 2002

BT introduced self-install variants of its IPStream products, called IPStream Home & Office. Wholesale connection charges were reduced to £50 (ex VAT) with monthly rental charges starting at £25 (ex VAT) for IPStream Home. However, the end-user also had to buy or rent a DSL modem.

1 April 2002

Charges for IPStream fell dramatically when BT reduced the monthly rental charges for the IPStream 500 and IPStream Home 500 products to £14.75 (ex VAT). Monthly rental charges for IPStream S and IPStream Office were also reduced.

29 April 2002

Charges for DataStream Home & Office and VideoStream Plus fell when BT reduced the annual rental charges to £111 and the connection charges to £50 (both ex VAT).

1 November 2002

BT further reduced the annual rental charge to £101 and introduced a wider range of virtual paths to provide service providers with greater technical and commercial flexibility over the service delivered to end users.

13 December 2002

BT Wholesale announced it would be offering ISPs half price broadband connections as part of a limited promotion from 10 January until 31 March 2003. The activation charge for the IPStream Home 500 product was cut from £50 to £25. The activation charge for business broadband services in the BT IPStream S range was also halved from £260 to £130.

3 April 2003

BT announced it would reduce the monthly rental charges for the IPStream Home 500 and, more dramatically, its IP Stream Office products from 1 May 2003:

  Previous monthly fee New monthly
IP Stream Home 500 £14.75 £13.00
IP Stream Office 500 £40 £18
IP Stream Office 1000 £60 £28
IP Stream Office 2000 £80 £38

7 May 2003

BT announced it would introduce price cuts for its DataStream wholesale broadband product aimed at fixed line operators. BT said the cut, of 70p per month plus discounts, would come into effect just one month after its IPStream reductions (3 April, above).

4 September 2003

BT announced that it would further reduce the price of its DataStream wholesale broadband product by 50p per month. In addition, BT announced an increase to the price of its IPStream Office 2000 product of £5.00, to £43 per month.

20 November 2003

BT launched IPStream Home 1000. The wholesale monthly rental charge is £23.


On 20 November 2003, BT launched its IPStream Home 1000 product.

Oftel has concluded its investigation into a complaint from a number of operators in relation to BT's IP Stream price cuts. Oftel's initial findings were that these price changes, relative to the Datastream product, could have prevented other operators from competing to provide broadband services to Internet service providers. Oftel therefore held urgent discussions with BT, and asked them to make reductions in the price of the Datastream product.

Following these discussions, BT announced on 7 May 2003 that it would cut its Datastream prices by 70p a line, with additional discounts for high volume connections. On 4 September 2003, BT announced a further Datastream price cut of 50p per month. In addition, BT has increased the price of its IPStream Office 2000 product by £5.00 per month. Oftel has concluded that, following these price cuts, BT is meeting its regulatory obligations.

  • Kingston's wholesale Asymmetric Digital Subscriber Line (ADSL) Services

Since 1 November 2002 Kingston Communications has offered service providers a range of wholesale products. They are:

Exhibit 13 Kingston's wholesale DSL products

IPLine RapidTime

Go An entry level self-install ADSL product aimed at the residential market

IPLine RapidBiz Solo

A single PC ADSL product for the business market. Not available as a self-install option

IPLine RapidBiz Net

A range of business ADSL products allowing network connection. Available in 500, 1000 and 2000 kbps variants.

Before the launch of these products, Kingston offered a wholesale ADSL product that could be used by service providers primarily to offer services aimed at the residential market.

All Kingston's wholesale products have a £55.32 (ex VAT) connection charge with annual rental charges ranging from £231.60 to £1,122 (both ex VAT), depending on speed, contention and type of connection.

  • ATM interconnection

Following Oftel's June 2002 direction requiring BT to provide interconnection to its BT's broadband network, operators now have the option of offering competing wholesale and retail services. The purpose of the Direction is that the prices BT charges for interconnection are set at a level that encourages competition between the different providers. As a result of the direction ISPs are offering innovative services to customers.

  • Local Loop Unbundling (LLU)

LLU enables competing operators and service providers to create their own DSL products rather than having to buy BT’s DSL products on a wholesale basis. LLU enables other operators and service providers to install their equipment in BT's exchanges in order to offer their own broadband services to end users.

The LLU condition in BT's licence came into force on 8 August 2000. This sets out BT’s obligations and gives Oftel powers to act if problems occur. In addition, the EC Regulation on LLU came into force on 2nd January 2001. Since then, there has been an intensive programme of work by BT, other operators and Oftel to set the technical and operational framework for the LLU process. Where necessary, Oftel has taken action to resolve disputes.

Exhibit 14 LLU take-up

 

Jan 03

Mar 03

May 03

July 03

Sep 03

Nov 03

Total loops unbundled

2,300

3,000

4,600

6,400

7,600

7,800

Towards the end of November 2003, there were around 7,800 (fully and shared) unbundled loops being used by operators and service providers to deliver a range of broadband services to end-users including, for example, SDSL and 4 mbps services. Services were available from 178 physical co-location and 50 distant location sites.

For more information about the progress made with ADSL rollout and LLU, including current issues and upcoming developments, see Oftel's DSL fact sheet at
http://www.ofcom.org.uk/static/archive/oftel/publications/broadband/dsl_facts/index.htm

19.3 Leased Line Access

Leased lines are permanent high-capacity telecommunications links. They are supplied by network operators to business users and are used by operators and services providers, for example, to supply backhaul for mobile networks and connections to the Internet used by Internet service providers. Leased lines may be provided at a variety of bandwidths ranging from below 2 mbps to 2.5 gbps.

  • Oftel issued its comprehensive Direction on Partial Private Circuit (PPC) prices and service level agreements on 23 December 2002. PPCs are the key wholesale components of leased lines which telecoms operators buy from BT so they can offer their own services directly to end users. The prices set by Oftel for PPCs are typically 50 per cent lower for connection and 20 per cent lower for rental than BT's previous charges. Oftel believes these charges better reflect the costs BT incurs in providing these services. The amended charges have been backdated to 1 August 2001 when PPCs were first introduced by BT.
  • Oftel also required BT to make a number of improvements to its service level agreement for PPCs. These improvements include BT paying appropriate levels of compensation to other operators in the event of late delivery. This will act as an incentive for BT to provide a high quality service to other operators.

Overall, Oftel believes that these measures will allow operators to compete more effectively with BT in the retail market for leased lines.

Oftel is considering whether further action is required in the leased line market as part of its implementation of the new EU regulatory framework (see below).

19.4 Broadband Fixed Wireless Access

Broadband fixed wireless access (BFWA) allows high-speed data connections using radio links between an aerial located on the user's premises and a base station, rather than using a telephone line or a cable television network.

  • 3.4GHz

Licences were originally awarded in the 3.4GHz spectrum to Ionica and Thus in 1993. Ionica's licence was revoked and given back to the Radiocommunication Agency for reallocation. In July 2002 the government removed limitations of use and roll out obligations and the licences were re-auctioned in June 2003. There were 12 bidders for 15 licences and Poundradio (a subsidiary of PCCW Hong Kong) won 13 out of 15 licences. The other two went to Red Spectrum and Public Hub. The auction raised £7,414,000.

In September 2003 PCCW acquired Red Spectrum’s licence and now PCCW own 14 out of 15 licences.

  • 3.6-4.2GHz

GX Networks recently acquired Firstnet, and operate the first wireless network built in the UK. This network was built using spectrum at 3.6-4.2GHz and covers the Thames Valley and several major UK cities.

In October 2003, GX Network agreed to purchase Pipex and plans to sell its broadband services under the Pipex trading name.

  • 28GHz

The RA also auctioned spectrum for BFWA at 28GHz in November 2000. Energis, Your Communications, Faultbasic, Broadnet UK, Chorus Communication and Eircom NI won licences in seven out of fourteen regions, collectively covering 60% of the UK's population. There were no bidders in the remaining seven regions and Eircom has surrendered its licence. The other licensees are at various stages in deploying networks. Your Communications is the only company to have launched a service. Its services offer low contention data services to businesses at 512 kbps (£500 connection charge, £4000 yearly rental) and 3 mbps (£1000 connection charge, £15,200 yearly rental) from completed base stations in Birmingham, Manchester, Cumbria and Leeds.

The 28GHz licences that were not awarded in the 2000 auction were available for auction until mid October 2002 at the original reserve prices (varying from £1 to £2 million) and under the same terms, but no bids were made. The RA launched a consultation on the future process for awarding the available 28GHz licences, this proposed that licences should not contain a ‘use it or lose it’ clause or restrict the purposes for which they can be used. The consultation closed on 14 November and the RA has decided to remove the clause.

  • Other spectrum

Other operators have spectrum that could be used for higher bandwidth fixed wireless access services, but deployments have been limited. For example, there has been some trial deployment by ntl of 10 GHz equipment for its customers.

  • Wireless local area network technologies (WLAN) or 'Wi-fi'

The UK recently amended the regulatory framework to permit the commercial use of wireless local area network technologies (WLAN), such as 802.11b, in the 2.4GHz licence-exempt spectrum. Following consultation by the RA earlier this year, parts of the 5Ghz band have also been available for commercial public services since 12 February 2003.

BT has announced recently that they will provide wholesale Wi-fi products across more than 400 locations in the UK by autumn 2003. There are now more than 1,800 hotspots in the UK and The Cloud, a Wi-Fi network wholesaler, has secured access to 7,000 more Hotspots sites. The biggest players in the UK are BT Openzone, Starbucks (T-Mobile) and Megabeam.

For further information see the Radiocommunications Agency’s broadband wireless update at:

ttp://www.ofcom.org.uk/static/archive/ra/topics/broadband/index.htm

19.5 Mobile Higher Bandwidth Access

The Universal Mobile Telecommunication System (UMTS) is a so-called "third-generation” (3G), broadband, packet-based system to be deployed in Europe for the transmission of text, digitised voice, video, and multimedia to mobile computer and phone users. The likely data rates range from about 64-144 kbps for fast moving users in rural areas (depending on the quality of service), up to 384 kbps for slow moving users in urban/suburban areas.

There are 5 licensees for 3G networks, all four incumbent 2G operators and Hutchison 3G, a new entrant to the market. Hutchison 3G (under the brand name of '3') launched commercial sales in March 2003. Commercial services from other service providers are expected to become available between now and 2004.

19.6 Broadband Satellite Access

Some satellites in orbit around the Earth can offer broadband services. Data transfer has traditionally been in one direction only from the network to the end user ('one-way' satellite). However, new developments have enabled a satellite return path to be used ('two-way' satellite).

In April 2003, the Office of the Deputy Prime Minister launched a 3-month consultation looking at the siting of satellite dishes and antennas. The consultation offers five options, ranging from no change to full deregulation.

  • Two-way broadband satellite

Two-way broadband satellite offers the potential to reach those parts of the UK outside of the reach of an ADSL or cable modem connectivity solution. A number of service providers have launched broadband satellite services in the UK and subscriber numbers are increasing.

For example, Aramiska's services start at £99 a month for speeds of up to 256 kbps downstream and 64 kbps upstream, with a £500 installation and connection fee. BTOpenworld charges £109.99/month for its multi-user product monthly and £59.99 for the single-user service. The connection charges of £1,299 and £899 respectively for the services both cover the purchase of equipment. [All prices exclude VAT.]

  • One-way broadband satellite

One way satellite enables high-speed always-on downloads to the end-user, using the PSTN as the return path. A number of ISPs are offering retail services based on this.

20. Review of the broadband market

The new EC regulatory framework requires Member States to review the main electronic communications markets by July 2003, in order to ensure that regulation remains proportionate in the light of changing market conditions. Oftel's broadband market review divides the broadband market into three distinct areas, which are:

  • Retail leased lines and the markets for wholesale inputs – the retail section will cover analogue and digital up to and including 8 mbps.
  • DSL (wholesale bitstream access)
  • Local Loop Unbundling (unbundled access)

20.1 Retail leased lines and wholesale inputs

http://www.ofcom.org.uk/static/archive/oftel/publications/eu_directives/2003/eu_leased_lines/index.htm

Oftel’s consultation document published in April 2003 proposed that there is now a market for wholesale symmetric broadband origination which includes not only wholesale terminating segments used for retail leased lines, but also radio base station backhaul circuits, LLU backhaul and any other symmetric broadband origination products (such as SDSL) which may be introduced in future.

Oftel proposed in the April 2003 document that this market (and the retail leased lines market) should be split into three, with a proposed finding of SMP at low and high bandwidths (up to and including 155 mbps) and no SMP at very high bandwidths. The review also proposed a finding of SMP in wholesale trunk segments.

Oftel proposed regulation at the wholesale level broadly similar to that currently applying, other than at very high bandwidths where it is proposed that any existing regulation should be withdrawn. Thus the measures in the PPC Directions and the LLU backhaul Direction published in August 2002 are to a large extent being carried forward into the new regime, providing certainty for operators. At the retail level, Oftel proposed regulation only for low bandwidths, agreeing with the European Commission that reliance should instead be placed on wholesale regulation for high and very high bandwidths.

The consultation ended in June 2003. A second consultation will be issued before the end of the year.

20.2 DSL (wholesale bitstream access)

http://www.ofcom.org.uk/static/archive/oftel/publications/eu_directives/2003/eu_dsl/dsl.pdf

The wholesale broadband access market review consultation document proposes that BT has SMP in the following markets:

  • the market for asymmetric broadband origination in the UK (excluding Hull); and
  • the UK market for broadband conveyance.

The remedies include a specific requirement to provide ATM interconnection on a retail minus basis as well as a general access obligation. The review also proposes that Kingston has SMP in the market for asymmetric broadband origination in the Hull area.

The consultation ended on 7 July 2003. Oftel has considered the responses and intends to publish a second consultation before the end of the year.

20.3 LLU

Proposals on local loop unbundling will follow in 2004.

Notes

  1. Oftel’s research examines UK SMEs with 1-250 employees and a minimum annual turnover in excess of £50K
  2. A proportion of narrowband users are unsure which package they are using
  3. This figure includes residential and SME subscribers to ADSL, cable modem, fixed wireless and satellite services and services provided via unbundled local loops. It does not include leased lines.
  4. 80% of people live in areas where the exchange has been upgraded, but BT advises Oftel that technical limitations mean 96% of the population within an enabled exchange area can get broadband services.
  5. Oftel understands from BT that because of the technical limitations of ADSL, an average of 96% of the population within an enabled exchange area can get broadband services. This means that 77% of the UK can get broadband.
  6. These figures are underrepresented, as they do not include all subscribers to rural community networks.
  7. This figure is based on Oftel’s estimate that 87% of broadband connections are to residential customers and that there are 25 million homes in the UK (Office of National Statistics)