Briefing for analysts: Telecoms Partner, Competition Stuart - PDF document

1 Briefing for analysts: Telecoms Partner, Competition Stuart McIntosh 21 st July 2010

Agenda • Introduction Stuart McIntosh • Wholesale local access / Wholesale broadband access Gareth Davies • Net neutrality Alex Blowers • Mobile call termination David Stewart • Q&A Q&A 2

Wholesale local access / wholesale broadband access wholesale broadband access Gareth Davies Gareth Davies Competition Policy Director 3

Agenda • Recap on proposals from Wholesale Local Access and Wholesale Broadband Access market reviews Access market reviews • Main issues raised in responses • Proposals in context • Next steps Next steps 4

WLA market review proposals New regulatory approaches right balance of policies to allow delivery on both VULA – Virtual Unbundled VULA Virtual Unbundled Duct & pole access (PIA) Local Access Maintain existing remedies Sub Loop MPF Shared MPF Unbundling 5

WBA market review proposals • Markets definitions based on number of Principal Operators present by exchange area • 4 separate markets: – The Hull area: KCOM (100% market share) – Market 1: BT (98.5% market share) – Market 2: BT (69% market share) – Market 3: No SMP • Remedies: – General remedies (access no undue discrimination General remedies (access, no undue discrimination, cost orientation etc) in Hull, Market 1 and Market 2 – Charge control on BT in Market 1 6

Main issues raised in responses Local Access (WLA) Broadband (WBA) • Market definition: • Broad consensus on market definition, – BT advocate deregulation of markets SMP findings and need for VULA and with 3+ Principal Operators PIA – EC considers account should also be EC considers account should also be taken of market shares • VULA issues: – Recent market developments suggest – Progress towards Wires Only need for reconsultation on market – Other technical characteristics vs GEA Other technical characteristics vs GEA boundaries boundaries – Pricing • Remedies: • PIA issues: – BT opposition to charge control in – Geographic scope Geographic scope Market 1 and to cost orientation M k t 1 d t t i t ti – Restrictions on usage – Timing • Some argue for improvements in Some argue for improvements in existing remedies (LLU and SLU) 7

Proposals in context (1) Current & Likely strong Nearer-term remedies focus planned planned focus longer term networks “1 st third” 1 st third Urban Wavelength or fibre or fibre VULA unbundling? “middle third” Sub-urban Sub-urban ? ? PIA Local / regional initiati es initiatives “Final third” wireless PIA SLU /other Rural Strong focus Lower focus 8

Proposals in context (2) Strategic focus Near term priorities • Enable effective competition in first and second “thirds”: • Design fit-for-purpose consumer switching and migration processes from start – Effective wholesale products (VULA) that • Ensure appropriate VULA development path VULA VULA maximise scope for innovation • Intervene if BT and industry fail to agree appropriate SLA / SLG regime – Fit-for-purpose migration • Monitor BT’s pricing proposals to ensure no undue discrimination • Support use of PIA, to promote investment • Work with BT, industry and OTA to ensure in middle and final “thirds” and potentially that PIA reference offer is fit-for-purpose on a more limited scale in first “third” • Encourage and support trials PIA • Promote investment in “hard to reach” • Facilitate release of planning data required areas by supporting local and regional for network deployments initiatives in final “third” • Explore use in FTTC applications as part of SLU rural market testing initiatives rural market testing initiatives • Explore need for BT to update SLU pricing 9

Next Steps • Reconsultation on WBA market boundaries in August 2010 • Switching consultation to be published in August / September 2010 g p g p • Publish WLA and WBA market review statements in autumn 2010 – Followed by active Ofcom involvement in implementation • WLA and WBA charge control consultations in autumn 2010 • Support for public policy initiatives to extend NGA coverage – Universal Service Commitment, rural market testing, infrastructure sharing • O Ongoing technology programme i t h l 10

11 Net neutrality International Director Alex Blowers

The Internet Traffic Management Continuum Blocking Priority given to some service Traffic Traffic content e.g. providers’ content or management Management spam, illegal applications over others only applied y pp Questions website (perhaps for a fee - potential during periods of content revenue stream for ISPs) high congestion (a) What forms of discrimination are fair and reasonable? (b) In what instances might intervention be justified? Throttling/degrading Priority always y y Blocking rivals’ g Best efforts of some types of given to most content or – No traffic (c) What form of traffic e.g. P2P vulnerable types applications e.g. management intervention, if of services e.g. rival IPTV – No charging any, would be voice, video service for tiered appropriate? streaming, games QoS 12

Discussion taking place as part of wider debate • International interest in ‘net neutrality’ and traffic management has increased significantly – US: FCC has proposed two new principles: non discrimination & transparency – Europe: Norwegian, Swedish and French regulators have all published proposals or guidelines covering ‘net neutrality’ – European Commission has now published its own consultation / questionnaire • UK Government to consider how to implement relevant provisions of new EU Regulatory Framework 13

What is Ofcom’s role? • Ofcom’s existing powers and duties are being revised: Revised European Telecoms Framework, to be implemented by UK Government, includes changes to legislation designed to – Prevent degradation of services and hindering or slowing of traffic – Introduce more specific requirements for greater transparency – Provide for UK Government to empower Ofcom to impose ‘minimum quality of service on the internet’ • Net neutrality paper opens discussion on use of Ofcom’s powers to address traffic management concerns: – Anti-competitive discrimination – Consumer transparency 14

Focus of our discussion document Anti-Competitive Discrimination Consumer Transparency • Ofcom has received no formal complaints • Traffic management presents a challenge from industry that require investigation to for consumers to understand and detect date… • But some evidence of friction between • Lack of transparency on traffic parties management policies may already be an issue for consumers • Anti-competitive behaviour could be a p problem – need to consider how we would • Potential for consumer harm could increase address this as traffic management becomes more widely deployed • Principle of transparency therefore a given 15

Timing and next steps Closing date for responses to discussion document : 9 th September 2010 • • Stakeholder and industry views welcomed on discrimination and consumer transparency • Consultation timing allows us to feed back results to other bodies considering net neutrality and traffic management, e.g. European Commission • Allows us to prepare for any new responsibilities for Ofcom under Telecoms Framework as transposed by UK Government (coming in to force next year) 16

Ofcom’s proposals for mobile termination rate regulation 2011-2015 termination rate regulation 2011-2015 David Stewart David Stewart Competition Policy Director 17

Regulation of MTRs has a long history in the UK MTRs, subscription and ownership from 1995 to 2009 MTR b i ti d hi f 1995 t 2009 140 140 2 25 tion/personal 120 20 ation) 100 100 per 100 populat e (% of popula MTRs (ppm) 15 80 60 10 10 M ubscriptions p users of mobil 40 5 20 u Active s 0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Subscription Ownership Average MTRs Source: Ofcom, 2009 18

In April 2010, we proposed continued falls in MTRs for 2011 2011 to 2015, applying to large and small operators 201 l i l d ll 2007 regime 2011 regime (proposed) • Only large players regulated • All players with mobile numbers regulated • Regulated rates currently ~ 5ppm • Rates falling to 0.5ppm by 2014 • Higher rates for smaller players g p y • Fair and reasonable rates for smaller players – which we expect to be the same across the market • LRIC+ • Pure LRIC 19

In April 2010, we proposed continued falls in MTRs for 2011 to 2015, applying to large and small operators 2011 201 l i l d ll 2007 regime 2011 regime (proposed) • Only large players regulated • All players with mobile numbers regulated • Regulated rates currently ~ 5ppm • Rates falling to 0.5ppm by 2014 • Higher rates for smaller players g p y • Fair and reasonable rates for smaller players – which we expect to be the same across the market • LRIC+ • Pure LRIC AND NOW: Submissions received from industry, consumer groups, MPs Submissions received from industry, consumer groups, MPs • • Consulting with the European Commission and affected parties • Large public response 20