MEMORANDUM SUBMITTED BY KINGSTON COMMUNICATIONS
Kingston Communications (KC) welcomes this opportunity
to draw to the Committee's attention the current state of the
Oftel managed rollout of local loop unbundling (LLU). Our submission
focuses on LLU not only to address key problems with the current
process but as an example of the need for change in the way our
fast moving and converging industry is regulated.
KC is in a unique position within the LLU debate:
— KC was amongst the first telecoms
company to deploy ADSL technology for mass market use. The company
has used ADSL since 1994 and now offers a broadband portal—Kingston
Interactive Television—which allows customers to access
digital multi-channel television, on-demand programmes, internet/e-mail
and local information services—we have done it and we know
how it works.
— KC hopes to deploy national ADSL
services that will provide the full range of digital services
to both residential and business customers. Our experience has
shown us that market trends point towards this growth being video
rather than telephony led.
We are committed to ensuring that roll-out of
LLU is nationally successful but feel that the parlous state of
Oftel's current process (prompting an unparalleled number of requests
for determinations and complaints) begs the following questions
to Oftel:
Why has Oftel underestimated the need for speed?
The roll out of LLU is many times slower than
it needs to be.
The Government has clearly stated its desire
to place Britain at the forefront of the knowledge economy. Competitive
products, using the digital local loop, are a vital part of keeping
Britain ahead but Oftel's chosen timetable elongated by the "deny,
delay, degrade" policies of BT will ensure that Broadband
Britain will not be achieved by the Government's target of 2002.
The currently proposed initial rollout pace of 10 exchanges per
month for independent operators is a tenth of that achievable.
This pace is being set by a BT with no legal responsibility to
ensure that Broadband Britain is delivered "in internet time"
rather than BT time.
The UK is now far behind the USA in delivering
mass-market DSL services. It is our fear that BT's anti-competitive
prevarication will push the UK way down the digital league table.
Whilst BT is allowed to treat its "domestic" market
as a private fiefdom, competitive delivery of new services will
be a perpetually frustrating and difficult process.
Why has Oftel underestimated the importance of
television services in provision of DSL services?
LLU is not only about faster internet services
for a narrow market sector but, particularly for domestic consumers,
embraces video on demand, broadcast TV, interactive TV, internet
via TV as well as high speed internet access, telephony and videophone.
Oftel's current practice of "thinly" spreading access
to LLU will ensure that TV-hosted services will not be available
unless an operator is fortunate enough to be allocated a "doubled
up" allocation (6 racks as opposed to 3 racks). Oftel is
now re-consulting on this policy in the "Consultation on
Local Loop Unbundling Bow Wave Process". But this document
addresses a fundamental issue of policy in a technocratic manner
with no mention of the potential needs of domestic consumers or
even television in its 57 pages.
It is natural for Oftel that they approach this
as a telephone/internet matter rather than giving sufficient weight
to the television and multi-media aspects of service delivery.
Short-term commercial advantage may well focus commercial companies
on the business internet market but if real gains are to be made
for an informed e-Britain then having a full digital multi-media
communications package in peoples' homes is vital. If the bulk
of allocations are "3 racks" then, at best an inevitable
lengthy period of industry consolidation will follow this regulatory
process to allow companies such as Kingston to obtain the share
of the local loop needed to deliver true digital services to residential
customers.
Why has Oftel not prioritised national roll-out?
One of the Government's key policy objectives
is to achieve Broadband Britain by 2002. But the present rollout
does not guarantee comprehensive coverage, rather it encourages
"Broadband Blackspots". There will be a geographical
digital divide. By 2002 some areas will have at least two choices
of broadband fixed line services whilst the majority of the country
will have none. For example Oftel has allowed BT to prioritise
its roll out not in areas without broadband services but the areas
of the country in which broadband is already delivered by cable.
Hence areas without any broadband delivery will have to wait longer
than necessary and will receive a dominant BT service whilst independent
operators have to wait BT's leave to install. Similarly, Oftel
has preferred to "thinly" spread allocation to the local
loop, exchange by exchange, small unit by small unit, this system
mitigates against companies wishing to provide a national roll-out
of consumer products. Economies of scale which will allow for
less profitable areas to be covered within national footprints
cannot be planned for under Oftel's current roll out process.
It is inevitable that areas of modest population density will
miss out.
Why has Oftel taken a "reactive" stance
to BT's reluctance to properly commit to the LLU process?
At first, Oftel chose to implement LLU by a
industry driven self-regulatory process. But LLU is not an appropriate
policy area for such a self-regulatory approach. There is no common
cause between BT and other operators. In fact, Oftel's actions
contradict its own policy set out in the June 2000 document Encouraging
self and co-regulation in telecoms to benefit customers:
"S5 Self-regulation, as distinct from co-regulation,
will depend on the extent to which stakeholders have a common
interest in co-operating with each other."
The decision of Government to achieve LLU by
a licence amendment rather than through legislation has ensured
that persuasion is the main tool available to Oftel in encouraging
BT to facilitate a swift and competitive rollout of the local
loop. Oftel's chosen means of implementation has made it reliant
upon subjective information from BT. Throughout this process Oftel
has been one step behind BT.
Kingston has taken a full and active role in
the industry driven process. We do accept that the lack of real
and effective progress was evident some months ago. We do not
accept that this was invisible to Oftel and are deeply concerned
that communications between industry and Oftel were so defective
that appropriate remedial action was not taken sooner.
Why does Oftel apply the same approach to BT whether
the services are new or based on its former "nationalised"
services?
It would be ridiculous to suppose that phone
boxes should be regulated according to similar basic parameters
as dial-up internet access or LLU but Oftel does.
Oftel allows BT to bring out its retail product
before its wholesale product giving BT a head start in markets
for new services. This happened with fixed rate access to internet
services (Surftime/FRIACO). Similarly, BT's Openworld ADSL product
will have a full year's head start on competitors making use of
LLU. BT receives such an advantage not due to a history of innovation—in
fact, it is well documented that BT is not an innovator in provision
of services. Yet again BT's competitors will be playing "catch
up" not for legitimate historical reasons but due to regulatory
timidity.
In summary KC believes Oftel's approach has
been to focus on technical details whilst missing the broader
policy objectives requiring rapid and effective LLU deployment.
KC is currently engaged in meeting with Ministers and Oftel along
with other major players in industry in the hope that LLU can
be put back on track. We are, however, concerned that such late
talks may be an attempt to "lock in" BT once they have
already bolted and gained a significant head start on their true
competitors.
November 2000
| 
