Select Committee on Trade and Industry Minutes of Evidence


  We appreciate the interest shown by the Committee in the impact of local loop unbundling on UK consumers. Local loop unbundling will bring about significant changes to the telecommunications market in the UK and it is important for consumers that we achieve a successful implementation. We have outlined below a number of areas that are currently causing some concern both to ourselves and our customers, that the Committee may wish to consider.

  We were pleased to note that when questioning the Director General of Telecommunications on Tuesday, the members of the Committee were well briefed and asked a number of highly pertinent questions. There are, however, a number of aspects of the unbundling process which the Director General did not mention and which we believe are highly relevant.

  We would therefore wish to make the following additional observations:

  1.  The Director General made much of the fact that he had imposed a new licence condition on BT relating to unbundling. Although it is true to say that the Director General agreed the terms of the licence change with BT, it was not brought into force until Thus and fellow operators specifically asked the Director General to invoke it. Prior to that point, BT had failed miserably to engage in meaningful contract discussions with its competitors.

  2.  Ms Lambert also explained that BT's much more rapid roll-out of it's own DSL service has a positive effect since it is available as a wholesale service to operators. What was not mentioned at all is that Thus, and our competitors, have a great many problems with the service and the contractual obligations BT have imposed, which still remain unsatisfactorily resolved. BT flatly refused to discuss the contract terms with us. This led Thus to form an industry group with other operators and Internet Service Providers to negotiate with BT. As with unbundling, BT's strategy has been to delay and degrade, effectively operating a scorched earth policy as it gradually withdraws from its monopoly over the provision of DSL. These tactics led the industry group to make a number of formal complaints to Oftel, none of which have yet been resolved by Oftel.

  Specifically these complaints relate to:

    —  the terms of the ADSL service contract imposed by BT on all operators;

    —  pricing of the product and the margin squeeze effect;

    —  poorly defined nature of the ADSL product and the poor performance of the product;

    —  BT providing information to its own downstream businesses, for example by providing access to BT marketing channels and customer databases; and

    —  BT's pattern of behaviour both in ADSL wholesale provision and on Local Loop Unbundling.

  These issues are now impacting directly on our customers. Domestic and business customers alike are justifiably complaining about the poor quality of service and the unduly onerous contract terms they are being offered by the operators, who in turn have no option but to pass on the terms imposed unilaterally by BT with the tacit consent of Oftel.

  As the Committee observed on Tuesday, BT has indeed stolen a march on its competitors by virtue of its monopoly position in rolling out its own ADSL service. Thus wholeheartedly supports moves towards a co-regulatory environment but experience to date shows that co-regulation in the UK means regulation by Oftel and BT.

5 November 2000

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