Memorandum submitted by NTL Group Ltd
NTL Group Ltd is a broad-based communications
company providing a range of broadcasting and telecommunications
services to consumers and businesses. Following the acquisition
of the consumer business of Cable & Wireless Communications
(CWC) earlier this year, NTL is the largest cable operator in
the UK. We also provide broadcast transmission services to the
independent commercial TV and radio sectors.
NTL has been closely involved in the local loop
unbundling process alongside OFTEL and other operators. However,
we have recently withdrawn from the process of allocating space
in BT exchanges to rival companies in Great Britain.
Given the public debate on the LLU process,
it is worth pointing out that, although regulatory uncertainty
has been a contributory factor to this decision, the principal
cause of this withdrawal by NTL is the commercial uncertainty
surrounding the size of the market for, and price of quality of.
LLU-enabled DSL services. Whilst we believe that ADSL services
will be viable in the longer term, it does not make sense for
NTL at this present time to deploy LLU-enabled DSL as opposed
to investing in other services.
We are still looking to take LLU forward in
Northern Ireland, where a specific commercial opportunity is available
to us which would require an ADSL component. As the committee
may be aware, a separate process has been established for allocating
local exchange capacity in the Province.
As an aside, it is worth noting that the tribulations
of the LLU process highlight the need for a policy of encouraging,
as far as possible, the development of alternative local infrastructure
in competition to BT. Whatever difficulties are experienced in
opening up BT's own network, the UK is better placed than many
countries in that it has scope for competition in broadband services
between BT, services delivered over cable networks, and over radio-fixed
access networks. NTL has launched cable modern services and intends
to market these aggressively against BT's ADSL offering.
OFTEL is planning a major review of competitiveness
in the mobile sector, commencing towards the end of the year.
We expect that, as part of that work, OFTEL will wish to examine
whether existing measures to ensure third party access to mobile
networks are adequate to ensure fully effective competition.
This is a complex issue. In general, ntl believes
that communications policy should encourage the development of
alternative infrastructure wherever possible. This has successfully
been achieved in the mobile area with a result that in many respects
the market is indeed highly competitive. Fore instance, pre-pay
services have been deployed which have significantly grown the
market and, according to OFTEL's own evidence, have proved attractive
to customer groups who might be expected to have been excluded
from the benefits of competition.
Forced access to networks is not a risk free
option, because an unduly heavy-handed access regime would put
at risk further infrastructure and service development by mobile
operators. Moreover, some forms of third party access could encourage
forms of competition which are of concern to MPs, such as complex
or misleading tariffs. (This can happen if the service provider
has no scope to offer genuine efficiencies or innovations compared
with its network rivals, and may therefore use "confusion
marketing" in order to obtain at least some customers and
Against this, some commentators have expressed
concerns that in some areas the mobile market is not fully competitive;
that there is, for instance, an ongoing problem with the rates
for terminating calls on mobile networks and that in other respects
the behaviour of mobile companies is suspiciously uniform vis
a vis third parties.
One key test of whether the market is truly
competitive will be whether mobile companies start to enter into
agreements with third parties on so-called "Mobile Virtual
Network Operator" (MVNO) terms. The MVNO concept is based
on the idea that some third party companies would be able to provide
"add on" services which are either cheaper, of high
quality, or more innovative than the mobile operator could provide
itself. Supporting an MVNO might therefore lead to a loss of revenue
for the mobile network operator in the short run (as the MVNOs
"add ons" would substitute for the less efficient "add
on" services which the network operator would otherwise itself
have provided), but it would strengthen the mobile network in
the long run vis a vis rival networks that did not carry
the same MVNO services.
OFTEL will therefore have to consider whether
there is a genuine move towards supporting MVNOs (as this theory
would suggest will happen in a competitive market), whilst recognising
that it will not benefit competition to impose excessively intrusive
or harsh third party access terms on the mobile networks.
Again, OFTEL is currently completing an investigation
into leased line pricing which has focused in particular on whether
there are barriers to competition at the wholesale level (ie the
provision by BT of circuits to rival operators wishing to connect
up businesses). We believe that this investigation has rightly
concluded that there remain "road blocks" to the development
of fully effective competition in this area. We will be urging
OFTEL to follow through on its initial conclusions, which should
lead to a significant reduction in wholesale leased line prices
offered to rivals such as ourselves, and in consequence much improved
competition at the retail level.