Select Committee on Trade and Industry Appendices to the Minutes of Evidence


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 However, we have recently withdrawn from the process of allocating space in BT exchanges to rival companies in Great Britain.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 revenues.)

  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.

November 2000

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