APPENDIX 12
Memorandum submitted by Alcatel UK Ltd
We have seen with interest that your committee
will be holding an inquiry into OFTEL in the light of the concerns
expressed over unbundling of BT's Local Loop. This is a very important
issue in meeting the objectives of "Broadband Britain"
and avoiding the "Digital Divide". We thought we should
write to you, as Alcatel is the world's largest manufacturer and
supplier of the Broadband Technology (called ADSL) at the heart
of exploiting the unbundled local loop for high speed services.
We are supplying around 60 per cent of the equipment in the UK,
being installed in BT's exchanges as well as with Kingston Telecoms
and NTL.
In recognising OFTEL's prime objective is to
create effective competition, we feel it is necessary to draw
your attention to what we believe is the impact of the proposed
"Bow Wave Process" (for allocation of access to BT's
exchanges) in creating effective competition. We observe from
our global experience that the effectiveness of competition decreases
when there are too many players, due to a dilution of available
resources, (manpower, financial), higher prices due to restricted
economies of scale, and market delay or potential failure. The
objective of the process for enabling unbundled local loop operators
should be the rapid, competitive deployment of infrastructure
by players who will commit to a minimum geographic coverage and
speed of deployment. Without significant obligations for success
many players will follow a limited rollout plan and simply wait
to be bought out; from the UK experience in the CATV sector this
could take several years. Such a delay in creating effective competition
will undermine aspirations for "Broadband Britain" and
will most certainly exacerbate the "Digital Divide".
A variety of technologies do also create opportunity
for competition, which bypass the traditional Local Copper Loop.
CATV networks already provide this option, and together with the
forthcoming auction of spectrum for wideband radio access, and
deployment of satellite systems, there are a number of competitive
options open. Indeed satellite systems, such as Skybridge led
by Alcatel, will provide the same type of broadband access, as
delivered by ADSL, to every location in the UK, eradicating the
"Digital Divide".
We have considerable experience of the issues
relating to Local Loop Unbundling and creating widespread broadband
access. The attached table 1 sets out the state of play elsewhere
in the world. In our view the UK is ahead of most of Europe, with
effective deployment only being marginally ahead in Germany and
perhaps Holland, where the unbundling consultations were launched
earlier than in the UK. I also attach for your interest information
on moves in USA to avoid the "Digital Divide"[15].
The proposals, by an impressive list of 54 senators, recommended
tax incentives for enhancing geographic roll-out. Whilst we would
not necessarily recommend the same mechanisms here to stimulate
roll-out, encouragement is however needed through minimum objectives
being set and by involvement of regional administrations in the
UK. The attached map shows our view of the roll-out of ADSL on
unbundled copper based on a judgement of acceptable return on
investment for operators.
The precedent in unbundling BT's network infrastructure
elements has already been set on the basis of equal access. This
was achieved by separating BT's infrastructure business (now called
BT Ignite) from its Sales and Marketing business (now called BT
Openworld). This wholesale and retail split, delivered through
"accounting separation" has worked and this principle
should be firmly continued. The outcome of Local Loop Unbundling
should seek to encourage growth in retailing applications and
services, because that is where the innovation and creativity
lies, needed to deliver the UK's government's aspirations for
e-commerce. It seems therefore that LLU operators should carry
wholesale obligations on a non exclusive basis to all competing
suppliers of applications and services, in order to deliver and
maximise competitive effect. We believe that obligations on all
operators must be coupled with accounting separation and non-exclusivity,
so that competition is seen to be fair. It is retail competition,
which will drive the services offered via the Local Loop, so the
framework should actively encourage new service retail entrants.
The number of competitors is going to be much lower in the infrastructure
wholesale sector, where the cost of investment is high, than in
the service retail sector; healthy competition is needed in both
sectors.
9 November 2000
15 Not printed. Back
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