Select Committee on Public Accounts Eleventh Report


1 Regulating the fixed-line telecommunications market

1. BT continues to dominate the fixed-line telecommunications market.[4] In some parts of the country, such as rural areas, BT may be the only practical choice for most consumers. Oftel sought to introduce competition to BT in this market with:

a)  the development of cable networks as an alternative to BT's fixed-line services;

b)  indirect access, enabling consumers to route a call through an alternative supplier even though the call originated on BT's fixed-line network;

c)  carrier pre-selection, where customers can opt for certain defined classes of call to be carried by an operator selected in advance without having to dial a prefix;

d)  wholesale line rental, where other suppliers rent an exchange line from BT and offer an integrated service to consumers.[5]

2. These developments have brought important benefits to consumers. About 60% of households have access to cable and can switch from BT to cable and vice versa.[6] Oftel informed us that liberalisation has led to a fall in prices and that rates of switching in telecommunications were comparable with energy markets; for example, 2.5 million consumers have switched to carrier pre-selection.[7]

3. Competition has brought greater choice and more information for the consumer to assimilate. This has presented the regulator with a strategic challenge over the extent to which it should be more pro-active — advising consumers about the choices available to them, encouraging them to switch supplier where this is in their interests, and requiring suppliers to provide clear and consistent information to help consumers make sound decisions.

4. Oftel saw the whole of its work as aimed at providing benefits to consumers[8] and one of its four objectives was to have well-informed consumers. To meet this objective, it published four information leaflets advising consumers how they might choose the right telecommunications provider.[9] It was, however, reluctant to provide direct assistance to consumers. It preferred to leave the provision of support to the private sector, for example by accrediting price comparison websites such as www.uswitch.com, which provides practical help to consumers keen to investigate switching supplier.[10]

5. Oftel assumed that consumers conformed to a model of 'rational' behaviour: if it provided information about products, which were explicitly priced and advertised effectively, people would choose the most appropriate. Its perception of how consumers behaved was based on limited research. It was only in 2002 that Oftel launched a significant research programme to look at consumer needs in a different way, an exercise it could have undertaken earlier.[11]

6. Oftel's approach contrasted with that of other regulators. In the energy market Ofgem and Energywatch have actively encouraged consumers to switch suppliers, as in their view this has provided the best way to take advantage of competition. Oftel was reluctant to follow this example because it considered that, while Ofgem and Energywatch were giving out good and effective information, the telecommunications sector was not such a simple industry.[12]


4   Qq 3, 5 Back

5   C&AG's Report, paras 1.3, 1.7 Back

6   ibid, p7, footnote 2 Back

7   Qq 6, 30  Back

8   Q 12 Back

9   Q 11 Back

10   Q 33 Back

11   Q 16 Back

12   Q 29 Back


 
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