Memorandum submitted by Ofcom
SECTION 1
1. Ofcom's relevant statutory duties
1.1 Ofcom welcomes this opportunity to submit
evidence to the House of Commons Business and Enterprise Committee's
inquiry into broadband speeds in the UK.
1.2 As the United Kingdom's independent
regulator for the communications sector, Ofcom's principal duty,
set out in section 3(1) of the Communications Act 2003 is:
(a) to further the interests of citizens in relation
to communications matters; and
(b) to further the interests of consumers in
relevant markets, where appropriate by promoting competition.
1.3 Our main statutory duties in the area
of the Committee's inquiry are sections 3(2)(b) and 3(4)(b) of
the Act, specifically:
(a) to secure the availability throughout the
UK of a wide range of electronic communications services;[129]
and
— the desirability of promoting competition
in relevant markets;
— the desirability of encouraging investment
and innovation in relevant markets;
— the desirability of encouraging the availability
and use of high speed; and
— data transfer services throughout the
United Kingdom.[130]
1.4 The relevant statutory duties under
the Communications Act are in part drawn from the EU Regulatory
Framework for Electronic Communications, specifically under Chapter
III of the Framework Directive, Tasks of National Regulatory Authorities,
it is stated that National Regulatory Authorities:
"shall promote competition in the provision
of electronic communications networks, electronic communications
services and associated facilities and services by inter alia:...
(b) ensuring that there is no distortion or restriction
of competition in the electronic communications sector;
(c) encouraging efficient investment in infrastructure,
and promoting innovation;"[131]
1.5 We are active in a number of areas that
touch upon the Committee's inquiry with respect to the above duties,
as well as seeking to secure competition at the deepest level
that is effective and sustainable, particularly in the longer
term. This ongoing work builds on the strategy outlined in our
Super-fast Broadband statement and our Next Generation New Build
statement.[132]
SECTION 2
2. Is the target for universal access to
broadband at a speed of 2Mb/s by 2012 ambitious enough?
2.1 We note that the Government's proposal
for a Universal Service Commitment of 2 Mbit/s is not intended
as a target for the generality of consumers, but as a threshold
which should be available to all. Most premises in the UK are
already capable of receiving bandwidths in excess of 2 Mbit/s.
2.2 The question of whether this minimum
threshold is sufficient, and is likely to be for a reasonable
enough duration to justify policy intervention depends, we would
suggest, on three critical factors:
— Current and future consumer expectations:
what level of bandwidth is likely to be delivered without the
proposed government intervention, and how is this likely to evolve?
— The extent of any market failure:
how many consumers are unable to obtain a specific level of bandwidth
commercially, and what impact will this have?
— The cost of remedying this market
failure: What would it cost to fill any such gap, at least
partially, and is such expenditure justified by the benefits that
will accrue?
2.3 The current position, according to research
recently published by Ofcom,[133]
is that consumers on the most widely used "up to 8Mbit/s"
DSL-based[134]
packages receive a mean maximum bandwidth of 4.8Mb/s, and a median
of 5.6 Mb/s. Other available DSL-packages offer greater bandwidths,
and the entry-level cable package offered by Virgin Media provides
a mean maximum speed of 9.5Mb/s.
2.4 Setting the proposed Universal Service
Commitment at any of these levels would involve intervention to
subsidise the provision of broadband to roughly half of UK households,
an obligation that would likely be very costly, and which could
undermine the delivery of services by commercial players. Instead,
and as set out in the Government's Digital Britain report,
the aim should be to set a target below these levels, but which
does not exclude consumers from the benefits which can be provided
by broadband internet. The Government has set out the rationale
by which it has arrived at the proposed 2Mb/s threshold in that
report. We note that this proposed threshold is more than sufficient
to provide basic internet access to transactional websites, makes
allowance for the fact that in many households there may be multiple
simultaneous users of such services, and is sufficient to support
new services based on video content, which are likely to become
increasingly important.[135]
Judgements about whether the ability to access this range of services
fulfils the policy objection are necessarily difficult to reach,
and may change over time.
Future demand
2.5 If demand for higher connection speeds
emerges, it is most likely to be as a result of the increasing
use of live streamed video, either for TV viewing or as part of
video-based communication services. Such services are already
a part of many consumers' internet activity: Ofcom research indicated
that one in four internet-connected households accesses a catch-up
TV service, such as by the BBC iPlayer or 4oD. YouTube, providing
access to user-generated video content, has a UK audience of 16
million.
2.6 At present, these services can be delivered
using less than the recommended 2Mbit/s; however expectations
of the quality, and hence bandwidth of internet-delivered TV are
rising at the same time as usage of these services. The BBC recently
increased the standard iPlayer video stream to 0.8Mbit/s from
0.5Mbit/s; it has also introduced a high quality stream at 1.5Mbit/s
and a "high definition" stream which runs at 3.2Mbit/s.
2.7 Increasing demand for high speed services
may also lead to contention within the home: a 2Mbit/s line would
come under pressure when multiple users are accessing higher quality
video simultaneously.
2.8 We can expect that the average bandwidths
delivered by commercial providers will continue to increase over
the next few years without additional intervention—and as
noted above, the majority of UK homes are already in a position
to access higher speed services. Furthermore, the 2Mbit/s recommendation
does provide for access to much of the live video currently available
to internet users.
2.9 Nonetheless, the 2Mb/s Universal Service
Commitment is perhaps best viewed as an important milestone in
the evolution from a narrowband communications infrastructure
to a world in which the norm is super-fast, or next generation,
broadband. In this context, the key challenge is to ensure that
whatever technical solution is delivered for 2012 is capable of
further evolution.
SECTION 3
3. Is the Government right to propose a levy
on copper lines to fund next generation access?
3.1 In examining the Government proposals
to introduce a general supplementary charge on all fixed copper
lines to create a Next Generation Fund, we suggest there are three
key questions to consider, many of which draw on our previously
published and ongoing work[136]
in relation to super-fast, or next generation, broadband access:
— is next generation access, and the super-fast
broadband services that it promises, of significant potential
value to UK consumers and citizens?
— if so, is the deployment of these networks
by commercial interests alone likely to be extensive and timely
enough to maximise the potential benefits for the UK?
— to the extent that there may be shortfalls
in commercial deployment, what are the best mechanisms for addressing
these?
3.2 It remains difficult to quantify the
potential benefits of super-fast broadband over and above those
delivered via existing infrastructure. Given the early stage of
its development both here and abroad, there is limited direct
historic evidence on which to draw, so any conclusions are inevitably
speculative in nature. Nevertheless, the limited emerging evidence
from current generation broadband and early next generation deployments
suggests that there is the prospect of real consumer benefits
emerging.[137]
Included among these is the ability to receive high bandwidth
speeds regardless of distance from the telephone exchange.
3.3 Consumers, citizens and businesses are
likely to realise private, social and economic benefits following
the roll-out of super-fast broadband. Many of these will build
on the already strong progress made with today's broadband services.
The new super-fast broadband services supported will provide a
range of different characteristics, such as higher downstream
and upstream speeds, that will enable innovative new applications.
3.4 For residential customers, super-fast
broadband may provide a better or more reliable way to do things
they already do today—for example, faster and more reliable
connections for web-browsing, file sharing and e-commerce. In
the longer term though, consumers are likely to benefit from new
products and services that can only be delivered over super-fast
broadband connections, including bandwidth hungry content and
audio-visual services.
3.5 For citizens these new services and
applications may offer more intuitive and engaging ways to relate
to each other and to physical and virtual communities more broadly.
They will enable citizens to participate in new ways with society
and democratic processes, and will influence how citizens access
and benefit from future public services.
3.6 Business customers are more concerned
with availability, resilience and quality of service—particularly
given that loss of connections can mean loss of business. There
is also scope for businesses to use super-fast broadband services
to improve their productivity, for example making greater use
of online sales and purchasing systems, or more widely adopting
cost-saving strategies such as teleworking. Super-fast broadband
may also underpin an online economy where consumers and online
businesses can trade, develop new applications and services and
drive the UK's creative industries.
3.7 To ensure that super-fast broadband
really delivers these potential consumer, citizen and business
benefits, it is imperative that there is:
— wide availability of super-fast broadband
in the home, in the office and, potentially, on the move, at affordable
prices and available to many;
— effective choice of super-fast broadband
services and the applications offered over the new networks;
— high take-up of super-fast broadband
by a broad range of different consumer groups, citizens and businesses;
— service innovation—a range of new
services available that improves the lives of consumers.
And that there are:
— competitive prices—consumers must
benefit from competitive prices and efficient delivery of services,
but with prices at levels that give incentives to investment;
— empowered consumers—who understand
what these new services offer them compared to today's broadband.
They must also be able to easily migrate between services and
competing suppliers, while being protected against potential abuse.
3.8 Ofcom believes that there are significant
potential benefits in the deployment of next generation access
and that these are likely to be maximised if it is deployed as
widely as possible while still maintaining affordability and effective
competition.
3.9 The costs of deploying next generation
access are important in considering the second question—how
far and how fast will commercially-led deployment progress? Because
of the need to upgrade more of the physical infrastructure comprising
the access network for next generation broadband than was the
case for current generation access, the deployment costs are significantly
higher. As discussed elsewhere in this document in relation to
universal access to broadband, there are areas of the UK in which
even an upgrade to current generation broadband is not commercially
viable. Unless the revenues generated by next generation services
are much higher than currently achieved, it seems certain that
areas beyond commercial deployment will be more extensive for
next generation access than for today's broadband.
3.10 The accuracy of any assessment of the
areas likely to remain "unserved" will improve over
time as currently uncertain aspects of the commercial case become
clearer, for example:
— How much will consumers be willing to
pay for the new higher speed access?
— How many consumers will be interested
in upgrading from their current broadband products?
— What new services will emerge to take
advantage of the higher speed access and what revenue will they
attract?
— What are the real world deployment costs
of next generation access in the UK?
— How quickly will deployment in the UK
and abroad lead to reduced equipment and operational costs?
3.11 Super-fast broadband is already available
to around 50% of UK premises via Virgin Media's network, and BT
intend to deploy next generation access in its network to around
the same proportion of households and businesses. Private sector
investment to deliver super-fast broadband is therefore very much
a reality for large parts of the UK, and infrastructure-based
competition will develop in these areas in the coming months and
years. It is possible that as the market develops we will see
deployment costs fall and/or revenues increase to the point that
these and other companies significantly increase the proportion
of the UK that is served. At the same time, there may be cases
where the expected costs rise above current expectations, for
example as a result of practical difficulties, or as a result
of using more expensive technologies to deliver higher quality
services.
3.12 However, most cost estimates[138]
suggest that per customer deployment costs increase very rapidly
as coverage progresses beyond around two thirds of the country.
Scenarios in which the entire country is served solely on the
basis of commercial deployment therefore seem unlikely. While
market developments may see next generation coverage being extended
over time, there also remains the question of whether this will
happen quickly enough to maximise the potential benefits to the
UK.
3.13 It is likely therefore that super-fast
broadband will deliver significant benefits to the UK, but may
not be commercially available to up to a third of premises. Ofcom
has considered the role regulation plays in detail in its previous
consultations and most recently our statement on super-fast broadband.[139]
The principles we have outlined in those publications are designed
to ensure that our regulation does nothing to artificially limit
commercial investment in, and therefore coverage of, next generation
access, while at the same time ensuring the full range of consumer
interests are protected.
3.14 While inappropriate regulation can
harm otherwise viable deployment business cases, it is not as
clear that regulation can or should be used to underpin investments
that are not efficient or commercially viable. Regardless of the
regulatory approach, the challenging underlying economics of next
generation access in the less densely populated areas of the UK
are likely to remain. Therefore opportunities to accelerate super-fast
broadband deployment, and/or see it deployed more widely using
other forms of intervention such as the proposed levy will remain
a matter for public policy.
3.15 To the extent that any form of public
intervention is used to address the remaining unserved areas,
it will be important to ensure this is done as effectively as
possible. Issues that will need to be considered include:
— minimising the overlap of publicly-funded
deployment areas with those which would otherwise have been served
via efficient commercial investment. This will involve careful
and ongoing assessment of market development and commercial deployment
plans;
— ensuring that access to funds is subject
to a competitive process, and open all entities capable of delivering
an efficient solution;
— ensuring that the assessment criteria
for those contesting the fund are appropriately specified. These
should cover issues such as required coverage, timescales, service
specifications, pricing, competitive access, use of standards,
future network upgrades; and
— ensuring that there are opportunities
for effective competition to emerge. In the areas which require
public intervention, this is more likely to be based on products
that make greater use of existing infrastructure (so-called "active"
products) than seek to duplication cabling and other equipment
already installed (so-called "passive" products).
SECTION 4
4. Will the Government's plans for next generation
access work?
4.1 In our super-fast broadband statement
published in March 2009, we stated that investment in next generation
access networks will improve users' broadband experiences through
higher bandwidths, a better balance between downloading and uploading
speeds and more reliable, higher quality services. These improvements
have the potential to support innovative new broadband services
and applications, bringing real social and economic benefits for
consumers and citizens.
4.2 However, given the nature and scale
of the investment associated with next generation access networks,
it is widely accepted that universal coverage is unlikely to be
achieved without public intervention. We recognise that Government
has a responsibility not only to address issues around social
inclusion but also to create the right conditions for business
to succeed in highly competitive global markets.
4.3 A publicly-funded scheme has the potential
to deliver the benefits of super-fast broadband to areas which
would otherwise be disadvantaged, increase business competitiveness
and improve consumers' access to new online services.
4.4 The Government announced in its Digital
Britain report that it will seek to support investment in
less commercially attractive parts of the country. The Government
proposed to do this by introducing a levy of 50p/month on all
fixed telephone lines. The money generated, estimated to be £150
million to £175 million per annum, will be collected over
a number of years and used to fund super-fast broadband roll-out
in the "final third" of the country.
4.5 The experience to date of broadband
delivery and adoption appears to demonstrate that the competitive
provision of services delivers wider choice, greater innovation
in services and keener prices to businesses and individual consumers
alike. So while the precise details of these high-level plans
have yet to be finalised, we consider that it is important that
the Government's final scheme should be designed to increase competition
among communications providers as far as possible and encourage
privately-funded provision to the greatest extent possible.
4.6 This will require the final scheme to
be well targeted and well structured to avoid distorting competition
or expending avoidable use of public funds. Specifically there
are two particular areas that we would like to draw the Committee's
and Government's attention to:
— targeting will require careful analysis
of market failure to identify where the costs of supplying network
coverage would not be economically efficient and/or would be such
to make private sector investment highly unlikely.
— those companies receiving funding should
ensure that third party access is required to ensure the greatest
choice to business and individual consumers.
4.7 In terms of successful plans for super-fast
broadband, it is very easy to place too much emphasis on the importance
of activities to increase availability of these networks to end-users.
The Government's plans for a levy (see section 3) are one example
of such activities. However, for super-fast broadband to be truly
successful and make a difference to consumers, businesses and
the UK more generally, the services these new networks offer will
need to be taken up and used. Without high levels of take-up,
these new networks will not deliver material benefits.
4.8 So while it is right to consider the
question of availability now, issues of demand and take-up are
likely to emerge just as they have for current generation broadband.
This is especially true where consumers' willingness to pay and
demand for very high bandwidth services remains unclear, both
in the UK and in other countries. It is probably too early to
consider actions to help drive take-up: the private sector is
considering this now, and is well placed to develop new applications
and services that can drive take-up. But it could well be a future
issue for consideration.
SECTION 5
5. Are companies providing the speed of access
which they promise to consumers?
5.1 Broadband speeds are clearly a vital
component of the consumer experience of broadband services, and
for the market to operate efficiently, consumers must have accurate
information about the comparative speed of broadband services
in order to inform their purchase decisions. The absence of such
information has the potential to lead to market failure and consumer
detriment as consumers make sub-optimal choices and operators
have reduced incentives to invest in delivering higher actual
speeds.
5.2 However, broadband speeds are not straightforward
to define or communicate as they vary by location and by time
of day. For example, the maximum speeds available to customers
of DSL broadband (the most common type of broadband, delivered
via the copper telephone line, which accounts for around 75% of
UK fixed-line broadband connections) are defined by the length
of the wire from their local exchange to their home; and speeds
will typically slow down below these "maximum" speeds
during peak times due to contention (shared bandwidth by multiple
users) in both their provider's network and in the broader internet.
Therefore although DSL packages will have a "headline or
"advertised `up to'" speed, most customers will not,
in practice, be able to achieve this speed.
5.3 Ofcom has been active in ensuring that
consumers have the information they require in order to make informed
choices about their broadband service. We have sought to ensure
that:
— advertised speeds enable consumers
to identify the differences between different types of services.
It is important that providers differentiate between packages
offering different speeds. For example, current mobile broadband
deployment in the UK can either deliver maximum speeds of 3.6Mbit/s
or 7.2Mbit/s, services delivered via ADSL1 can deliver maximum
speeds of 8Mbit/s, those delivered via ADSL2+ can deliver maximum
speeds of 24Mbit/s and fibre-based services can deliver higher
maximum speeds. These advertised speeds are always referred to
as "up to" as speeds will vary between consumers and
by time of day, and it is important that it is always clear to
consumers that the actual speeds they receive will vary and will
typically be lower than the "up to" speed. The Advertising
Standards Authority (ASA) is responsible for advertising and Ofcom
has discussed how broadband is advertised with the ASA.
— consumers are given accurate information
at point of purchase on the speeds their line is capable of delivering
(the estimated access line speed), and a clear explanation that
actual throughput speeds are likely to typically be less than
the access line speed. In order to increase consumer understanding
of broadband speeds and to ensure that consumers are advised in
advance of purchase of the speeds available to their specific
location, Ofcom introduced in June 2008 a voluntary Code of Practice
for broadband speeds[140]
("the Code"), which 50 broadband suppliers have signed
up to (representing over 95% of UK broadband connections). The
Code came into force in December 2008 and requires ISPs to tell
consumers the maximum speed they can expect and to explain why
actual speeds vary. Ofcom is working both to increase consumer
understanding of the Code and to monitor that ISPs are complying
with the code.
— consumers have access to reliable
data which compares the performance of ISPs. Information about
the actual speeds that consumers receive should be in the public
domain to help consumers understand more about the factors which
determine broadband performance. In turn, if consumers have access
to this information, operators will have greater incentive to
compete on actual performance and invest in newer technologies.
Ofcom's research into actual broadband speeds (published in July
2009)[141]
was a major step towards this, although it only looked at "up
to 8Mbit/s" and "up to 10Mbit/s" packages from
the largest nine providers. We are currently reviewing how we
will repeat the research and discussing with stakeholders (ISPs,
consumer groups and industry monitoring experts) how to ensure
that this information is available to consumers on an ongoing
basis.
Different measures of broadband speed
5.4 There are a number of different definitions,
or types, of broadband speed:
— Headline or advertised speed.
This is the speed that ISPs use to describe the packages that
they offer to consumers. They are typically described as "up
to" speeds, and refer to the maximum speed at which any customer's
line will synchronise to the Digital Subscriber Line Access Multiplexer
(DSLAM) at the exchange.
— Modem synchronisation speed or access
line speed. This refers to the maximum speed of the data connection
between the broadband modem and the local exchange or cable head
end. It constitutes the maximum speed that an individual line
is capable of receiving.
— Download throughput speed. This
is the rate of data transmission from a network operator's access
node to a customer. This figure is often dependent on factors
such as the ISP's network, its traffic shaping and management
policy[142]
and the number of subscribers sharing the network at the same
time. Because speeds typically vary throughout the day, average
download throughput speed is a more useful measure.
— Upload speeds. Broadband connections
do of course work both ways—they have an upstream as well
as a downstream. Virtually all broadband connections in the UK
are asynchronous, with upload speeds typically much slower than
download speeds.
5.5 There are other speed-related measures
which also impact on the consumer experience of broadband. These
include:
— Latency. The time it takes a single
packet of data to travel from a user's PC to a third-party server
and back again. Connection with low latency will feel more responsive
for simple tasks like web browsing and latency is particularly
important for some applications such as online gaming (these are
also known as Ping times)
— Jitter. A measure of the stability
of a connection (it can also be defined as the rate of change
of latency). The lower the measure of jitter, the more stable
a connection is. Jitter is a major contributor to the quality
of a VoIP (Voice over IP) phone call and is also valued by online
gamers.
— DNS resolution time. The DNS (domain
name service) protocol translates domain names (such as google.com)
into the IP addresses that are actually used to route traffic.
Every ISP maintains its own DNS servers through which customers'
computers issue queries to translate names into IP addresses.
When these servers fail or operate slowly, web browsing and other
online activities suffer. A slow DNS time does not affect download
speed, but can severely affect the responsiveness of the internet
while browsing.
How broadband speed is advertised
5.6 Broadband services are typically advertised
as offering speeds of "up to XMbit/s", where this speed
represents the maximum possible modem synchronisation speed in
the downlink.
5.7 This is in accordance with Advertising
Standards Agency (ASA) guidelines which recognise that it is important
for providers to be able to differentiate between different products,
and the variation in actual speeds means it is not practical for
providers to advertise on the basis of actual speeds.
5.8 This "up to" speed is important
in enabling providers to differentiate between different types
of services. Figure 1 details the distribution of these packages
by headline speed based on data provided by the nine largest ISPs
in the UK by retail market share (who have a combined market share
of over 90%). It indicates some shift in the market towards higher
headline speeds between November 2008 and April 2009, with much
of the change attributable to Virgin Media upgrading all its 4Mbit/s
cable customers and many of its 2Mbit/s cable customers to an
"up to" 10Mbit/s package.
Figure 1
UK RESIDENTIAL BROADBAND CONNECTIONS BY HEADLINE
SPEED
Source: Ofcom, based on
data provided by the UK's nine largest ISPs by retail market share
(representing over 90% of the total market)
Why broadband speeds differ from the advertised
speeds
5.9 However, these "up to" speeds
do not represent the actual speeds which consumers receive. The
following constraints all mean that the actual speeds delivered
to consumers are typically considerably less than the advertised
"up to" speeds.
— Advertised "up to" speeds typically
detail the maximum speed at which a line can synchronise to the
Digital Subscriber Line Access Multiplexer (DSLAM) at the exchange.
However, the actual speeds available to the end user are typically
less than this because some of the available capacity is used
by critical communications protocols which are required for the
connection to operate. ISPs typically limit the bandwidth available
for end users' data in order that there is sufficient capacity
for this other "overhead" data.
— For DSL broadband, the maximum line speed
available is constrained by the length of the copper wire connection
between the premises and the local telephone exchange, with speeds
slowing down as the length of the line increases.
— For all broadband connections, speeds
are constrained by contention in the ISP's own network; this is
a particular problem during peak periods as multiple users put
demand on backhaul networks.
— Poor wiring and interference within the
home can severely impact performance. In June 2009, BT launched
an initiative to address this by offering the BT Broadband Accelerator
(a filter which consumers install into their phone socket in order
to reduce electrical interference from telephone-extension wiring)
free of charge (save postage and packing) to all customers where
BT believes performance can be improved.
— Congestion on the wider internet causes
individual websites and applications to slow down.
— Consumer equipment performance, in particular
computers and routers, can affect speeds received.
5.10 As DSL broadband is currently the only
broadband technology which is available nationwide, the maximum
speeds available to many consumers are defined by the length of
the copper wire between their home and the local telephone exchange.
Figure 2 depicts the theoretical degradation of the maximum speeds
achievable by DSL broadband as the length of line from local telephone
exchange to premises increases. It shows that although second-generation
DSL services (ADSL2+) offer significantly faster speeds than first-generation
ADSL speeds to customers with a short line length, beyond a distance
of 3 kilometres from the exchange there is little difference between
the two technologies.
Figure 2
THEORETICAL MAXIMUM DSL SPEEDS BY LENGTH
OF LINE FROM EXCHANGE TO PREMISES
Source: http://www.tpg.com.au/dslam/faq.php
Ofcom's voluntary code of practice on broadband
speeds
5.11 In order to address potential consumer
confusion caused by the variance between advertised "up to"
broadband speeds and the actual speeds delivered, and to ensure
that consumers are better informed about the choices of broadband
products available to them, Ofcom introduced the Voluntary Code
of Practice on Broadband Speeds[143]
on 5 June 2008. This came into force on 5 December 2008 at which
point 50 internet service providers, collectively representing
over 95% of UK broadband subscriptions, had committed to adhering
to the Code.
Signatories to the Code also agree to comply
with the following:
— Provide all consumers within the sales
process, with information on their estimated access line speed
(regardless of whether the sale is conducted over the phone, in
a retail shop or through the ISP's website).
— Provide a facility on their website so
that consumers can find out, in a clear and easily accessible
manner, what their estimated access line speed is, ie the maximum
speed that the customer is going to receive as opposed to the
advertised headline speed.
— Provide the customer with a durable record
of the estimated access line speed given at point of sale.
— Explain to the consumer in a clear and
meaningful way that the actual throughput speed that a consumer
receives is likely to be lower than the estimated access line
speed and headline speed. ISPs should explain that the actual
throughput speed experienced by a consumer will be influenced
by a number of factors including the ISP's network capacity, the
ISP's traffic shaping and management policy, the number of subscribers
online at any one time, by time of day etc. ISPs should also indicate
to consumers the times of day when the network is likely to be
most congested.
— Use their best endeavours to set out
clearly, and in a prominent place on their websites (eg within
help or FAQs sections), information relating to their respective
policies on fair usage; traffic management and traffic shaping
to cover, at a minimum, the matters set out below.
Therefore, if ISPs are compliant, the Code will
ensure that broadband is sold on the basis of the access line
speed rather than just the advertised headline speed so that customers
have a better expectation of what they will receive. The Code
also includes measures that should be taken if, after appropriate
diagnostics, the customer continues to receive an access line
speed significantly lower than the estimate provided at point
of sale.
Consumer perceptions of broadband speeds
5.12 In Q1 2009, more than eight out of
ten consumers were satisfied with the speed of their fixed-line
broadband connection. However this was significantly lower than
satisfaction with the overall service (90%), or with value for
money (84%) (see Figure 3). Satisfaction with the speed of the
service has also fallen from 90% in Q1 2006. However, this is
likely to be due to changing expectations—in 2006 many consumers
may have been comparing broadband services against narrowband
(dial up) access, while in 2009 broadband has become widespread
as have online applications which require faster downstream speeds,
such as the BBC iPlayer.
Figure 3
RESIDENTIAL CUSTOMER SATISFACTION WITH ASPECTS
OF BROADBAND SERVICE
Source: Ofcom research
Base: All adults with
broadband (fixed broadband only from 2009)
Note: Includes only those
who expressed an opinion. *Q1 2009 figures based on fixed broadband
service
5.13 Satisfaction levels with mobile broadband
services were lower than for fixed-line broadband services (Figure
4). This is likely to be a reflection of greater variation in
mobile broadband performance than in fixed-line broadband performance
as well as much lower actual average speeds.
Figure 4
RESIDENTIAL CUSTOMER SATISFACTION WITH ASPECTS
OF MOBILE BROADBAND SERVICE
Source: Ofcom research,
Q1 2009. Base: All adults with mobile broadband
Note: Includes only those
who expressed an opinion
5.14 After price, speed of connection was
the second most commonly cited service aspect, which consumers
said they compared when selecting their broadband supplier, with
45% comparing speeds (Figure 5).
Figure 5
BROADBAND FEATURES COMPARED BY CONSUMERS
Q15. Which if any of the following internet
service features have you tried to compare from different broadband
suppliers?
Base: All respondents
(2,128)
Source: GfK broadband
speeds survey among 2,128 online panel respondents who are broadband
decision makers, September-October 2008
5.15 Among those who sought to compare speeds,
32% found it "extremely easy" or "very easy",
with a further 30% finding it "fairly easy". A quarter
(25%) of consumers found it difficult to compare speeds with 10%
finding it "very difficult" or "extremely difficult".
Note, however, that this research was undertaken in September
and October 2008, before the Code came into force.
Figure 6
EASE OF COMPARING BROADBAND FEATURES
Q16. How easy was it to compare the following
internet service features from different broadband suppliers?
Base: Those who have compared
service features (1,417)
Source: GfK broadband
speeds survey among 2,128 online panel respondents who are broadband
decision makers, September-October 2008
5.16 More than a quarter (26%) of consumers
thought that their actual connection speed was not what they expected
when they signed up. This compares with 17% whose expectations
on reliability were not met, and 9% who thought they would receive
a higher download limit.
Figure 7
AGREEMENT THAT SERVICE MATCHES INITIAL EXPECTATIONS
Q12A/B/C: To what extent do you agree or
disagree that your [speed/reliability/download limit] is as you
expected it to be at the time of signing up?
Base: All UK broadband
decision makers (2,128) / All with a download limit (457)
Source: GfK broadband
speeds survey among 2,128 online panel respondents who are broadband
decision makers, September-October 2008
Ofcom research into actual broadband speeds
5.17 Ofcom undertook a major research project
between November 2008 and April 2009 into the actual broadband
speeds received by consumers. The research involved assembling
a representative panel of over 1,500 UK broadband users and monitoring
the broadband performance delivered via a hardware unit connected
to panellists' routers. The final research report was published
on 28 July 2009.[144]
5.18 Overall, we found that average actual
download throughput broadband speeds delivered were 4.1Mbit/s.
This represented 57% of the average advertised "up to"
speed (7.1Mbit/s), and 83% of the average maximum speed delivered
(7.1Mbit/s). (Note that as we were not able to run specific access
line tests for our panellists, we use the highest download throughput
speed test recorded during the month as the maximum line speed).
(Figure 8)
Figure 8
AVERAGE UK BROADBAND SPEEDS, APRIL 2009
Source: SamKnows measurement
data for all panel members with a connection in April 2009
Notes: (1) Data have been
weighted by demographics, ISP and headline speed in order to ensure
that they are representative of UK broadband consumers as a whole;
(2) Data are not comparable to that published in the January 2009
broadband speeds report as one operator has re-stated its package
split (while the average headline speed of connections over 8Mbit/s
has fallen significantly as a result of Virgin Media upgrading
many of its 2Mbit/s and 4Mbit/s connections to 10Mbit/s)
5.19 Focusing in particular on the "up
to" 8Mbit/s packages (which in April 2009 accounted for 57%
of residential UK broadband connections), we found that fewer
than one in 10 of our sample on 8Mbit/s headline packages received
actual speeds of over 6Mbit/s and one in five received less than
2Mbit/s (Figure 9).
Figure 9
AVERAGE DOWNLOAD SPEEDS FOR PANELLISTS ON
"UP TO" 8MBIT/S PACKAGES
Source: SamKnows measurement
data for all panel members with a connection in April 2009
Note: Data have been weighted
by demographics, ISP and headline speed in order to ensure that
they are representative of UK broadband consumers as a whole
5.20 As detailed above, the length of the
line from premises to exchange constrains the speeds that are
available via DSL broadband (all "up to" 8 Mbit/s packages
in the UK are delivered via DSL). Figure 10 indicates that there
is a strong relationship between the average speeds delivered
and the distance from the exchange. (Note that the distance is
the straight-line distance calculated from the six-digit postcodes
of premises and exchanges).
Figure 10
DISTANCE FROM EXCHANGE AND AVERAGE DOWNLOAD
SPEEDS ACHIEVED BY PANELLISTS ON PACKAGES OF "UP TO"
8MBIT/S
Source: SamKnows measurement
data for all panel members with a connection in April 2009.
5.21 The relationship is a little stronger
when the maximum speeds received are plotted against distance
from exchange (Figure 11). This chart also highlights that hardly
any customers on packages of "up to" 8Mbit/s ever receive
speeds higher than 7Mbit/s, indicating that even those customers
living very close to an exchange do not experience the headline
speed when downloading files. This is because the advertised speed
refers to the modem synchronisation speeds (see 5.1), but some
of the available capacity is reserved by ISPs for use by critical
communications protocols which are required for the connection
to operate. ISPs typically limit the bandwidth available for end
users data in order that there is sufficient capacity for this
other "overhead" data. For example, if a line synchronises
(connects to the DSLAM at the exchange) at 8128kbit/s (8Mbit/s),
systems such as the BT broadband Remote Access Server (BRAS) system
limit user traffic to 7.15Mbit/s.
Figure 11
DISTANCE FROM EXCHANGE AND MAXIMUM DOWNLOAD
SPEEDS ACHIEVED BY PANELLISTS ON PACKAGES OF "UP TO"
8MBIT/S
Source: SamKnows measurement
data for all panel members with a connection in April 2009.
5.22 Overall, we found that average actual
download throughput broadband speeds delivered were 4.1Mbit/s.
This represented 57% of the average advertised "up to"
speed (7.1Mbit/s), and 83% of the average maximum speed delivered
(7.1Mbit/s). (Note that as we were not able to run specific access
line tests for our panellists, we use the highest download throughput
speed test recorded during the month as the maximum line speed).
(Figure 12)
5.23 Broadband speeds are also constrained
by contention in the network, which affects all types of broadband
(including DSL, cable and mobile broadband). Figure 12 shows how
speeds during the peak evening period of 8-10pm are on average
across all panellists only around 77% of the maximum speed ever
recorded (typically during an off-peak hour when there is very
little contention in the network). Average speeds in this peak
evening period are around 90% of the average speeds recorded throughout
the day. Speeds in the "working" hours of 9am-5pm Monday
to Friday are marginally faster than overall average speeds.
Figure 12
VARIATIONS IN DOWNLOAD THROUGHPUT SPEEDS
BY TIME OF DAY
Source: SamKnows measurement
data for all panel members with a connection in April 2009
Note: Data have been weighted
by demographics, ISP and headline speed in order to ensure that
they are representative of UK broadband consumers as a whole
5.24 We had sufficient sample sizes to be
able to compare the speeds delivered to consumers on "up
to" 8Mbit/s DSL services with those delivered to customers
of Virgin Media's "up to" 10Mbit/s cable service. Figure
13 summarises the speeds achieved by ISPs in different time periods
to a 95% confidence interval around the mean.
5.25 Our research found that the average
actual speeds received by Virgin Media cable customers on "up
to" 10Mbit/s (8.1 to 8.7Mbit/s) are significantly higher
than those delivered by any of the largest eight DSL operators'
"up to" 8Mbit/s packages. Among the DSL operators, average
download throughput speeds sit in a range of 3.2—5.1Mbit/s,
with significantly faster average speeds delivered by O2,[145]
Orange, Plusnet, Sky and TalkTalk than by AOL Broadband and Tiscali.
Figure 13
AVERAGE DOWNLOAD SPEEDS, APRIL 2009
Source: SamKnows measurement
data for all panel members with a connection in April 2009
*Caution: small sample
size (<50)
Note: The range shown represents a 95% confidence
interval around the mean.
5.26 The access technology used is a significant
driver of variation in broadband speeds delivered. Services delivered
via cable offer higher speeds on average than comparable DSL services
because, unlike DSL broadband, there is no significant degradation
of performance over the length of the line to a consumer's premises.
Second generation DSL broadband (ADSL2+) can deliver faster speeds
than first generation DSL broadband (ADSL1).
Figure 14
AVERAGE DOWNLOAD THROUGHPUT SPEEDS BY TECHNOLOGY
AND HEADLINE PACKAGE, APRIL 2009
Source: SamKnows measurement
data for all panel members with a connection in April 2009
*Caution: small sample
size (<50)
Notes: (1) Data for ADSL1 up to 2Mbit/s and ADSL1
and ADSL2+ up to 8Mbit/s have been weighted by distance from exchange;
data for ADSL2+ services up to 16Mbit/s and all cable services
have been weighted by region and rural/urban; (2) The error margin;
shown represents a 95% confidence interval
5.27 Mobile broadband (ie broadband services
delivered via cellular networks typically to a USB modem or "dongle")
was outside the scope of our own research. Data published by Eptiro
in June 2009 suggest that mobile broadband at headline speeds
of "up to" 3.6Mbit/s or "up to" 7.2Mbit/s
typically deliver average actual speeds of less than 1Mbit/s,
significantly slower than any DSL or cable packages.[146]
5.28 Another driver of variation between
ISP performance is the backhaul capacity available (which determines
the level of contention in the network. Figure 15 below shows
the impact of contention in the network by examining the average
speeds delivered against the maximum line speeds (defined as the
maximum speed a customer ever received) for DSL and cable services
of "up to" 8Mbit/s or 10Mbit/s.
5.29 This is useful because it highlights
the areas over which the ISP theoretically has control (as maximum
speed is defined by the physical constraints of the connection
into a home, the average speed as a proportion of the maximum
speed reflects performance within these constraints). The maximum
line speed is also important to the way in which broadband is
sold, since under Ofcom's Code of Practice for Broadband Speeds,
suppliers who have signed the Code have committed to advise customers
of the maximum line speed (also known as the access line speed)
at the time of purchase.
5.30 The analysis shows that there are some
differences between operators, indicating that contention in the
network is a bigger issue for some ISPs than for others. Average
speeds delivered by Plusnet, Sky and Virgin Media are significantly
closer to maximum line speeds than for any other operator, meaning
it is likely that their customers will typically receive more
consistent speeds throughout the day.
Figure 15
AVERAGE SPEEDS (24 HOURS) AS A PROPORTION
OF MAXIMUM SPEEDS, APRIl 2009
Source: SamKnows measurement
data for all panel members with a connection in April 2009
*Caution: small sample
size (<50)
Notes: (1) Includes combined LLU and non-LLU customers,
data have been weighted to splits provided by ISPs; (2) Data have
not been normalised by distance from exchange as it indicates
average speed as a proportion of maximum speed and should not
therefore be affected by differences in line length caused by
differences in customer profile.
Ofcom's next steps
5.31 Broadband speeds vary as a result of
a number of factors and ensuring that consumers are informed of
the speeds available in a way which is accurate and easily understandable
is not straightforward. Considerable progress has been made within
the last year in improving the information which consumers have
to inform their purchase decision. Specifically, Ofcom has taken
a number of measures to ensure that consumers are properly informed
about broadband speeds:
— Access line speeds and variations
in broadband speed. All providers who have signed up to Ofcom's
voluntary code of practice on broadband speeds are required to
advise of the access line speed and how actual speeds may be lower.
— Comparative actual speed data.
Given the complex factors which combine to determine the actual
speeds delivered, it is unrealistic for broadband to be sold by
the average actual download speed which consumers will receive.
Nevertheless, it is important that consumers have access to comparable
data on actual speeds delivered by ISPs. Ofcom's recent research
into actual broadband speeds has identified that there is significant
variation in performance between operators offering services at
the same advertised speed, and that there is also variation between
maximum speeds and average speeds.
— Consumer information. Ofcom has
also published consumer guides[147]
on broadband speeds and choosing a broadband provider which have
helped to inform and empower consumers.
— Advertised speeds. Broadband packages
are advertised as delivering "up to" speeds. This is
in accordance with Advertising Standards Authority (ASA) guidelines
which recognise that it is important for providers to be able
to differentiate between different products, and the variation
in actual speeds means it is not practical for providers to advertise
on the basis of actual speeds.
5.32 However, consumer research and research
into actual speeds has identified that ISPs need to do more to
ensure that they are giving their customers enough information
about the services they provide and the types of factors that
may impact on the actual speed they receive.
— Consumer research in September 2008 (before
the Code came into force) found that speed of connection was a
key cause of dissatisfaction with broadband services and that
over a quarter of consumers (26%) thought that their actual connection
speed was not what they expected when they signed up.
— Research into actual speeds finds that
on average actual speeds are only 83% of maximum speeds and are
slower still in the peak evening periods. There is also variation
between operators.
5.33 Ofcom is committed to monitoring the
market and intervening as appropriate to ensure that the broadband
market operates efficiently and that consumers have access to
the information they need to make optimal choices of broadband
supplier. Our work within the next six months will include the
following:
— Ongoing research to assess consumer satisfaction
with aspects of broadband services, including speed of connection.
— Working with industry and consumer stakeholders
to determine how best to ensure that consumers have access to
accurate and comparable actual speed data on an ongoing basis.
— Mystery shopping research to assess compliance
with the voluntary code of practice on broadband speeds and remedial
action if required.
— Defining scope and timing of future research
into actual broadband speeds
— Ongoing monitoring of consumer complaints
regarding broadband speeds and the miss-selling of broadband.
— Continuing engagement with the ASA on
the guidelines for the advertising of broadband
— Considering revisions to the Code of
practice in the light of the above, including whether it should
be made mandatory and whether a requirement to advise of actual
speeds should be incorporated.
SECTION 6
6. To what extent does current regulation
strike the right balance between ensuring fair competition and
encouraging investment in next generation networks?
6.1 As part of its recommendations in the
Digital Britain Report, the government proposed to amend
the Communications Act 2003 to make the promotion of investment
in communications infrastructure one of Ofcom's principal duties
alongside the promotion of competition, to meet our overarching
duties of securing the interests of citizens and consumers in
the provision of communications services.
6.2 It is worth noting that our duties already
attach a great deal of importance to incentivising investment,
particularly in relation to electronic communications networks.
Specifically, under Article 8 of the Access and Interconnection
Directive, 2002, and transposed under Section 3 of the Communications
Act 2003, Ofcom is already duty bound to promote competition in
the provision of electronic communications networks and services
by, inter alia, "encouraging efficient investment
in infrastructure, and promoting innovation."
6.3 Ofcom does not consider that competition
and investment are necessarily mutually exclusive. Our duties
to consumers and citizens can be best met through both securing
competition and promoting investment. Our regulatory framework
promotes investment by ensuring contestability, recognising risk
and giving certainty. We have given specific consideration to
investment in new build next generation networks in our guidance
notes published in May, which draw on our previous statements,
aiming to provide further assurance by setting out expectations
in advance of the market developing.
6.4 Moreover, Ofcom adheres to defined procedures
in regulating markets to ensure that we act proportionately and
effectively,[148]
in line with our regulatory principles. These are outlined below.
Regulation and investment—the UK experience
6.5 Shortly after Ofcom came into being,
we initiated a Strategic Review of Telecommunications in 2004.
This recognised the need for investment in emerging technology
and new platforms by competing scale operators alongside BT in
order for the UK economy to remain competitive and to therefore
promote competition at the deepest, economically viable, level
possible.
6.6 Our Review's conclusions led to elements
of BT's assets identified as economic bottlenecks being placed
into a separate business unit, Openreach, which in combination
with agreed price reductions in provision of essential wholesale
services and the improvement of ordering and fault processes under
the auspices of the Office of the Telecommunications Adjudicator;
this facilitated BT's competitors to offer retail broadband services
over BT's copper wires via local loop unbundling. This has created
greater certainty for BT's competitors, allowing them to make
significant investment in new infrastructure. And we have seen
a wave of new investment by well-resourced competitors like Sky,
O2, and Carphone Warehouse to deliver LLU-based services. In fact,
the number of operators investing increasing threefold between
2005 and 2008.
6.7 By the end of August 2009, there were
6.06 million unbundled lines, compared to just 200,000 when Ofcom
published its Statement accepting BT's undertakings in September
2005. There was a twofold increase in the number of LLU enabled
exchanges between the end of 2005 and September 2008, at which
point some 1,902 exchanges had been LLU enabled. Over the same
period the percentage of households with access to at least one
LLU operator increased from 40% to 83%. Ofcom's initiatives to
promote competition have also resulted in greater scope to deregulate
the associated wholesale broadband access market in almost 70%
of country where competitive investment in LLU has taken place
with four or more operators present.
Figure 16
UNBUNDLED LOCAL LOOPS
6.8 At the same time, BT has been investing
in its next generation core network 21CN. The focus of this investment
programme has recently shifted away from moving its legacy voice
telephony customers onto a new platform, but BT continues to invest
in its next generation network, or NGN. BTs NGN-based broadband
services were launched in mid 2008 and are currently available
in 548 exchanges which equates to coverage of approximately 40%
of the population. By April 2010 BT expects these services to
reach 55% of the population.
6.9 These new networks have the potential
to deliver significant benefits to consumers, competitive communication
providers and BT. Equally, Ofcom is sensitive to the fact that
the investment climate for NGNs will be affected by regulatory
risks, including uncertainty about the level and nature of future
regulation. The areas where we are seeking to reduce this risk
are set out below.
6.10 A holistic approach to next generation
voice interconnect. Clarity and predictability about the regulation
of narrowband voice interconnection charges is particularly important
for all communication providers making NGN investments. Our proposed
approach for next generation narrowband voice interconnect is
that where Significant Market Power (SMP)—ie market dominance—is
found, reasonable charges should take account of the need to avoid
creating artificial arbitrage opportunities by taking a holistic
approach to cost recovery that avoids distorting incentives, and
the need to allow an appropriate return on BT's investment in
NGNs. We believe that this can be implemented using our existing
powers.
6.11 The cost of capital. Ofcom acknowledges
that there may be specific demand and technology risks associated
with BT's 21CN investment. Ofcom's consultations on risk and the
cost of capital consider how Ofcom could take into account such
risks in setting an appropriate investment return.[149]
6.12 Reducing uncertainty for alternative
providers. A key purpose of our approach to NGN is to help reduce
uncertainty for alternative providers about the impact that NGN
migration, specifically 21CN, will have on the current SMP access
and interconnect arrangements.
6.13 However, the issues raised by the migration
to next generation access networks, ie the migration from copper
to fibre-based access, are distinct from the issues raised by
the migration to NGNs outlined above and we have taken extensive
steps in this separate area as well.
6.14 BT also announced in July 2008 that
it intended to invest £1.5 billion deploying next generation
super-fast broadband services which will deliver up to 40Mbit/s
to 40% of UK homes by the end of 2012, and in May 2009 BT announced
that it was examining doubling the pace of this deployment. In
the interim, BT also announced that it will increase the number
of homes that can receive its ADSL2+ network, which offers speeds
of up to 24Mbps, to cover 75% of Britain by spring 2011 and 55%
by spring 2010.
6.15 Virgin Media has also launched a 50Mbit/s
product, now available across its network and the company has
also announced it is planning to invest in extending its network
beyond the 45% of the country it covers today.
6.16 There are also a wide range of other
smaller scale investments in NGA, including H2Os use of sewers
to build high performance new access networks in Bournemouth and
Dundee. A selection of super-fast broadband implementations and
trials are highlighted in Figure 18 below.
Figure 17
SELECTED UK SUPER-FAST BROADBAND IMPLEMENTATIONS
AND TRIALS
6.17 We recognise that building such networks
involves very substantial investment, and potentially long payback
periods. Prospective investors therefore seek certainty over the
regulatory landscape, particularly with respect to regulation
of charges. Ofcom is keen to ensure that prospective investors
are not inhibited from investing in super-fast broadband because
of the regulatory regime and consumers gain maximum benefit from
the delivery of new high-speed services now and in the longer-term.
6.18 On this basis, we have published statements
with a view of setting out the regulatory principles in relation
to next generation access deployments, in order to provide regulatory
certainty. These principles have already been published in a number
of documents.[150]
6.19 As indicated above, we believe that
our duties with respect to consumers and citizens can be best
met by both promoting investment to support early deployment and
widespread availability of super-fast broadband and by securing
competition at the deepest level that is effective and sustainable,
particularly in the longer term.
6.20 In practice these translate into five
principles. These are based on the original regulatory principles
outlined in our 2005 Strategic Review of Telecommunications but
are expanded to reflect the differing characteristics of next
generation fibre based networks compared to current generation
copper networks, specifically:
— Contestability: creating conditions
that allow any player who sees a case for deploying next generation
access infrastructure to invest, as soon as they wish.
— Maximising potential for innovation:
scope for innovation and differentiation is essential for competition
in next generation access.
— Equivalence: in order to deliver
effective competition, we must ensure all players have equal opportunities
to access wholesale services at the levels where competition can
be effective and sustainable.
— Reflecting risk in returns: investors
in next generation access must have the opportunity to earn returns
on investment that reflect the level of risk incurred.
— Regulatory certainty: the regulatory
regime must be clear and in place for a reasonable period of time.
This will give investors the clarity that they need to invest
with confidence.
Each one of these five principles are important
to promote competitive investment and it is worth considering
how each principle is being addressed practically by Ofcom at
the present time.
6.21 Contestability. The principle
of contestability seeks to secure effective and sustainable competition
for consumers in the future. In practice Ofcom must consider the
appropriateness of options for new regulatory remedies which are
based both on physical access to ducts and well as electronic-based
wholesale services. This also means ensuring the retaining of
options for future competition that make future market entry possible
on the most cost-effective basis possible and that Ofcom will
promote inter-platform competition eg through spectrum release.
6.22 Maximising the scope for innovation
and differentiation. We expect that electronic-based products
will develop further in the future and offer scope for competitive
differentiation and innovation that are not possible with existing
wholesale "bitstream" products. To support this objective,
we have been working closely with industry to develop a good understanding
of the technical requirements for active products. We believe
it is important for active products to reflect many of these requirements.
The feedback from our stakeholders suggested that this can be
best delivered through industry's existing approaches to new product
development and we have made significant progress in standardisation
of such products with standards bodies in the UK and internationally
including, the Broadband Forum, MEF, ITU, and NICC.
6.23 Equivalence. In practice this
means a requirement to meet reasonable demand for deployment of
next generation access at the same time as BT. This may include
the provision of inputs using the same components, processes and
systems BT uses itself where reasonably practicable, or otherwise
to the same specifications, functionality and performance. This
work has already been taken forward in relation to variations
to the BT undertakings covering fibre-based services.
6.24 Reflecting risk in returns.
We believe that pricing flexibility on wholesale electronic-based
services is appropriate and that for physically-based products—such
as duct access—cost-based pricing that reflects the level
of risk incurred is appropriate and will support investment and
competition. In either case, the pricing of products must allow
opportunities to recover costs and earn a reasonable rate of return
on investments. However, while companies may have freedom to set
specific price levels, we will continue to monitor pricing for
behaviour that suggests anti-competitive motives or effects. This
will include the relative levels of prices or other activities
that may be undertaken to undermine fair competition.
6.25 In summary, Ofcom believes that its
duties to consumers and citizens can be best met through both
promoting investment and securing competition. Our regulatory
framework promotes investment by ensuring contestability, recognising
and allowing reward for risk and providing longer-term regulatory
certainty wherever possible. We have given specific consideration
to investment in recent statements and guidance, setting out expectations
in advance of the market developing to provide further assurance.
Finally, Ofcom adheres to defined procedures in regulating the
market to ensure that we act proportionately and effectively,
in line with our regulatory principles.
25 September 2009
129 Section 3(2)(b). Back
130
Section 3(4) (b), (d) and (e). Back
131
Article 8 (2), Directive 2002/21/EC of the European Parliament
and of the Council of 7 March 2002. Back
132
See Delivering super-fast broadband in the UK, policy statement,
3 March 2009, (http://www.ofcom.org.uk/consult/condocs/nga_future_broadband/statement/statement.pdf)
and Next Generation New Build, Policy statement, 23 September
2008, New build statement, (http://www.ofcom.org.uk/consult/condocs/newbuild/statement/new_build_statement.pdf) Back
133
UK Broadband Speeds 2009. Back
134
Digital subscriber line. Back
135
The BBC, for example, recommends a minimum speed of 500kbit/s
to use its iPlayer. Back
136
http://www.ofcom.org.uk/consult/condocs/nga_future_broadband/ Back
137
http://digitalbritainforum.org.uk/report/category/being-digital/ Back
138
For example, http://www.broadbanduk.org/index.php?option=com_content&task=view&id=303&Itemid=7 Back
139
http://www.ofcom.org.uk/consult/condocs/nga_future_broadband/statement/ Back
140
http://www.ofcom.org.uk/telecoms/ioi/copbb/copbb/ Back
141
http://www.ofcom.org.uk/research/telecoms/reports/broadband_speeds/ Back
142
Traffic shaping is used by ISPs to manage bandwidth according
to different policies. For example to optimise bandwidth so that
more users can get higher speeds or reduce heavy use during peak
hours. Back
143
http://www.ofcom.org.uk/telecoms/ioi/copbb/copbb/ Back
144
http://www.ofcom.org.uk/research/telecoms/reports/broadband_speeds/ Back
145
We have considered O2 and Be customers together. Back
146
www.epitiro.com/news/epitiro-publishes-uk-mobile-broadband-research.html
http://www.ofcom.org.uk/advice/guides/bbchoice.pdf Back
147
http://www.ofcom.org.uk/advice/guides/bbspeeds.pdf Back
148
The European Competitive Telecommunications Association (ECTA),
commissions a regulatory scorecard that compares the regulatory
environment in 18 EU Member States, as well as Norway and Turkey,
in the electronic communications sector and its effectiveness
in promoting the objectives of the EU Regulatory Framework. In
the latest scorecard for 2008, as in previous years the UK came
as the overall leader. Back
149
See www.ofcom.org.uk/consult/condocs/cost_capital2/ Back
150
Delivering super-fast broadband in the UK, Policy statement,
March 2009; and New Build Guidance, May 2009. Back
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