The rural broadband programme - Public Accounts Committee Contents

3  The role of the regulator

24. Ofcom is the independent regulator and competition authority for the UK communications industries. It last reviewed the wholesale broadband market in 2010 and is reviewing the market again this year.[35] We heard concerns from the witnesses representing the UK broadband industry about the scope for effective competition in the broadband market, and put these concerns to Ofcom.[36]

25. TalkTalk has lodged a Competition Act complaint with Ofcom due to its concern that the margin between BT Openreach's wholesale price and BT's retail price is so squeezed that other suppliers cannot sell the product profitably at the same price, thus restricting competition.[37] Ofcom told us that, when it reviewed the market in 2010, it had decided not to set a wholesale price; in part because it did not want to reduce incentives to invest in upgrading the UK's network. At that time, Ofcom also concluded that superfast broadband was not a separate economic market to existing broadband services, and expected prices for superfast broadband to be constrained by existing prices for lower speed services. Ofcom told us that, three years on, the premium being charged for superfast services had proved to be relatively modest. Ofcom also told us that it had recently issued the consultation for its current review of the market, which specifically sought views from the industry on whether Ofcom should be doing more on the issue of 'margin squeeze' between wholesale and retail prices.[38]

26. INCA told us that there should be much greater access for others to BT's infrastructure. It said that the conditions attached to others using the existing ducts in the ground and telegraph poles were too restrictive— for example, not being able to use them for business-grade services, or to run mobile phone masts, and having short notice periods for termination. Ofcom told us that it had introduced a requirement for BT to provide access to its physical infrastructure.[39] However, the NAO reported that, while Ofcom had indeed introduced this requirement—to allow competitors to deploy their own broadband wholesale infrastructure using BT's ducts and poles - in fact no provider had gone beyond trials and actually deployed any new network assets using this access.[40] Ofcom also told us it was aware of BT competitors' concerns about restrictions on being able to access BT infrastructure, and that Ofcom had invited them to submit evidence and analysis to support these concerns. However, Ofcom said that so far it had not received enough information or evidence to enable it to consider a change to the regulations.[41]

27. In support of there being effective competition in the UK broadband retail market, Ofcom told us that the regulatory framework had helped produce one of the most competitive broadband markets in Europe—reflected in availability, price and the incumbent (BT) operator's relatively low share of the market (30%). Ofcom said that the way it had applied regulation had made it possible for companies like TalkTalk and Sky to build businesses based on the incumbent's infrastructure and become major players in the provision of broadband. Ofcom reported that the majority of customers taking up superfast broadband services are on the Virgin network, not the BT network.[42] Ofcom also said that it considered the regulatory regime to be doing well in protecting consumers, with strong evidence that prices in the UK compared favourably with other leading markets in Europe.[43]

35   Q 346; C&AG's Report, paras 1.15-1.17 Back

36   Qq 11, 24-25  Back

37   Qq 24-25, 348 Back

38   Qq 346-348; C&AG's Report, para 1.15 Back

39   Qq 11, 351-354 Back

40   C&AG's Report, para 1.17 Back

41   Q 355 Back

42   Qq 32, 345-349 Back

43   Qq 358-359 Back

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© Parliamentary copyright 2013
Prepared 26 September 2013