Memorandum by the Office of Telecommunications
(OFTEL)
1. OFTEL welcomes the House of Lords inquiry
into the development and co-ordination of policy in the European
Union as it relates to e-commerce.
2. As the regulator for UK telecommunications,
OFTEL's role in electronic commerce arises from its primary role
of promoting the interests of consumers of telecommunications
services and its interest in the development of telecoms infrastructure,
over which electronic commerce services operate.
3. OFTEL's work on electronic commerce policy
is focused on the availability of access to data services such
as the Internet. OFTEL's main approach is to encourage and maintain
competition in the provision of such access so to drive down prices
and offer choice to consumers. This programme of work is carried
out primarily through the Internet and e-commerce project, but
also through many other projects in OFTEL's management plan. Key
activities include:
— provision of higher bandwidth services
through the Access to Bandwidth project;
— promoting special access packages
for schools and public institutions through the Learning Society
access issues project;
— examining the principle of extending
opt-out registers for junk calls and faxes to e-mail through the
Telecommunications Data Protection project;
— considering the impact of Internet
on Universal Service Obligations;
— investigating the pricing of leased
lines;
— determining revenue sharing for Number
Translation Services (NTS) calls (this formula underpins the subscription-free
ISP model);
— the establishment of the OFTEL Internet
Forum, to focus on issues of interest to the Internet industry.
Question 1: What needs to be done to create confidence
and to stimulate e-commerce?
4. For consumers and businesses to gain
the full benefits of the e-commerce global market place, it is
important that the environment in the UK is right to encourage
the development of e-commerce services and to enable consumers
to access them in the most efficient way.
5. OFTEL plays a key role in regulating
telecommunications networks, which means both the infrastructure
that underpins the Internet itself and the means of gaining access
to it. Getting the regulatory framework right is an important
part of promoting the development of e-commerce.
6. As stated in OFTEL's recent strategy
statement: Achieving the best deal for telecoms consumers,
January 2000, regulation where none is justified can distort or
undermine competition. It is vital that regulation is only imposed
where it is justified and that it is appropriate to the level
of competition in the market. Competitive markets, which have
incentives to innovate and invest, are the best way of meeting
consumer needs. It is particularly important not to stifle innovation
in newly emerging markets, such as e-commerce.
7. Regulation should be as "light touch"
as possible. The case for any new regulation should be scrutinised
very closely, and new regulation should only be introduced if
it is absolutely necessary for the promotion of competition and
for the protection of consumers, and if these aims cannot be achieved
in any other way.
8. OFTEL's strategy is "competition
plus". Competition is the key driver to obtain the best deal
for the consumer. "Competition plus" recognises that,
given the special features of telecommunications networks, there
are circumstances where some formal or informal regulatory action
is needed to protect consumers' interests in addition to the achievement
of effective competition. As effective competition develops there
will be less need for OFTEL to promote competition using licence
conditions and a greater reliance on the use of its powers under
the Competition Act.
9. Early last year the Prime Minister commissioned
the Performance and Innovation Unit (PIU) to identify a strategy
for achieving the Government's aim of making "the UK the
best environment in the world for e-commerce". The PIU published
its report e-commerce@its.best.uk in September 1999. One
of its 60 recommendations was for OFTEL and the OFT to carry out
a review to identify whether there are emerging barriers to competition
in electronic markets and make recommendations for preventing
these from becoming serious problems.[90]
10. OFTEL's strategy statement sets out
a timetable for market segment reviews. A review of the competitiveness
of the market for Internet access is due to be carried out during
the period July to December 2000. The intention is that this analysis
will be carried out on a regular basis.
11. Two important issues for the development
of e-commerce are the cost of Internet access, and the availability
of high-speed Internet access. These will be key issues in the
review—this paper gives OFTEL's initial thoughts.
COST OF
INTERNET ACCESS
12. OFTEL wants to see lower prices and
more choice for consumers who wish to access the Internet. OFTEL
wants to see prices for Internet access in the UK compare favourably
against the UK's main competitors, and for consumers to have a
variety of options for reliable and fast access to the Internet.
13. The UK's ISP market is extremely dynamic
leading to considerable innovation and lower prices. Just recently
there has been a number of ISPs who have announced unmetered (free
calls with a monthly subscription) packages. Telewest, ntl, Freeserve,
Altavista are just a few of the major ISPs who have already made
announcements.
14. BT have responded to these developments
by announcing their own unmetered access product called SurfTime,
to be launched on 1 June 2000. BT's SurfTime will allow BT customers
to access a variety of ISPs on an unmetered basis.
15. See Annex A for OFTEL's current brief
on Internet access, which also describes some of the key market
developments.
AVAILABILITY OF
HIGH-SPEED
INTERNET ACCESS
16. High-speed Internet access requires
broadband capacity. There are a variety of new technologies that
will be able to provide broadband capacity to consumers and small
businesses: digital subscriber lines (DSL), cable modems, broadband
wireless, digital TV and low earth orbiting satellite.
17. OFTEL expects that these technologies
and others may in time provide effective competition in the provision
of higher bandwidth access. But OFTEL believes that in the near
future the local loop, upgraded using technologies such as DSL,
offers the greatest potential to deliver higher bandwidth access
to the mass market.
18. DSL technology enables ordinary telephone
lines to be converted into high bandwidth pipes running into virtually
every home and small business. It will provide speeds of up to
2Mbit/s.
19. There are two separate developments
affecting DSL roll-out in the UK:
20. BT has been trialing DSL services since
October last year. It has announced plans to launch these services
in Summer 2000, with high-speed services available to 6 million
homes (around 25 per cent of access lines). BT expects to expand
its service to around 70 per cent of access lines by the end of
2001. As is required under the terms of its licence BT must provide
wholesale DSL access to other service providers on the same terms
as it provides those services to itself, and others should be
able to launch retail services to customers at the same time as
BT.
21. There will, therefore, be competition
in higher bandwidth services from the moment BT launches its own
retail DSL service.
22. But it is not sufficient for BT's competitors
to have to rely on the pace and scope of BT's ADSL roll-out. This
is why OFTEL announced last November that BT should allow operators
to lease its local access lines, a process known as Local Loop
Unbundling.
23. BT will be required to provide local
access lines and co-location to other operators to enable them
to upgrade the lines (with DSL technology) to provide higher bandwidth
capability and offer services direct to consumers.
24. There will therefore be competition
in the provision of higher bandwidth access (through operators
taking BT unbundled loops) from July 2001 at the latest. OFTEL
is currently working with BT to improve on this timetable.
Question 2: Does the European Commission's draft
Action Plan "eEurope: An Information Society for All"
offer a realistic means of promoting e-commerce in the EU?
25. OFTEL welcomes the publication by the
European Commission of this Action Plan, which recognises the
significance and potential benefits of the Information Society.
26. OFTEL is working closely with the Office
of the E-Envoy to meet the target of making the UK the best place
for e-business by the end of 2002. OFTEL supports the E-Envoy's
four main workstreams of Modern Markets, Confident People and
Information Age Government, backed by Analysis and Benchmarking.
27. Below are some comments on specific
areas of the Action Plan of high relevance to e-commerce, in which
OFTEL has some involvement.
90 This review is available on OFTEL's website,
at http://www.oftel.gov.uk/superhwy/ecom0400.htm. Back
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