Annex A
OFTEL ON INTERNET ACCESS
1. Summary
OFTEL supports the Government's aims to make
the UK to be the best environment for e-commerce by the end of
2002.
OFTEL wants to see choice and value for money
for consumers for Internet access.
OFTEL believes that competition is the most
effective way of achieving these goals.
The Internet is an extremely dynamic area and
the market is already delivering eg Telewest offering unlimited
Internet access for £10/month.
2. Government Targets
The Government's aim is to make the UK the best
environment in the world for e-commerce by the end of 2002.
The Chancellor challenged industry in his speech
of 16 February 2000:
"I know that [OFTEL] firmly shares my strong
belief that delivering low cost Internet access is one of the
single most important things we can do to promote the knowledge
economy. It is our aim that the cost of using the Internet in
the UK will be as low as in the US by end 2002. This is our challenge
to the industry—a challenge our country needs met, a challenge
we will continuously monitor in detail and if not being met will
prompt us into further action".
3. OFTEL's aims
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.
OFTEL's twin-track approach
There are two main areas of Internet access
that OFTEL is considering: narrowband and broadband.
Narrowband is the term used to describe dial-up
access using a computer and modem over the telephone network.
This is the Internet access technology of today. This is currently
the most common method of accessing the Internet for residential
and small business consumers, and may remain so for some time,
especially for low and occasional users.
Broadband is used to describe high speed access
to the Internet using a variety of technologies. This will enable
advanced services, such as the ability to watch and interact with
video over the Internet. This is the technology of the future,
but is coming soon. Broadband is at an early stage of roll-out,
but will be an important element of Internet access in the not
too distant future.
OFTEL is actively pursuing both narrowband and
broadband access by promoting competition. Competition gives choice
to consumers, and spurs innovation and lower prices. Heavy regulation
can reduce incentives to innovate and invest, but some regulation
is needed to remove barriers when they arise. OFTEL will act firmly
if necessary.
5. Where are we at—what's happening
in the UK market now?
ISP market: Competition has resulted in a variety
of tariffs, with a downward pressure on prices. There are over
400 Internet Service Providers (ISPs) in the UK, the majority
of which are subscription free, and many others offer other innovative
price structures. Unlike the rest of Europe, an offshoot of the
incumbent does not dominate the highly competitive UK ISP market.
Pay-as-you-go: The UK pioneered the subscription-free
(pay-as-you-go) model, which has been copied by many other countries.
Subscription-free Internet access led to a rapid growth in the
number of Internet users in the UK, and is likely to remain the
best option for occasional or light users, and those who do not
wish to commit to a contract. Some ISPs offer subscription free
access at rates below the normal local-rate tariff, and OFTEL
has put in place changes which will allow ISPs to price even more
flexibly.
Unmetered access: Some subscription ISPs have
offered unmetered access at weekends and evenings for some time.
Some, such as AOL, also offer reduced peak rates of 1 pence per
minute for a small subscription. BT itself offers unmetered off-peak
access for £9.99 per month via its BT Internet package. ISPs
continue to innovate and there are a number of ISPs that offer
completely unmetered access. Telewest's SurfUnlimited package,
available to subscribers in its franchise area, allows unmetered
access at all times from £10/month although subscribers must
also make a certain amount of non-Internet calls as well. ntl
have recently announced a similar scheme to be launched in April.
Freeserve, still the largest ISP in terms of subscribers, has
recently introduced completely free access if subscribers re-route
£10 of non-Internet calls through the Energis network. This
is a very dynamic area, with new products are being announced
by ISPs every week.
BT SurfTime: BT announced plans before Christmas
to offer unmetered pricing packages in Spring 2000. These packages
included a variety of options for unmetered access for a fixed
monthly fee, as well as offering cheaper pay-as-you-go prices.
BT is able to offer these upgrading its local exchanges so that
data traffic can be taken off the telephone network at the earliest
opportunity and put onto their data network. By this method, Internet
traffic can be transported more efficiently, leading to cost savings
that can be passed on to consumers. Discussions are continuing
between the Internet industry and BT to ensure that other operators
are able to compete and take advantage of BT's new pricing packages
and network upgrade.
SurfTime prices: In March BT announced its modified
pricing structure for SurfTime. Prices will be £5.99 and
£19.99 per month for unmetered off-peak and peak access respectively
in addition to line rental. The product is expected to be available
from June.
6. How does the UK compare with other countries?
Key figures:
— Use of Internet grew 200 per cent
in 1999.
— There are now around 7 million Internet
subscribers in the UK (1 in 5 homes now has access to the Internet).
— 14 million adults (around a third)
now regularly use the Internet (at home, work or college).
The latest OECD comparisons for March 2000 show
that:
— For off-peak access the UK is the
cheapest in the OECD (based on BT Internet).
— At peak times, BT remains expensive
although the gap has narrowed since the last comparison.
— Telewest's SurfUnlimited compares
favourably with all OECD figures for anytime access although availability
is limited.
— Launch of SurfTime and others (eg
ntl and Freeserve) will improve things still further.
Further details are available of estimates of
the number of UK Internet users and International Internet Access
Price Comparisons.
7. Other ways of accessing the Internet
Mobile: One of the key technologies for accessing
the Internet will be the mobile phone. Such services are already
available. Within the next 12-18 months the UK can expect to see
a much greater uptake of mobile Internet services as the industry
puts in place new technologies and services that exploit those
technologies to change GSM from being primarily a voice service
to a voice and data platform with significant revenues being generated
from data value added services. Key technology developments will
result in faster data connections and more enhanced services.
Television: Access to the Internet via their
television is likely to become increasingly common as Web-enable
TV set-top boxes and games consoles become more popular. These
devices are already available and being used by consumers. Accessing
the Internet in this way may be more convenient for some people
who cannot afford, or do not like the complexity of using a computer.
8. Broadband Access
This is an area of considerable market development
at the moment, with many exciting developments in areas such as
ADSL, Cable Modems and Broadband Radio. A separate brief has been
compiled to describe this work.
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