Christopher.J.Gosnell@stl.stc.co.uk (08/10/90)
Telecom news from Britain centers on the impending break-up of the
cosy telecommunications duopoly that stifles our country and the
possible introduction of local loop competition via the cable
companies.
(Copied from the {Independent} 7 August 1990)
Telecom and Mercury to lose duopoly. - by Colin Brown
Senior ministers are planning to inject more competition into the
provision of telephone services in Britain by breaking the duopoly
over the systems being operated bewteen British Telecom and Mercury.
Cable television companies could be allowed to compete with Telecom
and Mercury to provide local telephone services, but some of Margaret
Thatcher's strongest supporters in the Government want to go further
by opening the market to widen the national telephone network.
The ministers believe the battle over the network - to be fired by
an autumn government consultation paper - should be only the first
step in a campaign for greater competition in public utilities, where
privatisation has failed to deliver improvements.
[stuff deleted about privatisation and competition]
This has reinforced the view of some ministers that the telephone
services should be deregulated too, allowing a free-market approach to
the provision of national networks for business and domestic users.
"There are a range of options for breaking the telephone duopoly, but
sticking to the status quo is not an option", a government spokesman
said.
A ministerial battle is likely to take place over the extent to
which the Telecom and Mercury duopoly is ended. Allowing cable TV
companies to compete for local business would be seen as a minimal
step, leading to more radical competition for national networks.
BR [British Rail] and the electricity supply industries could be
among those interested in competing to provide national networks of
lines for the highly profitable commercial sector.
The Government had hoped that breaking Telecom's monopoly would be
sufficient. However, Mercury has been criticised for its slow progress
and Oftel, the telephone consumer watchdog, is believed to be
sympathetic to improving local services for domestic users.
Ministers are reluctant to destroy the competitor they have helped
to create with Mercury. No decisions have been reached, and giving
more freedom to cable companies is seen as the most likely compromise.
American telephone companies have invested in British cable TV
companies in anticipation of being allowed to compete for local
business.
The demand for greater competition will be taken up next month with
the publication of proposals for inclusion in the Conservative general
election manifesto by the right wing No Turning Back group of Tory
MPs, who include influential ministers.
----------------------
And on the inside pages:
Companies lobby to cash in on telephone services boom - by Mary Fagan
The prospect of the duopoly review has sparked a fierce round of
lobbying on the part of the many players who want to cash in on the
telecommunications boom.
Representations are already being made to both the Department of
Trade and Industry and the regulator, Oftel.
Among the loudest voices are the cable television industry, the
operators of current and future mobile telephone services, and British
Rail, which for its own purposes already owns and operates one of the
biggest telephone networks in the country.
It is widely expected that the review will be most radical where
local telephone services are concerned, as this is the sector where
BT's rival, Mercury Communications, has made little impact. According
to the Cable Television Association, almost all its members are
interested in offering local telephone services, but they need radical
changes in the regulatory system to do so.
Cable television companies can offer telephone services within
their franchise areas, but only as an agent of BT or Mercury. Less
than half a dozen do so - all through Mercury - mainly because the
revenue-sharing deals imposed by Mercury mean that it is not worth
their while.
The cable television companies want to become fully fledged local
Public Telecommunications Operators, free to act in their own right
and also with the right to link their networks to the longer distance
and international networks of BT or Mercury and mobile telephone
companies, or the likes of Britsh Rail. In addition, the want the
right to link their adjacent local networks to form regional and even
national groupings.
According to Richard Woollam, the director of the Cable Television
Association, the cable companies could be generating almost half of
their revenues from telephone services by their tenth year in
operation.
Mercury has already acknowledged that margins for the cable
television companies need to be better. It is believed to be allowing
its cable partners to keep up to 30 per cent of revenues generated
from the calls, instead of only 10 of 15 per cent in the past.
British Telecom is deeply concerned that much of the renewed
investment in the UK cable television industry comes from the American
regional telephone companies. It is believed they are keen to cash in
on the liberalised UK market, while US regulation prevents BT from
taking up reciprocal opportunities on the other side of the Atlantic.
Another BT concern is that it cannot provide telephone [I assume
this is a misprint for television] and entertainment over its main
network while the cable television industry can offer telephone
services, albeit as agents. BT says that to finance the fibre-optic
cabling of every home and business - which would cost up to #20
billion - it needs the revenue from television and other services such
as home banking and shopping.
The cable television industry argues that allowing BT such freedom
could kill its fledgling industry before it gets off the ground. In
any case, Mr. Woollam says BT can offer television in areas where it
has a cable TV franchise, yet is selling many of its cable television
investments.
While most people expected the mobile cellular radio companies,
such as Cellnet and Vodafone, to want a greater role and more freedom
after the duopoly review, many are more surprised at the interest
shown by British Rail.
Last month BR launched a wholly-owned subsidiary with the right to
exploit BR's nation-wide private network, which runs into every city
and town in the country. The BR network is independent of BT and
Mercury, whereas many private networks rely on lines leased from these
two PTOs. It includes 17,000km of cable and 1,000km of microwave
links, but reselling any capacity on these lines is prohibited.
Peter Borer, managing director of British Rail Telecommunications,
wants to expand the network, financing it through links with private
sector partners. Operating at an arm's length from BR, he wants to be
allowed to offer private telephone and computer networks for large
companies, and to resell capacity to third parties which could also
offer private networks. BR's network could also be used as a backbone
to link local mobile telephone and cable television networks.
Whatever the outcome, British Telecom will argue that future
competitors must share its obligation to provide universal service,
however remote or unprofitable the customer might be.
-------------------
And now, some questions.
- what is the status of local loop competition in the US ie. can a
residential customer ever choose his local telco? (without moving
house :-) If not, is this prohibited by law or just by Baby Bell
muscle? Is ANYONE allowed to provide voice and TV services on the
same line?
- is there local loop competition anywhere in the world at present
(assuming land-lines for the moment)
- in the event of local loop competition, what should be done about
universal service? Is this still a real issue in developed countries
(where most everywhere is wired up already) or just a telco
bellyache? Should this be a problem of private companies or should
the Government be paying up for this "social service"
All opinions my own, of course.
Regards,
Chris Gosnell ( cjg@stl.stc.co.uk)