|Campaign for Unmetered Telecommunications|
Access to Bandwidth: Indicative Prices and Pricing Principles
A response to the OFTEL Statement of May 2000, Access to Bandwidth: Indicative Prices and Pricing Principles.
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The Campaign for Unmetered Telecommunications in the UK (CUT) is pleased to comment on Access to Bandwidth: Indicative prices and pricing principles issued in May 2000. This consultation document presents BT's proposed price structure for Local Loop Unbundling (LLU) along with OFTEL's initial views on it. The price structure must follow basic pricing principles set out in the new licence condition - Condition 83 'Requirement to provide Access Network Facilities'. CUT views this consultation document as being very important because it is the first major step in defining the economics and scope of LLU which will be critical to its success or failure in the UK.
CUT is not in a position to comment on the legitimacy of BT's proposed LLU costs due to the complexity of determining them and looks to the use of a valid bottom up local loop cost model to evaluate BT's own 'top down' cost information which is being used as a starting point by OFTEL. CUT strongly recommends to OFTEL that it should use a commercially available local loop model such as the HAI Model developed by Hatfield Associates of Boulder, Colorado which is considered by many to be the most detailed cost model of the local loop in existence today. The model has been mainly applied in the USA, but it can be customised for any country in the world and has recently been applied to local loops in Australia and New Zealand. CUT believes that OFTEL has been unduly reliant on its own local loop cost model and that for an issue as important as LLU it should seek independent corroboration of its own model's results with an independently developed and internationally recognised cost model. Hatfield Associates was founded by Dale Hatfield, who left the firm to become the Chief Technologist of the FCC. OFTEL should also look at LLU costs as developed by Public Utility Commissions (PUCs) in different areas of the USA as a benchmark for evaluating the reasonableness of BT's proposed prices and price framework. The USA is well ahead of the UK on LLU and OFTEL should draw as much as it can from this experience.
Assuming that the relative disparities which BT shows for connection costs are valid between line transfer (£130 or £190), spare pair (£230 or £385), and new lines (£585, £775 or £1,185), CUT is concerned that this will have the following undesirable consequences:
In order to promote a successful implementation of LLU in the UK, CUT recommends that OFTEL should take the following major actions which will avoid the above problems:
If OFTEL proceeds with only the adoption of full LLU, CUT predicts that there will be a very limited take up of LLU in the UK. This would be confined to premium priced high speed business ADSL services and specialist xDSL broadband services such as SDSL which require a dedicated line with no voice services. Moreover, these services would be confined to high volume exchanges in order to keep the cost of co-location facilities on a per line basis within reason.
CUT also notes that there are technological alternatives to LLU which are becoming increasingly competitive. These include fixed wireless, WAP and eventually 3G wireless, satellite, fiber to the home and innovative last mile alternatives such as laser (TerraBeam) which operates in an unlicensed part of the spectrum. It is in OFTEL's and BT's best long term interest to see that LLU is implemented in as efficient and cost competitive a manner as possible.
CUT also makes the following detailed comments concerning specific aspects of BT's proposed full LLU pricing structure and OFTEL's initial conclusions:
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