Achieving the Best Deal for Telecoms Consumers A response to Oftel's Strategy Statement of January 2000, Achieving the best deal for telecoms consumers. Please email any reply to consultation@unmetered.org.uk or to CUT, 24 Broadway, West Ealing, London W13 0SU. Phone/fax: 020 7681 2831 © January 2000, The Campaign for Unmetered Telecommunications

The most serious problem with the statement is that it is premature. We suggest it has been written two or three years too early; it implies a world which does not currently exist and which may never exist without a rather heavier regulatory touch than OFTEL seems willing to apply in the future.

This world is concerned with land line telecommunications. Clearly, this segment of the UK telecommunications industry is structurally less than ideal, with BT owning over eighty per cent of residential fixed phone lines and being sole physical telecommunications provider of such lines to fifty per cent of the population - and this after sixteen years of a notionally competitive market.

That said, there are three principal initiatives afoot which are intended to mask those structural flaws:

1. Calls and Access (extant), which allows other providers to access BT services - but not its physical network - and charge for them as they see fit;

2. Carrier Preselection (later this year), which will allow BT subscribers to choose between other long-distance and international providers more easily than at present;

3. Local Loop Unbundling (middle of next year), which will let providers of both telephony and broadband Internet access put equipment into BT exchanges and gain access to BT's physical network including its local loop between exchange and subscriber.

1. work;

2. solve all current problems;

3. result in real competition, hence

4. force BT to behave itself

But there is no guarantee that these initiatives will work, and what happens if they do not is not even considered by OFTEL.

To decide whether or not they are working OFTEL will be conducting formal reviews, open to the public, of industry segments. These reviews are a good idea, but they are hampered by being periodic. For example, the Internet review takes place for six months every two years, with the first review being late this year. This means there is no review late next year, just after local loop unbundling has taken place and when local loop service provision will surely be in a fluid and complex state. This is not acceptable: we suggest that at least the Internet review - and possibly all of them - are made continuous for at least three years from now until everyone knows whether or not the OFTEL initiatives are working.

OFTEL introduces two new concepts in its statement: co-regulation and the informed consumer. One is flawed and the other requires OFTEL to become good at something it is currently poor at.

Co-regulation is, in principle, a good idea; the notion is that the telecommunications industry, OFTEL and consumer groups get round a table and thrash out solutions to problems which turn up. There are three difficulties with this, though:

Firstly, where are the consumer groups? For example, the OFTEL Internet Forum has only one participating organisation outside the telecommunications industry, namely us. That the Forum exists at all is certainly an improvement on a couple of years ago, when the Internet was treated as a nuisance by OFTEL, but there is a whole raft of detailed technical issues, which few people outside the industry understand in depth or can be expected to learn about from scratch, yet which drive what is done when. Existing or new consumer groups, if they are to participate in co-regulation, will need help.

Secondly, OFTEL's thought processes are usually not visible. For example, the various submissions following its consultation on the Universal Service Obligation, including ours, were made at the end of last year yet OFTEL will only produce a response by April this year. Nobody outside OFTEL will know how it got from a set of responses, via its own ideas, to a final document, and there will only be brief discussion in that document of the various responses. If people outside the telecommunications industry are to be involved in co-regulation they must be told, in detail and possibly through a formal response to their submissions from OFTEL, why their ideas were accepted or rejected and where they have made mistakes.

Thirdly, the telecommunications and Internet Service Provision industries have been left much to their own devices for too long; the result is that they are suspicious of outsiders and have trouble handling them, particularly when the issue of publicising what is going on between the various organisations comes up. We know because we have experienced some of the problems ourselves; who can do what in co-regulation will have to be defined before any meetings or contacts take place.

The informed consumer is a person who is given information about a range of available telecommunications services and, based on that information, makes the right choice for their particular circumstances.

To test the concept, try www.phonebills.org.uk. Had you heard of that service before now, and did you know that it was run by OFTEL? Probably not in both cases.

For the informed consumer to become reality the consumer will have to be informed. Thus OFTEL, or a third party such as a public relations agency acting for OFTEL, must raise its game. It must redesign the OFTEL Web site - this having been in the works for several months now - take out newspaper, magazine, television and banner advertising, put out leaflets and posters in libraries and Citizens' Advice Bureaux, get schools involved and generally spread the word. These methods of communication must be appropriate: it is ironic that those who can most afford to access the Phonebills Web site are probably those with least need of its calculations.

All of this is a tall order for an organisation which has always had difficulty relating to consumers.

We note that a favourite OFTEL word - competition - runs right through the document. OFTEL assumes competition will increase as a result of the three principal initiatives described earlier and various others. Certainly it is more likely that it will increase, now that absolute rigidity in telecommunications pricing structures is under attack, but it is not obliged to increase.

OFTEL is correct to note that the market will not provide in some cases, such as in providing a basic telephone service to everyone, and regulates its provision through the Universal Service Obligation on BT and Kingston Communications.

However, other fundamental errors have not been resolved by the market and have, in the past, been underestimated or missed altogether by OFTEL. BT Surftime, although based on the correct pricing model for meaningful amounts of Internet access - as even OFTEL now admits - was certainly not proposed because BT wanted to introduce it or was under competitive pressure to introduce it; is is unlikely to have been proposed under pressure from OFTEL, which was a late and reluctant convert to unmetered telecommunications.

In fact, before the BT Surftime proposal almost every telecommunications operator provided mediocre but mutually beneficial tariffs with relatively little competition between operators and not much change over time.

Quite apart from there being little concrete evidence at the moment - despite a raft of proposals - that that situation will improve, who is to say that similar sticking points will not arise in the future? And, given that OFTEL has fallen short in its duties before now, is it acceptable for it to shrink away yet further?

The length of time it took for universal unmetered services to be proposed illustrates one item which OFTEL repeatedly misses in its lists of criteria for evaluating competition: diversity of services. Initiatives such as providing phone number ranges and encouragement for unmetered Internet access have theoretically broken the deadlock and set the scene for a wide variety of tariffs but, again, we have to see whether what OFTEL has done actually produces results.

On the formal measurement of competition, we note that OFTEL is proposing vague 'international benchmarks'. We hope that, when firmed up, these are submitted to outside bodies for consultation and review: the fiasco of the OECD benchmarks must never be repeated.

We also note that OFTEL wants telecommunications tariffs to be more closely related to the costs of providing the service being tariffed. But how can it measure that when neither it nor anyone else outside the telecommunications operators knows these costs or has any means of accessing them?

Lastly, we observe that an existing example of self-regulation - that of the cable industry, which was largely left to its own devices, save for the obligation to comply with its licence conditions, under OFTEL's belief that it would compete with BT as a matter of course - was a failure for several years, although the cable operators finally seem to be waking up.

This failure is a good example of the fact, which OFTEL seems to have trouble coming to terms with even now, that competition is not automatic even when it seems that an appropriate framework has been set up for it to take place.

We have left the mobile industry out of these comments because, in competitive and structural terms, it is a relative paragon compared to land telecommunications; that said, we see issues such as tariffing for WAP and broadband wireless Internet access which have barely been thought about at the moment and which could potentially cause trouble.

Finally, we note a particularly unfortunate omission from OFTEL's document: it offers a strategy without vision. There is no attempt to address, on any scale, the structural issues mentioned in the second paragraph above: also, no hard information on what is expected from the telecommunications industry in return for OFTEL, in principle, regulating less.

For example, reviewing access by other operators to BT's local loop every five years is not enough; the mistake we warned about in a previous response to an OFTEL consultation document - that of being too satisfied with the most recently implemented technology and not looking forward and planning, with industry and consumers, on a large scale for what is to come - appears to be being made.