Market reviews and Narrowband Internet access

Justin Moore

Internet Project Manager, Oftel

9 April 2003

Overview

• Background

• Current regulations

• Market review proposals for regulation– NTS– FRIACO– wholesale Internet termination

Background

• New regulatory framework comes into effect from 25 July 2003

• Undertake market reviews to implement appropriate SMP regulatory conditions, eg– requirement to publish prices– requirement to supply specific products

Current Regulation

• BT supply of NTS and FRIACO

• BT Internet termination– publish prices– non-discrimination

Call origination

Wholesale Metered & unmetered Internet

termination

Retail metered and unmetered Internet access

FRIACO NTS

Wholesale Internet termination products(eg SurfPort, SurfPort24)

Market reviews

• Define relevant markets

• Analyse market to assess Significant Market Power (SMP)

• Consider regulatory options

Which market reviews are relevant to narrowband Internet?

• Review of wholesale call origination– consider regulation of NTS and

FRIACO

• Review of unmetered narrowband Internet termination– previous review identified competitive

issues in supply of wholesale unmetered

Fixed narrowband wholesalecall origination

NTS and FRIACO proposals

Wholesale call origination and local-tandem conveyance

• Fixed narrowband conveyance

• Initial view - BT has SMP

• General SMP conditions– Provision of network access, no undue

discrimination, basis of charges etc

• Supply specific products– IA, FRIACO, NTS etc

NTS call origination

• Origination of Freephone,Special local rate, Special national rate and Premium Rate Services calls

• Retail operator undertakes retailing of calls on behalf of terminating operator

NTS Options

• Option 1: No specific regulation for NTS call origination

• Option 2: Regulated retention and annually set retail uplift

• Option 3: Regulated retention and charge control on retail uplift– 3 options for charge control

NTS Initial conclusions

• Regulated retention – promotes competition and innovation

in downstream markets– significant benefits to consumers

• Retail uplift charge control (4 yrs)– avoids costs and uncertainty of

annually set charge

NTS retail uplift charge control

NTS in the Hull area

• Current unregulated arrangements appear to be satisfactory

• Introducing regulation may– introduce significant regulatory costs

and practical difficulties in billing– risk higher consumer prices

• Initial view is that regulation would not be proportionate

FRIACO Options

• Option 1: No FRIACO product

• Option 2: DLE FRIACO only

• Option 3: DLE FRIACO and unrestricted ST FRIACO

• Option 4: DLE FRIACO and ST FRIACO with ‘stranded assets’

FRIACO Initial conclusions

• Option 3: Requirement to supply DLE FRIACO and ST FRIACO– necessary to promote competition in

unmetered markets– stranded assets no longer relevant – unrestricted ST FRIACO facilitates

entry into market

FRIACO in the Hull area

• Currently no FRIACO product

• Initial view is not to impose FRIACO requirement on Kingston– Not appropriate without reasonable

demand being demonstrated

• Still need to provide network access on reasonable request

Review of Unmetered Narrowband Internet Termination

Unmetered narrowband Internet termination

• Jan 02 statement on broader market concluded – BT had market power– competition issues with unmetered

rather than metered termination

• Market review appropriate for unmetered termination

Internet termination market definition

• Unmetered v metered

• Demand side– limited evidence of switching– unmetered not justified for low users – flexibility verses security

• Supply side– cost / time to set up FRIACO network

Internet terminationmarket analysis

• Unmetered separate to metered markets– Market shares changed considerably

– Evidence of entry/competing services

– some countervailing buyer power

– BT does not appear to charge a significant price premium

Internet termination conclusions

• BT does not have SMP

• Although concentrated, initial view is that no collective dominance

• No SMP means no regulation– need appropriate call origination

regulation

– can review market again in future

Unmetered narrowband Internet termination in Hull

• Separate geographic market for Internet calls originating in Hull area

• Initial view : Kingston has SMP – only firm offering unmetered

termination and no FRIACO product

– its ISP has a large share of retail market

Unmetered narrowband Internet in Hull - Remedies

• Remedies needed to promote retail ISP competition

• Requirements on Kingston – to provide network access– not to discriminate unduly– publish a Reference Offer– publish charges, and technical

information

Summary of proposed changes

• NTS principles remain with charge control to give predictability of costs

• FRIACO remains, with ST FRIACO limitations lifted

• No regulation of metered and unmetered Internet termination

Questions