Clause 88 - Conditions about leased lines
Communications Bill
9:30 am
Mr John Whittingdale (Maldon and East Chelmsford, Conservative)
Clause 88 deals with an important area in which we are seeking to achieve a competitive market. Government and Opposition are probably on common ground in thinking that creating the conditions for greater competition in telecommunications is a desirable objective.
Unfortunately, the Minister was not able to join us for our interesting discussion on local loop unbundling. However, I am sure that he will have taken advantage of the intervening period to read our
debate. I was gratified to hear him say this morning that he attached importance to local loop unbundling—even though progress towards that end has been almost invisible.
The absence of LLU means that the ability of alternative operators to lease lines has become all the more significant. Earlier this year, one of the main competitors to BT said:
''Without LLU, the main source of competition is at the service provider or re-seller level. This too got off to a very poor start in the UK—although not as badly as in some European countries. If LLU had lived up to expectations, reselling of BT's wholesale product would only have been a temporary solution; but it looks now as if it will be the main show for at least the next two or three years.''
I suspect that it might last even longer than that. Alternative operators are able to lease lines and offer a competing product to the consumer, and it appears that that is the main area in which consumers enjoy genuine competitive choice. For that reason, I am keen to explore clause 88 with the Minister and to discuss how he thinks Ofcom will seek to promote that further.
The truth is that alternative operators who have tried to take advantage of the provisions and offer a competing service have run into a series of obstacles that have made it harder for them to do that. One alternative operator has talked to us about the problems that it has encountered and it has drawn attention to a number of difficulties. Oftel is addressing some of those difficulties, but they will certainly require more intervention by Ofcom when it is up and running. For example, on fairly simple point, that alternative operator said:
''If BT could provide us with wholesale ADSL circuits in a timely fashion, at the right price to stimulate the market, could guarantee the level of service and provide the features needed by business users, we would be happy. But sadly, this is not been the case.''
That operator acknowledged that
''BT has made progress in getting the lead times for installation down to a reasonable period'',
but said that it still had difficulty in obtaining ''a decent ordering system''. That was meant to have been in place before autumn last year, but the operator said that
''current processes are cumbersome and error-prone.''
Repeated complaints have been made. Although those have to some extent been dealt with because Oftel has intervened, pricing remains a matter of concern. For a long time, alternative operators complained that they were being charged more by BT for a wholesale ADSL line than BT Openworld—a BT-owned provider—was charging its retail customers. Operators pointed out that BT appeared to be retailing its own service at less than cost. Following much protest and intervention by the regulator, BT reduced its prices by enough to reduce any penalties that it might face under the Competition Act 1998, although not sufficiently to remove completely the squeeze on margins. It is possible now for alternative operators to employ some margin from business ADSL lines.
There have been other attempts to make it easier to offer competing services. For example, there have been long arguments about whether BT should enter into a service level agreement with alternative operators. BT enters into contracts with all of its customers, so why should a service level agreement for wholesale ADSL prove so difficult to obtain? Similarly, BT designs its services, including its wholesale DSL products, for its own retailer, BT Openworld, whose customer base is primarily residential. Alternative operators have asked whether there are enhancements that might allow DSL to compete with that business, but it is fair to say that such requests have met with a lack of enthusiasm. I am told that
''The standard response to such requests is 'This will have to go in the development stack'.''
In all those areas, there has been resistance from the main provider to allowing alternative suppliers to develop and offer services on the same, equal basis to that which is offered by BT's own subscriber. Oftel has addressed that during the last year, although it seems to have taken it a long time to get round to it. For example, three or four months ago Oftel announced that BT should be able to supply a wholesale service to alternative suppliers that would allow them to offer their customers one telephone bill for charges and line rental. Previously, that was not possible: subscribers who took on an alternative provider received two bills—one from the alternative provider for call charges and one from BT for the line rental charge.
Undoubtedly, having one bill will help. David Edmonds, who we now know will be on the board of Ofcom, said at the time:
''Operators made it clear that providing a single telephone bill would enable them to offer a variety of packages to consumers such a single flat rate charge for all calls and the abolition of the line rental.''
That is a step forward. We have recently begun to make progress and only last month Oftel published
''detailed proposals to enable service providers to offer residential and business consumers a new service covering line rental, calls and bills over BT's network.''
That comes from a consultation document and the precise requirements need to be properly consulted on, so we are not there yet. I hope that the Minister will acknowledge that Ofcom should treat this matter as a priority. As hon. Members have said, it is likely to be the main area in which we achieve true competition.
Despite all the moves to open up BT's network and encourage alternative providers to enter the market, progress is still limited. More than 50 per cent. of the retail market is provided for by BT Openworld—BT's own service. The next biggest provider is Video Networks Ltd., which is a specialist provider of a home choice video service. After that, there are three or four internet service providers, but they have far smaller shares in the market. Does the Minister envisage the development of a genuine competitive market of which each main provider has a significant share, rather than there being one dominant player owned by BT?