Wednesday, November 26, 2014

Competition in telecommunications...UK style

One of these days I will write a definitive account of how we all got so much wrong in the pursuit of better outcomes in telecommunications than were being delivered in the early 1980s. But today I just want to compare and contrast two countries, the UK and Australia.

The first thing to note is that both countries were early leaders i the move to restructure telecommunications markets - at least amongst those that had grown up under the European PTT model. Both were early (in the 70s) in spinning telecommunications out of the Post Office. Both introduced competition in the late 80s and early 90s.

The UK did one thing differently - they fully privatised BT before undertaking competition reform. But in reality it has made little difference.

The UK stayed with an industry specific regulator with both technical and competition function (Ofcom) whereas Australia dismantled AUSTEL in 1997 and gave competition and access to the ACCC.

BT sold its mobile operation to what became O2. BT also agreed to voluntary functional separation of its access network - but only in the face of a very determined Ofcom Chair Steven Carter.

But today we learn that BTs competitors are complaining through their industry body the UK Competitive Telecommunications Association (UKCTA) that BT still retains a monopoly position "some 30 years after privatisation and 10 years after the formation of Ofcom."

I'll be honest and say that from the Foreword to their report I can't understand exactly what it is that the UKCTA is arguing for. It seems to be another version of "we need you to increase competition by increasing regulation of the monopolist."  This, I might say, sounds awfully like the current refrain of Optus, Vodafone and the Competitive Carriers Coalition in Australia.

They seem to know what they don't like but I haven't ever heard anything that sounds like a convincing story of what the market structure looks like after whatever intervention they seek today. I have drafted something for publication elsewhere on the economics and if it doesn't get a run I'll share it here.

In the meantime getting a new single technology structurally separated access network for 93% of the population was a really good place to start. But no one was ever prepared to hitch their wagon to defending the one thing that could deliver.

Disclaimer: The CCC was originally formed around the meeting table in my office at AAPT. It's original mission was a response to the content sharing deal between Foxtel and Optus. At that time I questioned my colleagues at AAPT on whether as part of the deal we should demand that the Telstra HFC cable be made open access as it provided service in areas poorly served by exchange based ADSL. There was no interest because we did not have the capacity to build a billing and provisioning system to access it.

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