A British member of Parliament (MP) Mon. challenged the U.K. telecom regulator over claims that British Telecom (BT) is hurting small providers. In a posting on his website, George Young, who represents N. W. Hampshire, said he has twice asked the Office of Communications (Ofcom) about recent hikes in BT’s wholesale prices for some broadband products. Now, Young said, he regards it as “very urgent to have a clear statement” from Ofcom explaining how its decisions are intended to benefit industry and its customers. In Aug., BT announced higher prices on IPStream broadband office (end-to-end) products, saying it has a “regulatory obligation” to maintain a margin between those products and its DataStream offerings, which let large ISPs buy local access from BT but provide connectivity over their own networks (CD Aug 16 p4). Ofcom later issued a “margin squeeze” ruling requiring the spread. The increased IPStream costs have riled small- and medium-sized ISPs that contend they're being squeezed out of existence. Some 70 of them formed a group, the U.K. Internet Federation (UKIF), which has been pressing BT and Ofcom for relief. BT and UKIF have had several meetings on the ISPs concerns, so far unresolved, but UKIF has also been talking to Parliament. Young, who said he had talked with both BT and the ISPs, wrote that there seems to be a “prima facie case” Ofcom “may have misjudged the market implications of its decision on an obscure bit of jargon called the ‘margin squeeze test’ and related rulings as applied to BT’s pricing and product packaging in the wholesale ADSL market.” Ofcom’s actions could have a “dire effect” on small ISPs and their customers, Young said, particularly because BT gave only 28 days’ notice of the “dramatic” change in price structure. While most markets may not offer a case for protecting resellers that don’t directly compete with BT, he said, the U.K. broadband market is different now because: (1) A high proportion of retail and business customers lack choice in cable and so rely on ADSL. (2) For any company wishing to provide broadband to customers, BT is the only available primary supplier. (3) In an evolving market, the wide range of ISPs offering different products and services is important in securing a high level of innovation. (4) Small and medium-sized ISPs add value in ways not open to larger providers. While in principle they may get a better deal from a bulk consolidator than from BT, the consolidator also must rely on BT, “so that somewhere in the process either an artificial margin or 2 sets of costs are being added before the product reaches the consumer.” The issues may be “obscure,” Young said, but “we mustn’t allow that to damage our opportunities in the use of broadband.” UKIF is worried that the price structure change, effective at month’s end, will prevent them from maintaining profit margins, because of yearlong contracts with their customers, the group said. “Ofcom must rethink the timing of the impact of their actions or they will seriously damage an entire industry in the name of ‘regulation,'” a UKIF spokesman said. Young has been “the first MP to grasp the nettle on this difficult issue,” he said. UKIF is urging as many people as possible to contact their MPs.
Dugie Standeford
Dugie Standeford, European Correspondent, Communications Daily and Privacy Daily, is a former lawyer. She joined Warren Communications News in 2000 to report on internet policy and regulation. In 2003 she moved to the U.K. and since then has covered European telecommunications issues. She previously covered the U.S. Occupational Safety and Health Administration and intellectual property law matters. She has a degree in psychology from Duke University and a law degree from the University of Tulsa College of Law.
LONDON -- Telecom regulators must confront VoIP challenges on closed markets quickly or risk undermining international accounting rates before there’s a new system in place, a speaker said Thurs. at the Carrier World 2004 conference here. VoIP regulation in closed markets is still in the early stage of debate, and some countries are closely watching the consultations in the U.S. and European Union, said Craig Sillman, MCI vp-international regulatory affairs. In the current unsettled state, he said, regulators, incumbents and entrants are dealing with VoIP several ways.
LONDON -- Europe’s new e-communications regulatory framework appears headed toward more rather than less regulation, European Telecom Network Operators’ Assn. (ETNO) Dir. Michael Bartholomew said here Thurs. So far it hasn’t led to a lighter regulatory approach and it’s likely to spark increased litigation at the national level, he said. Telcos worry that transposition of the framework into the national laws of European Union (EU) member states “often goes against its spirit,” focusing on legacy networks rather then bottlenecks to the introduction of new services. Bartholomew’s comments came at Carriers World 2004 here.
LONDON -- The U.S. and U.K. see eye-to-eye on many telecom and Internet issues despite differences in their respective infrastructures, NTIA, FCC and State Dept. officials said Wed. “Technology doesn’t recognize any borders,” said NTIA Dir. Michael Gallagher. Given their common heritage and common approach to difficult issues like spectrum and broadband, he said, it’s not surprising the countries’ positions are in alignment. Investment challenges associated with broadband deployment exist in every country, said FCC Comr. Kathleen Abernathy. Neither the U.S. nor the U.K. directly subsidizes deployment, she said, meaning “we're all looking at the same things to spur investment” through regulatory approaches. Their comments came during an interview with Communications Daily.
GENEVA -- Participants in the copyright debate are “talking past each other” by using terms -- such as “intellectual property (IP)” and “public interest” -- that mean different things to different people, said Time Warner Vp-Assoc. Gen. Counsel-IP Shira Perlmutter Tues. Copyright used to be a fairly esoteric subject, particularly at the international level, she said, but digital developments and globalization have led to an “explosion” of the debate, as well as the number and types of participants. Their mutual misunderstanding is hampering their ability to move forward, Perlmutter said. Her comments came at the Transatlantic Consumer Dialog on the future of the World Intellectual Property Organization (WIPO) here.
GENEVA -- The World Intellectual Property Organization (WIPO) should rethink several items on its digital agenda, several panelists said Mon. at the Transatlantic Consumers Dialog (TACD) conference here on WIPO’s future. Both the proposal to give broadcasters protection against unauthorized lifting of their signals and the European Union’s (EU) directive entitling nonoriginal databases to copyright protection are controversial in some quarters. Both are making their way through WIPO’s Standing Committee on Copyright & Related Rights (SCCR), and one member of that group urged that those items of “unfinished business” be put to rest so WIPO can move on to other issues. Others want to see both ideas disappear entirely.
Trading and liberalization may not be the way to free up radio spectrum for new uses, and in any case they shouldn’t be mandated, several commenters told the European Commission (EC) last week. The comments came in responses to a May report to the EC urging the European Union (EU) to require member states to implement spectrum trading and liberalization (CD May 28 p7). The report recommended that member states be given wide latitude in deciding how their systems work as long as national spectrum management regimes are harmonized across the EU. But some commenters said there are other ways to deal with spectrum allocation and assignment.
Following discussions last week with British Telecom (BT), some U.K. ISPs said they're hopeful they can resolve their dispute over BT’s decision to hike prices on some broadband office products. Last month, BT announced it would raise wholesale prices on some IPStream products -- packages sold to ISPs which then offer retail services to their customers. BT’s move anticipated a ruling by the Office of Communications (Ofcom) this month, which set a margin between DataStream products -- which allow large ISPs to buy local access from BT but provide connectivity to customers on the ISPs’ networks -- and IPStream. The price increase angered smaller ISPs, which feared it would drive them out of business (CD Aug 16 p4 or WID Aug 16 p3). Last Wed., members of the Internet Service Providers Assn. (ISPA) U.K. met with BT Wholesale Dir.-Products Bruce Stanford. ISPA told Stanford the higher charges -- up to 32% on some IPStream products -- and the fact they can be imposed on only 28 days’ notice “may mean ISPs will be forced to charge significantly more for their services, diminish service levels or even close.” Stanford “listen[ed] sympathetically” and agreed to another meeting later this month, the group said. But the U.K. Internet Federation (UKIF), a coalition of more than 70 small and medium-sized ISPs formed to fight BT’s price increases, remained unconvinced after a Fri. meeting with Stanford. BT has already raised prices by about 7% more than Ofcom’s regulation required, UKIF said; the telco said that can’t be immediately reversed because of another increase in broadband prices resulting from Ofcom’s recent proposals for LLU connection and rental pricing (WID Aug 27 p4 or CD Aug 27 p8)). But UKIF said Stanford agreed to look into adjustments to the broadband prices. UKIF said it’s encouraged by BT’s willingness to consider reducing prices but worried those adjustments might be offset some by Ofcom’s LLU ruling. “The trouble is BT will be treating these 2 adjustments together, which UKIF believes… does not guarantee a reduction in price for IPStream or DataStream products,” the group said. But UKIF said BT is considering the group’s proposal to modify its capacity- based charging model to a usage-based scheme, which could benefit smaller ISPs. UKIF is already lobbying members of Parliament and has set meetings next week with Ofcom and the Dept. of Trade & Industry. It’s also looking into the Ofcom appeals process, it said. BT is committed to reviewing the numbers but thinks it has little wiggle room for adjustment, a spokeswoman said. The margin between IPStream and DataStream prices must be acceptable to Ofcom at all levels, she said, so BT can make changes only if they comply with Ofcom’s margin-squeeze formula. Part of BT’s objective in meeting with ISPs is to explain why it acted as it did, and what it must do to comply with the regulations, she said. Even if adjustments are possible they won’t happen overnight, the spokeswoman said. “But we are talking” to ISPs and understand their position, she added.
European ISPs need a “put-back” regulation similar to that in the Digital Millennium Copyright Act (DMCA), several participants said Fri. at the Organization for Security & Co-operation in Europe (OSCE) conference in Amsterdam on guaranteeing media freedom on the Internet. Under the DMCA, material wrongly claimed to be copyrighted or trademarked, and blocked by ISPs under notice-&- takedown provisions, must be put back online. No such provision exists in the e-commerce directive, which contains a notice-&-takedown provision similar to the DMCA’s, said Christopher Marsden, from the Oxford U. Programme in Comparative Media Law & Policy. The lack of a put-back law leaves Internet speakers at the mercy of individual ISPs, he said. Marsden cited a comment by Internet guru Steve Bellovin to the effect that when confronted with questionable material on their networks, ISPs “shoot first, don’t even bother to ask questions later.” To see how ISPs handled copyrighted material on both sides of the Atlantic, Marsden posted copyrighted material and then complained of infringement to a European and a U.S. ISP. The European ISP automatically pulled the content, he said, while the U.S. company sent a long list of lawyerly questions aimed at ferreting out whether the material was in fact copyright-protected. The result highlighted one positive note in the DMCA, Marsden said. A put-back provision could be of interest to ISPs, said Stephane Marcovitch, exec. dir. of French ISP association AFA. As things stand now, he said, European ISPs have no incentive to put such a provision in their self-regulatory codes of conduct and would be liable for restoring content. With the European Union’s e-commerce directive up for review next year, Marsden said, free speech activists will likely press for a “put-back” provision in any revision of that law or the copyright directive. “Private censorship sounds a bit hysterical,” he said, but that’s what the lack of a put-back provision means.
U.K.’s telecom regulator published a final “margin rule” Thurs. setting out the price gap British Telecom (BT) must maintain between its IPStream and DataStream broadband products, to allow new players to compete with IPStream using DataStream. The regulator found that BT’s current DataStream and proposed IPStream prices comply with the country’s new regulatory framework for e- communications networks. Anticipating Ofcom’s move, BT this month raised wholesale prices on some IPStream broadband office products, prompting outrage from small- to-medium-sized ISPs afraid the “margin squeeze” would drive them out of business. This week, the U.K. Internet Federation (UKIF) said it was talking to legislators about Ofcom’s anticipated ruling and considering seeking help from the European Commission. The consultation also sparked concern from BT, which had issues about the workings of the margin squeeze test, a spokeswoman said. However, she said, BT now understands better how Ofcom intends to use the rule. The company will study Ofcom’s 151-page document and wait to see what other industry segments do, the spokeswoman said. UKIF’s response to Ofcom’s announcement was swift. Instead of promoting effective and sustainable competition, the group said, the decision will concentrate market control in a few large ISPs. The market-squeeze model is based on large ISPs, not smaller ones, which should be charged for the capacity they use instead of their customer numbers, UKIF said. It also panned Ofcom for admitting “its model might be wrong” but hoping it will correct itself in the coming 5 years. “This does not give industry much hope,” UKIF said. The ISPs called on Ofcom to reevaluate the nature of its wholesale broadband access regulation -- “and a parliamentary enquiry might help this process.” Also Thurs., Ofcom unveiled its final proposals for wholesale price cuts for local loop unbundling (LLU) services. In May, the regulator set out initial proposals from its market review on wholesale local access (which includes LLU), but didn’t specify LLU prices. It also announced proposals for the wholesale margin on BT’s DataStream broadband products. At the same time, BT cut prices for its LLU services. Given BT’s actions, Ofcom said, it could simply have relied on BT’s voluntary price reductions and the work of a newly created independent telecoms adjudicator. However, it said, many operators thought Ofcom should do its own price review to give new market entrants greater certainty. Thurs.’s proposals include: (1) A 68% decrease in shared access connection prices from those before the BT price cut. (2) A 76% reduction in rental fees. (3) A 42% drop in fully unbundled connection transfer fees. (4) A 27% decrease in fully unbundled new provide connections. The consultation doesn’t set a ceiling for fully-unbundled loops, the subject of a separate analysis. LLU “offers the greatest potential for downstream service and price differentiation and competition,” Ofcom said. However, given the substantial capital investment needed to enter the market, BT’s Datastream “will play an important transitory role.” The new pricing structure, industry participation in the telecom adjudication scheme and BT’s “fresh approach have the potential to add up to a faster broadband roll-out for Britain,” said Ofcom Chief Exec. Stephen Carter.