Baroness Buscombe
Consumer and citizen interests next. Will we need regulation? Will technology outpace the regulation? What are the pitfalls of such rapid change?
Elizabeth France, UK Telco Ombudsman
My role: run a not-for-profit company, not a statutory agency. But independent dispute resolution is mandated by law. 115 member companies. Investigated over 3,300 cases. Billing/charging and customer service most common (former most common issue). [Hey, telcos are there to price discriminate and obfuscate prices!] Most common issue is correct charges but consumer is confused. Debilitating effect on consumer confidence. Bill dispute for pennies goes all the way up to ombudsman, and consumer switches supplier.
Many consumers of telecom are young people for whom we need to take extra care. Three cases of teens with download bills in the thousands of pounds that they can’t pay.
Claire Milne, Antelope Consulting
UPDATE: See Claire Milne’s clarifications on my note-taking in the comments below.
Focus on consumer affairs and affordability. OFCOM basic principles: competition where it is effective and appropriate. But surely it is always appropriate!
Some consumers overwhelmed by choice. Market forces will push more people into universal service net. Might have thought the opposite. Notes shortage of consumer representatives in the room.
Would ask OFCOM to tell us more about the price of jam, who is paying, and how long we need to wait for jam, whose bread it will be spread on, how thickly it will be spread. Support idea of consumer charter, list of consumer rights. Would then form a framework to deal with complaints.
Phil Mochan, Compere Capital
Need a high-capacity fixed infrastructure to homes, and mobile BB. Large capital investment, efficient spectrum use, FTTH. Spectrum scarce. Should spectrum be charged for? Believe it is a regressive tax on communications. New wireless technologies coming to market. Selling spectrum to provide for them is against interests of UK citizens.
Other countries have had “beauty contests” to spread benefits more widely. 3G in Sweden, low population density, cheaper.
In UK there’s an incentive to extend life of copper loop as long as possible as a sunk cost. Keep it going until OPEX of copper too high [it gets wet underground, folks!] or it can’t support the required services.
OFCOM should direct its efforts to minimise costs of capital. When fibre is delivered to a community the copper should be forced to be switched off. Price floors below which regulator promises not to intervene to reduce costs. BT should be forced to open access to ducting. Rural areas should be funded by 2-5% levy on FTTH projects.
[Notably no real discussion of innovative ownership structures, Paradox of the Best Network, etc. This discussion isn’t grounded in the key tectonic issues.]
Q: How many complaints come from an inability to get through to the operator at all? Overloaded customer service, incompatible web sites?
A [France]: Have about 80 cases a week, but about 1000 calls. Those are very often that can’t get through to complain, take an order. Ombudsman knows alternative ways into the operators. Would be sad if these get escalated through complaints procedure.
Q: [Orange]: What is the role of regulators to protect consumers who don’t spend the time to understand or investigate what they are buying? BT 20 years ago was simple pricing, now much choice = many pricing options. Should we nanny consumer?
A: [France]: For many a few pounds make a big difference. Don’t expect companies to nanny consumers. But companies don’t go out of their way to make tariff structures simple. [A telco sinks capital and then price discriminates network traffic, it’s the raison d’etre of commercial telecom!] Consider the “reasonable consumer” and balance of probabilities.
Q: Would emphasise similarity between financial services industry and telecom. Similar product complexity.
Q: Lack of clarity of what comes out of OFCOM etc. Lack of plain English.
Q: Advised Carphone Warehouse when they were small. One core thing was to guide people through the complexity and confusion. Reflected in their success.
Q: Strategic review looks at geographic areas. Might pay different amounts in rural and urban areas.
A: [Mochan] Believe you should have floored pricing, and use universal service levy to maintain it.
A: [Milne] Could experiment with geographic de-averaging. Operators don’t tell us exactly how unprofitable it is. Allow prices to diverge, increase range of operator investment options. Start with a 10% range.
Q: [London School Economics] What would a consumer’s charter look like if written down?
A: [Milne] Not an original idea. Some of he places that have them include California and Australia. May not be role models, but do work. Somewhat new.
Q: [BT, but talking as a consumer] Personal experience of contract complexity. Get drawn to the bits you want to see. Kids see “free texts!” but ignore the price of the calls. How to deal with this?
A: [France] Yes, you are right. Companies could be clearer. Misunderstanding in mobile market around credit limits. Used for company’s benefit, not consumer’s benefit. Phone not cut off when credit limit reached. Paying by direct debit, credit limit rises. Father with three teens needs to know credit limit means something. Should act more like credit card companies who phone you up when there’s unusual behaviour.
Q: [Carphone Warehouse] In a competitive market in consumer space, good customer service. Price comparison engine, uSwitch only company in the market. Which? soon providing similar service. Are these meeting the need? What is really expected?
A: [Mochan] Will consumers know what the bill will look like at the end of the month. Can’t find out before then. Have to wait. Doesn’t relate to how the individual thinks of it. Minutes aren’t the value that’s in people’s heads.
A: [France] Some of the more recent fixed and mobile products trying to be simple, but still gotchas like non-geographic numbers. Websites very hard to search and navigate.
A: [Milne] Haven’t yet seen a mobile site that can let you move over your existing phone. Always assume you don’t have one, need a new one. Needs more flexibility. Companies not willing to tell you what’s the best package for you based on historical usage, and certainly don’t do it automatically. Operators know who their markets are, but it can be hard to know if you’re really the one being targeted.
Stephen Carter, CEO OFCOM
Update on Strategic Review
[He really talks fast, so apologies for errors and omissions.]
Telecom can be dry. Communications Act – lots of interest when TV (ITV regulation), not when debating the telco bit. Telco only gets attention when it goes wrong: pricing scams, networks down. Few people care about the success or otherwise of telcos and infrastructure. Public, media and analysts view telecom as a utility sector, very different from late 1990s.
Risks and rewards in telecom are not that of a traditional utility. More of an “Ow!” factor than a “Wow!” factor today, though. Culture and creativity will remain, but in 10-15 years we hopefully won’t need full-day conferences about telecom regulation.
Predecessor regulators left a hostage to fortune in saying sector-specific regulation would go away, e.g. RPI-X price regs for BT. OFCOM has 3 other statutory reviews under process, and this was an extra one. Surely EU regs comprehensive enough, some say? Became apparent this wasn’t the case, only had high-level principles and a toolkit. Didn’t have detailed UK analysis, identification of real competition barriers.
Also needed review because of technology change in network architecture. BT potentially ahead of other countries. Discussion of topology of networks confusing. Transformative changes. Bigger than that of analogue to digital TV which gets more public attention.
For all of regulation efforts current structure of fixed line access not sustainable.
Three options: 1. Regulatory forebearance, use ex-post regulation; 2. Referral to competition commission for structural review; 3. Open and equal access.
Second option is not a bogeyman to force BT cooperation. It’s a real possibility, and designing how process would operate.
What are attributes of a functioning market? Prices down, poor quality service reduced. Remain important concerns, but consumers also want innovation, diversity and choice. Many flavours of voice product, platforms; quicker, more portable. Should we focus on promoting competition, not consumer protection? Law says competition is only a means to an end. But believe only a market based on true competition can deliver what consumers desire.
Could in theory intervene directly. But too hard to permit innovation while doing this.
Have in 20 years had a period of managed duopoly; then access competition; then [retail?]. Ideally would be scope for competition at every level: service, access, core. Competition issues in mobile an order of magnitude less than fixed. Why?
Tried a similar approach in fixed market with competing access infrastructure (cable) with expectation of wireless to come on stream. Could discuss what might have happened if this had been pursued more aggressively, but have 50% coverage. See no imminent likelihood of same UK coverage of cable as USA, Netherlands, Belgium.
OFCOM enthusiastic about wireless, but not sensible to predicate basis for competition on technically and economically unproven technology. Spectrum liberalisation to speed this up.
BT’s access network will remain a natural monopoly and bottleneck for near term. Need continued regulation. Core network more competitive.
Hardly headline news. Proposals are more than old wine in new bottles. Principle of no undue discrimination will be made more effective in its practical operation.
Regulation itself has impact on competition. Several phases of regulatory approach, causing different business models and regulatory dependence. Conflict of regulatory dependencies, and then regulator makes incremental changes to keep everyone happy. Rewards to scale that market would naturally deliver don’t arrive. Instead have fragmentation. Regulation as much part of the problem as the solution.
Preferred choice is equality of access. Product equivalence, and equality of access.
No ultimatum to BT. Changes to behaviour and governance would flow from structural and procedural changes at BT. BT mandated to come up with its own suggestions, as an expert in its own structure.
Product equivalence has attracted less attention, despite being more important. Differentiate from equivalence of inputs and outputs. Prefer the former, but not possible for some legacy products because of cost. Wholesale line rental an example. We’re five years into this already.
Need to move wholesale regulation upstream of bottlenecks. Not into horse trading with BT. Deregulation justified on a stand-alone basis.
Regulation creates uncertainty, and that repels investment. A review of BT’s 21CN plans. How to regulate prices of that.
Little prospect of new access networks against copper. Costs should be set against cost of new network build. Will not artificially price to encourage new networks that are unlikely to materialise.
What if BT can’t deliver (which I don’t believe will happen)? Much of the access and product equivalence can be delivered by existing statutory powers. But to impose these would be painful, product by product, market by market.
Analysis suggests endemic problem of BT control of bottlenecks. Best if Enterprise Act [i.e. BT demerger] used rather than trench warfare.
Will need to time to avoid likely UK election.
LLU in UK. Was dead in water, IPStream working but complaints, DataStream pricing wrong. Approached from a strategic standpoint. Not to create short-term arbitrage, but strategic approach. New adjudication structures.
Don’t want adversarial approach to BT. Believe BT wants competition to grow pie. Smaller slice of larger market. Some human error, but organisational commitments. BT deserves credit for retail BB take-up. Wholesale a different game. Need deliverable KPIs. “Right first time” and “throughput”. Former at 65%, should be 95% by March. Second is order processing. Have milestones.
Increased LLU competition means BT could geographically de-average DataStream product. Incumbent can disrupt market by announcing pricing plans, create uncertainty for other operators using LLU.
Universal service for BB? Political stakeholder interest. We’re a long way from this. A matter for government. Can take two forms. Obligation to ensure availability to all through subsidy. In OFCOM view, no justification as BB penetration below 20% so no exclusion of the poor. Was a hot political issue, less so now. But a mistake to believe universal coverage of low-megabit BB is good enough. Should have more focus on BB and less on TV broadcasting following the election.
Q: Elaborate on broadcast vs IP distribution.
A: Have legitimate concerns about move first to digital TV broadcast and then to IP distribution. Currently outside remit and powers.
Q: Aren’t regulators opposed to averaging of costs and returns? Won’t we have micromanagement?
A: Yes, to get out we might initially need to get further in. Supposedly “light touch regulator”, but not sure what it means. More merit in being a strategic regulator than a microregulator. Sometimes need to get deeply involved to make right decisions and then get out of the way. Tensions between operators here in ensuring integrity of tariff models. Balance with competitive concerns. Preference is self-regulation wherever possible. Works better in some markets than others.
Q: Only took 5-10 years for mobile to go from nice to mass. How long does BT have before argument diluted by new technologies?
A: Don’t know – ask BT. Can extrapolate current 60k BB connections per week. Would contest 5-10 year outlook – took Vodafone 10 years to get 1m customers. But accept broader point. Took 3 years to get UK bill, 4 years EU, 18 months for OFCOM to find its feet. If I know what the winning technologies were I wouldn’t be doing this job.
Q: [Wanadoo] A climate of consultation now. Most telling is with NGN in BT. More than anything illustrates need for regulatory contract and settlement.
A: All this will add to nothing if we don’t get 21CN interconnect regime right. Knowledge asymmetry between regulator and regulated. Demands a level of engagement from incumbent player.
Q: To what extent will radical change of 21CN drag us back to regulatory trench warfare?
A: Hasn’t happened yet, opportunity to build in processes and systems at point of conception. Rather than build obsolete transient OSS and BSS systems, focus on getting next generation right.
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Congratulations on your rapid coverage.
But what I should have said (and think I did) is that Ofcom wants to promote competition wherever it is "effective and sustainable", apparently assuming this is the same as being "appropriate" (to further consumers'interests). Not everyone would agree with Ofcom's assumption. I cited examples of PRS dialler scams, confusion marketing and neglect of less attractive market segments as effects of competition which are not in consumers' interests.
I didn't say - but am suggesting now - that the test should be "effective, sustainable and demonstrably in consumers'interests".
Yes, thanks for posting these notes. Having done something similar recently (posted notes from an EC workshop in Brussels on spectrum policy and R&D last November - see http://www.open-spectrum-international.org/ec-workshop.html - might I suggest posting a cleaned-up version after you catch your breath? Important to be clear what ideas and opinions are your interpolations, and which are relayed directly from speaker.
Posted by: at January 28, 2005 08:35 AMIf it's in [square brackets] then it's my commentary. Otherwise it's the original speech, with light precis as I can't type fast enough. Errors are all mine.
Posted by: at January 28, 2005 10:50 PM