EC approves localised broadband deregulation

Ofcom's proposals to ease broadband regulations in areas of the UK where BT is no longer dominant get an enthusiastic reception from the European Commission

The European Commission has given its approval to the proposed deregulation of the wholesale broadband market in parts of the UK.

The proposals were made last November by Ofcom, the UK telecoms regulator, in light of the perceived success of broadband regulation in much of the country, which claimed regulation was no longer necessary. They apply to many geographical areas where the former incumbent BT is no longer deemed to have a monopoly and, if they are finalised, they will potentially have implications for around 65 percent of all UK homes and businesses.

Ofcom used two tranches of regulation to weaken the "significant market power" that BT enjoyed. One was local loop unbundling (LLU), which involved letting rival operators install their own equipment in BT's local exchanges at a reasonable price, thus freeing them from having to resell BT connectivity. The other was regulation of "bitstream access", which involved fixing the price BT could charge other operators for its wholesale broadband product — BT also had to publish the rate.

Bitstream regulation was intended to stimulate competition in areas where unbundling was not economically viable for alternative operators.

"This is the first time a national telecoms regulator in the EU has identified different broadband markets in different geographic areas within a country and proposed lifting regulation in those geographic areas now characterised by effective competition," read a statement from the Commission on Thursday. "The Commission supports Ofcom's proposal, which is based on detailed economic evidence, to deregulate local exchanges with four or more actual or potential providers serving areas with more than 10,000 homes and businesses."

Ofcom has welcomed the Commission's support while BT's chief, Ben Verwaayen, said on Thursday that the news was a "step in the right direction".

Verwaayen added: "Britain has one of the most competitive markets in the world with customers benefiting from innovation, great choice and low price."

Ofcom, which recently ended a consultation on the deregulation, will now go through a "period of review", after which it will decide what to do. If Ofcom does go ahead with what it has proposed, BT will be free to raise or — more likely — lower its wholesale broadband prices for different kinds of customers.

The regulator also wants to create different regulations for local exchange areas where only BT is present (covering 19.2 percent of UK premises), areas where two or more providers are present but where the exchange only services under 10,000 premises (covering 15.7 percent of UK premises), and the Hull area — an anomaly in that its sole broadband provider is Kingston Communications.

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