Easynet warns against telecoms complacency

The machete of regulation must be wielded to prevent a competitive telecoms market being choked by the jungle of incumbency, says Easynet's chief executive

Continued tough regulation of the UK's telecommunications market is essential if the progress made over recent years is not to be lost, according to telecoms operator Easynet.

Speaking to ZDNet UK News, Easynet chief executive David Rowe warned of "the danger of complacency". He fears that recent improvements in areas such as broadband may discourage regulators from taking tough action where necessary in the future.

According to Rowe, incumbent operators are still so powerful that constant vigilance is needed if competition is to thrive.

"It's like a temple in a jungle. If you turn your back the jungle will very quickly grow back, and it is as if the temple was never there," said Rowe, explaining how lax regulation would, he believes, allow the likes of BT to achieve high levels of market dominance, effectively strangling competition. "You always need competition, to keep the incumbent on its toes on issues such as prices and quality of service."

Rowe added that many of the successes of 2002, such as the boom in broadband take-up, are due to decisions made several years ago -- and should largely credited to Don Cruikshank, Oftel director-general between 1993 and 1998.

"The effect of regulation isn't really seen for three or four years. Much of hard work was done by Cruikshank, and we are now seeing the effects of it. I'm not sure the next regulator [David Edmonds] has been as efficient, and in future will he be less efficient?," said Rowe.

Last week, the European Commission published its latest annual report into the EU telecommunications sector. This report concluded that the liberalisation of Europe's telecoms market since 1998 had resulted in a rise in growth and innovation, especially in the mobile sector.

The EC also recognised the boom in broadband take-up, but expressed concern that in many countries the incumbent operators are still dominant, especially in the wholesale broadband market.

All EU member states have introduced local-loop unbundling (LLU), which allows other operators to install their equipment in local telephone exchanges and compete against the incumbent operator in the wholesale market.

However, the EC found that by 1 October 2002 just over 1 million telephone lines had been unbundled across the EC, out of a total of 187 million subscriber lines.

Many incumbents have been accused of deliberately obstructing the process so as to maintain their market share, but the EC said the slump in the telecoms sector is the key reason for LLU's failure to make more impact.

"Progress in regard to unbundling over the last year has still been slow, and has clearly been affected by the downturn in the telecommunications market and the difficulty for operators in obtaining capital financing for investment purposes," said the EC report.

Easynet is one of the few companies still involved with LLU in the UK, and its wholesale ADSL products are proving popular with businesses. However, Rowe said he was concerned that Oftel, and its successor Ofcom, might be outfoxed by BT in the next few years.

Ben Verwaayen, BT's chief executive, is keen to create a "one BT" culture within the telco, which had been split into several different operations in recent years. Reports have suggested this could see the closure of BT Ignite and BTopenworld -- which was partially subsumed into BT Retail last week.

Such a move, if it helped BT to cut costs, would appear to be beneficial to the whole sector if it helped the firm to lower prices. Rowe, though, has his worries.

"Recently, BT has been competing with itself to an extent, which is good for everyone else, but there is a danger in what BT are doing at a group level - creating one BT in which everyone works together," said Rowe. "It could well be sensible for BT, but it could have a big effect in terms of competition and cross-subsidy," he suggested.

If such a move was approved by the regulator, Rowe would like to see other measures to keep BT from running away with the market. "The incumbent has everything, so you have to deliberately hamper it in order to create effective competition," he explained.

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