Tuesday, 23 March 2010

Pensioner in price cap shocker

Ofcom has published its Review of the Wholesale Broadband Access Markets (WBA), updating a 2008 assessment. A lot has happened in the past two years, you might think. But not in the case of WBA. Last time around Ofcom, like a latter-day King Lear, split the moiety of the United Kingdom that has the good or bad fortune not to be Hull into three. Like Lear, Ofcom proposed a somewhat unequal distribution to its daughters, though one would hope that the consultation process will be a little more fit-for-purpose.

At any rate, unlike Lear, Ofcom does not seem to have changed its mind much in the intervening period about how the kingdom is to be divided. Back in 2008 16.4% (now 14.2%) of UK premises were in exchange areas served only by BT. Another 13.7% (now 13.8%) had two or three competing operators and the remaining 69.2% (71.3%) were blessed with four or more. And no doubt also "With shadowy forests and with champains rich'd, With plenteous rivers and wide-skirted meads".

What with all those forests, meads and stuff, it was clear to Ofcom that no regulatory intervention was needed there, then and now. Not so for the other two daughters, though. In 2008 Ofcom imposed general access and non-discrimination provisions on and obtaine voluntary commitments from BT to keep wholesale prices between a floor and a ceiling. The floor commitment ran out last summer and the ceiling goes this December.

Now, though, Ofcom is proposing to ease restrictions where there are 2-3 operators, in the hope that competition will pick up there. Meanwhile it will bear down harder on the one-operator daughter with a price cap, an obligation for prices to be oriented to cost and another for cost accounting to provide transparency. Presumably, in the matter of competition Ofcom is convinced that "nothing will come of nothing".

Of course the outcome for Ofcom's predecessor was far from happy. It remains to be seen whether Ofcom's discriminatory behaviour will also lead it to perish on some blasted heath, but that's a drama for another day.

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