Regulation of Telecommunications Companies

As more and more economic and social activity takes place over computer networks so the ability of everyone to have quality access to those networks at a reasonable price becomes increasingly important. The current debate in 2002 is over what is termed “broadband” access. This debate has shifted direction several times over the last couple of years offering a good example of how fast moving technology issues can evolve.

The debate in the UK often centres on the role of BT as the dominant telecommunications provider. The heat in the debate reflects the state of liberalisation in the UK market. This liberalisation has led to the growth of a number of dynamic telecoms providers who are keen to develop products and markets but has also left one very large company, BT, as both a competing retailer of services and the owner of the largest network of wires into people’s homes.

There are two very different views as to the overall state of the UK market. One perspective, as offered by BT, is that we have done very well in terms of lowering the cost of access to the Internet and moving ahead with new technology. The other, as usually put forward by BT’s competitors, is that BT is stifling innovation by other suppliers and commanding an unfair advantage that reduces real competition.

As with many such debates, there are elements of truth on both sides. What the debate highlights is the need for reserve regulatory powers to ensure that this increasingly essential service is available on a fair and reliable basis.

The objectives of the regulator (OFCOM) should include the following: Internet access to be available as a universal service at a fair price and at an appropriate speed (this will increase over time); Firm action against restrictive markets in access devices, software and content delivery, and the promotion of mechanisms for interoperability. Increase consumer choice in the digital television (DTV) market by promoting free-to-air services and access to them. Promote competitive access over telecommunications infrastructure.

While we accept the general case that the market can and should provide internet access including the faster access that is generically called “broadband”, there are instances where there may be market failure or where a public body wishes to invest to move ahead of the market. In these circumstances we do see a role for Government support for broadband rollout including targeted investment where appropriate and the use of fiscal incentives. This is explored further in section 3.1 of this paper.

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