THE COMMUNICATIONS ACT 2003, OFCOM AND THE UK WHOLESALE LOCAL ACCESS MARKET

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In this essay, first, I will discuss the introduction of the Communications Act 2003 and outline OFCOM’s role in relation to the Act. Second, I will assess OFCOM’s actions vis-à-vis its ‘review of the wholesale local access market’, which encompasses local loop provision of broadband. Third, I shall provide analysis of the impact of regulatory reform for BT, its competitors and individuals. I shall do this with reference to primary and secondary empirical evidence.

According to Garcia-Murillo and MacInnes, convergence is taking place in the realms of technology, industry, regulation and government agencies (Garcia-Murillo & MacInnes 2002:58). In response to the regulatory problems of convergence and overlaps, in the UK, the Office of Telecommunications (OFTEL) recommended a ‘single electronic communications regulator’, to adequately control social and economic issues related to electronic communications (Baldwin & Cave 1999:297), underpinned in part by a rationale to prevent ‘regulatory vacuum’ and overlapping ambits (Garcia-Murillo & MacInnes 2002:60-61). This led to the establishment of OFCOM (Office of Communications), the regulatory body for ‘the UK communications industries’ (OFCOM 2004 a:1), which embraces and coordinates the previous roles of OFTEL, ‘The Independent Television Commission’ (ITC), ‘The Broadcasting Standards Commission’ (BSC), ‘The Radio Authority’ (RAu) and ‘The Radiocommunications Agency’ (RA) (Darlington 2004 a:1).

OFCOM oversees the application of the Communications Act 20031 (‘the Act’) legislation (OFCOM 2004 a:1), which was preceded by, in essence, a White Paper2 published in 2000, followed by a draft Communications Bill in 2002 ( Darlington 2004 b :1). The draft Bill incorporates ‘into UK law the new EC Directives that overhaul the regulation of electronic communications’ (Hewitt & Jowell no date available:3). The Bill became the Communications Act 2003, which ‘received Royal Assent’ on the 17 th July 2003 and OFCOM assumed power in December 2003 ( Darlington 2004 b :1). OFCOM’s regulatory action can be seen as legitimate or ‘good’ regulation in one context, because the regime is authorised by Parliament through the Act. If OFCOM can supply evidence that it has achieved the aims set out in the Act then it can be said to have fulfilled its legislative mandate (Baldwin & Cave 1999:78).

Five Directives serve to harmonise European communications regulation, reduce entry barriers and promote competition ‘to the benefit of consumers’: The ‘Framework Directive’ structures the regime and puts forth the ‘fundamental rules and objectives’ applicable to all the Directives. The ‘Authorisation Directive’ establishes a new system such that any actor can provide ‘electronic communications services […] without prior approval’, that is to say that ‘authorisation’ supersedes ‘the former licensing regime’. The ‘Universal Service Directive’ defines services that ‘must be provided to end-users’. The ‘Access and Interconnection Directive’ defines the terms under which operators may access each others’ services and networks in the interests of public access to communications services. Finally, the ‘Privacy Directive’ establishes the terms of user privacy (OFCOM 2004 b:7).

The government’s vision in relation to the Act, as explained in the White Paper, is to promote a competitive and dynamic media and communications market in a ‘global’ context, encourage universal access3 to diverse and high quality services and to safeguard consumers and citizens (communicationswhitepaper.gov.uk no date available:1).This vision is encapsulated in Section 3(1) of the Act, which states that OFCOM’s principal functional duty is

There are many other duties ‘by virtue’ of the overarching duty cited above. One example is to promote

the availability throughout the United Kingdom of a wide range of electronic communications services.

In performing these duties OFCOM must ‘regard’ the ‘desirability’ of factors such as ‘promoting competition in relevant markets’, promoting and assisting self-regulation, ‘encouraging investment and innovation in relevant markets’ and ‘encouraging the availability and use of high speed data transfer services throughout the United Kingdom’ (hmso.gov.uk 2003 a:Section 3(4)).

A main principle of the Act is based on increasingly competitive communications markets and this implies that OFCOM will increasingly utilise competition law rather than ‘sector-specific regulatory powers’4 (Higham et al. 2003:28). Claisse asserts that OFCOM is ‘under a duty to use a “light touch” approach’ to regulation (Claisse 2004:1) and the use of competition law and promotion of self-regulation to an extent exemplifies this. Competition law is a ‘market-harnessing control’, that can be used as an alternative to, or in association with regulation, as an instrument to influence competition by ‘channelling market forces’ and thereby foster adequate competition to encourage optimal outcomes for consumers and citizens (Baldwin & Cave 1999:44). These laws can control companies that hold monopoly power, one form of market power, a situation where one company has the potential to significantly influence the price or volume of products traded (Economist 2005:2). In practical terms, according to Steuer, monopoly power is assessed by measuring a company’s share of the ‘relevant market’ (Steuer 2005:2). A primary manifestation of monopoly power is ‘predatory pricing’, where a company attempts to set the market price below its cost price, in an attempt to drive competitors out of the market. If successful, it will utilise its dominant market power to recover predation costs (Baldwin & Cave 1999:13).

The five EU Directives require that OFCOM periodically review ‘competition in communications markets’, to ensure that appropriate regulation is promulgated (OFCOM 2004 b:3). OFCOM’s market reviews have three stages: The first concerns ‘definition of the relevant market or markets’, the second, an assessment of market competition, with a primary focus on whether actors have ‘significant market power’ (SMP) in the defined market(s) and third, upon discovery of SMP, ‘assessment of appropriate regulatory obligations’. This is performed with reference to a European Commission (EC) ‘ recommendation on relevant product and service markets’ in light of EU harmonisation and ‘guidelines on market analysis and the assessment of SMP’, to facilitate adequate assessment of a market (ibid. 2004 b:8).

The scope of OFCOM’s ‘review of the wholesale local access market’ is to set out a framework for providing ‘wholesale local access services [,…] co-location’ and to determine suitable charges for these services (OFCOM 2004 b:3). By ‘wholesale’, it is meant, services that are supplied to ‘operators’ to enable them to supply retail services as opposed to direct retail to end users (Europa 2002:6) or more formally, wholesale services ‘means services related to Network Access used by or offered to any Communications Provider (including the Dominant Provider)’ (OFCOM 2004 b:129).

‘Local access’ concerns the connection of ‘local loops’ (ibid. 2004 b:8 ). A local loop, as illustrated in Figure 1, is comprised of the ‘local access connection’ between the customer’s equipment and the local exchange and is usually constituted by a twisted pair of copper wires (ibid. 2004 b:10,214 ). OFCOM’s review focuses on the loop, the ‘flexible jumpers’ and ‘tie cables’ that complete the connection, together with related services. The local loop connection joins the user’s premises with the ‘main distribution frame’ (MDF) and the jumpers and tie cables connect to an operator’s equipment, such as DSLAM5 and ‘concentrators’, located within the MDF (ibid. 2004 b:10 ). Figure 1 shows three configurations: DSLAM provides customer A with broadband only, customer B receives broadband and narrowband and customer C exemplifies the most common connection at present, narrowband (ibid. 2004 b:10-11 ). Broadband can support ‘always on […] high data transfer speeds’, whereas narrowband only allows ‘low data transfer speeds’ (ibid 2004 b:213-214 ).

Figure 1: The local loop: part of OFCOM’s product description

Figure 1: The local loop: part of OFCOM’s product description (OFCOM 2004 b:11 ).

Lafont and Tirole assert that the local loop is ‘widely perceived as a bottleneck’ (Lafont & Tirole 2000:12). In one sense, a bottleneck is a crucial element of the network, an ‘essential facility’ (ibid 2000:97) that can be problematic in technological terms of incompatibility of standards and from a competitive perspective, as it can be utilised to ‘protect commercial interests’, presenting problems of access for competitors (BSG6 no date available:7). In another sense , Sharer asserts that the local loop or the ‘last-mile’ is a bottleneck in terms of limited bandwidth (Sharer 2002:1). According to Lafont and Tirole, the local loop is a complement to other parts of the network and can be distinguished as a market segment. If this segment is monopolised it can be described as a bottleneck (Lafont & Tirole 2000:97). Regulation is required here to enable insurgents to access the incumbent’s network (ibid 2000:6).7 OFCOM asserts that BT is forced through current regulation to provide ‘wholesale local access product to other operators’ and concludes that ‘it is unclear whether it would choose to do so in the absence of such regulation’, although, presumably it would not (OFCOM 2004 b:18 ).

According to OFCOM, the ‘local access network remains one of the least competitive segments of communications overall’, with BT’s share of the UK market (excluding the Hull area) standing at 84% (OFCOM 2004 b:79 ). OFCOM’s belief is that increased competition, based on ‘infrastructure investment’ and ‘continued innovation in access technologies’, could benefit end users by providing accessible and affordable broadband with ‘video-quality bandwidth’ and help to diffuse ‘voice over broadband (DSL)’ (ibid. 2004 b:5,79 ). For some, ‘competition is the best regulator’ and this is founded on the notion that companies are more likely to provide customers with high quality services at a suitable price when they are in competition. So, competition can be viewed as ‘means to the end of consumer welfare’ (Baldwin and Cave 1999:210-211).

OFCOM’s regulation in this context, concerns ‘unbundling’ local loops, in order to stimulate competition in broadband provision and in particular to develop competition at a local level, where this may be deficient in terms of local access (OFCOM 2004 b:5). ‘Local loop unbundling’ (LLU) is defined by OFCOM as a process whereby an incumbent provider’s local loops are ‘physically disconnected from its network’ and in turn connected to an insurgent operator’s network, such that they can directly provide services to customers, bypassing the incumbent’s equipment (ibid. 2004 b:214 ). So, an insurgent can wholly or partly lease lines from BT or Kingston and supply customers with ‘voice and/or data services’ (ibid. 2004 b:78 ). Services related to LLU include access to MDF sites to allow insurgent operators to install and maintain equipment, and ‘co-location’, which enables a competitor to locate equipment alongside BT’s at an MDF, such that they can ‘connect to BT’s network and purchase LLU services from BT’ (ibid. 2004 b:78 ). OFCOM asserts that LLU is important as it allows competitors to innovate, diversify their products, provide increased bandwidth services and improve levels of service (ibid. 2004 b:79 ). In summary, the ‘concept of unbundled access to the local loop is an instrument for disciplining market power’ (Gabelmann 2000:2).

In reviewing the market for wholesale local access, OFCOM defined the relevant markets, in the first instance by specifying the relevant products. The main focus is the ‘wholesale supply of access to the metallic local loops’ that connect to end users. In the review they consider alternative methods of local access connection for voice and data services, such as those provided by cable TV companies and assess the extent to which they constitute an effective substitute (ibid. 2004 b:10 ). For example, ntl and Telewest have cable connections that have the capacity to provide voice and data services and there are alternatives such as a fibre connection, wireless links and mobile connectivity (ibid. 2004 b:12 ). The second dimension of market definition is to specify geographic boundary. In this case, the markets can be defined as:

• wholesale local access in the UK excluding the Hull Area; and

• wholesale local access in the Hull Area.

BT operates across the UK , except in the Hull area, where Kingston operates (OFCOM 2004 b: 3-4,17).

The second stage of the review attempts to assess the competition in the relevant market. OFCOM describes this as ‘market power assessment’ and as mentioned earlier, there is a focus on SMP (OFCOM 2004 b: 8,36). Section 78(1) of the Act states that

a person shall be taken to have significant market power in relation to a market if he enjoys a position which amounts to or is equivalent to dominance of the market (hmso.gov.uk 2003 a:section 78(1)).

In Article 14(2) of the Framework Directive, dominance is defined as

a position of economic strength affording the person the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers (hmso.gov.uk 2003 b:section 78(200)).

OFCOM discuss the Directive and asserts that a market is ‘effectively competitive’ only if SMP is not held by a communications company (single dominance) or companies (collective dominance) (OFCOM 2004 b: 36). They assess this by observation of three factors. First, ‘existing competitors’ are considered and OFCOM identifies the cable operators ntl and Telewest as the only companies with any ‘significant presence’ in the UK market excluding the Hull area8(ibid. 2004 b: 37). Figure 2 illustrates respective market share in terms of connection volume.

Figure 2: ‘Local access connection volume shares for the UK excluding the Hull Area’.

Adapted from (OFCOM 2004 b: 36).

Figure 2: ‘Local access connection volume shares for the UK excluding the Hull Area’

OFCOM conclude that the capacities of ntl and Telewest do not in any way limit BT’s market power and in any case, their services are only available in ‘50% of BT’s service area’ (OFCOM 2004 b: 39). Second, OFCOM assesses the ‘potential competition’, that is to say, possible market entrants. OFCOM concludes that it cannot foresee a ‘substantial’ new entrant to the market in the near future. The third issue considered is ‘countervailing buyer power’ (ibid. 2004 b: 41,36). This is described by Sloman as the power held by ‘powerful buyers’ to prevent price increases, which offsets the power held by a monopolistic or oligopolistic seller (Sloman 2003:186). This means that ISPs for example, who buy wholesale local access from BT, must have the capacity to ‘credibly threaten to switch their demand away from BT’ and OFCOM found that there is no purchaser in the market who has such power (OFCOM 2004 b: 42). These three factors considered, OFCOM concluded that ‘BT holds a position of SMP’ in the relevant market (ibid. 2004 b: 44). It also determines this for Kingston . BT responded with disagreement on several points, for example, the methodology used to define the market. Nevertheless, OFCOM appears to stand by its judgement and it asserts that ‘[a]ll other respondents agreed with Ofcom’s finding of SMP’ (ibid. 2004 b: 43).

Section 87(1) of the Act states that if OFCOM discovers SMP, then it is obliged to set conditions as it sees fit, in accord with the Act (OFCOM 2004 b: 49). This is the third stage of the review. According to OFCOM, without regulation, both BT and Kingston would lack incentive to supply wholesale services and this would undermine competition vis-à-vis supply of downstream services, that is, retail or intermediate services. Regulatory action is justified on the grounds that remedies will ensure competition and thus in turn consumers may benefit from ‘lower prices, wider choice of supplier, product differentiation and higher quality services’ (ibid. 2004 b: 51). Typically, in a liberalised market, regulators counteract market dominance through imposition of restrictions on the incumbent (Baldwin and Cave 1999:217). However, an alternative is to rely solely on competition law. For instance, the Competition Act 1998 seeks to ensure that enterprises compete on a ‘level footing’ by prohibition of anti-competitive practice (OFT9 no date available:1). Baldwin and Cave assert that during transition from a market with monopolistic tendencies, to one of open competition, price regulation can aid consumer protection (Baldwin and Cave 1999:222). OFCOM asserts that in this case, ex-ante regulation rather than ex-post competition law is appropriate and this assertion rests on identification of SMP, deeming a market as ‘non-effectively competitive’, such that ex-post competition law would be ineffective as it ‘prohibits the abuse of dominance rather than the holding of a dominant position’ (OFCOM 2004 b: 53). Therefore, intervention is required to ‘set detailed terms and conditions for access to […] networks’ (ibid. 2004 b: 52).

OFCOM considered and implemented the following options to remedy SMP.

Many of these options can be characterised as ‘disclosure regulation’, a ‘light-handed’ form of regulation that enforces information disclosure about prices and technical issues for example (Baldwin and Cave 1999:49). Option 3, ‘basis of charges’, is one important aspect of changes implemented. Ex-ante regulation is required to prevent BT or Kingston setting excessive prices, ‘to maximise their profits’, through increasing wholesale charges, which, in turn, insurgents must pass on through an increase in retail price, perhaps eventually forcing market exit. Intervention thus aims to move ‘the market towards a position where effective competition is realised’ (OFCOM 2004 b: 58). Table 1 illustrates a dramatic reduction in charges for a ‘fully unbundled line’, which gives operators full control of the line and ‘shared access’, access to the broadband channel alone. The ‘old’ charges date from May 2004, before BT reduced its prices voluntarily. The ‘final’ charges came into effect on the 1 st January 2005 (OFCOM 2004 c:1).

 

OLD

FINAL

CHANGE (%)

Shared access

 

 

 

Connection

£117

£34.86

70%

Rental

£53

£15.60

71%

Fully unbundled

 

 

 

Connection (transfer)

£88

£34.86

60%

Connection (new provide)

£265

£168.38

36%

Rental

£119

TBD

N/A

Table 1: Changes in LLU charges from May 2004 to January 2005

Adapted from: (OFCOM 2004 c:1).

BT pre-empted the enforced price cuts, in response to a threat by OFCOM to disintegrate its retail and wholesale divisions. In this context, the implications for BT are a ‘short-term dip in revenues’ (Datamonitor 2004:1) and as such BT has reacted, according to an anonymous industry insider, by undermining LLU and wholesale competition (anon. cited in Richardson 2005 a:1). Richardson asserts that effectively, BT is reducing its broadband prices ‘in areas where it will be competing head-on with LLU operators’ and as such, insurgents may be put under pressure (Richardson 2005 a:1).

Richardson refers to UKIF10 and it asserts that in OFCOM’s UK telecoms sector review, it ‘missed a golden opportunity to open up the UK communications market to greater competition, innovation and investment’ ( Richardson 2004 a:1). He continues and asserts that UKIF is confounded by OFCOM’s ‘hands off’ approach, limiting its intervention on ‘several enduring economic and technical bottlenecks’, which perpetuates BT’s dominance. UKIF asserts that OFCOM identify a need for BT to implement significant behavioural change, although it looks to BT to propose the basis of this (UKIF cited in Richardson 2004 a:1). In a sense, OFCOM’s behaviour can be explained by an ‘interest group’ theory (Baldwin & Cave 1999:21).

Theories such as ‘public interest’, ‘interest group’ and ‘private interest’ can be used to explain how regulation ‘arises, develops and declines’. In the public interest approach, advocates of regulation propose that its objective is to result in public benefit, in situations where, for example, the market fails to provide this benefit (Baldwin & Cave 1999:18-19,21). Advocacies of an ‘interest group’ theory might explain this regulatory change as a ‘competition for power’ seen to result from the interrelationships between groups, such as BT, ntl, Telewest, Bulldog and Wanadoo, and between these groups and government, in contradistinction to the ‘public-spiritedness’ of public interest theories. Bernstein’s vision bridges group interest and public interest approaches, such that regulatory action is understood as based on group negotiation, but simultaneously viewed as ‘pursuit of the public interest’ (ibid. 1999:21). However, a private interest theory may explain OFCOM and BT’s actions more appropriately. The ‘ Chicago ’ theory, as expounded by Stigler and Peltzman, emphasises diversion of the public interest through capture of the regulator (ibid. 1999:22) , a situation where the regulator is persuaded to act in the industry’s interest, rather than public interest (Sloman 2003:359). Essentially, because of BT’s monopolistic profits being subject to OFCOM’s disposal, BT has a private interest to ‘influence the regulator’ and thus, it may be that a market develops for regulation itself, such that BT captures the regulator, as its interests are seen as more valuable than OFCOM’s (Baldwin & Cave 1999:21-23). Bernstein’s ‘capture theory’ is oriented away from economic interests in favour of the forces associated with regulatory structure vis-à-vis temporal frame through a ‘life-cycle’ theory. In this context, OFCOM can be seen to have surpassed ‘gestation’, where it originated, in this case determined by issues surrounding contemporary communications, to ‘youth’. Although OFCOM presumably carries forth some of the experience and expertise of its previously disparate components, it is a new and converged regulator and as such, is susceptible to outmanoeuvre ‘by the regulatees’, through a lack of stability and inexperience and may therefore exhibit capture symptoms (ibid. 1999:25 emphasis removed).

An aggregation of the remedies implemented by OFCOM under the Act, serve to encourage investment and innovation and encourage UK-wide broadband services. BSG asserts that this is essential for the ‘long-term interests of consumers and competitors’ (BSG no date available:2). However, Richardson refers toVerwaayen and asserts that LLU could lead to a digital divide, with insurgents targeting the most profitable exchanges, thus, only urban areas would invite investment (Richardson 2005 b:1). In a sense, this is a form of ‘cream-skimming’, the act of only supplying to ‘the most profitable customers’ (Baldwin & Cave 1999:13).

Enders Analysis suggest that the new cost structures for LLU mean that BT’s retail arm will be competing with insurgents that have significantly less ‘DSL supply costs’ (Enders Analysis 2004 a:2), exemplifying that ‘downstream competition’ is often a function of ‘upstream inputs’ (BSG no date available:9). ISPs can either pass on the cost saving to consumers, or retain it themselves and in this context it appears that regulation benefits BT’s competitors and telecommunications consumers. Enders Analysis asserts that it expects BT to ‘find options to safeguard its retail broadband market share’ and it may do so by innovation in terms of launching new products and ‘marketing initiatives’, although they doubt that this strategy will be effective, ‘given that price, to a considerable extent, rules the market’ (Enders Analysis 2004 a:1-2). They assert that product innovation and further erosion of retail price will grow the UK broadband market and this may increase DSL share to the disadvantage of cable operators, although it asserts that the latter have thus far offered ‘a richer product set with more aggressive pricing’ (Enders Analysis 2004 b:1-2).

Richardson asserts that uptake of broadband in 2004 has ‘almost doubled’, there is an ongoing decline in charges and an increase in users connected. He asserts that at the beginning of the year, there were 3.2 million connections in the UK , rising to more than 5.7 million connections (including cable broadband) at year end. ISPs have reduced prices and often simultaneously increased bandwidth and Richardson asserts that BT’s market share is falling as insurgents ‘introduce more flexible [,…] innovative […] and cheaper products’. He asserts that ‘this means little to those who can’t get broadband’, although, BT ‘extended the reach of its broadband service’, enabling another million DSL connections and by summer 2005 99.6% of UK residencies and businesses should have broadband availability ( Richardson 2004 b:1). So, on average, it does appear that regulatory developments have been in the public interest, but perhaps weighted to more profitable areas.

In conclusion, it can be seen that issues related to electronic communication, such as convergence, have created a need to reconfigure and develop new regulation. The five European Directives provide a framework for European harmonisation and are incorporated into UK law through the Communications Act 2003, which aims to promote a competitive communications market and one which increases universal access for a diversity of high quality, affordable services. OFCOM oversees the Act and to achieve its aims must promote competition, encourage investment and innovation and particularly in this case, promote broadband.

OFCOM’s ‘review of the wholesale local access market’ is one of many periodical reflections that assesses competition in a market and the appropriateness of regulation in light of market conditions. This review concerns BT and Kingston ’s provision of local loop services to competitors. The local loop connects the consumer with the exchange and can be described as a bottleneck, as without regulation incumbents would prohibit access to competitors. In order to promote competition, local loops are unbundled, such that competitors may, subject to a fee, co-locate their equipment with the incumbent and assume full control of the loop or share access and in turn they can supply consumers directly.

Through an assessment of competition in the relevant markets, OFCOM discovered that BT and Kingston hold significant market power. Thus OFCOM implemented several remedies in an attempt to ameliorate this. It appears that OFCOM looks first to ex-post competition law and then ex-ante regulation where it is necessary. Many of the remedies relate to transparency of operation, through information disclosure. One important change is a reduction in charges to insurgent operators for access to the local loop. It appears that this can be described as price regulation. BT voluntarily reduced its prices before enforcement, as a response to a threat by OFCOM to divide its wholesale and retail operations. In light of the changes BT has sought competitiveness by undermining LLU and competition by price reductions to undercut competitors, but only in areas that are highly competitive. This is coupled with innovation of new products and marketing systems.

‘Broadband is a powerful enabler and a catalyst for accelerated change for consumers, companies, organisations and nations’ (BSG no date available:4). Richardson asserts that broadband connections and choice are increasing, whilst prices are falling and so it does appear that the current regime disadvantages BT in favour of its competitors and in turn, on ‘average’ this appears to benefit consumers. Thus, it could be considered that OFCOM is achieving its overarching duty as laid out in section 3(1) of the Act and to an extent this exemplifies the importance of innovation and regulation of information and communication technologies.

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1 According to Darlington, ‘the Communications Act 2003 is a formidable piece of legislation: 411 Sections and 19 Schedules running to 590 pages. It actually weighs in at 3 lb or 1,350 grams. The Explanatory Notes run to another 235 pages’ ( Darlington 2004 b :2).

2 The white paper is entitled ‘A New Future for Communications’ (Hewitt & Jowell no date available:3).

3 Universal access or universal service concerns ‘access to a defined minimum service of specified quality to all users everywhere, and in the light of specific national conditions, at an affordable price’ (European Commission cited in Hawkins et al. 2002:245-246). In the context of the UK, a universal service obligation (USO) means that BT and Kingston are charged with funding and ensuring provision of affordable basic telephony services, including Internet access, although not broadband, to all UK ‘citizen-customers’. A USO attempts to ensure that these services are available to those who cannot afford them or who may live in an area that is uneconomic to serve (OFCOM No date available:3,5-6).

4 Whereas competition law applies to all industries, sector-specific regulation is tailored to economic sectors such as telecommunications (Norton Rose no date available:1).

5 This is a ‘Digital Subscriber Loop Access Multiplexer’, which terminates ‘DSL enabled local loops’ and is comprised of DSL modems/multiplexer that converge many loops into one ‘data path’. DSL (Digital Subscriber Line) also known as xDSL, are technologies that have the potential to transform local loops into ‘high-speed digital lines’. ADSL (Asymmetric Digital Subscriber Line) is a variant of xDSL (OFCOM 2004 b:213 ).

6 Broadband Stakeholder Group.

7 An incumbent is a firm that holds key assets and control in an industry. BT exemplifies this in the wholesale local access market and is likely to employ an incumbent strategy to retain ‘control of their dominant position’ by meeting competitive threats with ‘creative strategies’ such as ‘reconfiguration of assets that in the past have proved to be stable sources of competitive advantage’ (Mansell & Steinmueller 2000:24-26). An insurgent strategy aspires to compete with incumbents, often through introducing innovation, in such a way as to threaten incumbent positions or develop new markets, ‘with the aim of mass-market acceptance’ (ibid. 2000:29,32).

8 In the Hull area, Kingston supplies about 100% of the market (OFCOM 2004 b: 44).

9 Office of Fair Trading.

10 United Kingdom Internet Foundation.

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