What the ADSL is going on?

Opinion

What the ADSL is going on?

Users wait for broadband Internet access as Oftel is slammed by communications managers for weak regulation. Guy Campos reports

Is David Edmonds, the man who runs Oftel, a watchdog or a lapdog by temperament? That is to say, does the telecoms regulator have the nerve to make BT act in the customers' interest or is he a soft touch?

The question matters because businesses need cheap ADSL broadband Internet access to make the much-vaunted e-business revolution a success. But firms represented by the 2,000-member Communications Management Association (CMA) are extremely frustrated by BT's delay in rolling out ADSL services, according to a survey released last week.

The business managers questioned believe Oftel has been too slow to force BT to introduce ADSL. Likewise, they believe Oftel has been too slow to give BT's competitors the right to enter the company's local telephone exchanges and provide alternative ADSL services from them.

CMA members believe BT needs to be pushed to introduce ADSL because it has lucrative ISDN and leased line businesses that would suffer from the introduction of cheaper broadband access. It also needs a push to allow competitors into its exchanges because this might prevent it from establishing a dominant position in the ADSL market.

It is not just in the UK that the incumbent telephone company is under pressure to "unbundle the local loop", the term used to describe giving competitors access to the last mile of copper wire from a local telephone exchange to a customer's office or home. The European Commission is in the process of forcing telephone companies all over Europe to unbundle their local loops.

But some European countries have acted ahead of the UK, most notably Germany and Denmark. In Belgium, even without unbundling of the local loop, favourable conditions for cable companies have provided the competition that forced the main Belgian telephone company to roll out ADSL services two years ago.

Oftel has accepted the argument from BT that some exchanges are simply too small or are not secure enough for the placing of competitive equipment.

But Mark Naftel, a solicitor at law firm Norton Rose acting for a would-be ADSL competitor from America, said this is nonsense. Modern digital telecoms equipment takes up to 90% less space than the old-fashioned analogue equipment that came before it.

Even Edmonds himself acknowledges that, looking at the affair in retrospect, he should have acted "tougher and sooner" against BT. The question is: why didn't he?

Critics say it is in the nature of the man - a civil servant by training - to seek consensus and avoid rocking the boat. Edmonds was appointed in 1998 at a time when BT enjoyed a cosy relationship with the Labour Government, following the company's offer to provide free Internet access to schools. The company would have lobbied hard for a more emollient choice than his immediate predecessor Don Cruickshank, an abrasive character who had tested the limits of Oftel's powers in dispute after dispute with BT.

Cruickshank was a sceptical man who simply did not believe BT when it put forward reasons why it couldn't meet his demands. He ordered the company to do things that he was told were impossible. As a result he had no friends in BT but he got results.

The CMA accepts that being director general of telecoms is a difficult job to hold down. Regulations are complex, information is provided only slowly by companies with an axe to grind, and Oftel itself does not have enough staff to keep on top of BT.

Oftel lives constantly with the prospect of having its decisions subjected to judicial review or referral to the Competition Commission.

BT appealed twice to the Competition Commission against decisions by the former director-general Cruickshank. On both occasions Cruickshank fought them all the way and won. But a less aggressive personality would not be as likely to seek confrontation.

It is not just a question of one man, however. Many experts believe that Oftel needs more than its current tally of 210 staff to keep tabs on BT and other companies because the telecommunications market is exploding in size and moving at a faster speed than anything the civil service and even business itself is used to.

"The problem is that this is a presentational matter and it would be very easy for critics to say that the cost of regulation and the number of bureaucrats is increasing all the time," said CMA director-general David Harrington.

More power

Harrington feels that something - be it more power for the regulator to receive access to all of BT's documents or more staff to analyse the information - is needed to combat the company's delaying tactics.

Otherwise Oftel will continue to be stuck in a cycle of requesting information, receiving unhelpful data or only part of what it needs, requesting the information all over again, and then not sorting out the problem until years after it becomes apparent to customers.

Oftel itself is unlikely to be around in its current form once computer-telecommunications convergence takes place. The Government is due to publish a white paper later this year which is expected to feature a proposal to merge Oftel with other regulatory bodies covering broadcasting technology following media convergence.

In the meantime, British businesses are still waiting at the end of the line for the cheaper broadband network access that would make Britain a better place for e-business.

Comment: Experts give their verdict on Oftel

Jim Norton

Head of e-commerce policy, Institute of Directors

"Oftel has signed up to an agreement with BT about the timing of the unbundling of the local loop that it must be quite embarrassed by, but then I've got things wrong in the past too. I think they listened to BT too much and I don't think they should believe all they are told. But they were probably starved of resources and to resolve the question of whether or not exchanges have the space for competitors' equipment you would need a squad of people going round the country and inspecting them."

Robin Bloor

CEO of Bloor Research

"To be fair to Oftel it has got a particularly difficult job to do. It is sitting over what is effectively a monopoly telephone company and has to deal with the negative behaviour that is typical of telephone companies the world over - the tendency to sit on new technology in the hope of milking profits out of existing investment.

The telephone companies should have rolled out ISDN a decade ago and ADSL should be all over the place by now. Oftel has had years to get a reasonably competitive marketplace into shape and it always seems to be late."

Tony Lavender

Principal consultant (business strategy and regulation), Ovum

"Oftel got its strategy right but its tactics wrong.

"It established its unbundling strategy in 1998 but then tried to negotiate with BT. Oftel probably thought it was the right thing to do to get a positive outcome and that you shouldn't intervene if you don't have to. But it didn't put enough pressure on BT to get things done soon enough. Oftel was also slow to react to proposals from the European Commission earlier this year on unbundling. I don't think it realised how serious this was."

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This was first published in October 2000

 

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