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U.K. leapfrogs the U.S. in deregulation.


Recently the world witnessed a rare changing of the guard: Margaret Thatcher, Britain's Prime Minister, resigned as Britain's most well-known PM since Sir Winston Churchill.

But regardless of the circumstances surrounding Mrs. Thatcher's departure, one thing is certain: the telecommunications industry in Europe is indebted to Mrs. Thatcher and her advocacy of deregulation and competition in telecommunications.

Perhaps Mrs. Thatcher's most important legacy appeared back in early November, 1990, around the time she left 10 Downing Street. The British Department of Trade and Industry issued a white paper called "Competition and Choice: Telecommunications Policy for the 1990s". It is currently being reviewed by many of the key players in Britain's telecommunications industry.

And just as significant is the impact of this document on the U.S. telecom industry.

This month's column briefly examines the key points of this very significant proposal, and its impact on both the U.S. and U.K.

The British analysis will be offered by Peter Gentle, Managing Director of PCG Services, a telecom consultancy based in Ipswich, a suburb of London.

Peter and I are partners on numerous telecom projects, in the spirit of global cooperation (and capitalism).

Total Competition

The new proposal is revolutionary because it recommends full competition in U.K. telecomm markets, including local, long distance and international services.

Also proposed were legalization of international carrier service reselling and provision of private two-way satellite networks.

Further proposals include the establishment of equal access provisions for all long distance carriers, and permission for cable television companies to offer telephone services.

Although the proposal is currently being reviewed by users and other interested parties, it has far-reaching effects on the telecom industries in the U.K. and U.S.

U.K. View

From the U.K. perspective, developments leading to the proposal are noteworthy.

According to Gentle, "Much has been achieved in the U.K. over the last seven years in competition. And we all naturally think of Mercury Communications, Ltd. (MCL), the competitor to British Telecom (BT)," he said.

"But are we in a fully competitive market? Not really."

Based on current service levels, Gentle told me that present interconnection arrangements between BT and MCL make it possible for only about 75 percent of the country's subscribers to access both carriers.

"Thus we can conclude that 25 percent of the country is still in a monopoly situation," Gentle added.

To complicate matters further, Britain also has a small independent carrier, Kingston Communications, located in Kingston upon Hull.

This carrier provides local exchange service, and interconnects to both BT and MCL for long distance.

Britain also has two cellular mobile carriers, four Telepoint (one-way mobile communications) operators and three personal communications network (PCN) organizations.

During 1990 resale of long distance service became possible and cable television franchises were sold to numerous consortiums, many funded by U.S. regional Bell companies (RBOCs).

"Already four of the cable companies have been authorized to offer telephone services," he said, "but they must currently connect directly into a long distance carrier's network, as they cannot now provide users with switched access into our two carriers."

That will all change with the new proposal.

In the new environment, assuming it gets passed, cable TV operators will be able to expand their ability to offer phone service along with entertainment.

"They will be able to install their own local switches," Gentle said, "which can let subscribers decide which carrier to use, like in the U.S."

But problems are beginning to surface.

Gentle asks, "Will residential subscribers take advantage of the broadband facilities that could enter the home?"

So far the interest in this has been small.

Further, residents are not happy about their roads being torn up by cable construction crews.

"The average U.K. home is satisfied with four TV channels," he added, "and they will need to be educated on new services that are more than just entertainment."

Other questions deal with rights of way, particularly with fiber cable placement and emergence of additional long distance and international carriers.

But according to Gentle, "It is indeed encouraging to see both network competition and equal access, both supported in the user community, in the proposal."

Satellite Networks

Another important aspect of the new proposals is the opportunity for users to build two-way private satellite networks.

Currently, users in the U.K. can receive satellite signals of any type, but cannot transmit.

In the proposal, the government would issue licenses to anyone wishing to construct a two-way private satellite network, provided either end does not interconnect with a public telephone network (comments are being invited on this issue as well).

Still other issues involve interconnection of major long distance carriers with local public telcos. While that issue has been resolved technologically, a new one appears: the numbering plan.

Gentle asks, "The question here is whether each carrier will have its own numbering scheme, or will each subscriber have a 'number for life' that moves with them wherever they go?"

Effect On U.S.

While these issues are being analyzed over in the U.K., the impact of this proposal could have a significant impact here in the U.S.

First, approval of these recommendations lets the U.K. in effect leapfrog the U.S. in progressive regulatory actions.

Will this mean the FCC is likely to move more quickly on AT&T's pleas to be less regulated? Will the Justice Department and the next Congress move to reduce MFJ (Modified Final Judgment) restrictions on the RBOCs? Will the states favor less regulation than in the past?

The answer to these and many other questions is most likely "no". At least for the present.

While the jury is still undecided on the short and long-term impact of unregulated and fully competitive telecom service in the U.K., companies here in the U.S. are not waiting for the outcome. Already five of the seven RBOCs (not Bell Atlantic and BellSouth) are investing in start-up cable TV franchises.

Estimates on investments in local access facilities (e.g., broadband over fiber) range upwards of $3.0 billion through 1993.

RBOCs will be moving aggressively to leverage their considerable expertise in transmission to create local networks that combine cable TV and telephone services over the same facility (which they are currently prohibited from doing here).

Is our restrictive regulatory system encouraging RBOC investment dollars to leave the U.S.?

In the U.K., RBOCs can offer virtually any kind of service they want: local, long distance, entertainment and other enhanced services.

Curiously, the U.S. investment in Britain is already so significant that the U.K. Office of Telecommunications (OFTEL) estimates that more than 95 percent of all U.K. cable TV franchises have RBOC investments (and heavy ones at that).

And naturally, the U.K. is delighted with RBOC investments because they will bring competition to the U.K. and, more importantly, a much-needed infusion of capital into the country's sluggish economy.

Users will have more carriers and service providers from which to choose; this should keep prices down and encourage development of new services.

On the down side, BT has said it thinks RBOC investment in the U.K. is unfair because BT cannot participate in the U.S. switched local access market.

British end users note that while increased competition is good, they also do not want to see British firms hurt by the new competition.

And perhaps competition may not occur to the extent envisioned by the proposal's authors.

BT has an enormous, well-established network.

The company so dominates the business that it may take years for upstart carriers (even those funded by RBOCs) to make even the slightest dent in BT's (and Mercury's) networks.

But the message is clear. The industry is changing. We are witnessing the dawn of a new era in telecommunications.

Thanks for the legacy, Mrs. Thatcher.
COPYRIGHT 1991 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Kirvan, Paul
Publication:Communications News
Article Type:column
Date:Jan 1, 1991
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