UK telecommunications regulator Oftel thinks that its ‘let the market decide’ policy on consumer internet access has been vindicated in recent weeks, with dozens of new pricing models arriving. In a memo to the Department of Trade and Industry’s e-commerce inquiry, Oftel said that the rapid changes which are taking place are indicative of a competitive market and that regulatory intervention would be inappropriate.
The watchdog said there are now about 150 subscription-free ISPs in the UK, and the number of companies charging subscriptions but giving free calls is rising. Subscription-free ISPs make their money by taking a cut of the interconnection fee British Telecommunications Plc must pay to the network operator which terminates the ISP call. These ISPs take advantage of the fact that UK consumers must still pay for calls on a per-minute basis.
The first of these services started in September last year and, three quarterly phone bill shocks later, the market space for unmetered or toll-free access has emerged. BT Internet, The X-Stream Network and small telco Localtel Ltd all now offer unmetered access at certain off-peak times. These services make money in different ways. BT charges a monthly subscription and X-Stream takes advertising, while Localtel makes its customer sign their voice billing over from BT.
A number of other services using the BT model are soon to become available. In the meantime, dozens of services dubiously marketed as free have arisen, many of which can be more expensive than the subscription-free services. Some services offer credits-based accounts, where toll-free calls can be collected when users spend a certain amount of time on metered dialup. Some offer toll-free calls limited to short periods, often under ten minutes at a time. Campaigners argue that this is just as bad as metering. Most of these services are very small scale and, one could argue, strictly for the gullible.
Oftel is aware that the consumer is now looking for unmetered access, and reckons that out of the myriad of business models and banners screaming free the customer will eventually get what he’s looking for. The watchdog said, Oftel does not mandate that charges should be time-based. The problem, Oftel says, is that an operator cannot offer unmetered access while the interconnection between BT’s local loop and the terminating network is still metered. Operators could get around this through negotiation with BT, but Oftel would force the incumbent telco to offer the same deal to all ISPs that want it.
BT is unlikely to support that idea. It currently says that its planned rollout of ADSL later this year, which would offer unmetered net access for fixed monthly fees, will be shelved unless Oftel gives it a three-year monopoly on the technology. BT says its investment in ADSL cannot be justified if it is forced to allow its rivals access to the local loop (06/29/99). Oftel seems likely to reject that proposal, instead favoring opening up the local loop, virtually a BT monopoly, to competitors wanting to install ADSL themselves. BT’s position could be untenable, as a delayed ADSL rollout could give cable companies the edge on high-bandwidth home access. Cable operator NTL is already rolling out cable modems in selected areas of the country, with a view to going national in the next 12 months.
In the meantime, Oftel is pushing the metered access model as the way to spur competition. Most subscription-free ISPs use Number Translation Services (NTS) for dialup – where, for example, a user pays a local or toll-free rate for a national call. There are currently around 99 NTS price points, but ISPs tend to use the 0845 or 0345 local-rate prefixes for their services. Oftel says there is no inherent reason why this should be the case. The number of price points will increase to 9,999 by the end of the year, giving ISPs the chance to raise or lower prices by changing the NTS number subscribers use for dialup.
