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July 24, 1990

BRITISH RAIL PLAYS FOR HIGH STAKES IN BATTLE TO WIN EAR OF COMMUNICATIONS REGULATORS

By CBR Staff Writer

BR Telecommunications Ltd, the company brought in to being to exploit the massive telecommunications resources of its parent organisation British Rail (CI No 1,403), is not aiming to break the British Telecommunications Mercury Communications duopoly, up for review at the end of 1990. Quoting from the Beyond the Duopoly report commissioned by BR Telecom, its managing director Peter Borer stated that a third national public telecommunications operator with statutory powers and service obligations should not be licensed; instead, Borer called for a new category of licence to allow operators of large self-provided networks to sell spare capacity on those networks. These network operators, he went on, should be permitted to connect equipment to the public switched networks but would be conferred no statutory powers. The report’s recommendations are based on three assumptions: firstly, the pragmatic belief that a third licence will not be granted anyway; secondly, that even if it were, the UK market is not large enough to support three national operators; thirdly, that while Mercury had been a positive success on a national and international scale, its performance at the local-loop level has not just been weak, but in the words of a BR Telecom spokesman, blatantly poor. According to the report, this has resulted in demand for private circuits, especially in the local area for external extensions and for access to local nodes of value added networks, clearly outstripping supply – hence the recent price increases. Borer, who was previously with the Hull-based independent operator Kingston Communications, continued that if BR Telecom was granted the special telecommunications operator status that it wants, it would offer its resources to local cable television operators, corporate private networks and cellular radio operators – all of which were crying out for 2Mbps circuits – the Personal Communication Network providers, and to a number of resellers. It would also continue to make its network space available to British Telecom and Mercury, which already has a fibre optic leasing deal with BR Telecom. Examples of the services that BR Telecom could provide were dark unconnected – fibre leasing to PTTs, Personal Communication Network operators, video and broadband service providers and resellers; the provision of 2Mbps and 8Mbps digital private circuits to cable television operators; virtual private and shared networks with distance- and usage-independent tariffs; and later, 140Mbps private circuits for applications such as video and remote computer aided design. With 11,000 miles of cables – including 1,600 miles of fibre – 65,000 telephone extensions, 586 local area networks, 275 exchanges of which 70% use the digital DASS 2 and DPNSS protocols, and 11,000 data terminals, British Rail’s telecommunication resources are estimated at a conservative several hundred million pounds: BR Telecom has bought a concession valid for a minimum of 25 years that gives it all the rights to the network over all British Rail land. The concession includes rights to the UK portion of the proposed Union International de Chemins de Fer pan-European telecommunications network, which if realised would link up the telecommunications resources of Europe’s railways; a deal has already been signed with Union-member Eurotunnel ultimately to allow the British Rail tranche to link to the rest of Europe.

Infrastructure

As a whole, BR Telecom reckons that to provide the range of services listed above, around UKP200m to UKP400m per annum of investment is required, and is looking towards the private sector to raise much of this money – initially, this is most likely to be through the sale of equity stakes, and Borer revealed that he was already in talks with a number of potential investors – not surprisingly, any deals would depend on whether BR Telecom gets its licence in the first place. Borer is looking to turn over some UKP100m of business in the first year of operation; if it doesn’t get the licence it wants, BR Telecom will simply take over a

ll of British Rail’s business telecommunications requirements, and make its infrastructure available to other operators on a much less ambitious scale. Mark John.

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