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  1. Technology
February 7, 1989


By CBR Staff Writer

By Andy Evagora

The UK Office of Telecommunications has issued a discussion document on the future of leased line networks, saying that it wants network builders to be free to bring third parties onto their networks, for speech traffic as well as data, and to be free to sell on surplus capacity. The release comes after the raising of charges for leased lines by British Telecommunications Plc to levels where it will not be possible to derive more than a modest profit on reselling spare capacity on them.

The Office of Telecommunications has been reviewing the Branch Systems General Licence, BSGL, and Value Added and Data Services, licence, VADS, since the middle of last year, looking at the desirability of reducing the regulations in these licences; it also looked to the possibility of reducing the restrictions on the way in which private telecommunications systems can be connected with each other, and with the public telecommunications systems. A draft licence – a new Branch Systems General Licence to take the place of the existing BSGL and VADS licences – has been prepared to accompany the consultative document; the draft proposes a set of possibilities to focus comments. Oftel also looked at the fair trading rules, in the hope of finding means of simplification, and covered the possibility of permitting the simple resale of circuits leased from the public telecommunications operators. On June 30 1989 the restrictions on fixed link public telecommunications operators that bar them from allowing private circuits which they have provided to be used for simple resale, will be lifted. Although Oftel is considering issuing a new licence that would replace both the existing Branch Systems General and Value-Added Data Services licences, the former, it is proposed, should be replaced by a new licence, while the Value-Added licence would continue, but become largely redundant. Oftel highlights a number of considerations deemed relevant to a decision on the extent to which private circuits should be liberalised. Competition is one, with the Office considering that liberalisation would bring extra competitive pressures to the marketplace. Simple resale would offer possibilities for adding an extra layer of competition for basic telephone services; Oftel welcomes comments from the telecommunications industry on this area. Another benefit of removing existing restrictions on bypass is that they involve arbitrary boundaries which are difficult to govern. Oftel adds that the introduction of new services, such as Centrex, by public operators makes it difficult to establish fair competition between public operators and suppliers of call routing apparatus – thus public operators can provide network configurations not allowed to private systems because of restrictions, such as those on numbers of bilateral private circuits. The solution of accepting undertakings from public operators that they will provide new services in ways that respect notional restrictions in conformity to those applicable to private systems is considered unsatisfactory, mainly because it is said users’ needs can best be satisfied by allowing additional freedom in use. The complexity of present rules represents another salient issue: Oftel agrees the present restrictions frequently result in problems to suppliers of equipment in relation to the design of equipment or software. The original purpose of restrictions on bypass, it says, was to prevent the need for excessive adjustments to prices. Oftel consequently took serious consideration of the extent to which prices have now reached a better balance in relation to costs, removing the need for sharp adjustments. Oftel says that British Telecom is making a rate of return on investment that is broadly reasonable; but although Telecom has narrowed the imbalance between charges for local and long distance telephone calls, a substantial imbalance remains between call charges on the one hand and exchange line rentals and connection charges on the other – thus a considerable subsidy still flows from call charges to exc

hange line provision. Oftel believes that there is now no strong case for delaying additional liberalisation measures because of any disruptive effects on the price structure that might follow. From this point the burden of proof as far as liberalisation is concerned rests on those who argue against it: any such case, it is said must rest on carefully constructed financial modelling. Liberalisation may not need be delayed on the grounds that it would effect British Telecom’s ability to provide the necessary cross-subsidies to support the provision of exchange lines, or on Mercury Communications Ltd’s ability to meet its licence obligations. An alternative may be to impose a surcharge on private circuits so that they contributed to the subsidisation of exchange line rentals in the same way as existing long distance telephony charges that might be displaced; Oftel notes that a precedent already exists in British Telecom’s structure of charges for Access lines. Oftel believes that eventually prices will move closer to costs, removing the need maintain surcharges; again Oftel is looking for industry’s views on the matter. Oftel also examined the nature of the Fair Trading regulations; conditions for the Value-Added and Data Services licence have caused concern, particularly with respect to the number of conditions providers must adhere to. One difficult area centres on the fact that organisations that do not supply value-added services in a commercial manner to third parties may nevertheless be subject to the fair trading regulations. These organisations include those that are members of closed user groups because they wish to allow suppliers to have access to corporate databases. Oftel argues that applications of the fair trading restrictions are questioned by the difficulty of separating the telecommunications service element from the wider element of service provided by the system’s operator.

Overlap Another problem identified is that arising from the overlap between the Branch Systems General and Value-Added Data Services licences, which could lead to unfairness among different service providers. Oftel will recommend that any new Branch Service licence should incorporate the condition on Open Systems Interconnection standards for major service providers, with an allowance for choice of standards where several such standards could apply in relation to a given service. It will also recommend retention of the condition relating to advance notice of changes to means of access.

Further Deregulation For Business Users of Public Telecommunictions Systems – a Consultative Document can be had from Office of Telecommunications, Atlantic House, Holborn Viaduct, London EC1N 2HQ.

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