The British Government’s Office of Telecommunications regulating body, is poised to announce that it is to scrap a controversial plan to regulate the Internet services businesses of telecommunications license holders in the UK, including British Telecommunications Plc, Cable & Wireless Plc and AT&T Corp, writes Andrew Lawrence. The decision effectively means that all of the UK’s 150 to 200 Internet service providers will continue for the time being – to escape any form of regulation. The Office drew up plans early in 1996 to classify Internet service provision as a core telecommunications activity, apparently in response to arguments that data and voice networking could no longer be regarded as separate technologies or businesses. Under the new rules, telecommunications license holders, such as telephone companies and cable companies, would have been more tightly regulated, while smaller Internet service providers would mostly have been classed as their customers. Internet service providers in the UK, led by the Internet Services Providers Association and the London Internet Exchange, have been lobbying fiercely against the proposed change since it was put forward in June 1996 – not because they are against regulation per se, but because a quirk of UK telecommunications law meant the change would have given an unfair advantage to those suppliers with a telecommunications license. Under the current laws, the telecommunications license holders are allowed to buy access to lines at a 10% discount as a reward for having invested in the telecommunications infrastructure. But at present, they are not allowed to buy Internet lines at this discount, because Internet services are not classified as core telecommunications activity. The watchdog now accepts that the proposed rule change, which was intended to level the competitive environment under its own watchful eyes, would in fact have made it more unfair by enabling bigger suppliers access to cheap lines. Smaller Internet service providers in the UK will be relieved that the plan is to be dropped. Many operate their core service at gross margins of little more than 10%, so British Telecom could have offered Internet services to the public at less than other Internet service providers could actually buy them for. Ultimately, they would either have been put out of business, or they would be forced into a reseller arrangement with British Telecom. British Telecom’s stance on the rule change has not been clear: while some managers had wanted a chance to buy lines cheaper, most executives believe that it would be better to compete on a level playing field with the rest of the Internet industry. This Oftel decision is most unlikely to be the end of the matter. The regulator says that it believes that the Internet businesses of the larger telecommunications companies need to be regulated, at least until the monopoly position of British Telecom in local markets is eroded.
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