UK telecoms regulator Oftel has forced BT to provide ST FRIACO, a new unmetered Internet product.
Oftel, the UK regulator, has forced incumbent telco BT to offer a new product called ST FRIACO (single tandem flat rate Internet access call origination) to ISPs. The service will allow ISPs to provide consumers with unmetered dial-up Internet access, with BT carrying calls from the customer’s home, via its local exchange, to the nearest main regional exchange for a flat annual fee.
BT already offers FRIACO, which carries traffic from the customer’s home to the local exchange for a flat annual fee. However, this is only useful for ISPs that have a national telecoms network and so can carry traffic from the local exchange directly to the Internet. Smaller firms that do not have their own national networks still have to pay to transport calls from the local exchange to their base – so ST FRIACO should be a boost for them.
However, it still won’t address the imbalance between larger and smaller ISPs. While the local nature of FRIACO was a problem, a much more serious problem is that for both products, BT requires firms to provide a large number of subscribers before they can sign up. As small local ISP Cloud Nine pointed out last month, BT’s pricing policy means that FRIACO is viable only for larger firms such as AOL and Freeserve with subscribers numbering in the millions.
AOL and Freeserve also have market power. Although they won’t be able to negotiate a cheaper rate with BT, since it must charge a flat fee of GBP589.74 per 64kbit/s switch, they are certainly more able to compete in marketing and advertising their products, as well as offering portals with more compelling content.
In the longer term, the larger ISPs win again. High-speed DSL access will become more prevalent over the next few years. Since this also requires ISPs to connect with local exchanges (whether the connection to the home is via BT or through other telcos’ equipment in BT exchanges), the dominant players will win out again. The leading operators in UK DSL access at the moment are BT, AOL and Freeserve – by a huge margin.
