Deregulation fails to answer phone calls…

Deregulation fails to answer phone calls…Why is it that in the UK we have to pay more for our phone calls than the rest of Europe? Deregulation was supposed to sort that out. Richard Wilson examines the evidence
Britain has prided itself over the last dozen or so years on having one of the most open and highly competitive telecommunications markets in the world.
We have been persuaded into believing that a free-market in telecommunications services will inevitably drive down prices by forcing companies to be more competitive. But it has not worked in the UK’s deregulated telephone market, and what is more worrying for phone users is that the future telephone market in this country looks like it could become less, not more, open.  
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It seems that after a dozen years of free-market competition for both fixed line telephones to the home and for mobile phones the British telephone user has been ripped-off. That was the view of the man who up until this year was responsible for ensuring fairness reigned in the UK’s telephone market.
BT and other telephone operators hotly dispute the merest suggestion that the cost of calls may be unjustifiably high. But last December a few chickens came home to roost when the new industry regulator at Oftel accused BT and mobile phone operators Vodafone and Cellnet of overcharging customers and ordered them to slash the price of calling mobile phones by 25 per cent.
The inevitable conclusion is that deregulation of telephone services has not worked as effectively as we might have expected.
The UK telephone market has more public telephone operators and more mobile phone companies than nearly any other country outside of North America. However, after more than a decade too much competitive power still remains in the hands of too few companies.
Market leading operators like BT, Vodafone and Cellnet literally call the shots and the regulator Oftel seems less than determined to act.
Only last week DTI loosened the regulatory controls on BT a notch further by allowing the telephone operator to bid in its own right for a new mobile phone licence. This effectively removes a 10 year old restriction originally placed on BT by Oftel in the interests of broadening competition in the mobile phone market.
And before too long the situation looks likely to take a further backward step.
Oftel may have ordered a pre-Christmas cut in call-charges, but it is not prepared to tackle the relatively high cost of telephone calls by opening up the market to even greater competition.
It is the level of cut-throat competition allowed in the US, which has driven telephone charges down and Internet usage up.
Significantly, even the European Union, traditionally bastion of monopolistic telephone operators, is now considering drastic plans to open up the provision of telephone lines to greater competition. (See Electronics Weekly February 3 1999).
If the EU follows through on those plans the cost of using the telephone and the Internet will plummet across Europe, but not in the UK.
Oftel has been dismissive of EU plans to compel market leading operators to rent lines to rival firms at cost prices. This is what already happens in the US and the benefits to the customer are obvious. But if Oftel gets its way then it will not happen here. Potentially making a mockery of the UK’s deregulated telephone market.
The regulator’s argument is that the provision of telecommunications services is a high cost activity, requiring high levels of investment. If the market is divided up between too many smaller operators the ability to invest will be threatened.
This may be a valid objection if it were not for the fact that the competitive US market seems to break the rule. Not only does it have the lowest telephone charges in the world, but its operators are the most advanced at introducing broadband services like ADSL and cable modem technology.
Oftel seems to accept that the provision of telephone services will remain the preserve of a small number of operators then the pressure to drive down the cost of telephone connections will be considerably less than in most other countries of the world.
Well, what’s new? In Britain we have grown accustomed to paying more than our European neighbours for most things.


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