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IMPLEMENTING THE AID: OFTEL CONSULTATION ON GUIDELINES

IMPLEMENTING THE AID: OFTEL CONSULTATION ON GUIDELINES. BT’S PERSPECTIVE PAUL RICHARDS RAD July 8th 2002. OUTLINE OF PRESENTATION. The Scope Of BT’s Response OFTEL’s Objectives The Nature Of Innovation Vertical Relationships, Pricing And Exclusionary Abuses.

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IMPLEMENTING THE AID: OFTEL CONSULTATION ON GUIDELINES

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  1. IMPLEMENTING THE AID: OFTEL CONSULTATION ON GUIDELINES BT’S PERSPECTIVE PAUL RICHARDS RAD July 8th 2002

  2. OUTLINE OF PRESENTATION • The Scope Of BT’s Response • OFTEL’s Objectives • The Nature Of Innovation • Vertical Relationships, Pricing And Exclusionary Abuses

  3. The Scope Of BT’s Response: (1) Main Response • Legal Context • Powers And Duties Of NRAs • The AID And Competition Law • The Economics Of Access • Access Obligations And Market Evolution • Pricing For Access And Interconnection • Application • Role Of Regulation • Feasibility Assessment For Operators

  4. The Scope Of BT’s Response: (2) Appendices • Legal Assessment (consultant) • Comment On OFTEL’s Market Power Designation For Broadband (consultant) • Innovation And Emergence Of Next Generation Networks (BT) • Nature Of Competition In Innovative Markets And Implications For Access Regulation (consultant)

  5. OFTEL’s Objectives:(1) Overall Framework • Long Term Benefits To Consumers (LTABE) • NRA Should Encourage Investment In UK • Access Mandated If Meets Requirements • Unclear How Tests Relate To LTABE • Not An Issue Of A ‘Wholesale’ Market • Forbearance And Costs Of Regulation • OFTEL Goes Beyond FD/AID • NRAs To Desist Where Innovation

  6. OFTEL’s Objectives:(2) Timing • The Option Appraisal Exercise • Commission • Guidelines On Principles • Recommendation On Markets • Guidelines On Remedies? • Position Of SPs and Authorisations • Too Soon To Issue Final Guidelines

  7. The Nature Of Innovation:(1) Historic OFTEL Position • Interconnect & Interoperability (1997-99) • Line Externalities • Market Power • Little Innovation In PSTN World • Convergence (1995-98) • 4 market model • BSMM • Transition Rules etc • Huge Concerns Over Vertical Relationships

  8. The Nature Of Innovation:(2) Next Generation Networks • Involvement Of Many Industries • Broadcasting • Internet • PC IT Industry • Entertainment • Telecommunications • High Degree Of Collaboration Needed • Risks Huge • Technical Standards ‘decentralised’ • Currently No Clear Business Model

  9. The Nature Of Innovation:(3) Emerging Markets • Several Value Chains Viable • Competition Is ‘For The Market’ • Pricing Is Critical: • Bundling • Discrimination By Customers/Over Time • Monopoly Quasi Rents Needed • Market Power Is Temporary If At All • Technologies Will Be Disruptive • Services May Be Short-Lived

  10. Vertical Relationships, Pricing And Exclusionary Abuses: (1) Problem Areas • Assessment Of Market Power • Retail Minus Formula • Gives Third Parties Huge Options Benefits • Margin Squeeze • Not Separate Abuse Under Competition Law • Very Difficult To Apply Where Innovation • Major Technical Problems Common Costs etc • Vertical Relationships • Exclusivity/FMA Not Necessarily Abusive

  11. Vertical Relationships, Pricing And Exclusionary Abuses: (2) BT Position • Parity Of Treatment Third Parties With Own Downstream Divisions • Fully In Alignment With Competition Law • Harmonised With Other EU MS • OFTEL To Re-Think Its Positions • Where Will Innovation Occur? • How Should Exclusionary Abuses Be Treated? • Focused Role For Ex-Ante Regulation • Handling Of SoRs/Disputes

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