EU backs Ofcom's broadband market deregulation

The European Commission has publicly backed a proposal by telecoms and media regulator Ofcom that current broadband market regulations should be scrapped in some parts of the UK.

Ofcom's research has revealed that major providers are largely competing on a level playing field regardless of enforced regulation, with around two thirds (65 per cent) of the UK market now having access to unbundled wholesale broadband. Detailed economic evidence suggested that these areas had four or more broadband providers competing against each other. Ofcom will make its final decision later in 2008.

"In the more densely populated areas of the UK, consumers have the choice between different broadband suppliers which have rolled out their own infrastructure," said EU competition commissioner Neelie Kroes. "For many of these areas ex-ante regulation is no longer warranted."

Around a third of the UK still lacks competition among providers, and the EU admitted that it had to be wary of under-regulation and allowing certain UK broadband providers to become dominant at a local level.

"These regulations were initially brought in to guard against BT dominating the market and to encourage competition in the telecoms sector post deregulation," said Chris Ducker, senior product manager at NTL Telewest Business. "However, Ofcom needs to carefully consider whether serious competition really exists in all regions not just for consumers, but for local businesses."

The proposal which the European commission looked at was Ofcom's second review of the market for wholesale broadband access, conducted in November 2007. Other broadband regulators in other countries were now following the UK's lead. In Spain, its regulator suggested similar intervention for the wholesale broadband market when plans were outlined for next generation access.

Ovum analyst Matthew Howett said that the regulator needed to be careful not to increase the layers of bureaucracy and red tape by dividing the market in this way.

However he was positive about the proposal: "For those areas where regulation is removed, careful monitoring will be needed to see if competition develops as expected. At present the benefits of better targeted regulation outweigh these concerns."

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