PublishedSeptember 3, 2014

A British Recipe for Open Internet Access: Separation of Monopoly Local Networks… and Competition for Bloody Everything Else

UK regulators at Ofcom decided about a decade ago to impose “functional separation” on its dominant telecom provider, BT, in order to obtain equivalent prices, terms and conditions for competing telephone Internet providers that must buy local connectivity from the legacy giant. The UK model for competition has Openreach as the source for wholesale local connectivity services that Ofcom deemed subject to an enduring bottleneck, and BT’s competitive business units competing for these bottleneck inputs on a level playing field with many others, for whom entry barriers are now lower.

While this regulatory intervention was at first seen as highly intrusive, BT decided to negotiate the terms of functional separation with Ofcom. Now that it has seen the test of 10 years time, it seems to suit even BT.   Internet access competitors in the UK include: Virgin Media, EE, Sky, TalkTalk, Primus and John Lewis (like Macy’s) Broadband.   And unlike in the U.S., these competitors have not divided up geographic regions of the UK as their own exclusive territories.   So they all actually do compete against one another for the same residential and small business customers.

In December of 2013 Ofcom reported that UK consumers are benefitting from one of the world’s most price competitive marketplaces. The UK has the lowest landline prices amongst major countries, and the broadband access market is very competitive. BT itself has the lowest fixed retail market share of any major European incumbent.

Another huge positive outcome from all this is that the UK, unlike most of the rest of Europe, need not worry much about net neutrality. Any Internet provider in the UK who blocks, throttles or discriminates against any online content its customers want will swiftly lose those customers to competitors that offer truly open and reliable Internet access.

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