What is OFCOM's Broadband Access Market Classification?
In the 2005 Strategic Review of Telecoms, OFCOM identified that competition based on Local Loop Unbundling (LLU) is crucial to maintaining the progress of broadband to give the greatest benefits of lower pricing and faster innovation.
The Strategic Review also recognised that in some geographic areas LLU was unlikely to be as successful as in others, meaning less direct competition and that BT Wholesale will be the primary provider. It was decided that these areas would be regulated at a wholesale level and that areas which have a large amount of competition would be de-regulated.
A review of exchanges was undertaken and in May 2008 OFCOM announced four separate geographic regions defined as follows:-
- Market 1 : Those areas covered by exchanges where BTw is the only operator.
- Market 2 : Those areas covered by exchanges where that are 2 or 3 principal operators.
- Market 3 : Those areas covered by exchanges where there are 4 or more principal operators.
- Hull Area : Those areas covered by exchanges where KCOM is the only operator.
OFCOM then decreed that in the Market 3 areas, no operator holds a position of significant market power (SMP) and these exchanges could be de-regulated.
How can I find out what Broadband Access Market my exchange is?
So what effect does the Broadband Access Market have on me?
Depending upon where you live, it could very likely affect the price you pay for broadband.
LLU providers have always been allowed to set their own costs, but OFCOMs ruling for regulation has meant that BT Wholesale prices must be fixed at a certain rate.
- Market 1 : IPStream adsl is provisioned by BT Wholesale only. Their prices are fixed by OFCOM and no cheaper alternative LLU is available.
- Market 2 : Some LLU is available. BT Wholesale prices are fixed, but LLU providers are free to set their own (cheaper) pricing.
- Market 3 : No operator has SMP and therefore the exchange becomes deregulated and BT Wholesale can reduce their prices in competition with the LLU providers.
Many people will think the above unfair, but those are the rules as defined by the regulatory bodies, which has now resulted in a 'two-tier' broadband in the UK where pricing may likely vary depending upon your location.
Access Market Regulatory Review.
The map on the left shows an overview of which areas in the UK have been classified in what market.
Principal operators are assumed to be AOL, O2, Orange, Sky, TalkTalk, Tiscali and BT Wholesale. The official definition is
Ofcom considers that a Principal Operator is any operator that is expected to provide
a material constraint in the market, either directly or indirectly. Ofcom identified a total
of eight Principal Operators; the incumbent operator BT, the cable operator Virgin
Media and six LLU operators (referred to as Principal LLU Operators). All of these
operators are active in the provision of wholesale broadband access services and all
have significant coverage of the UK (above 45 %).
It is assumed that there will be an annual review of exchanges during which time an exchange could be re-classified. The full classification is:
- Market 1 : BTw is the only operator
- Market 2 : 2 or 3 principal operators AND exchanges where there are 4 or more principal Operators but where the exchange serves less than 10,000 premises.
- Market 3 : 4 or more principal operators AND where the exchange serves 10,000 or more premises.
OFCOMs Statement Summary - Review of the wholesale broadband access markets
OFCOMs 2006/2007 Review -
Review of the wholesale broadband access markets 2006/07
OFCOMs Full Review 21/05/08 - Final explanatory statement and notification