Wholesale Mobile Access – a primary concern of the Competition and Markets Authority in its review of the proposed BT/EE transaction.

It has been an exciting couple of months for those of us with an interest in the regulation of the telecommunications industry.

We’ve had the publication of the much anticipated first “consultation” in Ofcom’s Strategic Review of Digital Communications. Those that have already grappled with its 180ish pages of Ofcomese will know it doesn’t exact contain much that hadn’t been known or floated by various stakeholders in the past. That said, Ofcom have, separately, proposed a dark fibre remedy on BT, which, given the completely woeful predecessor that was Physical Infrastucture Access was a welcome move by them.

What has been going on though, slightly away from Ofcom, is the Competition and Markets Authority’s (CMA’s) investigation into the proposed acquisition of EE by BT. Last week saw popcorn-worthy scenes between TalkTalk and Vodafone played out in the industry press about Vodafone’s status (or not) as a wholesale provider of mobile services to Mobile Virtual Network Operators.

The amicability of TalkTalk and Vodafone’s divorce in isolation is one thing, but a review of all the documents submitted to the CMA so far, conversations had at conferences, articles in the industry press and whatnot, all point to one thing. That there is a firm belief that the market for wholesale mobile access is not as optimal as some would like.

To me, this is reinforced somewhat by what I consider to be some fawning over the market by Ofcom in the Strategic Review of Digital Communications – there’s a paragraph in there implying there are more than 20 operators with access at the radio layer – so-called “thin MVNOs”. I will personally buy a pint for the first person that manages to list them all in the comments section below. My wallet is safe because I am pretty sure this is a sleight of definitions used to try and paint a rosier picture of what happened on Ofcom’s watch than really did.

All of this is irrelevant though, because the CMA has honed right in on this as being one of the primary concerns in its review of the proposed BT/EE transaction. Yes, there’s other stuff in there about mobile backhaul and quad play and yada-yada-yada, but, like the Eye of Sauron, they have had an immediate laser like focus on what we all know to be an area of concern in our industry.

We’ve been here before. We’ve seen a bottleneck of assets like the radio access network as recently (or as far back depending on how old you feel) as the late nineties with the introduction of carrier pre-select (CPS). We had indirect access before then – we still do of a fashion – but this was the first truly economically enlightened breaking of the BT monopoly I can think of.

CPS enabled an end user to permanently have BT program the local exchange to route their outgoing calls to an alternative provider, negating the need for a little magic box adding an indirect access code or dialling digits manually. The alternative providers would build their networks out to these exchanges to collect the calls. The rates for all of this were heavily regulated and they made profit by arbitraging the regulated rates versus their own efficiency in building a network.

Fast forward a few years and we have (and still do) one of the most competitive markets in the world for outbound calls from a premises, even before the advent of over the top communications. All this came about from a simple technical remedy to allow other, competent, operators to interconnect deeply in the BT network to offer a competing service.

What’s more is that every single CPS operator I can think of offers its own wholesale service – it doesn’t provide CPS just for its own retail operations, but to resellers and dealers and whatnot; each level of the supply chain is adding its own value to the proposition and before you know it you have hundreds, if not thousands, of “telcos” offering fixed voice services to residential and business users.

If we have a look at the mobile equivalent, this is not what you see. Granted there is a decent “alternative” market for mobile originated voice calls to international destinations, but thereafter, if you think about it, the market is rather foreclosed. GiffGaff is an O2 subsidiary, Sainsbury’s Mobile is, for all intents and purposes, rebranded Vodafone, Asda Mobile is rebranded EE and so forth. The Mobile Network Operators, I would say, in economic terms, are presenting a classic risk of being an oligopoly. This is not good for competition and not good for consumers or our industry if those risks are realised.

The CMA has some work to do on some of the more esoteric points on backhaul and on the issues of competition in pay-TV that have been around before BT and EE started to cosy up to each other; Ofcom are taking the structural separation of Openreach question into the Strategic Review, but there’s one very simple thing that can be done here and now to create a far more optimal market in mobile; which is wholesale mobile access.

Undertakings from BT/EE as part of the proposed transaction to create a CPS-like remedy to allow operators with their own Home Location Registers and what not to interconnect with the EE radio network for the conveyance of signals to and from handsets on charge controlled terms would mean all the major fixed networks could invest with certainty to offer services; to the outside world they would look just like a mobile network operator, not just a rebranded service that merely mediates some billing records for the end user. Just like CPS, there’s no reason to suspect they wouldn’t offer variants of this to the next level of the supply chain, all of whom could add value to the market. Next thing you’d know is we’d truly have one of the most competitive markets for mobile telephony in the world, not just one driven by a race to the bottom for Apple-upgraders.

But don’t expect good in-building coverage, because virtually all the lower frequency spectrum is held by the others…. that’s a subject for another time/discussion about Three and O2, but for now, there’s growing interest in the definition of wholesale mobile access and a narrow window of opportunity to get a decent form of it with evidence on why it is required and how it would help in front of the CMA.

Note from Tref. Peter Farmer is Head of Regulatory Affairs at Gamma Telecom and a pretty prolific contributor to this blog. Read some of his other authoritative stuff here.