A mere decade or two ago the UK didn’t just have a monopolistic provider of telecoms services, it had a single provider of telecoms services – British Telecom. They owned all the exchanges, the cables, the sockets and the phones. Yes – that’s right – they owned the phones – you weren’t allowed to plug your own phone into the socket, you had to rent one from BT. BT were an arm of the government and managed the entire supply of telecoms for the country.
Then the Conservative government at the time (translation for Americans – right-wing party in the UK, therefore still left of anything that could get elected on your side of the pond, even if they do have a certain element of the fascist bastard about them) decided to privatise everything they could get their hands on, including the railways, gas, electricity, water and, yes, phone company. Sold off to shareholders, in order to give tax cuts to the middle classes, British Telecom became a privately owned phone provider. At the same time, laws were passed allowing other phone companies to provide a service.
For years there wasn’t much change – other companies had severe problems prodiving a cheaper service than BT, who already owned a network that covered the entire country. A few companies tried, but failed to make much of an in-road. Cable TV companies had sprung up all over the country and in 1991 they were allowed to sell phone services as well. However, having to lay their own cable to every home they served, they were restricted to urban and suburban areas, where it was economic to dig up the roads.
Then broadband came along. BT was unwilling to cannibalise its existing dial-up, ISDN and leased-line businesses (all immensely profitable) and thus slammed on the brakes – ADSL was available in other countries for years while they carried out miniscule ‘feasability studies’. Eventually they began a half-hearted roll-out of ADSL, taking in the largest cities initially. By this point, not only were ISPs furious at the lack of movement, but the government had realised that the internet was a selling point. They put on pressure via the regulators and insisted that BT speed things up, not just to roll out broadband, but to allow others access to the local loop.
The Local Loop is the bit of wire that goes from the BT exchange to your front door. That final mile of wiring that costs millions of pounds to lay down in the first place and makes it impossible for anyone else to compete with BT (except for the cable companies in the most populous areas). By maintaining their stranglehold over that cabling, BT made themselves the gatekeeper for all services – if you wanted access to the internet, chances are they were making some money out of you.
Two solutions were put forward:
1) split BT into two companies – one for the telecoms services, one for the physical wires. The services company would rent the local loop from the wires company, at the same cost as any competitor, meaning that everyone could compete freely.
2) Allow BT to retain ownership of the wires, but forces them to rent them out to anyone who asked.
The easier option was (2) – Local Loop Unbundling (LLU). This was forced upon BT, who carried on with their stalling tactics, manipulating the accounting so that the prices were too high for anyone to effectively compete with them. Opting out of BT altogether and using a competing carrier was simply too expensive for most users.
Until this week, that is, when BT finally lowered their prices to around the same as the rest of the continent. At which point various companies leapt straight in with obviously preprepared business plans. NTL, a cable operator, announced that they would provide their services via BTs wiring. HomeChoice, who provide Video-On-Demand are expanding out of central London to take in other cities across the country. Others are bound to follow them.
Over the next couple of years we should see massive expansion of the services available to you over the wires that enter your house, basic internet access should drop in price and the speeds you can transmit data at will rise sharply. With the increased services being rolled out by these new competitors, we should see the larger companies forced to respond with added services of their own. You never know, Telewest (my cable provider) might even finally get Video-On-Demand piped into my house.
Goodness knows, if they don’t, someone else will.