Govt. Directions to Ofcom and the types of National wholesalers

As per the Direction, Ofcom has to assess the future competition in the communications market for mobile electronic communications services after the close of the award of 800 MHz and 2.6 GHz bands. Basing on this competition assessment Ofcom has to introduce appropriate and proportionate measures with a view to promote competition in the market after the auction. Considering all the above mentioned duties, especially the primary duties of furthering the interest of citizens and the interests of consumers, Ofcom decides to give maximum importance to the ensuing auction.

Ofcom has also considered its duties relating to optimal use of the spectrum taking into consideration the current and future spectrum demand, the appropriateness of encouraging innovation and investment and the availability of high speed data transfer services across the UK. At the same time the regulator has taken maximum care to protect the interest of consumers with regard to quality, price and choice of service.

Ofcom carried out this competition assessment by making its objective justifiable, transparent, proportionate and with out any discrimination. For the assessment of competition some key factors are relevant and it is admitted that certain uncertainties are revolving round these key factors. Ofcom has taken in to consideration of these uncertainties while making its proposals.

Terminology
Ofcom has distinguished three types of mobile service competitors in the UK and they are named as National wholesaler, Sub-national radio access network (RAN) and other retailers. The term ‘RAN” is more appropriate than the traditional term “Mobile network operator” (MNO) because the owners of sun-national RANs are ‘network operators’ on a smaller scale. The National Wholesalers can control wholesale access but they could not control “operating” the network. They could contract or share for access to ‘national RANS’.

National wholesalers are those who are supplying third parties in a wholesale market. They supply access to their RANs to a range of downstream retail operators, operators of smaller sub-national RANs, MVNOs and their own retail operators. At present in the UK there are four National Wholesalers namely Vodafone, Everything Everwhere, Telefonica and H3G.

The term ‘fourth national wholesaler’ used in the competition assessment refers to a national wholesaler other than Vodafone, Everything Everywhere and Telefonica. Based on the spectrum holdings, the new entrants and H3G are distinguished from the other three national wholesalers. As far as H3G and new entrants are concerned their credibility of becoming a national wholesaler greatly depends on their acquisition of spectrum in the auction.

Operators who own RANs but at the same time operate only in a limited area of the UK are considered as “sub-national RAN operators”. Ofcom has identified potential competitors as competitors operating in a limited area having access to certain sites with some low-power radio access equipment.

Any competitor who is providing mobile services to customers but doesn’t come under the category of National Wholesaler or Sub-national RAN operator is called “Other retailer”. The companies called mobile virtual network operators (MVNO) belongs to the ‘Other Retailers’ group. These retailers, on a commercial basis, buy wholesale services from the National Wholesalers and compete. The retailer’s customers would be supplied with the mobile services by the wholesaler. All other functions like signing up the customers, billing etc. will be managed by the retailer.

Promoting competition in future mobile markets Furthering the interests of consumers by promoting competition is one of the primary duties of the communications regulator as per section 3 of the Communications Act 2003. Article 8 of the Direction requires Ofcom to take proportionate and appropriate measures for the promotion of competition in the communications market. For this reason Ofcom is obliged to introduce appropriate measures in the future mobile market for the benefit of consumers. Ofcom considers that these measures should be introduced at the national wholesale level. The competition at the retail level, both directly and indirectly could be promoted by this measure. The competition in the retail level could be promoted directly since the National Wholesalers themselves are the significant retail competitors in the country and indirectly by making available wholesale access to retailers on reasonable commercial terms. At the retail level also, Ofcom wants to promote competition through sub-national RAN operators and the regulator is taking spe
cific steps in this regard.

During the March 2011 Consultation Ofcom suggested that if retailers are not provided wholesale access, in the future the competition in the retail market would be badly affected. The regulator believes that the availability of wholesale access to retailers depends on the competition of National Wholesalers. In the market if there is no competition at the wholesale level, then regulations has to play a major role. Hence Ofcom decides to promote competition at the national wholesale level as it would promote competition in the retail market. As such the main focus of competition assessment of the regulator was promotion of competition at the national wholesale level.

During the March 2011 Consultation, Ofcom considered the possibility of improving competition at the retail level. The Sub-national RAN operators using 2.6 GHz spectrum on a low power shared basis could improve retail competition. They have to adopt business models different from the one that is being followed by the national wholesalers. Ofcom suggested that the chances of these operators winning the spectrum and entering the retail market are remote and hence certain measures should be placed to facilitate their entry. Ofcom received many responses to these measures and in the light of those responses Ofcom presents its further thinking.