UPDATE AAISP Accuse Ofcom of Destroying Competition for UK VoIP

The often outspoken boss of business ISP Andrews and Arnold (AAISP), Adrian Kennard, has today accused the communications regulator, Ofcom, of “destroying competition” in the UK market for Voice-over-IP (VoIP) telephone services.

At present Kennard claims that it’s “actually very cheap to start up as a VoIP provider“, with a Linux based VoIP server costing around £1,000 and a few hundred per year to have it hosted in a rack. The cost of joining an ADR scheme can also add a few hundred more to that and then there’s the general labour etc. But all fairly cheap.

As a result the market is now full of “small players adding value to simple telephony” and creating competition, which Kennard said is “good for everyone, and (I believe) something OFCOM are meant to encourage“. But the ISP boss director notes that two of Ofcom’s recent changes appear to be forcing such providers out of the market by burdening them with excessive costs.

Adrian Kennard, Director of ISP Andrews & Arnold, explained:

“There are two changes OFCOM have instigated. Remember, OFCOM are meant to be acting in your interests and encouraging competition.

* Charging for numbering. Whilst a pilot this year, rolled out to just geographic numbering this is looking like £65,000 a year for the smallest allocation in each area. A huge entry price to the market

* Reducing interconnect fees on geographic numbering calls. This is making the hosting-for-free model less viable for carriers and looks like we may have to start paying for incoming calls.

The numbering thing is huge. It makes any small VoIP providers business model break badly. It is a charge for something we already have, not just new blocks or new telcos. We are trying to work out what to do. We may have to give the blocks to a larger carrier as the larger carriers with more paying customers may find it viable – but these blocks are no longer an asset we could sell, but a liability we are trying to avoid. So this may not be possible and we may have to hand them back to OFCOM.

That will stop service for all customers in those blocks even if ported out to another provider already. Clearly this is not in the consumer’s interests.”

Kennard further explains that the issue of interconnect pricing was also “pretty huge” because if the ISP has to pay for incoming calls then they “could not really sell a service” as their customers would not tolerate it.

In general Ofcom are accused of treating phone numbering like radio spectrum (i.e. as a limited resource), which apparently now requires charging as a means to control.

Adrian Kennard added:

“Of course, with radio spectrum, you don’t suddenly get a huge bill for spectrum you already have allocated, but importantly you can’t just add an extra digit to radio spectrum and have lots more, like you can with numbers.”

AAISP claims to have made various alternative proposals, such as for allowing numbers to be allocated in smaller blocks (big providers apparently don’t like this), supporting variable length numbers as used in other countries or simply suggesting that Ofcom make more numbers. But apparently the regulator has so far been “uninterested” in such ideas and instead remains “determined to ruin the market“.

In fairness it’s only right that, as VoIP grows to challenge traditional fixed line phone models, its standards should also be steadily raised to meet a similar level of service expectation and functionality. On the other hand treating VoIP too strictly could also risk damaging a market that doesn’t necessarily need fixing and forcing smaller ISPs out.

Meanwhile Kennard says that AAISP will continue, through engagement with their service carriers, to try and find a business model that would allow their VoIP service to continue (albeit possibly with some incoming charges or “balanced usage” terms). “I really hope we don’t have to hand back our numbering and kill off the numbers in use by our customers. Talking to other small telcos this seems like it may be happening a lot. So, goodbye competition in the UK. Well done OFCOM,” said Kennard.

ISPreview.co.uk are currently awaiting a response from Ofcom.

UPDATE 9th May 2013:

Here’s a reply from Ofcom.

A Spokesperson for Ofcom said:

“Ofcom is charging for geographic numbers on a pilot basis in 30 area codes where the supply of new numbers is particularly scarce. Ofcom has proceeded with this pilot after consulting publically and extensively on a range of measures to address the scarcity of geographic numbers.

Ofcom’s proposal to lower fixed termination rates to the marginal costs of termination will ensure that the regulated rate better reflects the cost of providing termination services. We are currently considering all stakeholder responses to this consultation very carefully before reaching our final decision.”