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UPDATE AAISP Accuse Ofcom of Destroying Competition for UK VoIP

Wednesday, May 8th, 2013 (9:17 am) - Score 992

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.”

Leave a Comment
8 Responses
  1. Avatar Somerset says:

    This was proposed in July last year, why complain now?

  2. Mark Jackson Mark Jackson says:

    Perhaps because when it was first proposed some of those same smaller ISPs felt that Ofcom would listen to their concerns and adjust their plans accordingly.

    But over the past few weeks we’ve been hearing more about this. Deadlines are approaching and previously private frustrations thus boiling over into the public domain.

    I wouldn’t be surprised to see something similar happen with Ofcom’s forthcoming revamp of the migration system, which has been around for awhile but is now close to being finalised.

    1. Avatar DTMark says:

      If smaller ISPs are relying on OFCOM to ‘see sense’ or to ‘stimulate competition’ then I fear for their future.

      This reminds me of the licencing of 3G frequency spectrums. Surely what you do is licence on a site by site basis incentivising all the players to fall over themselves to deploy locally and get the frequency allocation they want. Fits in nicely with the government’s ‘targets’ for 3G and 4G rollout.

      But it doesn’t bring in a pot of money for the government in one hit, so we can’t possibly do that. Instead, we allocate the frequencies nationally so that individual players may “hoard” them if they desire.

  3. Avatar zemadeiran says:

    Why not have a look at ip allocation organisations like RIPE for ideas?

    To impose large financial entry fees on small innovative players is extremely anti competitive to say the least.

  4. Avatar Martin says:

    OFCOM is not fit for purpose.
    They come up with the Market 1/2/3 system which kept prices high in 1 and 2 and was suposed to bring competition to BT.
    In many places this has not happened, and now it never will.
    Yet they keep it going, not even updating the Market rating when the reuired No. of ISP’s is reached !
    They have cost thousends of customers hundreds of pounds over the years, and all for nothing
    (certainly here, still only BT, which just cancelled this months planned 21CN upgrade !)
    Regards,
    Martin

  5. Avatar Corrado Mella says:

    Come on guys, this is expected.

    The dominant is feeling its lifeblood slipping away and has nudged OFCOM to squeeze the competition’s margins.

    Not only, now BT is patent trolling about SIP (see here).

    Now, if this was a democracy with a proper government, BT would be either reprimanded, fined or finally really split into smaller chunks (the joke that is the “BT Group” split is obvious to anyone), and OFCOM would be disbanded to be replaced with a forum where all parties have equal voice, one head – one vote.

    But this will never happen, as BT is another one of the Big Boys that “are not allowed to fail” and will always be propped up with our money, by hook or by crook.

    Just let them go on a tangent by their own, shortly they will be overtaken by traffic, might and volume and will become irrelevant in the telco market: for them it’s foolish to try to resist the tidal wave, and if they don’t understand what they’re against it’ll be a very hard and stern lesson.

    1. Avatar TheFacts says:

      So what is your plan for managing numbers?

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