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UK ISP TalkTalk Slams Ofcom Plan to Let KC Bundle Broadband and Phone in Hull

Posted: 27th Sep, 2010 By: MarkJ
KC UKofcomBroadband and phone operator TalkTalk UK has criticised Ofcom's recent proposal to allow KC ( Karoo ), the incumbent telecoms operator and ISP for Hull and East Riding in Yorkshire, to bundle its services. The ISP called Ofcom's plan an "admission of defeat", with similar concerns being expressed by other providers, including Fibrestream and Nexus Telecommunications.

Ofcom's proposal, which could result in residents and businesses of Hull being able to benefit from slightly cheaper broadband and phone bundles, first surfaced in August 2010 (here) and included a short one month consultation period.

However, in response to the consultation, several rival providers and some of KC's own customers have complained that lifting the restrictions could make it even more difficult for competition to enter Hull's somewhat isolated market. Perhaps the most scathing remarks came from TalkTalk, which represents well over 4.2 Million UK broadband customers in the wider market.

TalkTalk's Head of Telecoms Regulation, Rickard Granberg, told Ofcom:

"Ofcom essentially proposes to allow KCOM to bundle broadband, landline and other services in a way that is similar to packages offered by other communications providers in other parts of the UK. This would be subject to certain conditions around availability and pricing.

It must be said that Ofcom’s proposal is nothing short of an admission of defeat in trying to protect Hull consumers from harm caused by a dominant provider. KCOM has SMP in the retail voice market and, we suggest, would also be considered to be dominant in the Hull market for retail broadband if Ofcom were to review this market. Allowing KCOM to bundle telephony and broadband will only serve to damage if not completely destroy any prospects of competitive retail market entry into Hull.

Hull residents will be stuck with a single provider and will permanently miss out on the benefits offered by a competitive retail market in terms of price, quality and choice. Absent real competition, KCOM will never provide the same range of services with the same low prices and choice that is available to residents in the rest of the UK. KCOM will continue to be able to extract monopoly rents from consumers who will be in an even worse position than they currently are. We regret Ofcom is considering this course of action."

The Boss of Fibrestream, Guy Jarvis, added:

"K-C the incumbent operator has a de-facto monopoly on lines calls and broadband services and the action by OFCOM to allow bundling of services would clearly have the effect of preventing effective competition emerging in the Hull SMP area.

NextGenUs is putting forward a formal and reasonable request to K-C to provide full automated equivalence to the BT Openreach WLR3 product set and also SMPF/MPF wholesale access to allow the full range of CPs in the UK to be able to offer competitive retail services based on a credible wholesale offering.

Once that process is completed satisfactorily then NextGenUs would naturally be supportive of the same range of bundled retail services."

Ashley Hunter of Nexus Telecommunications noted:

"Currently Ofcom permits the "enforced bundling" of telephone line and local telephone calls by KC in the Hull area - this is illegal under UK Competition law.

No Communications provider has access to the telephone line at the Wholesale level in Hull from KC unlike the rest of the UK where Openreach (BT) were forced by Ofcom to allow other providers to gain access to the telephone line at an appropriate agreed wholesale rate of £8.39 per month. There is NO equivalent enforcement on KC by Ofcom.

Ofcom has a legal obligation, under their terms and reference to ensure that the market for telecommunications is open and fair and should administer this under the UK and EU Competition law.

...

There are a number of operators in the KC area offering either a line, calls or broadband (wireless) service BUT no one provider has access to the telephone line (the equivalent of Openreaches WLR3 services in the rest of the UK).

Therefore, in my opinion the offering of bundles by KC is purely a mechanism for ensuring market share retention and for the purpose of competition removal."

However there are some customers who do support Ofcom's plan and suggest that, since there is no other viable supplier, KC should be allowed to offer bundles. Bundles are seen as a way to tie customers down by offering a lower price for several communication products (e.g. broadband, phone, tv, mobile), usually taken alongside a longer contract period.
Ofcom's Initial Proposal Requirements:

* Bundles are made available to all residents (and businesses) equally in the Hull area; and

* Prices for bundles are published on KC’s website; and

* Prices for bundles are set in a way that will not discourage other communications providers from offering their services to consumers in Hull, should they wish to do so.
Ofcom's consultation officially came to a close earlier this month (2nd September 2010) and a verdict is expected at some point within the very near future. However it remains clear from the feedback that many have been unconvinced by Ofcom's arguments and feel that the regulator should be doing more to encourage competition in the area.
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