BT’s Tall Tale of Two Countries

BT’s Tall Tale of Two Countries


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This article is brought to you by AT&T Europe’s Public Policy Blog, A member of New Europe’s Knowledge Network.

 

In a recent article, the president of BT Group’s Americas operation reportedly asserted that US telecom companies are hindering its ability to compete in serving global enterprise customers in the US market. In calling for price regulation of broadband leased lines, to benefit carriers such as BT that choose not to invest in infrastructure in the US, Mr. Bas Burger claimed that US customers, “pay too much, they wait too long, and the quality is too low.” For a flourish, he added, “For a western world country, it is the worst I’ve seen.”

How ironic. And, as with BT’s familiar protests about the US market, how lacking in hard fact. BT’s adamant complaints about the US are even more remarkable, however, if you reflect on BT’s track record in the UK.

Let’s start with some objective facts about the price of broadband leased-lines. OECD studies consistently show prices for leased lines in the UK substantially exceed prices in the US. Whether it is the 2011, 2013 or 2015 biannual OECD Outlook report, UK leased lines are significantly more expensive than in the US. In the most recent 2015 OECD comparison, the cost of a UK 2 Mbps circuit is 47.5% higher, and a UK 34 Mbps circuit is 44.7% higher.

Screen Shot 2015-09-17 at 12.32.47

BT would also benefit from some honest reflection of its own quality of service performance in the UK. Ofcom recently stated: “We consider that BT’s quality of service in providing wholesale Ethernet leased line services is not acceptable.”1 And MP Chris Bryant, Shadow Secretary of State for Culture, Media and Sport observed late last month that BT “should be held accountable for its poor quality of service – the delays for repairs, the missed appointments, the months of waiting to switch providers.” AT&T’s experience as a wholesale customer of BT is consistent with these views.

Of course, BT’s tall tale of two countries offers a larger lesson about policy. I certainly respect that different countries will adopt policies that they find suitable for the facts in their market. The UK opted for a highly regulated wholesale model premised on the ubiquity of the BT network, and arguably, this has reduced incentives for investment and broadband deployment by both BT and its non-network based competitors. The US opted for facilities-based competition coupled with forbearance from rate regulation, and this has driven enormous investment by multiple network operators, advanced services, and competitive prices. With respect to industry investment levels, the 2015 OECD study also shows US public telecommunications investment per capita to be nearly 100% higher than in the UK. AT&T alone has invested over $120 billion in our wireless and wireline networks over the past 6 years − more than any other public company in the U.S. And from 2007 to 2014, mobile data traffic on our network increased 100,000%.

Mr. Burger’s call for intrusive regulation in the US is not supported by the facts. And further, the argument lacks policy credibility. In 2004, when Ofcom was considering reform that led to the creation of Openreach, BT observed that “an explicit commitment to regulatory forbearance needs to be made using an approach similar to that followed in the US to encourage investment in areas such as fibre, and perhaps other areas. The choice may well be between such policies of forbearance or chronic under-investment in a key driver of UK economic growth.”2

And far more recently — last month in fact — BT CEO Gavin Patterson criticized his UK competitors of “quite staggering hypocrisy” for seeking structural separation of BT, when those competitors had not been investing in their own new broadband infrastructure.

Hypocrisy indeed. BT might be more credible with a consistent message across the Atlantic, and a reliable set of facts. They have the opportunity to make fact-driven arguments to the FCC, and to prove that the UK regulatory model has been such a clear success for competition, investment and their customers, that the US should replicate it.

Like so many of BT’s delays for missed appointments, I’m waiting.

 

Sources:

Graphs: ­ OECD (2015), OECD Digital Economy Outlook 2015, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/9789264232440-en
OECD (2013), OECD Communications Outlook 2013, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/comms_outlook-2013-en
OECD (2011), OECD Communications Outlook 2011, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/comms_outlook-2011-en

  1. Ofcom, Business Continuity Market Review at 1.38 (2015).
  2. “Investment & Innovation: Creating a competitive advantage for the UK,” BT’s response to Ofcom’s Strategic Review of Telecommunications Phase 1 consultation document, 22 June 2004.
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