3GScottishUser
30th May 2007, 09:04 AM
From FT UK (28/05/2007):
UK telecommunications regulation has been a mess for decades. Oftel and its successor Ofcom have intervened to push down prices, often using the regulatory techniques used to ensure conventional monopolies, such as gas or water, only just return their cost of capital. Simultaneously, they have encouraged the building of alternative infrastructure, from cable in the 1990s to broadband unbundling and the UK's fifth mobile network after 2000.
UK regulators want prices to be low but not so low as to kill the new entrants they have sponsored. The unsatisfactory results, over several product cycles, have been fairly high costs for consumers and a series of new entrants of suspect viability. The latest is 3 UK, owned by Hutchison Whampoa (0013.HK - news) . It is barely break-even, even on the undemanding hurdle of earnings before interest, tax, depreciation and amortisation. Seven years after it won a licence, its market share is only 6 per cent.
Like most mobile new entrants, 3 gets a subsidy. When people on other networks call a 3 phone, they are unwittingly charged double the normal "termination" fee. Ofcom has now decided it is time for this perk to be phased out. Viewed in isolation, this is logical and Ofcom has indulged its penchant for 200-page documents to emphasise this. Because 3 customers make more calls than they receive, 3 is already a net payer of termination fees to its competitors. The change will push this cost to more than £100m annually, equivalent to seven percentage points off 3's inadequate ebitda margins. Ofcom must look at the big picture. If it wants 3 to survive, it needs to compensate, perhaps by making it easier for customers to move their numbers to 3. If it does not think 3 is viable, it should tell the network's owners in Hong Kong, who continue to pour in money on top of the billions already wasted.
http://www.ft.com/cms/s/3e6f758c-0d65-11dc-937a-000b5df10621,Authorised=false.html?_
UK telecommunications regulation has been a mess for decades. Oftel and its successor Ofcom have intervened to push down prices, often using the regulatory techniques used to ensure conventional monopolies, such as gas or water, only just return their cost of capital. Simultaneously, they have encouraged the building of alternative infrastructure, from cable in the 1990s to broadband unbundling and the UK's fifth mobile network after 2000.
UK regulators want prices to be low but not so low as to kill the new entrants they have sponsored. The unsatisfactory results, over several product cycles, have been fairly high costs for consumers and a series of new entrants of suspect viability. The latest is 3 UK, owned by Hutchison Whampoa (0013.HK - news) . It is barely break-even, even on the undemanding hurdle of earnings before interest, tax, depreciation and amortisation. Seven years after it won a licence, its market share is only 6 per cent.
Like most mobile new entrants, 3 gets a subsidy. When people on other networks call a 3 phone, they are unwittingly charged double the normal "termination" fee. Ofcom has now decided it is time for this perk to be phased out. Viewed in isolation, this is logical and Ofcom has indulged its penchant for 200-page documents to emphasise this. Because 3 customers make more calls than they receive, 3 is already a net payer of termination fees to its competitors. The change will push this cost to more than £100m annually, equivalent to seven percentage points off 3's inadequate ebitda margins. Ofcom must look at the big picture. If it wants 3 to survive, it needs to compensate, perhaps by making it easier for customers to move their numbers to 3. If it does not think 3 is viable, it should tell the network's owners in Hong Kong, who continue to pour in money on top of the billions already wasted.
http://www.ft.com/cms/s/3e6f758c-0d65-11dc-937a-000b5df10621,Authorised=false.html?_