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Effective competition review : Mobile

Effective competition review : Mobile. February 2001. Effective competition reviews. Oftel’s strategy set out regulatory principles designed to ensure the the level of regulation is proportionate to the state of competition in different telecoms markets

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Effective competition review : Mobile

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  1. Effective competition review : Mobile February 2001

  2. Effective competition reviews • Oftel’s strategy set out regulatory principles • designed to ensure the the level of regulation is proportionate to the state of competition in different telecoms markets • Oftel needs to measure effective competition in various markets • this is done through the effective competition reviews

  3. Mobile market review • objectives: • to review the state of the mobile market and to assess if OFTEL’s objective of “effective competition benefiting consumers” is being met • in the light of the results of the review, assess if current regulation continues to be appropriate • outcomes: • effective competition exists • the market is not yet effectively competitive but there is evidence that effective competition is developing • the market is not effectively competitive

  4. The mobile market review Activity Month Issue “kick-off statement” Mid September 2000 Issue consultation Early February 3 month consultation Feb, March, April 2001 Prepare final statement May, June, July Issue final statement July/August 2001

  5. 97/98 98/99 99/00 00/01 (E ND Q2) Subscribers (at end of period) 9022 14860 27185 34380 (000s) Total Revenues (£m) 3964 4738 6911 4732 The mobile market • continues to grow Source: Oftel Market Information and Oftel estimates

  6. The mobile market • sources of revenue are changing

  7. Consumer outcomes • 'best or near best deal' in comparison with consumers in similar economies • target is being met • but Oftel needs more information before it is sure that the UK is maintaining its position • wide range of services available • a comparison of services in different European countries shows that the UK consumer does have access to a wide range of services • consumer satisfaction • overall consumer satisfaction is high

  8. Consumer behaviour • consumers able to access and use information to take advantage of market opportunities • the available research suggests that many mobile telephony consumers are either not confident, not knowledgeable, or both • absence of barriers to consumers switching suppliers • consumer switching relatively high • some way to go before number portability is quick and reliable • SIM locking apparently on the increase

  9. Market structure • barriers to entry at the network/wholesale level • ISPs operating in retail markets rely on the vertically integrated network operators for the provision of wholesale inputs • if effective competition does not exist, there is considerable scope for leverage of market power from the wholesale to the retail mobile markets • structure consistent with a range of outcomes, from vigorous competition to collusion between the operators

  10. Supplier behaviour • active competition on price, quality and innovation • evident price competition on many services • not so evident on roaming and off-net calls • evident competition on quality • anti-competitive activity and collusion • many complaints but non proven • no immediate evidence of price signalling or tacit collusion • recent entry • other than Virgin, limited impact

  11. Pricing and profitability • prices broadly reflect underlying costs (absence of persistent excessive profits) • historic and some current returns substantially in excess of cost of capital • absence of inefficient suppliers • differences in ROCE indicative of inefficiency? • major task for next stage to study further relationship between costs, efficiency and profitability

  12. Conclusions • mixed picture • consumer getting a good deal in many respects • but is it the best possible deal? • on balance not yet effectively competitive • prices still above the competitive level, despite the presence of competition • future trends remain encouraging • consumers becoming better informed • prospect of new entry

  13. Implications for regulation • no case for price caps or cost-based access • if market not effectively competitive, present MI framework broadly appropriate • supply of unbranded airtime might be useful • licence-based measures remain necessary

  14. Next steps • comments to Oftel • by 4th May • comments on comments by 18th May • final statement July 2001 • workplan for the next stage • industry meeting to discuss scope of work on profitability and efficiency • further work on benchmarking

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