| The Failures of Structural Separation |
| Monday, 15 June 2009 07:40 |
|
Britain was the great success of separation, leading New Zealand, Australia, and the EU's Viviane Reding to recommend it. Britain went from over-priced to average and penetration boomed. Richards could imagine a seat in the House of Lords.
The problem, now becoming obvious: the wholesale monopoly needs strong and effective regulation. With all the noise of retail competition, Richards couldn't do that and even gave them an increase in the copper loop charge. The more the copper earns, the stronger the inclination not to invest in fiber. While France, Holland, Switzerland, and Verizon's quarter of the U.S. are moving rapidly to 100 megabit fiber. 95% of Britain will be stuck with DSL and a press release misleadingly named “fiber to the cabinet,” and even that won't reach most areas for years. Only half the country has a cable choice, and BT's copper has a monopoly elsewhere. To get Britain fibered, Richards had to set a gap between what BT's charges for fiber and copper. If line charges are similar, BT will try to milk what they have. If Richards wants fiber, he needs to lower the copper loop charge or take direct action. That's politically tough. He was beaten up by BT and their friends for not increasing it more. BT Openreach, with far less competition than BT Retail, can keep prices high. This will give a distorted picture unless the cash flows are netted out. The money goes from BT Retail to other parts of BT, so the (inflated) markup in the middle needs adjusting for. |