Virgin Media 2006 Annual Report Download - page 28

The Strategic Review of Telecommunications
Following the passing of the Communications Act 2003, Ofcom announced that one of its first tasks would be to carry out a
strategic review of telecommunications in the U.K. (TSR).
The TSR commenced in April 2004 with the observation from Ofcom that, despite almost twenty years of telecommunications
liberalization in the U.K., BT remained dominant in almost all telecommunications markets. Ofcom’s preliminary assessment was that
although the true infrastructure competition offered by the cable industry was highly desirable and had resulted in substantial
consumer benefits, it did not represent a sufficient competitive constraint on BT. Similarly, the intensity of competition to BT based
on access by third party service providers to the BT network via wholesale products, was insufficient. Ofcom felt, therefore, that it
should seek to increase competitive intensity by improving third party access to the BT network.
Having reached this conclusion, Ofcom has developed a concept known as “equivalence”. Broadly, this concept has been defined
as enabling BT’s competitors to gain access to BT’s network infrastructure on exactly the same (i.e. equivalent) terms as BT itself
enjoys.
At the conclusion of the TSR, BT offered and Ofcom accepted a number of undertakings to put the concept of equivalence into
practice in its dealings with competitors. This has been achieved primarily through the creation of a new division within BT called
“Openreach” which manages and sells network services to competitors and the rest of BT on the same terms and conditions (including
prices) and in accordance with the same processes.
The outcome of the TSR is expected to create further commercial opportunities for new entrants in markets across the
communications sector and therefore to meet Ofcom’s objective of increasing competitive intensity.
The efficacy of the undertakings will be formally reviewed by Ofcom during 2007.
Universal Service
The concept of universal service is designed to ensure that basic fixed−line telecommunications services are available at an
affordable price to all citizens across the EU. The scope of universal service obligations is defined by the Universal Service Directive
(see above under Regulation in the European Union) and is transposed into U.K. regulation by the Universal Service Order. This
Order has been implemented by Ofcom which has imposed a number of specific universal service requirements on BT and Kingston
Communications, both of which have been designated by Ofcom as universal service providers.
The European Commission has been considering the future scope of universal service obligations as part of the Regulatory
Framework Review (see above under Regulation in the European Union) and is expected to publish a Green Paper on this subject
early in 2007. This paper is likely to consider, among other things, whether universal service should extend to the provision of
broadband internet connectivity and whether there is scope in the future for making use of mobile technologies in the provision of
some aspects of universal service. We would be impacted by any future decision to require us to provide or to contribute to the
funding of universal service in the U.K.
Electronic Communications Code
Under the Telecommunications Act 1984, which was largely replaced by the Communications Act 2003, licensed public
telecommunications operators were eligible for enhanced legal powers under the electronic communications code annexed to the
Telecommunications Act 1984, or Code Powers. Code Powers are of particular benefit to those who construct and maintain networks
because they give enhanced
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007