Business

Changes to business digitisation brings

US Wi-Fi ‘Thief’ Man Charged
US police have arrested a Florida man for gaining illegal access on a domestic wireless Internet network.
In one of the first criminal cases involving this practice, Benjamin Smith III, 41, faces a pre-trial hearing this month after an April arrest on charges of “unauthorised access to a computer network” – a third-degree felony in the States.
Police say Smith ‘fessed up to sneakily logging on to the Wi-Fi signal after he was spotted using a laptop in his SUV outside the house of Richard Dinon.
Although it’s quite a widespread practice, the newness of the crime means that the Florida Department of Law Enforcement doesn’t even keep statistics, according to a report in the St. Petersburg Times.
With the rise of domestic Wi-Fi networks and Wi-Fi enabled PDAs, laptops and smartphones, more and more people are sniffing out unsecured networks and enjoying a free ride on other people’s connections.
There’s not much harm in that, but the newspaper report points out the darker side of Wi-Fi pilfering, with criminals using the unsecured networks to traffic in child pornography, steal credit card information and even send death threats.
The problem is that few people bother utilising the security protection that comes with their Wi-Fi routers, even though turning on encryption or requiring passwords would make things considerably more difficult for network freeloaders.
If Smith is found guilty of the charges, the outcome could set a dangerous precedent for wireless networking and potentially criminalise tens of thousands of mobile users who regularly log on to any signal they can find.
St. Petersburg Times
7 July, 2005
European Parliament Says Non! To Software Patents
The European Parliament has voted overwhelming against a controversial bill that might have led to software being patented.
Euro MPs voted 648 to 14 to reject the Computer Implemented Inventions Directive, declaring that that no one liked it in its current form.
The European Commission responded by saying that it would not draw up or submit any more versions of the original proposal.
Hotshot hi-tech firms insisted that the directive was essential to protect their investment in research and development, but opponents were having none of it, saying that the bill would have a detrimental effect on small firms and open source developers.
Today’s vote was on the 100+ amendments made to the original bill which was designed to give EU-wide patent protection for computerised inventions (like CAT scanners and ABS car-brake systems) as well as software when it was used to realise inventions.
The bill was supposed to get rid of individual EU nations’ patent dispute systems and replace it with a common EU procedure. Instead, the old system of patents being handled by national patent offices will continue, without any judiciary control by the European Court of Justice.
Opponents of the bill aren’t exactly whooping in the streets, with a poster on the urban75 bulletin boards astutely observing, “Don’t think that the fight is over; this was only rejected because both sides voted against it:
The anti-patent lobby just think the whole idea is ridiculous…and the pro-patent lobby feared that the amendments added to the bill would take away their power to patent everything, and thus also voted against the bill.”
With the European Parliament voting so decisively against it, small European software companies have a better chance of competing on a level playing field for now, but with big corporate interests at heart we don’t think we’ve heard the last of software patents.
It’s also worth noting that there’s now nothing to stop individual countries legislating software patents on their own.
Software patent bill thrown out [BBC]
Computer Implemented Inventions Directive
6 July, 2005
China Opens Clinic For Internet Addicts
China has opened its first officially licensed clinic for Internet addiction as State media reports growing cases of obsessed Internet gamers whose addiction has caused them to quit school, commit suicide or even murder fellow gamers.
Dr. Tao Ran, the clinic’s director reports that his patients suffer from a series of maladies including depression, nervousness, fear, panic, agitation and an unwillingness to interact with others (to be honest, that sounds like a lot of normal teenagers we know).
Their Internet addiction also manifests itself in sleep disorders, the shakes and numbness in their hands from a surfeit of fragging, clicking and scrolling.
The government-owned clinic opened for business in March this year, and is situated within the Beijing Military Region Central Hospital, with the patients – mainly aged between 14 to 24 – looked after by a team of a dozen nurses and 11 doctors.
Most report losing sleep, weight and friends after spending countless grimly hours glued to their PCs, with one 12-year-old reported to have spent four days in an Internet cafe, barely eating or sleeping.
The Web addicts claim that their online obsession helped them to escape everyday stress, with many older kids becoming fixated by online chats with the opposite sex.
Tao estimates that up to 2.5 million Chinese suffer from Internet addiction, although Kuang Wenbo, a professor of mass media at Beijing’s Renmin University, thinks the problem is being overstated:
“As the number of the Netizens grows, the number of the addicted people will grow as well, but we should not worry about the issue too much. The young men at the age of growing up have their own problems. Even if there was no Internet they will get addicted to other things.”
Patients diagnosed as Internet-addicted by Tao’s diagnostic test are presented with a combination of therapy sessions, medication, acupuncture and sports exercise, with the courses lasting around 10 to 15 days.
Treatment is not cheap, with the daily US$48 (~£27 ~€40) charge working out at more than double the average city dweller’s weekly income in China.
Some of Tao’s treatment sounds a bit medieval with one session involving a machine that stimulates nerve impulses by delivering 30-volt charges to pressure points.
Another treatment is reported to involve a clear fluid delivered via an intravenous drip to “adjust the unbalanced status of brain secretions.” Eek!
Although Tao claims that the long-term effects of treatment are generally successful, not all patients are available to resist the temptation to log on.
Internet addicts treated at clinic in Beijing [AP]
4 July, 2005
DoJ Operation Site Down: Raids In 11 Nations
In a pretty gung-ho move that shows a lot of seriousness, the US Department of Justice (DoJ) have announced the results of Operation Site Down. More than 20 raids occurred in Australia, Belgium, Canada, Denmark, France, Germany, Israel, the Netherlands, Portugal and the UK, as well as 70 in the USA.
Four arrests: David Fish; Nate Lovell; Chirayu Patel; and William Veyna were made in the US with them being charged with violating federal copyright protection laws.
Attorney General Alberto R. Gonzales was nothing if not stern, “By dismantling these networks, the Department is striking at the top of the copyright piracy supply chain—a distribution chain that provides the vast majority of the illegal digital content now available online, and by penetrating this illegal world of high-technology and intellectual property theft, we have shown that law enforcement can and will find — and we will prosecute — those who try to use the Internet to create piracy networks beyond the reach of law enforcement.”
We’d imagine there’s been a fair degree of celebration at this news in the entertainment world – dinner tables will be booked.
The DoJ reported that hundreds of computers had been seized, leading to at least eight major online distribution networks being shut down.
With the size of the seizures we’d imagine there’ll a big gap left in the world downloading. It will be interesting to see how long it takes to repair itself.
One thing the Attorney General said particularly struck us, “this illegal world of high-technology and intellectual property theft.” Let’s hope the two of these are bound together, and he’s not talking about a separate illegal world of high-technology. Now that would be worrying.
While closing down some file sharing networks for a period of time will temporarily throttle the flow of material over the Internet, we see far more direct financial loss through gangs selling DVD’s around pubs, clubs and streets of the UK, where this has reached such a level that we have seen a pub with “No DVDs” signs on the door.
File trading on the Internet is done by spending the time doing it, but it has no financial gain. The DVDs being sold in public are making someone very rich.
It does make you think that if downloading high-quality movies without seeing the head of someone getting up in the middle of the film to go to the toilet were easy, most of that fiver that people pay on the street would end up in the film company’s pocket. Sadly they’re waiting for DRM to be in place first.
US Department of Justice
4 July, 2005
Ofcom’s BT statement – Legal Issues Examined
Following hot on the heals of yesterdays Ofcom’s notice to BT, under Section 155(1) of the Enterprise Act 2002, Russ Taylor of OfcomWatch takes us through the legal issues.
Ofcom released the details of the BT settlement.
Folks, here are the key takeaways / open issues as I see them from a legal perspective:
* This is essentially a consultation on whether BT has promised enough (‘undertakings’ – spelled out in Section 2 of the document) to avoid referral of this matter to the Competition Commission. Ofcom concludes that BT has, and asks for public comment until August 12, 2005.
* Section 4.14 of the document is the key allegation, and check-out the indirect wording on Ofcom’s part! Ofcom basically say that BT had the incentive to engage in anti-competitive conduct, and later say that it suspects BT ‘may have acted in accordance with the incentives set out above.’ Is that Plain English? Even the title of Section 4 is non-confrontational… referring to the problems of the market, rather than problems with BT.
* Annex E is the basic document (the Annexes are here). It is the proposed agreement between BT and Ofcom. It specifies the undertakings. It looks to me like the Access Service Division (ASD) CEO reports to the BT CEO. So, presumably, the BT CEO can terminate the ASD CEO? That’s not exactly ‘separation’. And more importantly, it does not square with the classic definition of a CEO.
* It’s a lengthy document, and I’ve only skimmed it, but the missing element–in my opinion–seems to be a clear dispute resolution / problem solving element of the undertakings. In other words, what happens if BT shirks its duties, or there is a dispute about one of the undertakings. Are the undertakings self-enforcing? I don’t think so. Sections 12 through 17 of Annex E purport to cover this ground, but I think they are vaguely worded. Section 14, in particular, seems to merely allow BT and Ofcom to agree to disagree, and has no real teeth other than Ofcom’s ability to declare BT in breach of the undertakings. But what then? Does Ofcom then have the power to fine BT? I don’t think so – I think a breach would require Ofcom to go to court to secure a remedy… or threaten another referral? So, would communications policy decisions then rest in the hands of a court? Why didn’t Ofcom require BT, as part of its undertakings, to waive court procedures and agree to a schedule of monetary penalties, etc.
* I also recall that Ofcom initially said that third parties would be able to secure relief under this settlement–for their losses caused by BT’s breaches of the undertakings. How does that work? This element of the scheme seems to be completely missing from the documents.
* Finally, what happens if BT merges with another entity to which these undertakings do not apply. I’m confused… Overall, I think the document accomplishes much by way of technically sorting out a way to limit BT’s market power. But from a legal perspective, it needs some more thought.
* * *
This should be an interesting consultation… stay tuned…
Russ taylor is a co-founder of OfcomWatch
Ofcom
1 July, 2005
MGM vs Grokster Copyright Case Reviewed
Yesterday the US Supreme Court published their 55-page decision in MGM v. Grokster case. The headline summary? The file-sharing software companies lost and the media companies won. Delve a little deeper and it becomes more confusion.
Predictably reaction has been mixed. The Motion Picture Association of America (MPAA) hailed the court’s ruling as a “historic victory for intellectual property in the digital age.” On the other side of the fence, the EFF reaction was an expected contrast, “Today the Supreme Court has unleashed a new era of legal uncertainty on America’s innovators,” said Fred von Lohmann, EFF’s senior intellectual property attorney. “The newly announced inducement theory of copyright liability will fuel a new generation of entertainment industry lawsuits against technology companies. Perhaps more important, the threat of legal costs may lead technology companies to modify their products to please Hollywood instead of consumers.”
Background – How have we got here
As is well documented, the US media companies have been taking legal people who have previous been their customers, accusing them sharing music and films without authorisation. In many cases these people, or their parents have opted to pay a thousands of dollars in damages to the music companies, rather than risk going to court to defend themselves.
The media companies have found this approach very expensive as each of the people using the filesharing software has to be tracked down and pursued individually. As the file-sharing networks have millions of people using them at any given times, this is not a realistic way for them to stop these actions.
The media companies have, through their well-know and influential political lobbying, attempted various approaches to stop their media being shared without their permission – the most extreme so far was trying to make using P2P software illegal in the US. Happily, so far, this extreme idea hasn’t been successful.
Broad-brush approaches like this hurt the innocent as well as the people the media companies want to stop. P2P software such as BitTorrent is simply more efficient, economical way to distribute large file, such as audio and video. Digital-Lifestyles often uses BitTorrent as it reduces our hosting charges, as people who download the file also become distributors of the file, reducing the load on our servers.
Taking the direct approach
While going after individuals has, in the eyes of the media companies, has been successful, it’s expensive and time consuming. Yesterday’s ruling was about going after the makers of the file-sharing software – with the logic being, if you close them down, people won’t be able to share files.
Back in 2001 28 of the world’s largest entertainment companies started this legal action against the makers of the Morpheus, Grokster, and KaZaA filesharing software products. A number of legal cases have already been fought in the lower US courts, with the most recent finding going in favour of the defending file-sharing companies – Grokster and StreamCast, makers of Morpheus.
The Electronic Freedom Foundation (EFF), who have been assisting the software companies in their defense, felt a precedent had already been made for this. Back in the 1984 the US film studios went after the makers of video recorders, claiming that if there were to be sold the whole of the film-making business would vanish. The Sony vs Universal Studios case, or The Betamax Case, as it has more popularly become known, ruled that the manufacturer of a piece of equipment could not be held liable of uses that might infringe copyright. In legal circles this is know as Secondary liability.
(By a twist of corporate fate, Sony now owns MGM)
Where we are now
The ruling yesterday appears to be contrary to the findings of the Betamax Case. Justice David Souter said “We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by the clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.”
If a company makes and sells a device that is then used to distribute copyrighted material, the company is acting illegally.
While the court case is about software, it is important to note that the ruling isn’t just about software, it talks of a ‘device’. So this ruling could have impact on any service or piece of equipment that handles copyrighted material, be that Google, TiVo, iPod, etc.
While the media companies have met the ruling with excitement and delight, others are quite as sure. The sticking point is the use of the word Intent.
John Barrett, Director of Research at Parks Associates told Tom’s Hardware “I suspect [litigants] will spend the next five to ten years arguing over what exactly is ‘intent.’ The issue is, is it enough if you make everybody digitally sign off on some disclaimer that says, ‘I’m not going to use it to trade illegal files?’” Will networks have to actively search for and purge illegal files, or filter out files from being disseminated, or only allow certified content to be traded? Barrett asks. “It’s going to be a mess, because you’ve got to start down that road where the P2P guys are obviously going to try to paper over something with some disclaimers and a few splashy warnings, that just get ignored by everybody.” By way of comparison Barrett added, “It’s the same thing as when you go to the college library, [and] you see this little sign by the Xerox machine saying, ‘Copyright infringement in this area is a crime, etc., etc.,’ and then everybody just copied the books and ignored the sign.”
Others have brought forward the comparison with gun manufacturers. When guns are designed and manufactured these companies are not called to account when someone is shot dead by one of their products – considerably more serious that someone copying a piece of music or a film. The cited argument is “Guns don’t kill people, people do.”
What the future will hold?
Well, the debate will rage on both sides as to the long terms effect of this ruling.
On the legal front, the case has been sent back down to lower courts in the US, where the future fate of the file-sharing companies could be sealed.
Beyond that, many man-years of chargeable legal hours will be racked up as spectrum of companies try to understand how they are effected.
Many companies or trade organisation that have any thing to do with Intellectual Property Rights (IPR) will come out in the press supporting the ruling, many other will come out decrying it.
There will be a lot of people in tech companies convening meetings attempting to work out if they or their products could be affected by this ruling. Companies will examine their own internal processes in an attempt to understand if they could be found guilt of providing intent of copyright infringement.
As to whether this will impact the very existence of innovate start-up companies in the US, as Cory Doctorow claimed in a piece in Popular Science, can only be reveled with time, “what today’s decision will kill is American innovation. Chinese and European firms can get funding and ship products based on plans that aren’t fully thoughtcrime-compliant, while their American counterparts will need to convince everyone from their bankers to the courts that they’ve taken all imaginable measures to avoid inducing infringement.”
Supreme Court ruling (PDF)
MGM
Grokster
EFF
28 June, 2005
Geeks Take Over The UK
Long shunned as hobby-obsessed lonely losers living in messy bedrooms with a dreadful taste in music, geeks, computer spods and sci-fi nuts have revealed themselves as a lucrative target for advertisers.
The Sci Fi Geekforce Report, a new study by the Sci-Fi channel service, reveals geeks to be high-spenders with the power to make or break billion-pound brands.
With Borg-like numbers (nearly 7 million in the UK), the collective buying power of geeks is making cappuccino-supping noo meedja types sit up and reach for their mood boards, with the survey estimating the “geek pound” to be worth a staggering £8.2bn (~€12bn ~ US$15~)a year.
The research, undertaken in association with marketing specialists TGI and media agency Rocket, also revealed that the geeks are predominantly ABC1 consumers, with some 33% of their number being female.
The bigwigs of Sci-Fi conducted the research to try and work out the popularity of the multi-billion dollar genre when it was supposedly the province of “solitary, unpopular individuals with niche interests and questionable personal hygiene habits.”
Dan Winter, head of press at Sci-Fi, declared himself “blown away” by the survey, which challenged many of the stereotypes.
For example, far from being long-term bedroom dwellers with only a death metal collection for company, the survey revealed geeks to be sociable animals, 52% more likely than the average person to have had four holidays in the last 12 months and 125% more likely to visit pubs, clubs and bars.
Nearly 40% of geeks believed their special interests make them attractive to the opposite sex, although we’re not convinced that, “Hi! Have you seen the latest Asus motherboard?” is a winning chat up line.
The bit that will get the advertisers moist in their strap lines is the fact that geeks are 90% more likely to be the first among their chums to invest in new products.
Martin Heaton Cooper, advertising sales director for Sci Fi, commented: “It’s clear that in a time of advertising overload and scepticism, the mainstream is turning to their new geek counterparts to help them make product decisions.”
The Sci Fi Geekforce Report is due to be released in July.
Sci-Fi
28 June, 2005
France Telecom / Cable and Wireless Potential Deal Examined
Last weekend there was a report that France Telecom (FT) were rumored to be buying Cable and Wireless (C&W) for GBP 4bn. FT has of course denied it.
Though the telco market is consolidating, it does seem an odd match.
FT is the French equivalent of British Telecom (BT) the incumbent operator. The French government still owns a considerable portion of FT (though it has recently released a number of shares on to the open market).
C&W a UK monolith
C&W comes from the old school of telecoms, it’s a giant. It was half of the duoploy with BT when the telecoms market deregulated in 1994 (under the Mercury brand). It became very cash rich (to the annoyance of C&W’s shareholders), but like every other telco was hit hard by the telecoms crash after the dot com boom. They sold of their US operations (apart from the Caribean where they are still a virtual monopoly and very profitable) and have concentrated on their core UK operations.
As a telco, C&W has become very aggressive with their pricing especially in the wholesale minutes market and carry a lot of traffic for UK “switchless” providers and Carrier PreSelect (CPS) companies. They’ve become so aggressive they’ve been accused of predatory pricing (i.e. selling under cost to win business in the hope that it wins further business) but that’s not been proven.
They are trying to move into new areas and have announced new products such as VoIP, but as yet these are really marketing noises.
One area where they have invested in and have made real progress is Local Loop Unbundling (LLU) with their purchase of Bulldog (for GBP 18m). Bulldog have now unbundled about 400 exchanges and have plans to unbundle another 400 by the end of the year.
The C&W and Bulldog acquisition has had teething problems, cutting over to the vastly increased C&W infrastructure didn’t go particularly smoothly with customers losing connectivity for hours at a time. There are still on-going problems.
FT and C&W, not an ideal match
Would FT purchase C&W, well they might, but it would be an expensive buy.
Wanadoo (the ISP arm of FT) has stated they are going to invest EU 300m in unbundling exchanges (in the first year) and rumour has it there’s a total of EU 1bn over 3 years for LLU. So FT could buy C&W just for the LLU aspects, but really does seem excessive. C&W bought Bulldog for GBP 18m and they’ve invested at least 10’s of million into them. So 4bn is a HUGE premium to pay for a ready made network and 10’s of thousands of customers. Wanadoo already have considerably more broadband customers than Bulldog.
C&W have a big network, with good links into most of the telecoms companies in the UK, that might be of some value but the global number of call minutes is decreasing (as people move to VoIP) and the value per minute is decreasing even more rapidly (as flat rate calls – especially in the VoIP arena – become the norm). A call to anywhere in the world is now approaching around 2c (on average) per minute.
Another minus point is that FT already have a UK network (they purchased Equant), so having an old legacy telecoms network can’t seem that attractive.
There’s also Orange to worry about (the mobile side of FT), they also have considerable UK telecoms infrastructure.
All in all it doesn’t seem a good fit, though of course there may be another completely hidden agenda.
France Telecom
Cable and Wireless
Bulldog DSL
24 June, 2005
Ofcom: A New Regulatory Approach For Fixed Telecoms
UK Super-regulator Ofcom have today published details of a new regulatory approach for the UK’s fixed line telecommunications market.
We think this information is significant enough to be reproduced without editing.
A new regulatory approach for fixed telecommunications
Ofcom today published details of a new regulatory approach for the UK’s fixed line telecommunications market.
Ofcom has concluded that a new approach is necessary for the longer term, based on real equality of access to those parts of the fixed telecoms network which BT’s competitors cannot fairly replicate.
This new approach to regulation has six objectives:
1. to drive down the price of calls, connections and services for consumers and businesses;
2. to support more innovation through the growth of competitive products and services, such as faster broadband, television and voice over the internet and video-on-demand, from a range of credible companies;
3. to provide regulatory certainty for providers and investors so that they commit to developing, marketing and extending these products and services for UK consumers and businesses;
4. to re-focus regulation where it is truly needed, with swifter remedies to tackle anti-competitive behaviour and a structure which delivers equivalence to a timetable with real penalties and incentives;
5. to remove regulation wherever competition is effective and the effect of open markets – rather than regulatory intervention – ensures the delivery of choice, value and quality for consumers; and
6. ensure the necessary level of consumer protection through a combination of codes, sanctions and effective consumer information.
Ofcom Chairman David Currie said: “We believe these proposals have the potential to encourage more sustainable competition, more services, lower prices and greater consumer choice.”
Ofcom Chief Executive Stephen Carter said: “Effective regulation for the telecommunications industry needs to be forward looking, needs to encourage competition in the right places and needs to deliver tangible benefits for customers.”
He added: “These proposals are substantially different to traditional telecommunications regulation. They demand significant changes in key areas, and recognise that in other areas regulation can be rolled back.”
Proposed Undertakings
On Tuesday 21 June the Board of BT Group plc agreed in principle to offer to the Ofcom Board legally binding undertakings in lieu of a reference under the Enterprise Act. On Wednesday 22 June 2005 the Ofcom Board accepted this offer.
The proposed undertakings commit the company to substantive changes in organisation and behaviour; full detail of the proposed undertakings will be published on 30 June 2005.
A more detailed Ofcom Statement can be found online at www.ofcom.org.uk/consult/condocs/telecoms_p2/statement/
This news release should be read in conjunction with that statement. The full undertakings – which will be subject to final consultation – will be published on 30 June, together with a number of other proposals relevant to securing greater competition in the fixed line market, the details of which follow later in this news release.
1. Enforceability. The final undertakings to be offered by the Board of BT Group plc will be in lieu of a reference to the Competition Commission under Section 155(1) of the Enterprise Act 2002. They will be legally binding and enforceable, and will mean that:
  - in the event of a breach, Ofcom could take the matter to the High Court. The Board of BT Group plc would then be responsible for ensuring compliance with the order of the Court;
  - third-parties affected by a breach could also seek damages via the Court to recover losses incurred; and
  - these undertakings will sit alongside Ofcom’s existing competition and regulatory power.
Ofcom will publish the final undertakings for a six week consultation on 30 June 2005.
1. Branding and identity. The proposed undertakings offered by BT will stipulate the setting up of a new – and operationally separate – business unit, provisionally entitled Access Services, but with a distinct new brand and identity to be devised in the coming weeks. The new business unit will be staffed by around 30,000 employees presently responsible for the operation and development of BT’s local access networks. It will have:
  - separate physical locations for management teams;
  - separate bonus schemes; whilst the new business unit’s staff will remain BT Group plc employees, their long-term incentive plans will be changed to a new scheme which reflects the objectives of the new business unit, not those of the BT Group plc; and
  - over time, new branding on uniforms and vehicles which emphasises its operational separation from BT Group plc.
  - given the limited size of the market in Northern Ireland (and, as a consequence, BT’s current operational structure in Northern Ireland), BT has proposed – and Ofcom has accepted – that the three operational changes above will not apply to Northern Ireland. However, all other aspects of the proposed undertakings will apply equally across the whole of the UK; and
  - separate operating and trading systems.
2. Product equivalence. The new business unit will be required, through a set of formal rules on governance and separation, to support all providers’ retail activities (including those of BT Retail) on a precisely equivalent basis, which Ofcom terms “Equivalence of Input”. Equivalence of Input will mean that all providers will benefit from:
  - the same products, with equal opportunity to contribute to the development of new products;
  - the same prices, offered to all providers equally; and
  - the same processes, to ensure all providers are able to order, install, maintain and migrate connections for their customers on equal terms.
3. Products and services. The new business unit will offer a universally available product and service set:
  - Local Loop Unbundling (LLU) products, including fully unbundled loops (where a provider takes full responsibility for all of the customer’s voice and broadband services) and shared loops (where BT Retail continues to provide voice services and another provider is responsible for broadband).
  - All forms of Wholesale Line Rental (WLR), where a provider takes responsibility for all voice services and provides a single bill for both line rental and calls.
  - Backhaul products, which are used to connect the local access network to the core network. Some providers have built out their own backhaul networks; however many others are dependent on BT for wholesale backhaul services.
Equivalence of Input will also apply to IPStream – BT’s wholesale internet products used by many Internet Service Providers (ISPs) to provide broadband connections for their customers.
Detail of the timescales under which Equivalence of Input will apply to these services are set out in the accompanying Statement, which can be found online at;
www.ofcom.org.uk/consult/condocs/telecoms_p2/statement/
1. Next Generation Networks. The proposed undertakings will also set out a number of clear principles which BT Group plc should follow in the design, procurement and build of its next generation 21st Century Network. These principles will help ensure that other providers who will depend upon interconnection with BT’s 21CN do not suffer competitive disadvantage.
2. Board and governance. BT Group plc and the new business unit’s compliance with the proposed undertakings will be monitored by a new Equality of Access Board (EAB), which will also oversee the delivery of other legacy regulated products not directly delivered by the new business unit. The proposed undertakings from the Board of BT Group plc require BT Group plc to act swiftly upon the recommendations of the EAB.
  - The EAB will be a compliance Board, not an operating management Board;
  - The EAB will be chaired by Carl Symon, a Non-Executive Director on the Board of BT Group plc, with four other members, three of whom will be independent of BT Group plc and will be appointed in consultation with Ofcom;
  - The EAB will meet between six and ten times during the first year of operation;
  - The EAB will produce a regular summary report of its activities, which will be published; and
  - The EAB will have extensive powers to seek access to information from wherever in BT Group plc it deems necessary to do its work.
Ofcom Chief Executive Stephen Carter said: “The Ofcom Board proposes to accept BT Group plc’s proposed undertakings on the critical assumption that BT Group plc does not merely deliver the letter of the undertakings, but also the spirit.”
Other regulatory policy initiatives
Ofcom has also been developing a series of regulatory policy initiatives under its sectoral powers which, in their impact on the competitive market, will complement the proposed Enterprise Act undertakings offered by BT Group plc.
Cost of capital Separately, Ofcom has today also published a further consultation document on the Weighted Average Cost of Capital it will apply in assessing the rate of return on BT’s regulated products.
The consultation document can be found online at www.ofcom.org.uk/consult/condocs/cost_capital2/
Establishing the relationship between risk and return is an important aspect of Ofcom’s work. The more high-risk a company’s investment, particularly in terms of the volatility of returns compared to the volatility of returns on equity investments generally, the more expensive it becomes to raise capital in the markets, as investors expect a higher rate of return to acknowledge the degree of risk involved.
Where Ofcom is required to set a limit on the price a company can charge for its regulated products and services, it is important that those limits allow the company to make enough of a return on its investments to reflect the costs it incurs in raising capital.
In line with its preliminary consultation, Ofcom will propose separate levels for the traditional copper access network which differ from the overall cost of capital for BT Group as a whole. Ofcom believes that this approach will provide a fairer pricing regime for competitors using BT’s access network whilst allowing BT an appropriately higher return on higher-risk investments.
In the coming weeks Ofcom will also publish four further documents. These are:
Undue Discrimination Guidelines Ofcom has imposed regulation on some companies requiring them not to discriminate unduly to prevent then from using their dominance to the detriment of competition and consumers.
Ofcom is reviewing the guidelines that describe how it will investigate potential cases of undue discrimination. The present approach was designed by Ofcom’s predecessor Oftel before the Communications Act 2003 came into effect. The new approach proposed in the consultation, to be published on 30 June, will tighten the requirements and in Ofcom’s view will help increase effective competition.
The consultation will also include, by way of illustration, a number of examples of the kind of behaviour which may lead to undue discrimination. Those examples are included to help foster understanding of the new approach.
Wholesale Broadband BT Group plc has today announced that it will cut the price for full LLU by 24% per cent from £105 to £80 per year, with effect from August. BT Group plc has also committed to deliver stability on IPStream pricing until there are 1.5 million unbundled lines in the UK to encourage competition.
Ofcom believes that these voluntary measures from BT Group plc will help to stimulate greater competition in broadband markets by providing reassurance for LLU operators investing in deep level infrastructure.
Ofcom welcomes these initiatives from BT. It will publish a short statement on 30 June outlining its future plans for regulation of Wholesale Broadband. Ofcom is intent on fostering competition in the LLU market and will be quick to use its regulatory powers if required.
Next Generation Networks Ofcom will consult on the detailed practical steps to ensure that the development and deployment of BT Group plc’s Next Generation Network – 21CN – offers all providers the same products, prices and processes on equal terms and does not inhibit reasonable developments by alternative network operators.
The consultation, also to be published on 30 June 2005, will propose that BT Group plc should not simply inform its competitors what it is doing, but instead share details of deployment and interconnection with its competitors via a genuinely cooperative new NGN forum.
Universal Service Obligation Ofcom will consult on the outcome of its analysis of the Universal Service Obligation – the statutory safeguards which provide important citizen and consumer protection measures, including tariffs for people on low incomes, obligations to install new lines upon request and commitments to provide and maintain the public payphone service. The consultation will be published on 30 June 2005.
Deregulatory measures Ofcom is seeking to withdraw from the regulation of competitive markets wherever feasible and appropriate. Ofcom has previously consulted on deregulating in two narrowband wholesale markets. In July 2005 Ofcom intends to consult on possible deregulation in the leased lines and large business markets.
Ends.
23 June, 2005
Ofcom Freedom Of Information Act (FOIA) Midyear Figures
A number of people have raised concerns as to how open an organisation Ofcom is. It’s a public corporation, set up in many ways like the BBC, but it was setup with the knowledge that the UK Freedom Of Information Act (FOIA) would take effect in January 2005. This has led it to define the accessibility of the information that it produces, as it generates it.
We’ve heard many people have applied for information and have been turned down, with the frequently cited reasons being; Not in the public interest (how broad a brush would you like sir); or Commercially sensitive (also pretty broad). Others, who have had their request granted, are nearly always pointed to Ofcom’s extensive Web site, which isn’t always the known as the quickest to locate what you want.
We’ve heard that many applications take the statutory maximum number of days (20) to respond with a reply – even when it’s a refusal. This causes us some confusion – does it really take that long for Ofcom to deduce that it is going to be refused, especially as all information is graded on creation? Ofcom’s response is that if it comes back as a refusal, they will pass it through “internal procedures” to re-examine if they can release it.
Ofcomwatch have been keeping an eye on this for some time. We spoke to Luke Gibbs from Ofcomwatch about their FOIA findings, “This is something we’ve been looking at over the last year. It appears to us that Ofcom is following the letter of the FIOA, rather than the spirit. We’ll be doing further research into this later in the year.”
Russ Taylor, Ofcomwatch co-founder reveals their finding …
Ofcom was kind enough to provide OfcomWatch with some brief midyear statistics on how it is progressing with the Freedom of Information Act (FOIA), implemented in the U.K. on January 1, 2005. For previous Ofcomwatch posts on this issue, check Ofcomwatch’s Brief Guide to The Freedom of Information Act and its continuation.
* Ofcom is averaging about 130 FOIA requests per month ~ about 800 so far.
* About 70% of FOIA requests are granted. Common reasons for denying a FOIA request: (i) the data is commercially confidential and (ii) the request is overly-broad and could not be completed within the 18 hour / 450 GBP limit.
* 98.5% of FOIA requests are processed within the statutory time limit. Interesting point: Grants are reportedly swifter than denials, because Ofcom internally review proposed denials to determine whether they can be partially granted.
* Ofcom do not categorise FOIA requests because that would lead to prioritisation, which would be ‘wrong and unfair’.
* Overall, Ofcom commented that the FOIA — in ‘philosophical terms’ — is ‘both welcome and in line with our view of the public’s right to expect transparency and accessibility from public bodies’. However, Ofcom noted that FOIA is something of an operational burden because of the volume of requests received.
* * *
So, that’s Ofcom’s take (and progress) on FOIA so far. FOIA is of course a new area of U.K. law and we expect all public bodies–not just Ofcom–to struggle with implementation. OfcomWatch will take a closer look at FOIA in January 2006, as the first-year of the FOIA’s applicability to Ofcom draws to a close.
But, overall (and interim) statistics only tell part of the story:
* We’ve heard some interesting stories about FOIA from some of you, and we’ve filed less than a handful ourselves. Keep sharing your FOIA stories (mail to: [email protected]).
* I suppose we’ll also receive legal clarifications on just how powerful a tool FOIA is as some denials (whether by Ofcom or by others) are tested on appeal.
* Finally, FOIA is only one element of ‘better regulation’ that is being implemented across the U.K. Better regulation means that FOIA requests should be minimised because public bodies otherwise maintain useful websites and publication schemes, always with an eye toward satisfying their ultimate boss: the citizen-consumer. So, we always want your comments on how Ofcom can function better in this regard.
Stay tuned…
Ofcomwatch
Ofcom UK Home Office, FOIA
23 June, 2005

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