BT to Get Universal Service Relief

In a major sign of the changing times, it appears Ofcom, the U.K. communications regulator, finally is ready to release BT, the former monopoly provider, from its universal service obligations, which now require BT to run a phone line to every home in the country, as well as provide payphones and other basic services available at a reasonable cost.

Office of Communications Minister Stephen Carter is expected to propose that the legal requirement for BT to provide a phone line to every UK home become a "shared" responsibility whose costs will be borne collectively by all wired or wireless service providers.

Under the proposed new rules, universal service support will be provided by virtually every provider, whether wireless or wireline, and the support will be for universal broadband service, rather than narrowband voice, as has been the case in the past.

Today, BT has sole responsibility for supplying a phone line to every U.K. home. Current estimates are that this costs BT between £57 million and £74 million a year. Under the new rules BT would no longer bear this cost alone.

Presumably the new rules would require wholesale customers of OpenReach to share in universal service obligations.

Though there is no automatic and linear way to apply regulatory formulas used in one country to any other, there is clear logic to redefining "broadband" as the service for which universal service rules apply, rather than "voice," and equal logic to "burden sharing" by wholesale customers using the BT network, given the U.K.'s functional separation regime, where broadband access widely is available as a wholesale service for other retail competitors.

The North American regulatory regime is quite different, so a brute force application might not be feasible in either the United States or Canada, neither of which have the same sort of wholesale regime.

In the U.S. market, only one provider in each market, typically the incumbent local exchange carrier, has a legal requirement to act as "carrier of last resort," providing voice service to all potential customers. But observers long have wondered how long that state of affairs could last as more communications shift to wireless and as incumbents lose market share. In at least a few U.S. markets, the incumbent telco is in fact no longer the biggest provider of wired voice services.

How to rationalize and update universal service support therefore has been, and will continue to be, a contentious issue for U.S. competitors.