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Telecommunications in the UK

by Michael Gariffo

Copyright 2019, Faulkner
Information Services. All Rights Reserved.

Docid: 00017647

Publication Date: 1902

Report Type: MARKET

Preview

The United Kingdom has one of the most advanced
telecommunications markets in Western Europe, with ramifications
throughout the world. Massive telco
providers, including BT, Vodafone and others, that stretch across Europe and beyond make their home here with multi-national entities like
Orange and T-Mobile also holding a significant presence on the island
nation. Thanks to its important position in global telecom, the UK serves as a vibrant and shifting landscape in the
current mergers and acquisitions scene, with transactions occurring on a regular basis that
could have a huge impact on citizens of the UK and countries around the
world. This report examines the current telecommunications situation in
the UK, its history, and where it might be going in the future.

Report Contents:

• Executive
  Summary

• Market
  Dynamics

• Market
  Leaders

• Market
  Trends

• Strategic
  Planning Implications

• Web
  Links

• Related
  Reports

Executive Summary

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The UK telecommunications market is experiencing strong
growth in most segments.

Related Faulkner Reports

BT Group Company Profile

Recent
investments in telephony infrastructure have started to translate into
profits, particularly in the mobile communications arena. Wireless teledensity has surged to
more than 140
percent,
which, combined with the robust, all-digital fixed-line infrastructure
and the growing Internet industry, makes the UK
one of the premier telecommunications markets in all of Europe.

The UK is the fifth largest economy in the world, and
its telecommunications sector has benefited tremendously from its
28-year history with privatization, which continues to be cultivated by
its independent regulatory body known as Ofcom.

Market Dynamics

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The
United Kingdom (UK) is an island country in the northwestern part of
Europe made up of England, Northern Ireland, Scotland, and Wales. It is
the fifth largest economy in the world in terms of GDP, behind the United
States, China, Japan, and Germany. Approximately 66.02 million
people live within in the country’s 94,060 square miles. 

Figure 1 shows a map of the UK.

Figure 1. United Kingdom

Source: CIA World Fact Book

The
UK is a constitutional monarchy. Queen Elizabeth II is the head of the
government, and her reign covers the UK as well as 15 other nations including
Australia, Barbados, Canada, and New Zealand. In theory, the Queen is one of the most powerful heads of state in the
world but, in reality, her role is more ceremonial. Prime Minister Theresa
May, who took office in July 2016, acts as the head executive on behalf
of the Queen. The country has a bicameral legislative body called
Parliament, which is made up of the House of Lords and the House of
Commons.

History of the UK Telecommunications
Market

The
UK can trace its telecommunications market all the way back to 1881 when the
government created the Postal Telegraphs Department within the General’s
Post Office. The General’s Post Office continued to provide the majority
of telecommunications services until 1969, when the government created the
Post Office Telecommunications department, which was eventually split into
separate postal and telecommunications operations in 1981. The
communications division was renamed British Telecom. The government sold
51 percent of its stake in British Telecom, which is now called the BT
Group, in 1984, and the rest of the state’s holdings were divested in
sales held in 1991 and 1993. BT is still the leading communications
company in the UK, but its market share has declined over the years.

In
1982, the UK

government issued a second operating license to a company called Mercury
Communications, which was a telecommunications subsidiary of Cable &
Wireless. This communications duopoly continued to service the country
until 1991, when the market was open to competition. Mercury
Communications continued operating until 1997, when it was fully merged
into the Cable & Wireless brand. Cable & Wireless was one of the
flagship brands of the UK telecommunications market until the company
split itself into two companies – Cable & Wireless Communications and
Cable & Wireless Worldwide – in 2010. Confusingly enough, Cable &
Wireless Worldwide was the company’s legacy UK operations, and Cable &
Wireless Communications provided service throughout the Caribbean and
other parts of the world. Cable & Wireless Worldwide was acquired by
Vodafone in 2012, and Cable & Wireless Communications announced plans to
relocate its headquarters to the United States, leaving the UK market
without a Cable & Wireless brand for the first time since the 1860s.

Wireless Services.
Wireless services were introduced in 1985, when BT Cellnet and Vodafone
were issued 25-year licenses. Mercury Communications entered the market as
the third player in 1993, and Orange entered the market in 1994. There have been several ownership changes in
the wireless division since these four carriers were established. BT
Cellnet was spun off as an independent company called O2, and it was
eventually purchased by Telefonica. Mercury Communications divested its
wireless operations, One2One, to Deutsche Telekom, who brought the company
under the T-Mobile brand. T-Mobile and Orange eventually formed a joint
venture called Everything Everywhere, later renamed to simply EE and
acquired by BT.

Internet Access. Internet access has been available in the
United Kingdom since 1991, when a company named Pipex became the country’s first
commercial Internet service provider. That company eventually became part of
Opal Telecom, a division of TalkTalk Group. DSL started to become available in
the late 1990s, and now high-speed access is available via DSL, cable, and fiber-optic cable,
as well as fixed wireless, and cellular broadband.

Regulatory Environment

The UK’s telecommunications industry is
regulated by the Office of Communications, or Ofcom. The agency was
created in 2003 when the UK government decided to consolidate several
smaller agencies, including the former telecom regulator the Office of
Telecommunications (Oftel). Ofcom is now responsible for overseeing all
forms of communications, which include satellite, broadband, wireless, radio,
television, and traditional wired telephony. It also took over
responsibility for the UK postal service in 2011 when the Postal
Services Commission, or Postcomm, was merged into it.

Ofcom consists of a CEO (Sharon White), a Chairman (Baron Terrence
Burns), a Deputy
Chairman (The Baroness Shelia Noakes), and six Board Members. Ofcom’s powers are currently
supervised by the Communications Act of 2003 and grant it:

• Regulatory ability to impose conditions without
  agreement.

• Authority to impose fines for breach of
  regulatory obligations.

• An appeals process against regulatory
  decisions.

• Implementation of the
  requirements of European Union (EU) Directives, including a provision
  for "general authorizations" instead of individual licenses, and
  regulation based on "significant market power" (SMP) of carriers.

Ofcom’s recent activities have been to
impose special conditions on carriers that it deems to have a
competitive advantage over smaller players in the industry.

Of greatest significance to the UK environment has been a
number of special conditions imposed on carriers with significant market
power, particularly focusing upon provision of services to other
providers, such as meeting requests to supply certain services and
notification of price changes. A review is ongoing, focused largely
upon legacy provider BT Group, to determine in which markets it has SMP
status and to recommend application of these principals. Another major
change is that licenses are no longer required to provide
telecommunications services in the UK.

Former Prime Minister David Cameron has spoken publicly about his desire to
scale back the agency’s power, but it actually expanded its reach under his
leadership since it assumed responsibility for the country’s postal service.
This power was granted via the Public Bodies Bill, which provides UK Ministers
with the power to "abolish, merge, or transfer functions of the public bodies
listed in the appropriate schedules to the Act." Some of the key goals listed
under Ofcom’s 2019/2020 annual plan were:

• Promote competition and ensure that markets work
  effectively for consumers.

• Secure standards and improve service quality for consumers.

• Protect Consumers from harm.

• Move towards universality of broadband and mobile services

• Support investment in fiber networks and improving the quality of existing
  mobile services

• Prepare for the launch of 5G mobile services.

State of the Marketplace

Fixed-Line Services. The UK
has an advanced telecommunications infrastructure. All of the country’s
communications circuits are digital, and several companies operate
nationwide fiber-optic backbones. In 2016, the most recent measurement
year, there were about
31.5 million local access lines in operation in the UK. The fixed-line teledensity is
about 50.08 percent, which is still high compared to some of the other nations in
Western Europe, despite the UK’s inclusion of the global decline of
fixed-line accounts.

Figure 2. Total Teledensity in the UK, 2006-2016

Source: ITU-D

Wireless.
Wireless services are very popular in the UK, and that
sector of the market is thriving.
In 2016, the
country had over 80 million mobile customers and a wireless penetration rate of
119.5 percent. The
following figure shows the growth in the wireless customer base from 2006 through
2017.

Figure 3. Wireless Customers and Mobile Teledensity in
the UK, 2006-2017

Source: ITU

The UK
auctioned off licenses to provide third-generation wireless services in
2000, when 3G licenses were viewed as state-of-the-art applications and companies
shelled out billions of dollars for the rights to build next-generation
networks. Thirteen companies, including all four of the incumbent
providers as well as nine newcomers, participated in the auction, which
was one of the most lucrative in Europe
and drew heavy attention from analysts. The bidding lasted 150 rounds, and

the five winners paid a combined 2.5 billion pounds for their licenses.
All four of the incumbent service providers secured licenses – Vodafone,
O2 (which was then still part of BT Group), EE (which holds licenses
originally held by One2One and Orange), and a new player
called Hutchison Whampoa, a Hong Kong company that now offers service
under the 3 family of brand names. Vodafone paid nearly six billion pounds for its
license, whereas the other four winners paid more than four billion each
for their licenses.

While the United Kingdom was one of the first countries in the world to
launch 3G services, 4G services were introduced later than in other markets. 4G
licenses were auctioned off for a total of 2.3 billion pounds in 2013, about a
third less than the government expected to raise. The licenses went to BT,
Vodafone, EE, 3, and O2. Now, there are about 24.8 million 4G
subscriptions in the UK. The country’s four mobile operators worked in conjunction with the UK government to jointly invest $7.9 billion to
expand the reach of their networks to 90 percent of the population by the end of 2017.

Now, the country has shifted its focus to 5G proliferation. As one of the
Annual Plan goals for the 2019/2020 Ofcom working period. The country’s telecom
regulator is currently exploring the "implications of implementing networking
slicing under net neutrality regulations," exploring "fixed wireless services,"
and "engaging with consumers on the benefits of 5G services." The agency said it
hopes to "provide regulatory support for industry testing and early deployments
throughout the year, to ensure good outcomes for UK industry and consumers."

Internet.
The United Kingdom has a robust Internet sector. According to the most
recent data published by the International Telecommunications Union, there
were 26.01 million broadband Internet subscribers in 2017, which is 39.31 percent of the population. The country’s service
providers have done an excellent job building out infrastructure
and making broadband largely ubiquitous. According to data
compiled by Ofcom, 94.8 percent
of the country uses the Internet.

Figure 4 shows subscriber
statistics for the Internet and broadband sectors. 

Figure 4. Internet Users and Penetration Rate, 2006-2017

Source: ITU

Market Leaders

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The UK is one of the few European countries where the former monopoly
service provider is not the market leader in all sectors of the
telecommunications industry. The company is still the leading provider
of fixed-line services, but it has not had a presence in the wireless
industry since it spun off O2 in 2001.

Fixed-Line Telephony

BT Group. BT
Group is the former state-owned telecommunications provider, and it
provides service to 19 million consumers and more than one million businesses.
Its recent acquisition of EE has massively grown the company’s customer
figures, nearly doubling the accounts currently serviced in the UK, but
having relatively little impact on the fixed-line aspects of its
business. The assets of EE, particularly that company’s extensive
wireless network, are still in the process of being integrated into BT’s
own holdings, as it is only just over one year since the close of this
acquisition.

In addition to the ongoing integration of EE’s wireless assets, the company recently invested millions of
dollars in a massive build-out of a fiber-optic network that covers two-thirds of all homes and businesses in the country.

BT has restructured itself several times over the years and is currently
organized into for business units:

• BT Retail – BT Retail provides service to businesses and
  consumers in the United Kingdom.
• BT Wholesale – BT
  Group also has a sizable wholesale business with more than 1,000 customers.
• BT Global Services – This group provides telecom service to
  more than 6,500 businesses in 172 countries, including 64 percent of the
  Fortune 500.
• Openreach – Operates BT Group’s network
  infrastructure, including the local access network and the
  fiber-optic network it is building out.

Virgin
Media, Inc. Virgin Media is the largest cable operator in the UK
and a major player in the fixed-line telecommunications market, with
over three
million residential telephone customers. The
company, which was formed by the merger between NTL and Telewest Global,
was the first carrier in the country to offer service bundles that
combine fixed-line and mobile telephone service, broadband Internet
access, and cable television, which is also known as "quad-play
bundles." Today, 72 percent of their customers subscribe to more than
one service and 58 percent are signed up for at least three services.
It has a competitive advantage over Cable & Wireless and other fixed-line
carriers in that it does not have to lease capacity from BT in order to
deliver local and long distance telephone service.

Virgin Media also operates as a virtual mobile provider and has three million
customers.

Vodafone. Vodafone entered the fixed-line market when
it acquired the UK operations of Cable & Wireless in April 2013. Cable &
Wireless had been around since the 1860s and was one of the first
companies to compete directly with BT, but in recent years it had
shifted its focus to large businesses, other telecom carriers, and
government agencies. The acquisition was a major shift for Vodafone
since it puts the company in the UK fixed-line market for the first
time, and gives them another potential market to help offset their
competitive third place ranking in the competitive mobile market.

It also gives the company access to its own fiber-optic network. In the past,
the company spent about 200 million pounds a year leasing capacity from BT’s
network.

BT
still owns the majority of the local access lines, but the company’s
share of the overall call volume is dropping, suggesting that the
customers who are switching providers are businesses and consumers who
make a lot of calls (and spend a lot on their phone bills). The following
chart compares BT’s market share to its competitors in terms of call
volume.

Figure 5. Market Share For Domestic Fixed-Line Market Q3 2017

Source: Ofcom

Mobile Communications

The UK has a very competitive wireless sector. There are
four major carriers competing
in the country and three of the five largest mobile providers in the
world operate here. All of them are moving forward with fifth-generation
services and three of them are very close to each other in terms of
market share.

BT. The new owners of EE, formerly Everything Everywhere,
completed their acquisition of the company in January 2016. The company was
originally created in 2010 when Orange and T-Mobile merged their UK
operations into a mutually owned joint venture. The subsequent
acquisition was a move
designed to bring the incumbent landline carrier back into the wireless
market.

This new company is the largest cell phone provider
in the United Kingdom with 35 million customers and 38 percent of the
market. This strength comes from the combination of the former T-Mobile and
Orange networks, which have now been combined to power the 3G and 4G needs of
BT’s customers.

The company offers GSM, UMTS, and HSPA+ services across the country, and it
has 14.5 million 4G customers. Its 4G network covers 90 percent of the
population, and in 2016 the company announced it would spend $8.6
billion by 2019 to expand 4G and very fast broadband service to 95
percent of the country.

O2. O2 was created in 2001, when BT Group spun off its wireless
assets. It is the second
largest mobile carrier in the United Kingdom with 25 million customers
and 28 percent of the market. The company is currently owned by Telefonica
of Spain, but Telefonica is looking to exit the British wireless market.
In 2015, the company agreed to sell O2 to 3 for $13.4 billion in a deal
that would have created the largest mobile operator in the United
Kingdom. That deal was eventually blocked by the European Commission
because regulators believed it would stifle competition and lead to
higher prices.

With that acquisition off the table, several other companies have since lined
up to buy O2. The list of interested companies include Liberty Global (which
owns Virgin Media), French telecom carrier Iliad, and several venture capital
companies.

While O2 remains independently owned, the company has been
aggressively marketing two service bundles to differentiate itself from the
other pure play wireless carriers: O2 Home Phone – which combined mobile
calling, broadband Internet access, and a VoDSL landline service for a flat
monthly rate – and a package that combines mobile service and DSL Internet
access.

O2’s network runs on the GSM standard, and it has collaborated with Vodafone
on building out a nationwide 4G network. The two companies share the
infrastructure but use their own spectrum to deliver the service. This network
now covers nearly the entire country.

Vodafone. Vodafone is the second largest
wireless telephone company in the world, with nearly 500 million customers in
Europe, the Asia/Pacific, Africa, the Caribbean, and the Middle East. But
it is now the third largest player in its home territory and its market
share has been gradually declining. In the UK, it
has 17 million customers and 20 percent of the market. Much like BT
Group in the fixed-line sector, Vodafone’s market share in the mobile
market has been slowly eroding as other carriers build their marketing
strategy around competing directly against it. To counter this, Vodafone
is marketing itself as an innovative service provider on the
cutting edge of rolling out new handsets, faster networks, and creative
applications. In 2015, Vodafone held brief talks with Liberty
Global about a possible merger or acquisition, but those discussions
ended after two weeks without progress.

The company’s 4G network covers 95 percent of the UK population.

3. 3 is one of the newer players in the British mobile market, having launched
service in March 2003. The company provides service to 14 million customers over
an HSDPA, UMTS, and LTE network. The company has roaming agreements with
BT and O2 for areas outside of its network coverage, and its 4G network
covers 85 percent of the population. 3 would have become the largest
player in the industry had it been allowed to acquire O2.

Figure 6. Market Share For Mobile Customers

Source: Carrier Data

Broadband

The UK broadband market is healthy and competitive, with three companies
fighting for the number one spot in the market.

BT Group. BT Group operates
most of the last-mile infrastructure in the UK, which it uses to offer DSL services. It is the largest broadband provider
in the country with 33 percent of the
market.

High-speed broadband is a major part of the company’s business strategy,
and it has invested heavily in a nationwide fiber-optic network that provides direct-fiber access to two thirds of the country. To offset its
declining business, the company invested millions of dollars in a
massive build-out of a fiber-optic network that, when completed in 2015,
provided coverage to two-thirds of all homes and businesses in the country. Today,
that network covers about 21 million homes and businesses.

In 2016, Openreach, BT’s infrastructure operations, announced plans to bring
very fast broadband service to one million businesses by 2020. This service
offers connections of up to 1G bps.

Virgin Media. Virgin Media is the second largest broadband provider, with
25 percent of the market. Most of its high-speed customers have
a cable broadband connection, but it also resells DSL service from BT in areas not
covered by its coax network. The company’s most recent network upgrades
brought it in line with DOCSIS 3.1 standards, providing broadband speeds in
excess of 100Mbps for more than 12 million subscribers.

Virgin Media is also rolling out fiber-optic broadband service to 17 million
homes and businesses by the end of 2019. This service delivers connections of up to 200M
bps to businesses and consumers.

Sky. Sky is the largest satellite television
provider in the United Kingdom. It has 20 percent of the broadband
market. Its broadband network covers 85 percent of the country, and it offers
several service packages, currently capping out at a maximum download speed of
63Mbps. The company purchases network capacity from BT Openreach.

TalkTalk. The TalkTalk brand used to be a subsidiary of Carphone
Warehouse, a retailer of mobile phones that is owned by Best Buy, but it was
spun off as a separate company in 2012. It has 15 percent of the market
and it is the largest reseller of DSL service in the UK.

In 2015, the company announced it is testing FTTH services thanks to a joint
venture with Sky (Then branded as BSkyB) and a company called CityFibre. These services have since
launched to customers in select regions of the UK.

The
following graph shows the leaders of the broadband sector and their share of
the market. 

Figure
7. Market Share For Broadband Providers

Source: Ofcom

Market Trends

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The UK telecommunications market is stable
and competitive, and there are now some exciting
developments shaping the market.

Consolidation in the Market

The UK telecom market has seen one major acquisition and a
second deal that was blocked by the European Commission. The first deal was BT’s
acquisition of EE, which strengthened the incumbent’s role in the market by
giving it a much-needed wireless operation. BT had been out of the mobile sector
since it spun off its wireless business as O2, which was eventually acquired by
Telefonica. EE was started as a joint venture by T-Mobile and Orange, so while
the BT deal marked the return of one major player into the wireless sector, it
also meant two of Europe’s largest telecommunications carriers were leaving it.

O2 and 3 attempted to merge into a single company that would
have become the largest player in the UK mobile market, but the two companies
could not get regulatory approval to proceed. The European Commission believed
that the merger would result in higher prices for UK consumers.

Changes
in the Regulatory Landscape

The government has taken a more active role in promoting advanced and converging
communications technologies. As mentioned earlier, the UK

government consolidated several related regulatory agencies in 2003 into a
central organization called Ofcom. The government believes the creation of
Ofcom, and the passing of a new telecom policy in 2003, creates a better
framework for the next-generation of communications. Ofcom
has taken a hard-line stance against BT Group, even going so far as
threatening to break up the company if it did not start cooperating with its
competitors. The result has been explosive growth in the broadband sector, increased competition in all markets,
and decreased
consumer pricing.

Ofcom has been working recently to enforce new regulations from
the European Union that were implemented into the UK market in 2011. Those
include:

• Shorter contracts for telecom services.
  Telecom carriers cannot sign consumers to contracts
  longer than 24 months, and all consumers and businesses must be
  offered 12-month contracts when they sign up for services.

• Faster number portability.
  Mobile carriers must port telephone numbers to a new carrier
  within one working day.

• Better access to emergency services.
  Telecom carriers are required to make it easier for
  disabled people to access emergency services.

The regulator has also begun undertaking the task of planning for the
deployment of 5G services to the UK.

The
Explosive Broadband Sector

Broadband
technologies have had a major impact on the way people in the UK

get information, interact with each other, and conduct their daily lives.
From 2008 to 2014, the average speed of a fixed broadband connection
increased by 36 percent per year, and according to a study published by Ofcom,
more than
one-third of all broadband
connections in the UK operate at almost 30M bps, which is the nation’s own classification
for "very fast" broadband.

The National Broadband Scheme. The government
is currently following a five-year plan called the National Broadband Scheme
(2016-2020) which is designed to guide the deployment of very fast broadband
connections. The UK government has created a fund that will help network
operators build out infrastructure in parts of the country that currently do not
have any sort of very high speed connection and private
companies are unwilling to make the investment. This program, however, has strict
guidelines to ensure public funding does not exceed private investment.

According to the UK Department for Culture, Media, and Sport,
the government’s broadband plan had brought very high speed Internet access to
3.8 million buildings as of May 2016.

The Need for Faster Broadband.
The amount of total bandwidth being used in the United Kingdom is
increasing as people continue to use the Internet more frequently for
entertainment and business. As
such, the cable industry is taking steps to bring faster bandwidth services to
the United Kingdom. Virgin Media, for example, upgraded its network to the DOCSIS 3.1 standard, which offers speeds
in excess of 100M bps.
Today, the average broadband speed is 18.5M bps, but it continues to rise as
more fiber and advanced networks are deployed across the country.

Wireless Networks Continue to Grow

The UK wireless sector is still booming, despite concern that the market was too
saturated. Carriers are hoping fifth-generation technologies will open a new
avenue for continued revenue growth. All five of the major wireless carriers
currently offer 4G services, but these are expected to be joined by 5G
within the next couple of years.

Wireless
carriers are eager to build their next-generation customer bases because subscribers are
much more likely to use additional value-added services. As with the rest of
the world, wireless broadband is increasingly used for mobile streaming of
video and audio services, creating huge demand for network capacity and
broadband usage. These have become great sources of revenue for carriers
across the globe, and those in the UK are no different.

Converging
Technologies and Service Bundles

Communications
technologies continue to converge as organizations secure strategic
partnerships or execute mergers and acquisitions to expand traditional
telephony and Internet services into wireless, television, and related
products such as Video-on-Demand, IPTV, and VoIP. Bundling services into
triple-play or quad-play packages is continuing trend in the UK, where cord
cutting has not affected the industry as deeply as it has in some other
western nations.

Approximately 45 percent of all UK households
subscribe to some sort of service bundle. This means that a single
subscription is providing access to multiple services (home broadband
and TV for example), rather than simply denoting a home that subscribers
to multiple types of telecom services that are billed separately. Of these, packages that combine
fixed-line telephone service and broadband Internet access accounted for
38 percent of all bundle purchases, while another 29 percent subscribed to
bundles that combined voice, Internet, and television service. 

The Impact of Brexit

Despite being nearly two years on from the approval of Brexit, it remains
nearly impossible to say what the impact the vote will have on the UK’s telecommunications landscape.
Thanks to various rejected exit plans and governmental turmoil and
disagreements, even the
most basic economic and legislative changes resulting from the country’s
decision to exit the European Union remain in the early stages of
negotiation. As with physical trade, the transportation of data and
communications signals are likely to be deeply impacted by the forthcoming
alterations to the UK’s relationship with Europe. However, this assumes that the Brexit process will be completed without alteration or any type of reversal, a
fact that is by no means guaranteed. For now, it is necessary to take a "wait
and see" approach to the entire transition before even remotely educated guesses
on its impact can be made.

Strategic Planning
Implications

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of this report]

The UK

telecommunications market has been grinding through a process of gradual
privatization that was initiated by Prime Minister Margaret Thatcher in
1979 and is now largely complete. The first competitive
telecommunications license was issued in 1983 to Mercury Communications, a
subsidiary of Cable & Wireless. BT Group, then called British Telecom,
and Mercury operated as a duopoly for the next seven years. The Government
sold off 51 percent of BT Group in 1984, and it sold the remainder of its
share in 1991 and 1993.

The
BT/Mercury duopoly ended in 1991 and licenses were made available to all
applicants capable of providing telecommunications services. Competition,
which had been developing steadily, is now established in a variety of
areas. In addition to UK

initiatives, telecommunications privatization initiatives are affected by a
number of European Union policies, particularly the Green Paper of 1987,
which advocated separation of operators from regulators, transparency of
procedures and information, cost orientation of tariffs, access to monopoly
networks, and liberalization of services.

The

UK’s regulatory telecommunications agency, Ofcom, continues to push for
further liberalization of the market, hoping to increase competition and
stimulate growth. The government and the economy have already benefited from
some of previous regulator Oftel’s efforts. The pressure the European Union
(EU) has applied to member states has been effective in stimulating real
policy change. Whether this trend will continue after the UK exits the EU
remains to be seen. It is entirely possible that a reversal will occur,
in which the regulatory and business landscape reverts to the more
conservative, even monopolistic ways supported by the same right-leaning
politicians that managed to accomplish their goal in passing the Brexit
vote. Again, this outcome remains up in the air as negotiations to iron
out the details of precisely how the UK will make its departure are ongoing.

Meanwhile, from a purely commercial standpoint, the UK’s
telecommunications market, with the exception of fixed-line services, is
flourishing. Investors should expect more consolidation among major
communications companies to continue to expand service offerings and
leverage corporate synergies. This is a trend with growing steam not
just in the UK, but around the world. Rumors remain strong that industry
giants Deutsche Telekom and Orange are shopping around various national
carriers with an eye to sell. The full impact of this move towards
consolidation in the UK will depend largely on the regulatory landscape
in the coming years. Similarly, the regulatory landscape itself will
depend wholly on the trends in UK governmental leadership which, it must
be said, is currently in flux as strong opposition to current leadership
has become obvious among the UK citizenry. It is entirely possible that
a major shift in every aspect of British government, from the Prime
Minister’s office down, could be on the way. The influence such a sea
change could have on the telecommunications in the UK cannot be
overstated.

Web Links

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of this report]

• 3: http://www.three.co.uk/
• BT: http://www.bt.com/
• O2: http://www.o2.co.uk/
• Ofcom: http://www.ofcom.org.uk/
• Orange: http://www.orange.com/
• T-Mobile: http://www.t-mobile.com/
• TalkTalk: http://www.TalkTalk.co.uk/
• Telefonica: http://www.telefonica.com/
• Virgin Media: http://www.virginmedia.com/
• Vodafone: http://www.vodafone.co.uk/

About the Author

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Michael Gariffo is
an editor for Faulkner Information Services. He tracks and writes about
enterprise software and the IT services sector, as well as telecommunications
and data networking.

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