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The UK lacks effective wholesale broadband competition and needs regulatory intervention to restore confidence to the industry, according to an influential group of MPs.

This key finding from the Trade and Industry Select Committee (TISC) has already been applauded by those in the industry who have campaigned long and hard against what they say is BT's dominance of the UK's broadband market.

And it adds even more spice to the much awaited market review by communications regulator Ofcom, as part of its wholesale market review.

Key to yesterday's UK Broadband Market report is the committee's view that rival telcos are unable to provide wholesale broadband products that can compete effectively with BT. It seems that the committee has sided with those in the industry who said there wasn't enough margin between DataStream (a wholesale broadband product that allows telcos to use their own networks to deliver DSL) and IPStream (BT's end-to-end wholesale product).

Said the report: "As yet, DataStream has failed to deliver the competition in the wholesale broadband market, and, in turn, in the retail broadband market, that had been hoped of it.

"…with DataStream manifestly failing to deliver the outcomes that it as designed to achieve, clearly a careful review of the wholesale regulatory regime is required."

With the immediate future of the UK's competitive broadband market set to be decided by the regulator, MPs suggested that Ofcom use the review to instil confidence in regulatory procedure.

In what appears to be a clear poke in the eye for the now defunct telecom regulator Oftel, the report said: "It is imperative that those looking to invest in the market have confidence in the robustness of the regulatory regime. Without wishing to anticipate the detail of the ultimate outcome of the reviews, it is vital that the matter is resolved. It may be that that the advent of Ofcom gives the opportunity to re-establish confidence in the regulatory regime where currently it is lacking."

Responding to the report, AOL UK said: "We share the Committee’s belief that competition at the wholesale level is critical if content providers are to have the confidence to make the investment required to deliver the benefits of broadband to the broadest possible audience in the UK.

"AOL UK believes the broadband market in the UK is being held back by a lack of genuine wholesale competition on a national basis. AOL UK therefore applauds today’s Trade and Industry Broadband Market report for highlighting the problems caused by the lack of competition in the wholesale broadband market and for supporting the concept that “a careful review of the wholesale regulatory regime is required.”

Freeserve said it gave its backing for "new regulatory and market initiatives to accelerate adoption of broadband".

Tiscali UK boss Mary Turner said she was "pleased to see that the Committee has recognised the lack of competition in wholesale broadband. It has now placed the responsibility on Ofcom to ensure a competitive market and that an enhanced and sustainable margin is established between wholesale IPStream and DataStream.

"We are however disappointed that the Committee has failed to address, as a matter of urgency, the high activation fee of £50, a major barrier to mass adoption of broadband."

The Broadband Industry group, a lobby group including Cable & Wireless, Centrica and Energis, said the Committee's report "sets out some plain truths about the broadband market".

"The report confirms what the industry already knows - that the current regime has not delivered, and competition in the wholesale broadband market does not yet exist."

"Ofcom now has a unique opportunity to create a level playing field where true competition is possible, and where businesses and consumers can benefit from the full potential of broadband. Without decisive action a true mass market in broadband will remain beyond our grasp."

While the rest of the industry concentrated on the issue of competition, BT decided to focus on another conclusion of the report - namely, that MPs decided there were no grounds for the break-up of BT.

Calling the report a "well-balanced and constructive contribution to the broadband debate" BT "particularly welcomed the committee's view that it is not desirable for BT to be broken up and that the regulatory regime currently being developed needs to encourage further investment."

Asked about the crucial points raised about lack of genuine competition, questioned as to whether the margin between IPStream and DataStream was sufficient to enable rival operators to offer competitive broadband services, a spokesman for the UK's dominant telco insisted: "DataStream provides enough scope for competition." ®

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