1. Effective competition review : Mobile February 2001

2. Effective competition reviews Oftel’s strategy set out regulatory principles designed to ensure the the level of regulation is proportionate to the state of competition in different telecoms markets Oftel needs to measure effective competition in various markets this is done through the effective competition reviews

3. Mobile market review objectives: to review the state of the mobile market and to assess if OFTEL’s objective of “effective competition benefiting consumers” is being met in the light of the results of the review, assess if current regulation continues to be appropriate outcomes: effective competition exists the market is not yet effectively competitive but there is evidence that effective competition is developing the market is not effectively competitive

4. The mobile market review ActivityMonth Issue “kick-off statement”Mid September 2000 Issue consultationEarly February 3 month consultationFeb, March, April 2001 Prepare final statementMay, June, July Issue final statementJuly/August 2001

5. The mobile market continues to grow Source:Oftel Market Information andOftel estimates

6. The mobile market sources of revenue are changing

7. Consumer outcomes 'best or near best deal' in comparison with consumers in similar economies target is being met but Oftel needs more information before it is sure that the UK is maintaining its position wide range of services available a comparison of services in different European countries shows that the UK consumer does have access to a wide range of services consumer satisfaction overall consumer satisfaction is high

8. Consumer behaviour consumers able to access and use information to take advantage of market opportunities the available research suggests that many mobile telephony consumers are either not confident, not knowledgeable, or both absence of barriers to consumers switching suppliers consumer switching relatively high some way to go before number portability is quick and reliable SIM locking apparently on the increase

9. Market structure barriers to entry at the network/wholesale level ISPs operating in retail markets rely on the vertically integrated network operators for the provision of wholesale inputs if effective competition does not exist, there is considerable scope for leverage of market power from the wholesale to the retail mobile markets structure consistent with a range of outcomes, from vigorous competition to collusion between the operators

10. Supplier behaviour active competition on price, quality and innovation evident price competition on many services not so evident on roaming and off-net calls evident competition on quality anti-competitive activity and collusion many complaints but non proven no immediate evidence of price signalling or tacit collusion recent entry other than Virgin, limited impact

11. Pricing and profitability prices broadly reflect underlying costs (absence of persistent excessive profits) historic and some current returns substantially in excess of cost of capital absence of inefficient suppliers differences in ROCE indicative of inefficiency? major task for next stage to study further relationship between costs, efficiency and profitability

12. Conclusions mixed picture consumer getting a good deal in many respects but is it the best possible deal? on balance not yet effectively competitive prices still above the competitive level, despite the presence of competition future trends remain encouraging consumers becoming better informed prospect of new entry

13. Implications for regulation no case for price caps or cost-based access if market not effectively competitive, present MI framework broadly appropriate supply of unbranded airtime might be useful licence-based measures remain necessary

14. Next steps comments to Oftel by 4th May comments on comments by 18th May final statement July 2001 workplan for the next stage industry meeting to discuss scope of work on profitability and efficiency further work on benchmarking