Re-monopolisation through the Secret Club – Part 2

Simon Woodhead

Simon Woodhead

3rd September 2019

By Simon Woodhead

In 2017, I articulated in a blog post what I’d long said in private. In short, how there is no IP interconnect to BT subject to price controls, like the Standard Interconnect Agreement covering SS7 is, but rather IP from BT is a Managed Service. I suggested that BT were bifurcating the market into resellers of their IP product, and peers, the peers being offered comparative terms for moving away from Regulated SS7, to unwittingly become BT resellers. I called this the Secret Club and the full piece is: Re-monopolisation through the Secret Club

The consequences of this are three-fold:

  • New market entrants are highly likely to become BT Resellers rather than peers with regulated pricing and indeed, in our experience, the difference in status is entirely lost. We’re there now and have been for some time.
  • Middle tier operators such as us, who will not be BT Resellers, but are undesirable invitees to the Secret Club will be squeezed. As you’ll see in the last post, we’ve tried and the terms were nothing short of predatory. We await the next phase when it is suggested that ‘nobody uses TDM’ so poor little BT needs to raise the price for SS7, making their reseller alternative more attractive. That’ll be Phase 3.
  • Lastly, there are the Secret Club members who have signed their own strategic death warrant. I’d like to deal with them here as we enter Phase 2 of this.

I mentioned before how surrendering a Regulated price-controlled interconnect and replacing it with a commercial agreement was risky, especially if that was justification for dismantling legacy SS7 infrastructure. What is the way-out when that commercial agreement is varied?

Sadly, the geniuses that lead operators many hundreds of times our size didn’t see that and embraced this cool IP thing to ‘save costs’ and demonstrate dynamism (if buying a magic box can really be considered dynamic). It is therefore fascinating, vindicating, yet disappointing, to see some now having to seek to increase rates because of “migration away from TDM to SIP interconnects in UK with likes of BT etc, which has driven our underlying cost base up”. For context, this is from an operator seeking to increase rates by over 40% despite our volumes increasing, and those to that particular destination (UK fixed) tripling. Maybe being a reseller of your competitor with unregulated pricing and no way out does have consequences after all?

Isn’t it ironic that whilst the regulator crows about reducing prices (yes, we know consumer prices have actually risen) through their ongoing reduction of the regulated Fixed Termination Rate that, due to a reduction in competition and more people being resellers of the incumbent, prices are again rising at the wholesale level too?

We’ll continue progressing our BT Zero strategy but if ever we needed a competent regulator, able to address the neglect of the past, the time is now. Perhaps they’re just too busy preventing us from bringing improved coverage and competition to the mobile market, or fannying about with blockchain!

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