Ofcom strategic digital comms review welcomed by industry

Industry stakeholders have welcomed Ofcom’s wide-ranging review of the UK’s digital communications markets

Industry stakeholders have given a broad thumbs-up to Ofcom’s proposal to conduct an overarching review of the UK’s digital communications market, in an effort to ensure communications providers and services continue to meet the needs of users.

The review will cover competition, investment, innovation, and the availability of products in the broadband, mobile and landline markets. The regulator’s last major review of the sector took place in 2005, and led to the separation of BT’s access network and the creation of Openreach.

The past 10 years have seen major evolution in the sector, including the growth of superfast broadband availability and the transition to 4G networks, said Ofcom acting chief executive Steve Unger.

“Only five years ago, hardly any of us had used a tablet computer, HD streaming or 4G mobile broadband,” he said. “The boundaries between landline, mobile and broadband services continue to blur and our review will mean Ofcom’s rules continue to meet the needs of consumers and businesses by supporting competition and investment for years to come.”

The latest review will consider current and future regulatory developments, network investment plans from major operators and the spread of telecoms services onto the internet, as well as mergers, acquisitions, joint ventures and partnerships.

The regulator will seek to use the review to ensure future private sector-led investment is incentivised correctly, to maintain the healthy competition between providers in the UK that has kept prices low, and potentially to identify areas where there may be scope for deregulation.

Telcos want less oversight to compete

Ovum regulation practice leader Matthew Howett said that because the review was coming in the middle of a major shake-up in terms of consolidation, with BT and Three buying EE and O2, respectively, Ofcom would be challenged to envisage how the landscape would appear in the future.

Read more about Ofcom

“Clearly, the review needs to consider these mergers – and indeed it will be useful input for the advice that Ofcom gives to the relevant competition authorities,” he said. “However, the regulator is keen to downplay this aspect, instead attempting to focus on how the review could lead to further deregulation of the sector. This is where over the top [OTT] comes in.”

Howett said Ofcom had been constrained in its ability to react to OTT services, such as Skype and WhatsApp, which have been cannibalising traditional telco revenues. However, he suggested that the review would be an opportunity for Ofcom to consider the impact of OTT services and whether or not there should be further deregulation of the traditional comms markets to enable the telcos to fight back.

“It would not be entirely cynical to think that the review will focus mostly on this aspect rather than on issues such as a further separation of BT or new wholesale access requirement,” said Howett.

“Instead, these are likely to be addressed as part of the proposed remedies to get those deals approved. Ofcom’s wider strategic review could then be revisited once the dust settles following any eventual industry consolidation.”

A challenge to BT

CityFibre CEO Greg Mesch said that the vast improvements in service competition since 2005 had come at the cost of underinvestment by BT in network infrastructure. In this light, he welcomed the review.

“The UK communications market is underperforming, with one of the lowest shares of fibre-connected buildings in Europe,” said Mesch. “BT’s new focus on content and mobile will exacerbate this problem.”

Mesch called for Ofcom to reconsider the optimal structure for forcing pro-competitive fibre investment.

“The creation of a true level playing field for infrastructure investment, whether that means structural separation of BT or not, is crucial if the UK is to get the digital infrastructure it deserves,” he said.

Antony Walker, deputy CEO of techUK, also welcomed the review, saying a supportive policy and regulatory environment was crucial to encourage investment and innovation.

“In our manifesto, we highlighted the importance of ensuring ubiquitous world-class communications infrastructure for the UK to sustain growth and maintain its position as a world-leading internet economy and developer of digital content,” he said.

Read more on Telecoms networks and broadband communications