Ofcom To Hold First Major Communications Review In Ten Years

Ofcom will hold the first major review of the UK communications market in a decade as it seeks to develop a regulatory framework that balances the needs of service providers and those of consumers.

The last such review took place between 2003 and 2005 and resulted in new legislation allowing rival providers to access BT’s network infrastructure through Openreach.

Ofcom says the sector has changed significantly since then and will assess the UK’s broadband, mobile and landline markets for levels of competition, investment, innovation and types of service available to determine future policy.

Ofcom review

The ‘Strategic Review of Digital Communications’ will also take into account recent developments such as network investment and the ongoing trend towards consolidation among the major communications firms.

The desired result is a regulatory framework that encourages and removes barriers to invest while at the same time ensuring there is healthy competition. Ofcom will also see if there is scope to deregulate some areas of the market.

“We have seen huge changes in the phone and broadband markets since our last major review a decade ago,” said Steve Unger, Ofcom acting CEO. “Only five years ago, hardly any of us had used a tablet computer, high-definition streaming or 4G mobile broadband. The boundaries between landline, mobile and broadband services continue to blur, and people are enjoying faster services on a growing range of devices.

“Our new review will mean Ofcom’s rules continue to meet the needs of consumers and businesses by supporting competition and investment for years to come.”

Fibre regulation?

Ofcom will now talk to stakeholders, including the communications industry, consumer groups and the government, with a discussion document expected to be published in the summer and initial conclusions outlined at the end of the year.

The organisation says that in the past ten years, the cost of communications has decreased significantly while quality and innovation has improved thanks to strong competition. It argues that BT’s plans to boost fibre speeds to 500Mbps using G.Fast technology and Virgin Media’s £3 billion network expansion demonstrate a favourable climate for investment.

Despite this, superfast broadband regulation is an area likely to be up for discussion. Vodafone, TalkTalk, Sky and Virgin Media are of the opinion that BT’s position is too strong and that fibre is not as competitive a market as copper as most service providers are reliant on the Openreach network to varying degrees.

However Ofcom has already made moves to limit BT’s power by ordering the company to maintain a “sufficient” margin between the amount it charges for wholesale access to the Openreach fibre network and the amount it charges customers for its retail products.

Analysts suggest consolidation and competition from over the top (OTT) services may be a more important area of focus, however.

Battle against OTT

“The review is taking place against the backdrop of the biggest shake-up of the industry for more than a decade, with both BT and Hutchison’s Three trying to convince competition authorities that their acquisitions of EE and O2 respectively should be given the go-ahead,” said Matthew Howett, Practice Leader, Regulation, Ovum.

“This presents a challenge for Ofcom as it tries to envisage what the landscape will look like in the years to come. Clearly the review needs to consider these mergers.

As new, more nimble players such as Skype and WhatsApp have arrived on the scene and competed away traditional telco revenues, regulators have been somewhat constrained in their ability to react, and certainly have not responded in the way telcos might have liked. This review presents an opportunity for the regulator to properly consider the impact these competing services are having on the sector, and whether this impact warrants further deregulation of the traditional communications markets along the lines of what telcos have been demanding.

What do you know about UK mobile operators? Find out with our quiz!