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Ofcom completes first phase of digital communications review

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MUMBAI: Ofcom has outlined the challenges facing the UK in ensuring that consumers and businesses receive high-quality digital communications services over the next decade and beyond.

Ofcom’s Strategic Review of Digital Communications, announced in March 2015, is examining competition, investment, innovation and the availability of all digital communications services. These include broadband, mobile, landline and bundled services.

Communications are essential to the functioning of the economy, and to the way people work and live. Improving these services for consumers and businesses is Ofcom’s first priority, and the review forms a fundamental part of that work.

Ofcom is seeking views on its review, which is focusing on four main areas detailed in a discussion document published:

• investment and innovation in the market, which can help make services widely available;

• competition, to deliver quality services and affordable prices;

• empowering consumers and businesses, particularly making sure they have the information and means to choose and switch between providers; and

• keeping regulation targeted at areas of concern, and deregulating where possible to allow markets to function well.

Ofcom CEO Sharon White said, “This review is about ensuring people get the best possible communications services, wherever they live and work.

“Our priorities are clear. We want to promote competition, investment and innovation, so that everyone benefits from even better coverage, choice, price and quality of service in years to come.”

Investment and innovation

UK consumers and businesses have benefited from significant investment in communications services in recent years. 4G mobile broadband is now available to 42 per cent of premises from all four operators, and 90 per cent from at least one. Superfast broadband is now available to 83 per cent of premises, with a range of providers competing on service and price.

Ofcom wants to see the widest possible availability of high-speed broadband at home, at work and on the move. Ofcom estimates that a broadband speed of 10Mbit/s is necessary to benefit from today’s popular online services, such as on-demand video. However, eight per cent of UK households cannot currently access those speeds.

Availability is a concern in more rural areas, particularly in the nations and regions, but also in some urban places where roll-out costs or low incomes present particular barriers. Ofcom’s review will seek possible solutions to these problems.

It is examining how regulation can enable the commercial development of future ultrafast broadband, making it as widely available as possible.

Ofcom is also considering what further options might be available to improve mobile services. Mobile 4G broadband will reach 98 per cent of UK premises, due to Ofcom rules and industry investment. But consumers’ and businesses’ growing expectations for reliable, universal, always-on voice and data services will need to be matched by network investment.

Making sure competition delivers

A major focus of the current review is how well competition is delivering benefits to consumers and businesses. Ofcom’s last strategic review began in December 2003, concluding in September 2005. It led to the creation of Openreach, through which BT is required to provide access to competing providers on equal terms, for them to offer telecoms services to consumers.

This approach has delivered real choice, quality and value for phone and broadband customers over many years. However, some challenges remain. For example, the incentive for BT to discriminate against competing providers can be limited by regulation, but not removed entirely.

BT’s network has evolved in recent years, with fibre lines running closer to premises. This may require different models of competition than those that worked best for the traditional copper telecoms network.

In addition, Ofcom has been concerned that Openreach’s performance on behalf of providers has too often been poor, requiring the introduction of rules for faster line installations and fault repairs.

The review will address these issues, and Ofcom is today seeking views and evidence on future regulatory approaches, including:

• Retaining the current model, where Openreach operates as ‘functionally separate’ from BT, and using regular market reviews to address any concerns around competition;

• Strengthening the current model by applying new rules to BT - such as controls on its wholesale charges with stronger incentives to improve quality of service, or tougher penalties if BT falls short;

• Separating Openreach from BT could deliver competition or wider benefits for end users. It would remove BT’s underlying incentive to discriminate against competitors. Separation could also offer ways to simplify existing regulation. However, the process would be challenging and it may not address some concerns relating to Openreach - such as service quality, or the timing and level of investment decisions;

• Deregulating and promoting competition between networks. Virgin Media and a variety of smaller operators own networks, which allow them to provide phone and broadband services without using BT’s network at all. This kind of ‘end to end’ competition, which sometimes involves running fibre lines directly to premises, can help incentivise Open reach to improve its infrastructure. However, it could also lead to duplication of networks and weak competition.

It will also examine converging media services - offered over different platforms, or as a ‘bundle’ by the same operator. For example, telecoms services are increasingly sold to consumers in the form of bundles, sometimes with broadcasting content; this can offer consumer benefits, but may also present risks to competition.

Empowering consumers and businesses

People tailor communications services to their own needs, choosing from a range of providers at a price that suits them. For this to work properly, they need to understand the range of options available to them, and be able to switch between them effectively.

Ofcom’s review is considering whether consumers have all the information they need to make the choice that is right for them, both when researching the market and at the point of sale. It is also looking at how switching between providers might be made easier.

On 20 June, Ofcom introduced new rules that mean people can switch provider over BT's network by only dealing with their new supplier. Ofcom is currently considering whether similar processes may be appropriate for mobile and services bundled with pay TV, as consumers increasingly buy services this way.

Beyond this, Ofcom is keen to explore new ways in which consumers can engage with the market, in order to benefit from competition. Examples might include making services easier to compare, and increasing access to independent advice or feedback generated by users.

Targeted regulation and deregulation

The rules that govern the communications sector must evolve to keep pace with developments in technology, consumer needs and expectations. Ofcom’s review will identify where existing regulation may be simplified, removed or replaced.

For example, the rise of ‘over the top’ (OTT) internet communications services, such as instant messaging, may create a case for less regulation on mobile operators, or for extending existing rules to internet-based services.

Next steps

Today’s discussion document marks the conclusion of the first phase of Ofcom’s Strategic Review of Digital Communications. Since announcing the review, Ofcom has been engaging with a wide range of stakeholders - including industry, consumer groups, the UK Government and devolved administrations - through meetings and workshops.

Ofcom will now take forward the review’s second phase, and is seeking evidence and responses to the discussion document by 8 October, 2015. This will inform a statement at the turn of the year on priorities and action, which will shape Ofcom’s regulatory approach for the next decade.

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