Ofcom Consults on Proposed Shake-Up of UK Telecoms Market

Ofcom Consults on Proposed Shake-Up of UK Telecoms Market

Ofcom, the UK's communications regulator, has published a discussion document on its Strategic Review of Digital Communications. The document outlines possible changes to the regulatory regime applying to all digital communications services in the UK, including broadband, mobile, landline and bundled services. 

Ofcom now is seeking views from the public on four main topics:

  • Investment and innovation in the market, which can help make services widely available.
  • Competition to deliver quality services and affordable prices.
  • Empowerment of consumers and businesses, particularly making sure they have the information and means to choose and switch between providers.
  • Targeting of regulation on areas of concern, and deregulation where possible to allow markets to function well.

This is the first time in a decade that Ofcom has undertaken such a wide-ranging strategic review. A 2005 review led to the creation of Openreach, a functionally separate business unit of BT, a British multinational telecommunications services company. Through Openreach, BT is required to provide access to competing telecoms providers on equal terms, to enable them to offer telecoms services to consumers.

In the current review, Ofcom is considering the following options: 

  • 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 price control rules to BT.
  • Separating Openreach from BT.
  • Deregulating and promoting competition between networks. According to Ofcom, "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 Openreach to improve its infrastructure. However, it could also lead to duplication of networks and weak competition".

In deciding which options to take, Ofcom will have to take into account potentially market-changing developments, such as the attempted merger by EE (a British mobile network operator and internet service provider) with BT (this transaction currently is being reviewed by the Competition and Markets Authority); the anticipated merger between Telefonica UK and mobile network 3 (which falls within the jurisdiction of the European Commission); and BT's ongoing appeal before the Competition Appeal Tribunal against Ofcom's new "margin squeeze test" to reduce the wholesale price of superfast broadband that Openreach can charge BT's rivals.

The deadline for public responses to the discussion document is 8 October 2015.

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Bruce A. Olcott

Francesco Liberatore

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