UK: Long On Politicking, Short On Detail?

Most commentary to date has focussed on the White Paper’s proposals for regulation of broadcasting, especially ownership, content and quality issues. However, it also contains proposals for wide-ranging changes to Internet and telecoms regulation.

This paper highlights some key issues of significance for those two sectors. They indicate that encouraging clear thinking about the legislative framework, and a ‘joined up’ approach to the detailed regulatory rules, should form a major part of the telecoms and Internet industries’ input into the White Paper consultation process.

At this relatively early stage, industry should consider whether the legislative framework proposed would set a strategic direction appropriate for the UK communications sector’s future development. Is it likely, for example, to maximise opportunities for continued market growth, minimise the risk of distortions to make vs buy decisions, and encourage sustainable competition and innovation to the benefit of UK consumers? Detailed consideration of the content, drafting and relative weightings of the various statutory objectives, powers and duties underpinning the new regulatory regime will be critical to this analysis.

Chapter 1 of the White Paper sets out the 3 key Objectives underpinning the Government’s proposals for regulatory reform. These are:

• making the UK ‘home to the most dynamic and competitive communications and media market in the world’;
• ensuring ‘universal access to a choice of diverse services of the highest quality’; and
• ensuring ‘citizens and consumers are safeguarded’.

However, there is an inherent potential for conflict between the first and third Objective. Poorly conceived consumer protection regulation, for example, can have a detrimental effect on competitive outcomes, damaging consumers’ interests in the longer term¹. It’s not clear how the Government proposes these potential tensions should be balanced, or even that it recognises they are likely to exist. Similarly, the White Paper proposes a number of specific powers, objectives and duties for OFCOM, but gives little guidance as to which of them will be paramount.

These issues will need to be addressed in developing the legislative framework. Otherwise the legislation may not deliver OFCOM the certainty it needs to exercise its statutory functions in a manner which achieves, rather than undermines, the Government’s key Objectives.

In addition to sector specific competition rules², general competition law will of course apply, with OFCOM and the Office of Fair Trading having concurrent Competition Act powers in relation to communications. This is analogous to OFTEL/OFT’s present concurrent jurisdiction over telecoms.

However, the OFTEL/OFT concurrent powers have only been in place since March 2000, and as yet OFTEL has not seen the need to rely on them. Prior to implementation of the Competition Act, some industry players argued concurrency was a rather confusing ‘half way house’ and that rolling sector-specific regulators into the OFT would be preferable because it would:

• facilitate a more consistent approach to regulation of competition issues across different economic sectors; and
• signal Government and regulator commitment to liberalisation’s original goal of rolling back sector-specific competition regulation entirely in the longer term.

Going forward, the suggestion that OFCOM may be answerable to two different Ministries could reactivate concerns about these issues, potentially re-opening the concurrency debate³.

Leaving aside these structural issues, industry is also likely to be concerned competition regulation is given the weight it merits as one of the keys to achieving the Government’s first Objective. OFCOM will have responsibility for a wide range of other issues, many of which are arguably more ‘sexy’ than dry old competition!⁴ In particular, it will be important for the telecoms and Internet industries to ensure competition regulation of their sectors receives adequate resourcing relative to the higher profile broadcasting sector.

OFCOM will be under duties to review and roll-back regulation so that it is kept to the minimum level necessary. Industry will no doubt find these proposed duties attractive, given they are aimed at addressing perceptions - particularly within the telecoms sector - that regulation has become more interventionist over time. However, to ensure they are meaningful and effective, as well as to encourage a consistent approach, it is important these duties are exercised within an appropriate analytical framework. For example, they could be expanded to require OFCOM to impose or maintain regulation only where the benefits of doing so outweigh the costs.

The Government will ‘expect’ OFCOM to encourage self-and co-regulation where these would best achieve the regulatory objectives, however it is not clear whether this will be translated into a specific legislative duty. Assuming industry supports this approach, imposing a legislative duty along these lines would seem desirable. Consideration should perhaps also be given to confining self/co-regulatory approaches to certain types of issues (eg consumer protection, where self/co-regulation has generally proved more successful).

Some specific self/co-regulatory initiatives are proposed in Chapter 7. For example, the White Paper ‘challenges’ industry to develop ‘codes of practice for service delivery’ even before legislation, as well as suggesting the formation of an industry funded Ombudsman and a Consumer Panel. However, it is not entirely clear which particular sectors of ‘the industry’ are being challenged, or what role if any the Government proposes to have in what is likely to prove a fairly lengthy and time-consuming development process.

Regardless of the level of Government involvement, development of these self/co-regulatory mechanisms will require the commitment of significant industry time and energy. It is important this does not act as a barrier to smaller players’ participation. Similarly, as self/co-regulatory measures will be largely industry funded, it is important they do not impose unrealistic or unsustainable financial burdens. A knock-on effect on retail prices would obviously be undesirable!

1 eg ill-conceived pricing regulation has the potential to constrain non-price competition.

2 These will be largely driven by the proposed EC Directive on a Common Regulatory Framework for Electronic Communications Networks & Services.

3 Particularly given that, unlike OFTEL, the Independent Television Commission does not currently have concurrent Competition Act jurisdiction.

4 eg regulation of content quality and standards, plurality and diversity, and consumer protection.