In the eye of the regulator

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Telecoms regulator Ofcom has a hand in directing the major changes that shape the mobile market, from spectrum reallocation to cracking down on misselling and the deployment of future technologies such as mobile TV and femtocells.

Ofcom competition policy director David Stewart and consumer policy director Claudio Pollack discuss with Mobile News the most recent changes to affect the industry, namely the process the networks are undertaking to see portions of 900MHz spectrum redistributed from Vodafone and O2 to remaining networks to enable them all to fulfil recommendations in technology advances from the Government’s Digital Britain report.

The final version is due in June, and Ofcom says it will regulate on spectrum reallocation if the Government and the networks do not come to their own resolution.

Stewart and Pollack also discuss the upcoming completion of the Mobile Sector Assessment, which will consider possible approaches to future regulation prompted by changes in the market, such as the convergence of the mobile, IT and fixed line sectors.

The pair also shed light on the proposed new pan-European telecoms regulator BEREC (Body of European Regulators of Electronic Communications) and changes to mobile number portability processes.

Spectrum reallocation is a concern for network operators, with those running off 1800MHz looking for a chunk of the 900MHz spectrum occupied by Vodafone and O2 in order to run next-generation 3G services (see page 12). What is Ofcom’s position on reassigning part of the 900MHz band?

David Stewart: Some network operators have particularly desirable spectrum, and others have different parts. As spectrum use becomes liberalised, there is the possibility that the difference in allocations could mean the playing field isn’t level.

For us the question is how great the risk to competition is as liberalisation of spectrum usage occurs? And how strong the case for reallocation is? There are very strong views among the operators. We are looking at all the evidence in our policy consultation.

But the Government, through Digital Britain, is seeing if an industry-agreed solution can emerge, so we are looking at a combination our own policy consultation and the Government’s engagement with Digital Britain to trigger something that works faster and better for consumers.

If the mobile networks cannot agree on a solution, and it falls to us to decide, then we will consider the extent of any competition problem, the advantage any operators have over others and the money they would save in the way they set out their network.

Ultimately, it’s not about the impact on the operators – our objectives are to make sure customers have and continue to have a vibrant and competitive mobile market.

There are a lot of finely balanced issues and a lot of evidence being gathered. So there isn’t an answer just yet. The Government’s final Digital Britain report  is now scheduled for June. We are going to have arguments and evidence put to us that need to be considered so it’s likely our devision will be after Digital Britain comes out [in early June]. There is an opportunity to reach a resolution within Digital Britain. If not, then it falls to us.

Will any of the changes and improvements to infrastructure recommended by the Digital Britain report require changes to, or additional, regulation?

DS: There will be parts of the Digital Britain process that will need to be reflected in changes to regulation, but it’s hard to say in which areas and how much. We have a responsibility to participate as an independent regulator in the Government’s process.

Will the convergence of the mobile, fixed line and IT sectors also requires changes to, or additional, regulation?

DS: There is no regulation of mobile broadband in the way there is for fixed broadband, as it has evolved in a different way. Because of BT’s history, and to this day, [fixed line broadband] suppliers who want to supply a national market have to utilise BT’s network. So we have to issue rules as to how BT offers that access.

In mobile there has never been a need for that kind of regulation in mobile broadband or mobile voice.

The convergence of these sectors is great news for customers because it provides opportunities to buy services in a variety of different ways. It creates fresh challenges for regulators because the technology often moves ahead of the rules, so it creates opportunities for us to simplify and streamline the rules.

If businesses that were previously very different can now compete head to head, than this competition can do the work the regulator would have had to do previously. But it’s a key challenge for us, and the Mobile Sector Assessment is one of the projects we have that looks at convergent issues.

Is the Mobile Sector Assessment close to being completed?

DS: We are in the processing of issuing our second consultation. The first consultation set out our view of the market, how we see it as having evolved and where we see it developing. It asked a lot of questions on how this evolution would affect customers and how it would affect our job.

We had a lot of responses from consumers, consumer groups and the industry. We have then had to think about how Ofcom should respond to a world that’s becoming more wireless. We’ll be publishing those proposals in the next few weeks.

What issues have you identified so far?

DS: That most of the time the mobile market works well for most consumers. But there are some issues around consumer service, in a number of cases which is small relative to the total size of the market, but it is a large number of people.

There are questions around coverage and whether commercial processes will drive improvement around this; as well as the differences in access between geographical areas.

How does Ofcom perceive the handing down of regulation from the European Commission, such as for call and data roaming? Is there such a thing as over-regulation?

DS: The Commission has done good things for roaming rates and we have made no secret of our opinion that roaming rates have historically been far too high. We called on the industry to make rates lower and it’s no surprise to us the Commission has taken the steps it has.

The Eurotariff has been a big success for consumers. And it’s not surprising that we’re seeing a second round of thinking of where it should move forward particularly following some of the horror stories we have heard around data roaming.

It would be good to see competition drive rates even lower, and if there was evidence of that it would be evidence that the regulatory process has kind of exhausted itself. I’m not sure I’m seeing that kind of evidence.

Is the networks’ view that the mobile market would evolve naturally in terms of more competitive pricing without regulation, or is this just an excuse to keep prices up?

DS: It’s a plausible hypothesis, but you have to test it against the evidence. The evidence is that prices weren’t coming down, in the way they do in truly competitive markets over a long period of time – for example, the UK domestic market. It’s not a question of whether competition can work, it’s whether competition is working.

What will be the true purpose of the proposed new pan-European telecoms regulator BEREC (Body of European Regulators of Electronic Communications) and its relationship with Ofcom?

DS: BEREC is the evolution of a lot of co-operation between regulatory agencies across Europe. It’s in the nature of policy making that what happens in other countries can be important to understand. This puts a stamp on what’s already working.

But what of its ability to simply make recommendations to individual country regulators that are not legally binding?

DS: It isn’t so much that there is a comeback if we don’t go through with the recommendation, but what it requires us to do is think carefully about why we would take that path. The power to make a recommendation is significant precisely because of the nature of the process that you are recommending it into – ie. it’s transparent and considered.

So the recommendation matters and has a real influence over policy but doesn’t unduly constrain our ability to take the right decision to the UK.

How will the new misselling regulation be implemented and monitored?

Claudio Pollack: The new general condition surrounding misselling will allow us to potentially take action against mobile operators if they haven’t done enough to ensure minimum standards are in place for selling within their retailers and distributors.

We have an enforcement team whose job it is to make sure the industry is complying with these regulations. It will largely be driven by complaints, not just to us, but Consumer Direct, or the Citizens Advice Bureau, which is how we came to be aware of cashback issues in the first place.

We have the ability now to open an investigation; if there is a breach we can require a network to be fined, and reverse the consequences of the breach, which means the network would have to ensure the victims are compensated for any harm that has taken place.

It appeared the networks accepted this new general condition in a very begrudging way…

DS: There are all sorts of large scale businesses that have to think in terms of brand protection and how their goods are distributed. So the argument that this is a new challenge isn’t terribly convincing. The regulation stipulates things that few reasonable people wouldn’t agree, which that are simple, basic, practical things that should be standard.

Full article in Mobile News issue 438 (May 4, 2009).

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