Analysts Ovum claim that review into telecoms market could lead to deregulation as Sky calls for Openreach separation
The industry has welcomed the news that Ofcom will launch a new strategic review in to the telecoms market.
The review started on MArch 12 and is the second of its kind. The first, was launched in 2003 and lasted two years, led to the separation of BT’s access network through the creation of Openreach.
Industry analysts Ovum say further separation is unlikely, but this latest review could lead to deregulation that will benefit the market.
Ovum practice leader on regulation Matthew Howett said: “This time round the review is unlikely to focus on a further separation of the incumbent; instead it will ask where further deregulation can take place as a result of competition coming from so-called OTT players.
“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.
“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 – and indeed it will be useful input for the advice Ofcom gives to the relevant competition authorities. However, the regulator is keen to downplay this aspect, instead attempting to focus on how the review could lead to further deregulation of the sector. This is where OTT comes in.”
The announcement has been welcomed by the big players in the industry, which the regulator signalled last year.
“We welcome Ofcom’s Digital Communications Review, which we hope will establish the regulatory reforms needed to progress investment in better, faster mobile coverage across the UK,” said a spokesperson for EE.
“Since the review ten years ago, mobile connectivity has become no longer a luxury, but a necessity. As such, the UK regulatory framework needs to better address the challenges impacting investment and innovation in the UK mobile sector, including the need for a more supportive, more competitive, market for site locations, rents and business rates.
“In addition, we would expect Ofcom to address the changing relationship between network operators and the “OTT” players that rely on operator investment and services to grow their globally successful businesses.”
A spokesperson for Three said: “We welcome Ofcom’s decision to review the UK’s digital communication markets and will work with them to ensure that the regulatory framework for telecoms is proportionate and sensible, incentivises investment and works to the benefit of UK mobile consumers.”
O2 said that it looks forward to taking part in the consultation but refused to comment any further.
A BT spokesperson said: “We welcome confirmation of this review. Ofcom has helped to create the world’s most competitive telecommunications market – one where prices are among the lowest while the speed and availability of superfast services leads Europe’s largest economies.
“Its rules do now need to be simplified and modified given the market has changed out of all recognition. The UK needs an updated regime which will promote yet further investment whilst ensuring all companies can compete on an equal footing.
“We look forward to engaging with Ofcom as it updates its rules to take into account the explosion in competition over the past decade.”
Sky Group chief executive Jeremy Darroch commented: “We welcome Ofcom’s announcement of a review of the UK’s telecoms sector. There are serious questions about whether the existing structure can deliver the infrastructure, innovation and choice that consumers and businesses need.
“Structural separation of Openreach, the UK’s only nationwide broadband infrastructure, is at the heart of creating a sustainable industry; one that provides the capacity and incentive to invest whilst also harnessing the power of multiple competing retailers to drive higher take up and lower prices for customers.
“Ofcom must now take the opportunity to address Openreach’s conflict of interest as a subsidiary of BT or risk extending the problems that are affecting the industry and its customers today. We look forward to playing a full part in Ofcom’s review.”