Ofcom Considers Softer Approach to UK Telecom Operators

Digital Review Could Tackle Growing Influence of Web-Based Providers

New Ofcom chief Sharon White’s recent comments about the role of Internet services will offer encouragement for network operators, which have repeatedly protested at the growing influence of Internet-based rivals.

In an interview with the Financial Times, Ms White said that there is scope for a “lighter approach” to telecom regulation to account for the growing power of companies such as Facebook, Google and Skype.

The news will be well received by the operators objecting to the “privileged position” enjoyed by Web providers. These complaints have been a recurrent theme at Mobile World Congress, where terms like “level playing field” and “free ride” appear in presentations almost as frequently as “4G” and “mobile data”. Operators are concerned that companies like Facebook can offer communications services free of charge while networks make the substantial investment in the infrastructure needed to support them.

It now seems that Ofcom may consider a form of deregulation, although any move will need to support its wider aim to encourage investment and ensure fairness for consumers.

Ofcom’s digital review is certainly long overdue — the telecom landscape has changed substantially in the 10 years since the regulator’s previous investigation. This period has seen the emergence of a host of third-party communications providers that have eroded core services such as voice and text messaging. Companies including BT, EE, Vodafone and Virgin Mobile are now beginning to offer multiplay bundles of fixed-line telephony and mobile services.

Ms White faces a daunting first year. Ofcom is undertaking its most comprehensive market assessment for a decade, and is planning another auction of mobile spectrum. These responsibilities are in addition to presiding over two of the biggest deals in UK telecom history in BT’s acquisition of EE and Hutchison’s move for O2, and this could all occur against the backdrop of a new government. However, Ms White’s openness is refreshing and bodes well for development of the UK market.

The new chief’s comments coincide with a more sympathetic approach to telecom regulation that’s emerging from Brussels, and I expect the new regime at the European Commission to look more favourably on deals that consolidate markets to a smaller number of stronger players. This week also saw new European Union Commissioner for Competition Margrethe Vestager issue a statement of objections against Google over alleged anticompetitive behaviour.

The industry is entering a period of regulatory transition, and nowhere is this more evident than in the UK. A new head of Ofcom, two mega-deals totalling more than £20 billion, the creation of a new competition watchdog and a general election less than a month away could mean major changes ahead.