When IT Meets Politics

Jul 20 2015   1:02PM GMT

BT declares war on Ofcom – your opportunity to help reset the UK regulatory landscape

Philip Virgo Profile: Philip Virgo

Tags:
21CN
Broadband
competition
DCMS
EE
Gigaclear
Inca
ITS
lDCIS
Ofcom
Openreach
Virgin Media

I  was intrigued by Gavin Patterson’s reported attack on Ofcom for even raising the question of separating out Openreach. But for the “problems “of the BT pension fund and the block on foreign ownership of its surveillance operations, BT would probably have been broken up by its shareholders long ago. Today its share price is £4.50 (from a nadir of under £1.00 after a peak of £15.00) but a break up could be under way, before Ofcom completes its consultation, if it were to lose badly in the current battle to sign up those who want to watch TV over their smart phones (and Treasury and GCHQ were to remove their objections). Conversely, if BT wins well, it will need a massive rights issue to fund the extra investment in network capacity (EE as well as Openreach) to carry the explosion in mobile (even more than fixed) traffic under way.

The supposed threat to stand still on infrastructure investment because of uncertainty may prove to be a “Ratner gaffe” – especially if HMG reminds others of the availability of guarantees as used to underpin Virgin’s £3 billion spend on upgrades and extensions. A whole new generation of competitors (City Fibre, Gigaclear, ITS etc.) have investor backing to build lower cost, higher speed all-fibre networks to fill the other gaps left by the run down of BT’s 21CN investment programme (after local loop unbundling changed its core business model).  They would like BT to provide regional and national backhaul. But others are already stepping into this market too as sector regulators (e.g. for financial services) open up the market by demanding that payment systems (for example) have fall-back facilities over networks that are not critically dependent on each other.

The lack of investment in Openreach over the past decade (compared to period before local loop unbundling or the recent acceleration in infrastructure spend by its competitors) means that BT may lose its monopoly position across much of the UK before it is broken up – unless, of course, it responds positively to those shareholders who want it to lead that process. That leaves open, however, the question as to whether a break up would be good for stimulating competition, let alone investment. I suspect not.

You have until 8th October to help ensure that Ofcom becomes an effective competition regulator, helping re-create a globally competitive UK communications market in which customers (both residential and business)  have genuine choice and investors have confidence that the risks they take will not be compounded by political and regulatory uncertainty.

Do not waste that opportunity.

The discussion document for the Ofcom Strategic Review of Digital Communications  illustrates just how far thinking about the UK Broadband market has moved on since the consultation over the Digital Communications Infrastructure Strategy was launched during the silly season last year, with almost no publicity. Readers may remember my exercise to overcome that lack of publicity, drum up responses from other than the usual suspects by pointing out what was at stake, organizing a round table of those considering responses and getting these into the public domain because DCMS had no plans to put the responses into the public domain until after it had responded. The full set of responses is now available and I very much hope that Ofcom will be using them as part of its input. It is not, however, obvious from its discussion document.
 
The document is hard going. Even the executive summary is nearly 20 pages and needs a “Director’s Digest” to bring out the key points. But it has been released before the start of the silly season and the deadline for responses is not until after the end of the last party conference. 

I therefore strongly recommend reading it all, pondering the implications and responding accordingly.

I will post separately a copy of my own “dirty digest” to help readers understand the implications of some of the more measured language in the executive summary. I also strongly  recommending  reading Malcolm Corbett’s excellent paper on why we should “Support the Digital Innovators”    and, if you can, attend the INCA meeting  on Financing Independent Networks on Wednesday  to get a better understanding of what has changed over the past year.

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