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Communication Regulation in the UK

International Seminar

Electronic Communication Regulatory

Framework in the Era of Convergence

Vince AffleckDirector International, ITU & OECD, Ofcom

10 November 2010

Index

1. Ofcom – A converged regulator

2. Ofcom’s duties

3. Regulation of Electronic Communication networks/services

4. Content Regulation

5. Spectrum

6. Future programme

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1. Ofcom - a converged regulator

2

3

Ofcom formed from 5 previous regulators

Television regulation

Radio regulation

Spectrum management

Broadcasting standards

Telecoms regulation

4

Convergence in communications sector

• Platform level convergence

– Analogue to digital – VOIP

– Fixed and wireless combinations

• Service level convergence

– TV over broadband

– Fixed and mobile

• Device convergence

– Single fixed and mobile telephone handsets

– PCs providing voice as well as internet

– Mobile TV

• Industry convergence

– Consolidation within / across segments

Hub

Wi-FiBluetooth

5

Terrestrial analogue broadcasting

Mobile TV

Web streamed and on demand – DSL and fibre

Digital satellite, cable, terrestrial

Previously adjacent markets are competing

Ofcom Board

Colette

Bowe

Chairman

(Non Exec)

Philip

Graf

Deputy Chair

(Non Exec)

Millie

Banerjee

(Non Exec)

Mike

McTighe

(Non Exec)

Ed

Richards

CEO

(Executive)

Non-executive members are appointed by a representative

from BIS + DCMS + Ofcom Chairman + Independent

assessor

Chairman

appointed by a

representative

from BIS +

DCMS +

Independent

assessor

CEO appointed

by Chairman

(Subject to

approval by

BIS+ DCMS)

Executive Members

appointed by

Chairman and Non

Executives

Tim

Gardam

(Non Exec)

Jill

Ainscough

(Executive)

Telecoms

(Private/

Public)

Background/

Experience

Telecoms

(Private)

B’casting

(Private/

Public)

Appointment

Process

Newspaper Ind

(Priv/ate/

Public)

Economist

(Private/

Public)

Broadcasting

(Private/

Public)

Broadcasting

(Private)

Stuart

McIntosh

(Executive)

Telecoms

(Private/

Public)

The Board‟s policy & technical expertise across the sector

and independent appointment process

Norman

Blackwell

(Non Exec)

Economist

/Finance

(Private/

Public)

7

Ofcom: funding and staffing

• Funds raised by industry licence fees

• Ofcom retains a % of revenue from spectrum licenses

rest passed to Treasury

• 870 staff in Ofcom (from 1152 staff in legacy

regulators)

• Being reduced to 700 from April 2011

8

Ofcom: Governance

• Statutory public corporation – independent of

Government

• Ofcom staff are public servants (not civil servants)

• Board Structure

• Board subject to Code of Ethics & Standards

• Duties to consult, publish annual plan and reports

• Decisions appealable to specialist tribunal (CAT) that

sets standards for all UK regulators

9

Ofcom: Accountability

• Directly accountable to Parliament, not to a Ministry

• Publication of regular reports available to the public

• Annual Report to Parliament e.g. budget

• Annual Plan first published in draft form and consulted on

• All decisions and regulations are published

• All decisions and regulations are duly reasoned and open to judicial

review

• Regular consultation with stakeholders

• Extensive research to support regulatory activity

• Freedom of Information Act applies

2. Ofcom‟s duties

10

11

Ofcom: main duties

To ensure:

• the UK has a wide range of electronic communications services, including

high-speed services such as broadband

• a wide range of high-quality television and radio programmes are provided,

appealing to a range of tastes and interests

• television and radio services are provided by a range of different organisations

• people who watch television and listen to the radio are protected from harmful

or offensive material

• people are protected from being treated unfairly in television and radio

programmes, and from having their privacy invaded

• the radio spectrum is used in the most effective way

12

Ofcom: what we do not do

We are not responsible for regulating:

• disputes between consumers and telecoms providers

• premium-rate services

• the content of television and radio adverts

• the Internet

• newspapers and magazines

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Ofcom‟s five main objectives

Support and

protect consumers

across the UK

Secure citizen

interests (as

guided by

Parliament)

Promote

competition and

innovation

Maintain and

strengthen the

communications

infrastructure of

the UK

Simplify and

reduce regulation,

while maximising

value for money

3. Regulation of Electronic Communication networks

and services

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Regulating electronic communication networks and

services

We regulate by imposing obligations on SMP providers of networks and

services regarding:

• Access to bottleneck facilities

• Interconnection

• Universal service

Additionally, we have:

• concurrent powers to apply competition law

Regulating electronic communication

networks and servicesMarket Review approach

1) Define markets

• Identify relevant market

• Use competition law/economic principles [SSNIP test]

2) Assessment of market power

• Does an operator (or operators jointly) have significant market power (SMP)?

• Ability to profitably raise price and behave independently of competitors and consumers

• Market share, barriers to entry/expansion, switching costs, are key factors

• Absence of market power means effective competition in the market

3) Impose regulation (“remedies”)

• Only on operators found to have SMP, and where ex post competition law cannot

address issue

• Consider range of possible remedies, from light (transparency) to heavy (access, price

control)

• Should be proportionate and appropriate – address the competition problem in the least

interventionist way, and take account of relevant trade-offs

Next Generation Access

• BT has SMP in wholesale broadband access market

• BT offers high speed broadband access services over DSL

• In order to provide more advanced services, get higher speeds, BT is

rolling out fibre into the access network

17

NGA will support new and improved applications

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Services that may require higher speeds

NGA: regulatory issues

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• Wholesale „active access‟ products to deliver widespread investment and competition

• Options for effective and sustainable competition deeper in the network though „passive access‟

• Flexible pricing approaches that reflect risks

• Clear and well managed path to transition

Uncertainty surrounds:

• business case for investment

• designing and building networks that support

super-fast broadband services

• how the regulatory environment affects

investment

Questions around:

• How to secure competition that will bring the

most benefits to consumers

• what implications there are for existing

competition

• how the can good consumer outcomes be

secured

Investment challenges Competition challenges

Regulatory approaches must balance investment and competition

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CustomerStreet

Cabinet Local

Exchange

Metro

NodeCore Network

Coppe

r or

Fibre

Fibre

Passive Line Access

Regulation of NGA

Active Line Access

Active Line

Access

Active Line

Access

Active Line

Access

• Passive products will not work everywhere.

Active products offer the scope for competition

more widely

• In future these can support more innovation and

differentiation, but will still have drawbacks

• High quality active products are fundamental to

delivering competition

NGA: Ofcom decision

• BT required to offer an active wholesale access service (VULA)

• VULA is :

– Virtual Unbundled Local Access

– Similar to Local Loop Unbundling in PSTN network

• Pricing flexibility to reflect risk

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4. Content Regulation

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• Ensuring a wide range of TV and radio services of

high quality and wide appeal

• Maintaining plurality in the provision of broadcasting

• Applying adequate protection for audiences against

offensive or harmful material

• Applying adequate protection for members of the

public against unfairness or the infringement of

privacy

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Purposes of content regulation

Regulating for Quality

Regulating to Protect

Television content regulation achieves quality and

protection goals through a map of rules and quotas

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• PSB remits and

BBC service

licences

• Advertising

minutage and

scheduling limits

• Genre output

quotas

• Accessibility

quotas (e.g. for

subtitling)

• Consolidation and

cross-ownership

controls

• Independent

production quotas

• C4

Codes to define:

• Content standards for

programmes and for

advertising

• Requirement for clear

separation of advertising

from programmes

• Guidelines on fairness and

respect for privacy in

programming

Quality and Plurality Protection (Harm, Offence, Privacy, Fairness)

Ofcom regulates broadcast content through

licence conditions

• Communications Act 2003 requires Ofcom to set standards for the content of

programmes and advertisements

• Standards contained in a series of Codes of Practice

• Ofcom licences all commercial television broadcasters - Includes terrestrial

(commercial public service channels), satellite and cable. BBC remains as main

public service channel. Not licensed by Ofcom

• License conditions are a “Soft law” - not legal procedures, but licensees must

comply

• Duty on broadcasters to ensure:

– Wide range of programmes

– High quality programmes

– Appeal to variety of tastes and interests

– Effective competition in provision of services

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Licensee obligations

• Licensees must comply with Codes of Practice

– Broadcasting Code: standards for programme content

– Advertising Standards Code: standards for content of advertisements

– Rules on the Amount and Distribution of Advertising

• If licensees do not comply, Ofcom can impose a range of penalties

– Published adjudication

– Broadcast apology

– Financial penalty

– Revocation of licence

The Content Board: composition

Composition

• Chair is a non-executive member of Main Board

• Representatives of diverse backgrounds across UK, including the regions

• Other content committees include:

– Fairness Committee – judges fairness and privacy cases,

– Sanctions Committee – sets level of sanctions for breaches of the Code

– Radio Licensing Committee – awards commercial and community licences

The Content Board: Role and Remit

• The Ofcom Board seeks advice and recommendations from the Content Board on

any content-related aspects of decisions it has reserved for itself. All other content-

related decisions are delegated to the Content Board.

• The Content Board serves as Ofcom’s primary forum for the regulation of television

and radio quality and standards. It is charged with understanding, analysing and

championing the voices and interest of the viewer, the listener and citizen.

• It examines issues where the citizen interest extends beyond the consumer

interest, with focus on those aspects of the public interest which competition and

market forces do not reach.

The Broadcasting CodePrinciples

• Broadcasters and audience take responsibility

• Freedom of expression

• Protection for under-18s

– safeguard those too young to make fully informed choices for themselves

Areas Covered

• Impartiality and accuracy in news and current affairs

• Special impartiality rules at time of elections or referendums

• Fairness and Privacy

• Programme sponsorship and commercial influence (advertising regulation

delegated to the ASA)

• Harm and offence

• Crime

• Religion

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FREE TO AIR

TV

Content

regulation in

Context

(e.g. watershed)

PAY TV

Navigation

standards

(EPGs, rating,

watershed)

VIDEO ON

DEMAND

Navigation

standards

and access

controls (pins)

OTHER AV

CONTENT

Choice of

control tools

(filtering,

blocking, safe

search)

Consumer responsibility

Regulatory Controls

MEDIA LITERACY

Cross platform regulation and responsibilities

5. Spectrum

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32

Ways of Managing spectrum

Command & control

All decisions made by

the regulator

Market mechanisms

Decisions made in the

market

Licence-exemption

Regulator sets rules,

but users not licensed

Approach that has

historically been adopted

for over 90% of the

spectrum

Preferred approach in

UK: Trading,

liberalisation, technology

& use neutrality

Approach currently

adopted for 9% of

spectrum. Some argue

for radical increase

Spectrum: Ofcom‟s regulatory principles

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• Spectrum should be free of technology, policy and usage

constraints as far as possible

• It should be simple and transparent for licence holders to change

the ownership and use of spectrum

• Rights of spectrum users should be clearly defined and users

should feel comfortable that they will not be changed without

good cause

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Spectrum pricing

• Is more effective than some other constraints (e.g. roll-out obligations which can be difficult to

enforce)

– If spectrum users have to pay a market rate for spectrum they will be more incentivised to

use it efficiently

– This may mean rolling out services more quickly and widely in order to maximise returns

on investment

• Discourages spectrum hoarding

– A market based price is likely to make speculative acquisitions less attractive

– Where spectrum was not bought through a market mechanism, but was awarded

administratively, the subsequent application of incentive pricing may then encourage the

release of spectrum that is being underutilised

• Ofcom’s role is not to raise revenue

Reduces spectrum scarcity thus promoting innovation and competition

Major awards pending

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Amount

2.6GHz 205 MHz

800 Mhz (Digital dividend) 128 MHz

3.4-3.6GHz 160 MHz

6. Future Programme

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Priorities for 2010/11

37

Infrastructure & spectrumCompetitionConsumer & citizen

• Ensure wireless services for

the London 2012 Olympic and

Paralympic Games will be

delivered

• Start successful clearance of

800Mhz band to create

opportunities for new services

• Prepare plans for release of

spectrum for mobile

broadband

• Implement regulation to

support effective

competition and efficient

investment in super-fast

broadband

• Ensure fair and effective

competition in pay TV

• Broadband and mobile phone

not-spots

• Encourage consumers to

take up and use broadband

• Ensure consumers can

switch between

communications providers

• Update content regulation to

meet the changing needs of

audiences

Ongoing work areas for 2010/11

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• Support digital switchover

• Promote efficient allocation

of spectrum

• Develop stable international

framework to underpin

spectrum awards

programme

• Understand network

capabilities

Infrastructure & spectrum

• Promote effective

competition in fixed and

mobile telecoms

• Review regulatory rules

that affect funding of

content

• Enforce competition and

resolve disputes

CompetitionConsumer & citizen

• Ensure availability, take-up

and effective use of

communications services

• Review and promote

available consumer

information

• Protect consumers and

audiences from harm and

unfair practices

• Understand experiences of

business consumers

Identify opportunities for deregulation and simplification