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28|04|04

Ofcom publishes Strategic Review of Telecommunications Phase 1 consultation

Ofcom today announced Phase 1 of its Strategic Review of Telecommunications. The Review is the first wide-ranging analysis of the sector for 13 years and will set out Ofcom's perspectives on the future evolution of the UK telecommunications industry.

The Review will have three phases. The Phase 1 consultation examines the prospects and challenges for the sector now and over the next ten years. In the autumn, Phase 2 will propose and consult on the policy options and choices facing Ofcom. At the end of the year, Phase 3 will assess responses to these options and present Ofcom's recommendations and future approach.

The Review will address five fundamental questions, on which the Phase 1 document seeks initial views. The five questions are:

Question 1: What are the key attributes of a well-functioning telecoms market in serving the interests of citizen-consumers?

Question 2: Where can effective and sustainable competition be achieved in the UK telecoms market?

Question 3: Is there scope for a significant reduction in regulation, or is the market power of incumbents too entrenched?

Question 4: How can Ofcom incentivise efficient and timely investment in next generation networks?

Question 5: At varying times since 1984, the case has been made for structural or operational separation of BT, or the delivery of full functional equivalence. Are these still relevant questions?

Future Evolution

Telecoms is changing rapidly. The Phase 1 consultation seeks stakeholders' views on these emerging changes, their impact on competition, and therefore their significance for future regulatory strategy. These emerging changes are:

• Competition in voice services: In future, they may be different kinds of competition in voice services. Competition between fixed line operators and mobile operators is likely to increase as callers are increasingly happy to use either kind of network to make calls. Voice over IP (Internet Protocol) may also shift traditional sources of market power as it allows new types of supplier into the market.
• Demand for broadband: The consultation explores the future growth of broadband, and considers whether in future there may be scope for new, competing access technologies beyond DSL and cable, possibly offering much faster access speeds.
• Evolution in network design: The consultation also sets out to explore the impact on competition of future changes in network design. As networks increasingly use Internet Protocol (IP), this may change the scope for competition between them. Other changes in network design are important too. As networks increasingly use open standards like IP, and as intelligence grows in the devices connected to networks, the focus of regulation may need to shift towards control over technical standards and interfaces.
• Realignment in the telecoms industry: Many experts also predict consolidation, alliances, market entry or other forms of evolution in the telecoms industry. The consultation seeks views on these changes and their possible impacts.
• Universal service arrangements: All of these changes may have implications for the continued delivery of certain services on a universal basis to all citizen-consumers. We may need to think again in future about how we identify and fund universal service obligations.

Finally, Ofcom asks a number of questions about how regulation itself could affect growth of the sector. It is important that appropriate investment in the sector is encouraged, and that Ofcom strikes a balance between protecting consumers from unscrupulous suppliers and allowing innovation and choice.

Ofcom Chief Executive Stephen Carter said:

"The Review seeks to answer the five fundamental questions regarding sustainable competition, regulatory role, investment incentives, structural arrangements and the citizen-consumer interest.

"Following on from the implementation of the new EU Framework, it seeks to establish an approach for the next generation of telecoms investment and innovation."

The full consultation document is available on Ofcom's website (see Related Items) together with a Plain English Summary. The closing date for responses is Tuesday 22 June 2004.

Ends

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