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Overview

Robin Foster

Chief Adviser to the Board, Human Capital

Associate Director, London Business School Global Communications Consortium

Tom Kiedrowski

Policy Manager, Ofcom

Introduction

In her foreword to this book, Viviane Reding highlights the fact that the challenges posed by convergence in communications are felt globally, not just locally. The different authors in this book are all, one way or another, seeking to present a view of policy thinking in the shadow of the uncertainty that convergence brings. Although our contributors and research bring out differing perspectives and ideas, one thing is clear: the ongoing nature of the change underway will require a fundamental review of the approaches to regulation across a range of issues, and now is the time to prepare the groundwork for that review.

This chapter brings together some of the themes that the authors raise, and the questions they pose, and places them in a wider context, drawing on research carried out by Ofcom during 2005 and 2006 about the approaches being developed by communications sector regulators around the world. Our contributors describe a world in which communications markets are once again being transformed. A new wave of technological change, entrenching the next generation of internetbased technology in consumer life – digital audiovisual services, new internet protocol (IP) based, high-bandwidth networks, high capacity and low-cost storage of data – is creating new business models and destroying old ones. Market structures are changing, bringing into commercial competition firms that have been undisputed masters of their ‘own patch’, sometimes for decades. Consumers should benefit from more choice and lower prices. New media and communications services will bring the potential for important social as well as consumer value. Jonathan Zittrain points to the world of opportunities that now exists and the promise of much more to come with ‘netizens’ contributing to a two-way system, rather than just existing as consumers. These trends, our authors argue, will render obsolete much of the established regulatory framework, and require new models for the future to secure continuing citizen and consumer benefits. As one of our contributors, John Naughton, asserts: “Companies that do not adapt will vanish from the earth. The big question is whether the same holds for regulators.”

Trends in convergence

Digitisation has made it possible to deliver the same communications services – voice, video and data – over a number of different electronic communications platforms. Our contributors now see a future in which continuing innovation in services and network architecture is designed to facilitate mobility, convenience and flexibility of use. A decade ago, mobile, broadband, digital TV and radio, wireless networks and WiFi hotspots were niche products or non-existent. Today, they are all part of the mass market.

With the adoption of IP-based next generation networks (NGNs), new services and applications will be developed more quickly and at a lower cost than that associated with legacy networks. NGNs will allow for services that offer downloads and streaming of broadcastquality images, with the scope for the uploading of consumer-generated content carried on a single, converged, core network platform in combination with a variety of fixed and mobile access networks. Even wireless technologies, be they 3G and 4G mobile or WiMAX, will be capable of higher bandwidth delivery, although to varying degrees.

A dramatic improvement in compression, peer-to-peer capabilities, and cheap high capacity storage will transform the capacity of distribution networks, the cost of distribution, and the ability of consumers to store data and content in the home. Intelligent user interfaces – including navigation and search tools – will help users find their way around the huge volume of content they will have access to over the high-bandwidth networks.

Taken as a whole these technology changes result in important developments in the sector which will have profound consequences for markets, citizens and consumers and, in turn, for policy-makers and regulators. The authors of this volume identify or predict a number of distinct trends.

First, there will be a shift from a communications sector characterised by relative stability, high-entry barriers and monopoly, to one which is fast changing, subject to disruptive competition and increasingly open. Market boundaries will be redefined, and there will be increasingly blurred boundaries between what is considered broadcasting, entertainment and publishing; fixed or mobile; a supplier or a consumer. But although competition will increase, we may also see new bottlenecks emerging at different parts of the value chain. For example, control of digital rights management, search tools, or premium content could become bottlenecks and have increasing importance over time.

Second, there will be a transformation in the relationship between consumers and the providers of content and services to them. Consumers will have access to the infrastructure, information and tools which will allow them to search more widely for content, switch between alternative voice and other service providers, and participate more in their consumption of communications services. The impacts on both the competitive environment and on public interest objectives traditionally pursued in the media sector are potentially significant.

Third, there will be a change in the relative positioning of network providers and applications service providers. Currently, intelligence resides predominantly in the network; however, in a converged environment, it is likely that some intelligence will move to the edges of the physical network, which could shift some control from the underlying network to endusers and application and content providers, altering the balance of power between players in the sector.

Finally, there is likely to be a shift from narrow nationally focused policies and regulation, to an environment where the implications of global technology adoption as well as crossborder policy and business decisions become more important. This will require policy-makers not only to take an increasingly international perspective in their decisionmaking, but also to make choices about the appropriate level of engagement with regional and global institutions.

Market transformation

Inter-platform competition

The future should therefore bring increasing inter-platform competition: platforms will be able to deliver multiple services, and any given service will be able to be delivered by multiple, competing platforms. The most obvious example of the resulting increase in competition between platforms is in voice services. First mobile offered an alternative to the traditional PSTN for voice services, then Voice over Internet Protocol (VoIP) on the public internet offered a further alternative. A similar trend is evident in audiovisual, where services are now delivered via analogue and digital terrestrial, satellite, cable and now IPTV, all in competition with one another.

These trends in services and technologies, as well as regulatory innovations, have stimulated competition between platforms as well as more intra-platform competition with the result of increasing the challenges to traditional business models in the sector: few established businesses can be confident in their continued market success. Incumbent market shares are falling in radio, television, fixed and mobile telecoms, and price competition is generally increasing. As a result the major players in existing markets (who develop converged network platforms) are likely to seek to exploit their potential, and preserve their established market positions, by expanding their range of activities. One of the key changes over the next ten years is likely to be providers in once disparate parts of the communications sector increasingly moving into each other’s territory. There is the possibility of powerful media companies entering telecommunications markets with bundled service offers, and vice versa, as well as internet application service providers potentially moving into all three realms.

Governing the airwaves: importance of wireless and the need to optimise spectrum policy

Many of the new platforms that have emerged in the last decade, and many of the prospective new ones, are wireless of one form or another and will be designed to facilitate mobility. Thus the supply of spectrum is a key enabler to facilitating choice and competition as Peter Cochrane, Martin Cave, Isolde Goggin and Tom Hazlett all identify. Spectrum decisions will have a major impact on the evolution of the communications sector, and are therefore seen as a critical building block in any new regulatory framework.

The growth of wireless has been brought about both by consumers’ demand for mobility, and by a range of technical advances in compression technologies, battery life, processing power and miniaturisation. Importantly, wireless technologies now benefit from global economies of scale in device and network equipment manufacturing, which rely on similar radio spectrum frequency bands being used for similar applications in different countries.

In the past the problem of scarcity has been dealt with by a process in which spectrum has been assigned to users on the basis of administrative judgment. Negative externalities have been dealt with by granting exclusive rights of use for particular blocks of spectrum.

Such spectrum planning, relying heavily on central planning and expertise, was seen as the best way of addressing potential problems of interference and the need for international harmonisation of spectrum use. Isolde Goggin, in her chapter, remarks that the result has been a system which is good at safeguarding national rights (for example, for television broadcasting) and at avoiding interference. However, as Peter Cochrane and Isolde Goggin articulate, a key problem is the underutilisation of large chunks of spectrum under the ‘current command and control’ arrangements. In a fast changing world, it becomes increasingly difficult for central planners to identify and determine the best use of each part of the spectrum. It is better, all three contributors argue, to rely on market mechanisms, including auctions and tradable spectrum rights.

Martin Cave sets out the case for a market-based spectrum management regime in building on the argument that spectrum should be treated like any other input. He discusses how licenceexempt spectrum or commons can be fitted into this market-based framework and how spectrum management can be adapted to achieve flexibility in spectrum use in a richer context of adaptive technologies. In order to respond both to current and future needs for the period following 2010, Cave calls for a radical rewriting of the EU regulatory framework that would allow significant harmonised spectrum trading and liberalisation in the European Union.

The compatibility of spectrum property rights with a spectrum commons approach is covered by Tom Hazlett. Just as a public park is best provided when the costs of the park are known and competitive land-use alternatives are permitted, Hazlett argues that exclusive spectrum ownership facilitates efficiency. He argues that liberalising spectrum policy empowers competitive spectrum owners to experiment with alternative network architectures or access models and that it also permits governments to evaluate whether particular forms of spectrum access need to be subsidised.

As regulators make progress with liberalisation, and as awareness of spectrum trading increases, secondary spectrum markets are likely to become increasingly effective at allocating spectrum efficiently. In time, the characteristics of market maturity – liquidity, due diligence and market intermediaries – are likely to become increasingly evident. As the remaining primary assignments are complete, the role for regulators in spectrum assignment is likely to decline; their role in licensing, enforcement and international co-ordination will continue.

Our contributors also identify some of the problems that have to be addressed when moving to a more market-orientated spectrum system. In particular, spectrum authorities often face complaints from incumbent users when they try to free up spectrum for competitive purposes – especially if incumbents have committed to large scale investments on the assumption that they will have access to a scarce resource. Isolde Goggin notes that the debate on digital switchover has focused minds on how to balance market mechanisms with the need to ensure the availability of spectrum for services of general economic or social interest, and argues that there is “no right answer” to the balance between spectrum markets and a more policy-driven approach to spectrum allocation. Much depends on the nature of the public policy goals and the scope that markets might have for providing the right incentives for any particular group of spectrum users. Broadcasting may be a special case, she argues – especially where public service broadcasting is concerned. But even here there may be scope for introducing economic incentives for broadcast users of the spectrum – perhaps via spectrum pricing to encourage efficient use of the spectrum they have been allocated.

One thing is clear: even in a market-based approach, policy-makers and regulators affect the outcomes of spectrum assignment, for example through the sequencing and packaging of assignments and through their role in international spectrum negotiations.

New approaches to regulation

The trends described in this book are exposing the very different frameworks under which radio, television, fixed and mobile telecoms have historically been regulated. Much of the regulatory framework for different platforms is enshrined in legislation. Policy-makers will need to decide whether regulators should labour under the constraints of existing regulatory frameworks, or make changes to the legislative structure to take account of convergence.

Economic regulation

Changing market boundaries

Much of the focus of economic regulation in communications to date has been on promoting competition to monopolies, or, where this has not been feasible, replicating the effects of competition through regulatory pressure on costs and prices. In most countries where ex ante regulation is applied to a network operator a finding of dominance, or market power, in a defined relevant market is required first. In light of convergence, it is expected that boundaries between products and services will continue to blur; new forms of mobile and portable devices are likely to appear with interactive and broadcasting features. It is probable that this will have some implications for the market definitions that underpin ex ante regulations. Some new markets will emerge (e.g. for hybrid fixed and mobile services), and it is possible that cluster markets will develop for new service bundles. In particular, it is likely that there will be increased availability of multi-play service provision, with providers offering service bundles which may cover fixed and mobile telephony, broadband and broadcasting services. Convergence will inevitably lead to new market definitions, so the analysis will need to be updated.

Dynamic approaches

Against this background, regulators around the world are focusing increasingly on the dynamic benefits from the competitive process. In his chapter, Philip Booth argues that it is important for regulators to concentrate on the competitive process and less on trying to recreate the hypothetical outcome that would result from perfect competition. Expressed in another way, this means a different approach to balancing the risks inherent in any regulatory decision – worrying more about the risks that regulatory intervention might stifle innovation or distort market decisions than the risk that competition proves not to be as effective as hoped. Jonathan Cave identifies options for using market mechanisms more readily to achieve any given regulatory goal. Len Waverman argues what is required is a re-evaluation of the costs and benefits of ex ante regulatory intervention compared against the costs and benefits of relying instead on ex post competition policy framework. He stresses the importance of investment in advanced electronic communications services as a key determinant of economic growth. Even if there are some enduring bottlenecks, for example, regulators could still benefit from changing the focus of the way in which they approach regulatory decisions. As Irwin Stelzer argues, “less is more”, especially in periods of rapid technological change, and the presumption should be in favour of market forces to operate with technology that best satisfies consumer needs and avoids regulatory ‘mission creep’.

Infrastructure competition

How this debate plays out partly depends on where you are starting from. The approach needed in pursuing the twin aims of competition and investment is clearly determined to a large degree by the legacy of past infrastructure developments and the existing state of competition. The likely impact of inter-modal competition, especially on competition in the local loop/access network, depends on how much chance there is of it emerging (or threatening to emerge) in a way that can exercise a reasonable degree of constraint on the actions of a dominant incumbent operator. Even if there is effective competition in urban areas, there may be only one dominant supplier in less densely populated areas. M.H. Au, in his chapter on Hong Kong, explains how the particular conditions in that market have enabled huge progress to be made in promoting competition and withdrawing from some aspects of regulation – such as the planned end to local loop unbundling requirements, now that effective broadband competition has been established.

In the United States, where there is extensive access to both cable and fixed-line telecom networks, there is arguably greater scope to allow the market to take its course than in countries which have relatively limited cable competition, and where there is still a dominant incumbent telecommunications provider.

Investment in next generation infrastructure

Reed Hundt, in his chapter, raises the issue of communications sector infrastructure, and the role that it plays in providing wider competitive advantages for nations and their citizens. Electronic communications networks are not – for the most part – tradable across national boundaries, but they are an essential input into business and society in each country. Therefore, a premium should be placed on high-quality, cutting-edge and affordable telecommunications networks in order to improve efficiency and secure economic growth and jobs. Hundt argues that governments have a responsibility to ensure that their citizens do not come off worst in the competitive battle between countries, which means support is required for the creation of high-quality, modern and efficient broadband networks – and regulators have a role to play in ensuring the environment is conducive to this goal. But, as Hundt points out, the removal of unbundling rules in the United States and the reliance on inter-platform competition has not ended the debate about competition and access.

Net neutrality

Prompted partly by developments in the US, there is an emerging international debate about the issue of ‘network neutrality’. Although used by different people to mean different things, the real issue is about the extent to which network operators should be free to offer (and charge for) differentiated levels of service to access their networks. As different qualities of service become easier to implement in the long-term, this debate may intensify.

Eli Noam points to internet content and applications providers, as well as some traditional media companies that, he argues, have banded together in order to seek protection from the network companies’ power over access prices, quality, price discrimination and the perceived likelihood that they will favour their own content subsidiaries.

However, Reed Hundt points out that there are good economic reasons to allow such differentiation, in order to ensure that those who value enhanced service features and quality can attain them (for a suitable price) and that those who do not, don’t need to pay for things that they do not value. He argues that price and service quality differentiation will also provide the best environment for investment in network capacity and service levels.

Potential for new bottlenecks

Changes in services delivered may mean that new bottlenecks could develop at multiple levels of the value chain, for example in DRM or search engines. As our economic authors have cautioned, ex ante regulation at one level could be risky as it could favour one level over another and therefore distort the market, since companies’ investment decisions will be influenced by arbitrary regulatory distinctions rather than commercial realities. However, a removal of regulation could also be risky. This would imply that a provider power may be offset by the countervailing buying power of the purchaser. At the company level, this could be adequate as individual companies would be constrained in using their market power to distort competition, but at the consumer level it could be less so because retail price levels may be significantly higher as result. As part of this, regulators will have to balance the need to secure access to bottleneck platforms with the need to ensure incentives for efficient investment and innovation.

This is also important for the discussion on social goals and their implications for regulation. As Charles Leadbeater argues in his chapter, we should encourage the further development of a new highly social and distributed form of media production. The most important thing for regulators here, he suggests, is to abstain from interventions which unwittingly or deliberately sustain incumbents while squashing the scope for disruptive new entrants to emerge. In particular, established players may try to use extensions to copyright, patents, and other elements of intellectual property to protect their market position – rewarding current rights holders without necessarily providing any incentive for further innovation.

Regulation to support social objectives

Continuing social objectives

Our contributors argue that the blurring of product and service boundaries has significant implications not only for economic regulation, but also for the complex framework of social or ‘citizenship’ regulation – a myriad of rules and obligations which has evolved over the years to sustain what are seen to be important societal outcomes. Such regulation aims to deliver outcomes that even an efficient market would not guarantee. Interventions to secure such ‘societal outcomes’ include:

securing the widespread accessibility of fixed telecommunications services through universal service obligations
securing through the application of licence conditions to broadcast TV and radio channels:

standards for the protection of audiences against exposure to harmful or offensive content
standards to preserve the distinction between advertising and editorial content
range, quality, plurality and broad availability of broadcast audio visual and audio programming (achieved through measures including output quotas, news impartiality requirements, advertising restrictions, independent production quotas, and radio format specifications).

The need for new models

In many cases, the increase in competition within and between platforms represents the success of economic regulation. Yet, it can often undermine the mechanisms through which these societal outcomes have been delivered to date. These mechanisms can be thought of as implicit ‘compacts’: for example, access to valuable scarce broadcasting spectrum in exchange for Public Service Broadcasting (PSB) or commitments to protect against harmful or offensive content; or universal access to telephony at a uniform price in exchange for historic incumbency.

Competition erodes these ‘compacts’. For example, competition in telecoms has focused on high-value customers in low-cost locations, taking market share and eroding the margins that to date have cross-subsidised lower value customers in high-cost locations to an incumbent. In television, the scarcity value of terrestrial analogue spectrum is declining as multichannel penetration increases. As the value of one half of these ‘compacts’ declines, their effectiveness in securing social outcomes is likely also to decline. The origins of PSB of course lie very much in the analogue age. A key economic feature of broadcasting in the analogue world is its public good characteristics. In the age of satellite, cable and IP-based networks this will all change.

Eli Noam fears that as the internet becomes the main platform for most media uses, there will be pressure to extend existing telecoms regulatory rules to much of the media system as a whole. He argues that as the regulatory rules for the internet move towards those of telecom, because the issues that led to telecom regulation – discrimination, market power, national security, consumer protection – are the same issues being raised by the internet, it then follows that the telecom rules become the rules affecting all media.

Of course, some historic ‘social outcomes’ may instead be delivered by the market. Chris Giles makes some important practical points about the need to recast our public policy objectives and to develop new mechanisms, such as contestable funding, to deliver them.

Similarly, a number of universal service regulations currently ensure that blind or deaf people have access to special services allowing them to use telephones. The arrival of the internet, and of Next Generation Networks (NGNs) using open standards, allows products designed specifically for this market to be profitable, which may change how we need to consider such regulation.

Around the world, local and regional governments are examining different options to secure universal broadband provision – typically with access to some form of public funding, made available on a competitive basis. As Steve Burdon notes in his survey of developments in Asia, many regulators are adopting what he terms a “proactive” approach to managing emerging competition, which involves setting national interest goals – such as investment in modern infrastructures – as part of the overall regulatory framework.

Changing social needs

The new models will need to reflect changing social needs. In the future, consumers will face greater choice, and, given improved information and tools and a much better understanding of media issues (media literacy), will be able to exercise their own individual decisions about what to consume. John Naughton describes the waning influence of the established broadcasters and, like Charles Leadbeater, notes the importance of new media as a tool for increasing social democracy. Naughton argues that the new media ecosystem will be richer, more diverse, and immeasurably more complex than the old system. Blogging, for example, helps individuals to bypass the gatekeepers of the old media world, in which “freedom of the press was available to anyone who was rich enough to afford one”.

Nevertheless, there is still seen by many to be a strong and continuing rationale for intervening in the market to deliver desired social outcomes. David Puttnam argues, for example, that the citizens’ interest is still important in the digital world and needs to take precedence over consumer interest. In particular he notes the continuing importance of ensuring diversity and plurality in digital media, and the key roles that media literacy and an effective IP policy will play in that environment. Ruth Hieronymi in her essay argues strongly for the continuation of sectorspecific media law in the EU, and explains the intentions of the current proposals for extending content regulation to on-demand TV services.

Others see even more radical change – often for the better. Damian Tambini, in his chapter, sets out the case for a more holistic approach to role of communications in citizenship, which would encompass access to networks and services, content and public participation. He suggests that policy should develop the notion of citizens’ rights, including access to key information services – regulators may have a role in protecting some groups from an unacceptable level of information exclusion and certainly have a role in monitoring the extent and understanding the impact of such exclusion – particularly as an input into any debate about universal service obligations. Carolyn Fairbairn proposes some criteria by which we might decide whether new media markets need to be tightly regulated or otherwise, including the extent to which new services might exercise a powerful influence over our lives, and the risk that plurality may suffer.

Sustainability of national content regimes

The internet, especially with higher bandwidth services, will make it increasingly difficult to sustain national content rules and standards, although there should be scope for building a more effective self-regulatory system which meets public expectations. Even if continuing intervention to secure certain standards were desirable in the long run, the advent of broadband and the internet increases the practical challenge of finding effective means of so doing. Our contributors paint a picture of a world in which there are many thousands of content providers – with individual internet users posting audiovisual content alongside more established professional companies – very different from the numbers covered by the current licensing regime. Content will be available from outside a particular country, making enforcement difficult. There is also a transitional risk that – to meet the need to be seen to be doing something – regulation is either increasingly focused on those it can still affect (the traditional broadcasters), while allowing many other content suppliers to escape attention, or applied so widely that it hinders the development of innovative content propositions from the many possible new suppliers who could access the market.

Regulators around the world are grappling with similar challenges. They appear to be pursuing two very different responses. One approach is to tackle regulation of the internet head-on, with all the implications for intrusive regulation and impact on freedom of expression that entails, which is perhaps most starkly demonstrated in China. However this is not the only approach.

The other is to step back, and allow individuals themselves to exercise responsibility for what they and their families consume, aided by the latest in content filtering and rating devices, by better information about the nature of the content to which they have access, and by clear and enforceable laws to prevent the distribution and use of illegal content (such as child pornography). This latter approach could also involve some form of ‘opt-in’ regulation. That is, rather than determining via legislation who should and who should not be part of the regulated arena, it could be left to the individual industry players to decide voluntarily and perhaps encouraged by certain incentives. Jonathan Cave points out that new forms of regulation, including self- and coregulation, make greater use of commercial interactions to address governance issues.

Across the majority of countries, Ofcom has already found that a hybrid model of direct and self-regulation has been used to implement consumer protection measures in the e-commerce environment. For example quality seal systems are in place in France (L@belsite), Germany (Trustedshops) and Japan (Japan DMA), while the Global Trustmark Alliance promotes the use of quality seals at an international level.

There is likely to be an ongoing debate about what social outcomes remain valuable, and the need for regulation to continue to deliver those outcomes. For example, some outcomes, such as localness or ethnicity in programming, may remain desirable but increasingly be delivered by the market. For others, such as access to basic telecoms services, expectations of the minimum acceptable level are likely to be of most concern. There is likely to be a gradual shift, often initiated by regulators, towards more transparent and platformneutral delivery of such solutions, such as through a provider of public service content. The provider would commission audiovisual content that served stated PSB purposes, to be distributed via a range of technologies and media platforms.

Institutions and processes: 2010 and beyond

Consumer empowerment

Regulators will need to consider their response to increasing consumer empowerment, and also perhaps actively encourage its development. New media developments, for example, may bring a much more democratic and participative relationship between users and content providers (‘user power’, ‘pull not push’), and a shift in the balance between passive consumption and active content creation and conversation. This might reduce the need for content regulation in its traditional form. However, whereas some consumers are able to keep abreast of these developments and benefit from them, many may be baffled by their complexity. In her chapter, Carolyn Fairbairn highlights the potential that new media can offer content providers and public interest content provision in particular. A heightened role for citizens/consumers in exercising individual choice and responsibility for what they consume should be supported by effective, tough and well-targeted consumer protection measures. In other words, the challenge is to encourage and help those who have grown accustomed to traditional forms of communications to move into the converged world – for example, via media literacy initiatives, promotional activity and other incentives.

As Ed Mayo and Philip Cullum argue, the consumer interest needs to be close to the heart of regulatory decision-making. Their specific ‘menu’ of proposals includes that regulators need to start with a focus that sees the public not just as prime beneficiaries of regulation, but as its co-producers. They call for methodologies to be devised for action that goes beyond addressing imperfect markets, which they argue is the case at present. Above all, they argue that regulators should do far more to engage consumers in decision-making and they must move away from a regulator ‘knows best’ mindset.

Institutional Design

What does all this mean for regulatory institutions? At national level many argue that the case for converged regulators is clear. David Puttnam reminds us of the long gestation period for the Communications Act 2003 and is rightly proud of the important safeguards built into that Act. Viviane Reding suggests that the model of converged regulation could be adopted more widely, even though there are significant practical barriers to this in many countries. Italy, Finland and Australia all now have converged regulators of one design or another.

A more difficult question is what balance should be struck among national, regional and global regulation in this new era. No national policy-maker or regulator, in either the developing or the developed world, is able to act in isolation to the developments that are taking place around the world. This is especially true for some aspects of spectrum policy. Graham Mather sheds light on the current debate about the future structure of European telecoms regulation by highlighting parallels with other EU markets, and the case for intelligent cooperation between national institutions rather than a major shift of power to Brussels. Philip Booth also advocates that public policy-makers and regulators should intervene at the most local level so that the intervention is closest to the multifaceted individual consumers that it is designed to serve. In his chapter, Graham Mather also talks about regulatory effectiveness and identifies the importance of impact assessments in good regulatory decision-making. He also notes, though, that there is a risk that such processes lose meaning over time, and therefore need to be subject to periodic audits. In his discussion of internet governance, Jonathan Zittrain believes that if the current and future benefits are not to be lost, the internet needs its own specific type of regulation that is neither an intrusive state-led model nor a libertarian free-for-all. Instead he looks to such institutions as the Internet Engineering Task Force (IETF) and Wikipedia as potential guides to future internet governance.

Conclusions

Both Ofcom’s own international research, and the many thoughtful contributions to this book underline the changes that are likely to affect the communications sector over the next few years, and the challenges for regulation. Although many different and fascinating ideas are contained in the chapters, the common theme is that regulators and policy-makers cannot stand still. Indeed there is a risk that out-of-date regulation could hinder the development of the sector and – to use John Naughton’s biological analogy – destroy the organic changes which would otherwise occur.

The emergence of new wireless platforms has, and will, contribute to increasing interplatform competition able to deliver multiple services, and any given service will able to be delivered by multiple, competing platforms. As stated at the outset of this chapter, core networks are increasingly similar: they use IP and increasingly modular device components, and they are based on open standards.

These trends of more inter- and intra-platform competition and changing societal attitudes will affect the way that regulation delivers social outcomes in future. As competition erodes the value of one half of these implicit arrangements, they will become less sustainable and less effective. In the future, more transparent mechanisms will need to replace them. Policy-makers and regulators will have to look again at what societal outcomes are desirable, and to determine what can be delivered by the market and what requires new mechanisms for intervention.

These trends will simultaneously increase competition and choice, but also undermine the effectiveness of many of the old regulatory tools used to achieve public interest objectives – for example, public interest content provided by commercial broadcasters, and programme standards. They change the way we need to think about potential and actual competition, (temporary) monopoly power, risk and rewards, and the need for economic regulation. They also call for a reassessment of our public interest objectives in the sector, and the tools we have at our disposal to achieve them. As our contributors argue, they require further tough questioning of the continuing role and aims of regulation in the sector.

Many of our authors call for a radical rethink of the approach to regulation over the next five to ten years. They argue for a focus on investment and innovation, and for the reinvention of approaches to public interest content and other social objectives. They see the scope for a market-based spectrum policy to transform the competitive landscape. They are optimistic about the opportunities presented by new media and communications services for individual consumers and for society as a whole. But they identify concerns that will need to be addressed if the full benefits are to be realised and some worry about the emergence of an entrenched digital divide or ‘information deficit’. They see an imperative for less regulation in some areas, and also discuss how regulation needs to evolve and become smarter as it responds to the new challenges ahead.

Clearly regulatory innovation will continue to take place across the world as policy-makers and regulators respond and prepare for the challenges and the new opportunities that convergence and changes in market structure will offer. What will be important to factor in will be the need to engage with consumers and industry to understand these changes and developments. It will be necessary to reflect the highly dynamic nature of industry and technological evolution and avoid an excessively static view of markets.

The debate engendered by the chapters in the book will, we hope, help result in better answers to the big questions in due course. But, in summarising the contributions, we are impressed by the overall optimism about the potential for the communications sector to be a driver of economic growth and a generator of great cultural benefits – and the confidence that policy and regulation can evolve fully to realise those benefits.