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“... Surely nothing can be more plain or even more trite common sense than the proposition that innovation ... is at the center of practically all the phenomena, difficulties, and problems of economic life in capitalist society.” – Joseph A. Schumpeter, Business Cycles: A theoretical, historical, and statistical analysis of the capitalist process (McGraw Hill, NewYork, 1939), p. 87.

Innovation is a high priority for firms, governments and regulators world-wide. It generates profits in a dynamically competitive market, creates choice and value for the consumer and is a source of national competitiveness. Areas such as broadcasting and fixed line telecommunications have to cope with rapid technological innovations that are changing the nature of the markets they provide. The market needs freedom to innovate and it can be encouraged by a business environment which rewards those who innovate and punishes those who do not.

As regulator for communications, Ofcom needs to have detailed sector specific knowledge in order to maintain a high degree of neutrality, and to pursue policies that will enable the market to explore new technologies without distorting the incentives for innovation.

Ofcom can promote innovation without distorting the market through encouraging information transfer, targeted ‘balanced’ research, the provision of monitoring data or sponsoring an award designed to stimulate innovation (in a technologically-neutral manner).

In order to best undertake its duties Ofcom needs to shift its approach to one that has innovation at the core of its actions. Ofcom is given freedom to choose what weighting it gives to its duties, one of which is innovation. In the long run, as innovation is the mechanism by which choice and value can be delivered to the citizen-consumer – Ofcom’s highest duty – this report recommends that innovation is given considerable weighting in decisions of policy. Such decisions consequently should have a strong bias towards competition and neutrality.

The full print version is available below

• The Role of Ofcom in Encouraging Innovation [pdf]
  This work was conducted independently by Matthew Cleevely as part of his study at SAID Business School. By publishing the document, Ofcom does not necessarily endorse the work or any of the conclusions.

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