Ref: 55/00
Date: 27 July 2000

The Government’s forthcoming Communications White Paper will offer a unique opportunity to establish a regulatory framework so that consumers reap the benefits of the converging communications sectors, David Edmonds Director General of Telecommunications said today.

Proposals for a new regulatory framework for the converging communications sectors are set out in the Director General’s paper ‘Communications regulation in the UK’ – responding to the Government’s consultation on communications regulation.

These proposals have two main objectives: first to promote competitive markets to deliver choice, quality and value for money for consumers; and second, to maximise consumers’ access to a diverse range of communications services.

New electronic services offer new ways for people to work, study, shop or interact with Government. With convergence, many of these services can equally well be received over a television set, a personal computer, or a mobile phone.

A consistent regulatory framework for electronic communications is needed to allow competition, investment and innovation to flourish. It must be based on the same rules, applied across all the communications markets.

These rules should promote effective competition by enabling competitors to have access to the networks and gateways of those operators with market power; and safeguard access to services for consumers where the market may not deliver.

The proposed framework would ensure that a wide range of high quality and affordable services are available to all consumers across the different electronic communications markets.

Key proposals are:

• A single economic regulatory framework across the electronic communications sector;
• A regulatory authority whose objective is the best deal for the consumer;
• Rules to protect consumers and to safeguard universal access to key services including public service broadcasting.
• Clear arrangements for consumer input into policy-making, and an ombudsman to deal with individual consumer disputes.

David Edmonds Director General of Telecommunications said today:

"The convergence of the telecommunications and broadcasting sectors is having a profound impact. The Communications White Paper will lay the ground for legislation that offers an unparalleled opportunity to deliver a better future for everyone in this country. The right regulatory framework will help to give everyone, as consumers and as citizens, the best possible range of services at competitive prices.

"The new framework should create dynamic markets that deliver economic benefits to all consumers. Regulation should deliver quality, choice and value for money, while ensuring that consumers are adequately protected."

David Edmonds said that it was extremely important that regulation was consistent and proportionate.

"Inappropriate or unnecessary regulation can distort investment, innovation and enterprise. There should be tests which must be passed before intervention takes place. Access to communications networks should only be mandated when operators have market power and the benefits of intervention exceed the costs.

"In order to ensure consistency in the converged world, there should be a single regulatory framework right across the electronic communications sector. There should be clear arrangements for consumer input into policy-making set out in the statute, with an ombudsman to deal with individual consumer complaints.

"Content regulation should be separately organised, with an emphasis on self-regulation and co-regulation. To ensure coherence across the whole electronic communications sector, the regulatory agency should have overall responsibility for both content and economic regulation.

"The development of a world-class communications industry far transcends any organisation’s vested interests in its future. The design of a new agency should start with a blank sheet of paper – simply combining current agencies along existing lines is not an option.

"This new regulatory framework will enable the converging communications sectors to flourish and deliver immense benefits to consumers and businesses across the country."

Note to Editors

The Director General of Telecommunications paper ‘Communications regulation in the UK’ is available on the Oftel web site at www.oftel.gov.uk/about/whit0700.htm Copies are available to the media from Oftel Press Office on 020 7634 8991 and to the public from Oftel's Research and Intelligence Unit on 020 7634 8761.

SUMMARY OF ‘COMMUNICATIONS REGULATION IN THE UK’

A new framework for regulation

1. The paper sets out the views of the Director General of Telecommunications on an optimal approach to regulation in a world where technological change is removing many of the distinctions between telecommunications, broadcasting, and IT. The paper concentrates on the principles that should underpin a regulatory regime. It sets out a possible organisational solution, based on these principles.
2. The structure for regulation of the communications industries should meet the tests of:

• creating dynamic competitive markets which deliver economic benefits to consumers;
• maximising access to a diverse range of communications services;
• delivering quality, choice and value for money;
• ensuring consumer protection.

3. The UK regime will need to be consistent with new EC Directives, likely to come into force from 2002. The Oftel proposal is for sectoral regulation based on rules:

1. to promote effective competition by enabling competitors to have access to the networks and gateways of those operators with market power; and
2. to safeguard access to services for consumers where the market alone may not deliver.

Rules on access to networks

4. Because direct access routes into the home or workplace will remain limited, companies with market power in access to networks (and/or gateways) have the ability (and may have the incentive) to foreclose markets for services. Regulatory action is the most rapid, proportionate and effective public policy lever to prevent this. Ex ante sectoral regulation, to complement the Competition Act is essential to safeguard effective competition in the provision of communications services, at least for the foreseeable future. The abandonment of ex ante rules would fundamentally weaken the ability to promote and sustain competition in the UK.

Proportionate regulation

5. Sectoral regulation of the communications markets should be administered with an understanding of its impact upon investment, innovation and enterprise. Regulatory rules and actions need to be focussed, proportionate and objectively justifiable. Co-regulation and self-regulation should be developed. When effective competition exists, rules should be reviewed and removed.

Access for consumers

6. Sectoral regulation also exists to protect access for consumers to specified communication services. This has underpinned widespread and cheap telephony. 96% of households now have a fixed line. Targeted initiatives are likely to be necessary in the future - for example, to increase high-speed access to the Internet, to assist in the switch to digital television services and to guarantee the future of public service broadcasting. These initiatives can be part of a broader structure of economic regulation aimed at achieving effective competition – the best guarantor of universal access to high quality services in the long run.
7. The economic analysis of markets is a major component of sectoral regulation. There are other major areas that will need to be brought within a new framework. There will continue to be a need for public service broadcasting obligations for television and radio, and universal services in telecommunications. Issues of content need to be dealt with effectively, including safeguards for Internet users.

Objectives for a Communications Bill

8. The key goal for the Bill is for regulatory arrangements which are:

• founded on a core of focussed sectoral regulation combined with the application of general competition law;
• based on economic analysis of market power in individual markets when dealing with questions of anti-competitive behaviour, and broader issues including access to networks;
• flexible and dynamic to allow new methods of working in fast-moving markets;
• capable of providing consumer protection in key areas;
• enforced by a body that is independent, authoritative and which commands public confidence.

Structure of the regulator

4. Organisational design follows the analysis of what the regulatory agency needs to do. The proposals are:

• a single sectoral regulatory framework across the electronic communications sector;
• a single body with responsibility for delivering that framework across communications markets;
• a sectoral regulator with concurrent powers with the OFT under the Competition Act, and possibly concurrent powers in relation to merger controls;
• content regulation separately organised, with emphasis on self-regulation and co-regulation, but within a single regulatory body;
• spectrum allocation undertaken by the sectoral regulator with further analysis of the best way of handling the Radiocommunications Agency’s other functions;
• clear arrangements for consumer input into policy-making set out in the statute; with an ombudsman for dealing with individual consumer disputes.

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