Taming the Pirates

Ofcom faces tough new challenges.

In a speech to a roomful of executives at Millbank Tower in Westminster last Wednesday, Lord Currie of Marylebone painted a gloomy picture. The retiring chairman of Ofcom, the regulator for the media and telecommunications industries, talked about “corporate failures, forced consolidations and fire sales” as well as “a raft of business models that were not remotely sustainable”.

It was as if he had been distracted from his notes by the turmoil in the banking industry. However, Currie was talking about the state of the communications sector in 2002, when he was appointed to oversee the creation of Ofcom, which replaced five smaller regulators.

“It is easy to forget just how hard-hit much of the communications sector had been by the collapse of the dotcom boom,” Currie said.

Back then, debt-laden BT had just demerged its mobile arm, broadband investment had ground to a halt and ITV Digital had collapsed.

There is no denying that telecoms and media have been transformed since 2002, and Ofcom is rather pleased with itself for smoothing the way for the broadband boom - for instance, by opening up BT’s phone network to proper competition.

However, early successes do not mean that the regulator’s job has become easier. Some critics joke that Britain’s fastest-moving industries have a go-slow regulator these days. Certainly, Ofcom feels as though it has lost some of its early zip, but much of that is down to companies’ “propensity to reach for the lawyer”, as Currie put it in his speech.

When Ofcom is not facing another challenge to its rulings from increasingly litigious companies, it must grapple with how to deal with the fast-moving internet, which lies at the heart of the industries it oversees.

Ed Richards, Ofcom’s chief executive, has been busy, issuing four big reports in the past month on the future of public-service broadcasting, pay-TV, high-speed internet networks and the mobile-phone industry. “In all cases we are trying to promote competition, diversity and innovation,” said Richards, a former policy adviser to No 10 and the BBC.

He hates to talk in terms of battles, but it is impossible to see eye to eye with everyone. So while ITV might welcome the chance to cut its costly regional news output, BSkyB - 39% owned by News Corporation, owner of The Sunday Times - is less pleased by proposals for it to make its premium sports and film channels available to rivals.

“They are the big areas and we are taking them on,” said Richards. “Sometimes that means people won’t agree with everything. I am prepared to accept this - as long as we have done a good job in being clear about what we are trying to do and why we are trying to do it.”

His latest disagreement is with Sir Michael Lyons, chairman of the BBC Trust, who is trying to hang on to all £3.4 billion of the licence fee while Richards has floated the idea that cash-strapped Channel 4 should get a slice of it.

At Sky, Ofcom proposes to set the price at which the satellite broadcaster should wholesale some of its key channels to rivals to increase the availability of football matches for viewers. Richards denies that it is a rerun of attempts by the Office of Fair Trading (OFT) 12 years ago to break Sky’s dominant role in sport and films.

“It’s the same territory as the OFT butwe are proposing a much broader approach and a very different remedy,” he said.

It all sounds a far cry from the “light touch” regulator that once said it wanted to rip up the rulebook and do itself out of a job in some of the markets it policed.

Richards insisted that Ofcom still followed the same guiding principle.

“We try to be light-touch wherever that’s appropriate. We have a bias against intervention. But if we think that something is demonstrably in the consumer’s interest, then we should intervene firmly and effectively.

“I have no problem holding both those ideas in my head.”

The example he cites of where deregulation is more likely is in mobile telephony, particularly mobile-phone termination rates - the charges that networks levy on each other and BT to carry their calls.

“It is time-consuming, it is painful and it is constantly appealed,” he said. The main four mobile operators are inclined against change, dragging their feet over number porting - where consumers can take their phone number from one network to another.

Not every initiative has been a triumph. Ofcom’s decision to grant more spectrum for digital radio looks flawed after Channel 4 became the latest company to go cold on the medium, citing money troubles as it scrapped plans to launch radio stations.

Richards claims that issuing a second licence was not a mistake. “When you are a regulator you have to be comfortable with not knowing all the answers,” he said.

Where Ofcom has surprisingly little to do is on the internet, the place where media and telecoms are converging. There was a chance that it would have more to do if a Brussels directive - the audiovisual media services directive - had been implemented, but Ofcom fought to water it down.

It is left in the odd position of referring Kangaroo, a planned commercial version of the BBC iPlayer, to the Competition Commission, while YouTube uploads 13 hours of uncensored video onto its website every minute. The first is deemed to be “TV-like” so it is covered by Ofcom, while the second is not, even though YouTube is signing up broadcast partners to air full-length programmes and split the advertising income.

Richards hates to be thought of as empire-building, but he is pleased that Ofcom has taken on the role of ensuring that broadband providers honour a pledge to crack down on illegal downloaders.

“I am not sitting thinking, can I get my hands on more things?” he said. “We are comfortable with the idea that there are different levels of regulation as befits the area.”

For now, that means the internet is being cleaned up by self-regulation through the UK Child Council on Internet Safety, although that may change when a new communications act is produced after the next election.

Fresh from the Cabinet Office, Stephen Carter, Richards’ predecessor at Ofcom, took his place in the House of Lords last week as communications minister with an eye on preparing the ground for new legislation to police the internet age.

Currie expects that Ofcom will “find its remit being stretched” once he has gone. Richards’ workload is unlikely to ease any time soon.

source: timesonline.co.uk 19-10-2008

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