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Summary

On July 16, 2015 Ofcom published the discussion document in relation to its ongoing strategic review of digital communications, which began earlier this year. The UK regulator is welcoming responses up until October 8, 2015 and will publish some initial views in January 2016. Given that the outcome of the review is likely to set the regulatory agenda for the next decade, Ovum expects the already extensive lobbying to intensify.

The considerable noise around further separation of BT risks overshadowing equally important aspects of the review

In the lead up to the publication of the discussion document, BT and its rivals had been engaged in a bitter war of words in relation to where Ofcom should focus its priorities. BT’s rivals believe that the incumbent should be further split up and the access division, Openreach, hived off. BT has responded by calling for pay-TV to be in the spotlight. Both of these points have made it into the discussion document, yet neither should be the focus.

The strategic review seeks to ensure that the industry continues to meet the needs of end users. The last such review, a decade ago, lasted almost two years and ultimately led to the separation of BT’s access network. However, this review is unlikely to result in a further separation of the incumbent. Although Ofcom recognizes that there are challenges associated with Openreach, especially in relation to service quality, it heavily suggests that further separation will not address these issues and could ultimately be disproportionate. This is not to say that tweaks to the Openreach model are not likely.

What the review really does is present an opportunity for the regulator to properly consider the impact that competing services from so-called OTT players are having on the sector and whether this impact warrants further deregulation of the traditional communications markets. As new, more nimble players such as Skype and WhatsApp have arrived on the scene and competed away traditional telco revenues, regulators have been somewhat constrained in their ability to react and certainly have not responded in the way telcos might have liked. This is where Ofcom’s focus ought to be – that could even be an area where BT and its rivals agree.

Appendix

Further reading

UK (Country Regulation Overview) TE0007-000606 (July 2014)

“Ofcom’s strategic review could lead to further deregulation for telcos,” TE0007-000889 (March 2015)

Author

Matthew Howett, Practice Leader, Regulation

matthew.howett@ovum.com

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