Ofcom. It really isn’t an all powerful deity.

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Aladdin: You’re a prisoner?
Genie: It’s all part and parcel, the whole genie gig.
[grows to a gigantic size]
Genie: Phenomenal cosmic powers!
[shrinks down inside the lamp]
Genie: Itty bitty living space!

Aside from the comic genus of the late, great, Robin Williams, the Disney classic “Aladdin” reminds me of conversations I often have with people in our industry.

Telecommunications is regulated; heavily regulated. Sometimes we can be forgiven for forgetting this, because of the “General Authorisation” regime. Courtesy of the various European Directives which ultimately govern many facets of our industry, anyone is presumed to be a “fit and proper” person to run a network/reseller and provide a communications service. Compliance with the rules is presumed until otherwise demonstrated, or in the rare few cases where ex-ante regulation such as charge controls is imposed.

I have many conversations, often with smaller operators, but not exclusively, where a sentence like “Why doesn’t Ofcom do something?” comes up. Be that in the long-running net neutrality debate, something ITSPA members will remember, where Ofcom’s Chief Executive went before a Select Committee and invited more powers to deal with issues, through to perceived abuses of various legislative, moral or ethical codes (I would say number portability ticks all of those boxes).

Whilst Ofcom, in delivering taxpayer value, has slowly exited several floors in Riverside House, to the extent, for those that have had the misfortune of being summonsed into the inner sanctum, will know it truly is an itty bitty living space, many also seem to think that Ofcom has, or expects it to use, “Phenomenal cosmic powers!”. Aside from the obvious issue of how often it is currently found to have erred by the Competition Appeal Tribunal and how worrying such unmetered discretion could be, Ofcom is simply not an all-powerful Genie. Its powers are very limited, derived (in voice and data telecommunications at least) from a handful of European Directives, Recommendations and Regulations, with a little thrown in via the Communications Act 2003, Wireless Telegraphy Act 2006 and a few competition and consumer-right centric pieces of legislation. Yes, Ofcom has the power to set retail and wholesale price caps, but only after going through an exhaustive exercise of consultation and demonstration that such regulation is necessary and proportionate; the presumption in the regulatory construct of the day is one of deregulation and light touch regulation.

Various layers of jurisprudence have layered on top of this and reinforced the non-interventionist approach, such as last year’s Supreme Court judgement which essentially says that there has to be actual demonstrable consumer harm before Ofcom can exercise certain dispute resolution powers, not just uncertainty whether it will be caused or not.

Increasingly, Ofcom expects its stakeholders to tell it what powers it has and how it should exercise them; maybe they just like trolling me, but it is certainly increasingly my experience that you have to do the heavy lifting for them and point to regulatory and legislative provisions before they’ll entertain acting, if they can at all. In fact, I think my most uttered phrase in industry meetings is “Ofcom doesn’t have the power to do what you ask”. On top, they don’t expect things they publish or consult on to necessarily be the first a regulated telco hears of something – last year’s drop in fixed termination rates was a journey that started with the adoption of a Recommendation by the European Union in 2009, for example.

All of this conspires together to create an environment where there has to be a grave injustice with a well constructed legal argument as to why there’s an injustice and why/how Ofcom can act. For small operators, this could be tantamount to investigating crimes committed against them and prosecuting their burglar themselves!

Let’s just say that David does defeat Goliath and Ofcom takes action against an alleged injustice; well heeled and deeply resourced Goliath just throws some barristers at the Competition Appeal Tribunal and has the entire injustice reheard. If Goliath doesn’t like the Tribunal’s answer, it can go off to the Court of Appeal – right now I believe there’s one application in progress and there’s been 3 judgements appealed in the last few years. Then there’s been further escalations to the Supreme Court and also the constant risk of a reference to the European Court of Justice.

Ofcom is far from a genie, hardly a powerful wizard either. Perhaps a wise and battle scarred druid would be an appropriate analogy? Its decisions have no certainty until after the window to litigate expires (2 months from the date of the decision) and I would suggest it is becoming increasingly litigation weary – a sense I get from the current nature of its decision making.

I write this in response to Tref’s request for something to inform debate before the parliamentary purdah; Parliament’s wings are clipped here too – various European Directives explicitly prevent it from directing Ofcom in certain affairs, however, there are two things I would suggest they could strongly hint that Ofcom do (although one is really pushing it in relation to the non-interference directive) to ensure the sustainability of our highly competitive and vibrant telecommunications industry, assuming they aren’t too distracted throwing more public money at BT’s FTTC roll-out. Oh, and a third thing they can do outright.

Firstly, number portability is a farce. We used to be the world leaders in this area having one of the first truly open and competitive markets, only to have been lapped by Yemen. I strongly believe Ofcom does have the power to implement the appropriate European Directive in a more rigorous way to deal with some or all of the shenanigans we endure daily, but won’t.

Secondly, without boring you all (unless I am requested by popular demand) with a lecture in economics, the way that BT’s charges are controlled afford it the ability to subsidise its quad-play offering and Premiership football rights acquisitions courtesy of your business – its regulated weighted average cost of capital is calculated by Ofcom with reference to its near-junk status bonds and its beta of equity which are both influenced by its extra-curricular activities and artificially inflate your charges.

Finally, there was a government consultation process on streamlining the post regulatory decision making process to make things more, in part, accessible and to address some of the issues I refer to here. That seems to have stalled and/or died in a ditch, so would be worth dusting off and pursuing to a conclusion.

Three, relatively small,  relatively simple things would address two grave injustices; fibre rollout (premises or cabinet), net neutrality, data protection, Openreach structural separation, privacy and snooping, nuisance calls – all great and important topics for politicians and ones I am sure will be covered this week; but these two would be a decent, easily administered shot of adrenaline for us all.

Other political week posts on trefor.net:

James Firth on why government should stop looking to big corporates for tech innovation
Gus Hosein on Data Protection Reform and Surveillance
The Julian Huppert crowd funding campaign here
Paul Bernal suggests government should hire advisers who know what they are doing
Domhnall Dods on Electronic Communications Code reform
James Blessing Says “No matter who you vote for…

See all our regulatory posts here.

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