Communication Regulation in the UK. International Seminar Electronic Communication Regulatory Framework in the Era of Convergence
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1 0 Communication Regulation in the UK International Seminar Electronic Communication Regulatory Framework in the Era of Convergence 10 November 2010 Vince Affleck Director International, ITU & OECD, Ofcom
2 1 Index 1. Ofcom A converged regulator 2. Ofcom s duties 3. Regulation of Electronic Communication networks/services 4. Content Regulation 5. Spectrum 6. Future programme
3 1. Ofcom - a converged regulator 2
4 3 Ofcom formed from 5 previous regulators Spectrum management Broadcasting standards Television regulation Telecoms regulation Radio regulation
5 4 Convergence in communications sector Platform level convergence Analogue to digital VOIP Fixed and wireless combinations Service level convergence TV over broadband Fixed and mobile Device convergence Single fixed and mobile telephone handsets PCs providing voice as well as internet Mobile TV Hub Industry convergence Consolidation within / across segments Bluetooth Wi-Fi
6 5 Previously adjacent markets are competing Terrestrial analogue broadcasting Web streamed and on demand DSL and fibre Digital satellite, cable, terrestrial Mobile TV
7 Ofcom Board Norman Blackwell (Non Exec) Millie Banerjee (Non Exec) Mike McTighe (Non Exec) Tim Gardam (Non Exec) Philip Graf Deputy Chair (Non Exec) Colette Bowe Chairman (Non Exec) Ed Richards CEO (Executive) Jill Ainscough (Executive) Stuart McIntosh (Executive) Background/ Experience Economist /Finance (Private/ Public) Telecoms (Private/ Public) Telecoms (Private) B casting (Private/ Public) Newspaper Ind (Priv/ate/ Public) Economist (Private/ Public) Broadcasting (Private/ Public) Broadcasting (Private) Telecoms (Private/ Public) Appointment Process Non-executive members are appointed by a representative from BIS + DCMS + Ofcom Chairman + Independent assessor Chairman appointed by a representative from BIS + DCMS + Independent assessor The Board s policy & technical expertise across the sector and independent appointment process CEO appointed by Chairman (Subject to approval by BIS+ DCMS) Executive Members appointed by Chairman and Non Executives
8 7 Ofcom: funding and staffing Funds raised by industry licence fees Ofcom retains a % of revenue from spectrum licenses rest passed to Treasury 870 staff in Ofcom (from 1152 staff in legacy regulators) Being reduced to 700 from April 2011
9 8 Ofcom: Governance Statutory public corporation independent of Government Ofcom staff are public servants (not civil servants) Board Structure Board subject to Code of Ethics & Standards Duties to consult, publish annual plan and reports Decisions appealable to specialist tribunal (CAT) that sets standards for all UK regulators
10 9 Ofcom: Accountability Directly accountable to Parliament, not to a Ministry Publication of regular reports available to the public Annual Report to Parliament e.g. budget Annual Plan first published in draft form and consulted on All decisions and regulations are published All decisions and regulations are duly reasoned and open to judicial review Regular consultation with stakeholders Extensive research to support regulatory activity Freedom of Information Act applies
11 2. Ofcom s duties 10
12 11 Ofcom: main duties To ensure: the UK has a wide range of electronic communications services, including high-speed services such as broadband a wide range of high-quality television and radio programmes are provided, appealing to a range of tastes and interests television and radio services are provided by a range of different organisations people who watch television and listen to the radio are protected from harmful or offensive material people are protected from being treated unfairly in television and radio programmes, and from having their privacy invaded the radio spectrum is used in the most effective way
13 12 Ofcom: what we do not do We are not responsible for regulating: disputes between consumers and telecoms providers premium-rate services the content of television and radio adverts the Internet newspapers and magazines
14 13 Ofcom s five main objectives Support and protect consumers across the UK Secure citizen interests (as guided by Parliament) Promote competition and innovation Maintain and strengthen the communications infrastructure of the UK Simplify and reduce regulation, while maximising value for money
15 3. Regulation of Electronic Communication networks and services 14
16 Regulating electronic communication networks and services We regulate by imposing obligations on SMP providers of networks and services regarding: Access to bottleneck facilities Interconnection Universal service Additionally, we have: concurrent powers to apply competition law
17 Regulating electronic communication networks and services Market Review approach 1) Define markets Identify relevant market Use competition law/economic principles [SSNIP test] 2) Assessment of market power Does an operator (or operators jointly) have significant market power (SMP)? Ability to profitably raise price and behave independently of competitors and consumers Market share, barriers to entry/expansion, switching costs, are key factors Absence of market power means effective competition in the market 3) Impose regulation ( remedies ) Only on operators found to have SMP, and where ex post competition law cannot address issue Consider range of possible remedies, from light (transparency) to heavy (access, price control) Should be proportionate and appropriate address the competition problem in the least interventionist way, and take account of relevant trade-offs
18 17 Next Generation Access BT has SMP in wholesale broadband access market BT offers high speed broadband access services over DSL In order to provide more advanced services, get higher speeds, BT is rolling out fibre into the access network
19 18 NGA will support new and improved applications Services that may require higher speeds
20 NGA: regulatory issues Investment challenges Uncertainty surrounds: business case for investment designing and building networks that support super-fast broadband services how the regulatory environment affects investment Questions around: Competition challenges How to secure competition that will bring the most benefits to consumers what implications there are for existing competition how the can good consumer outcomes be secured Regulatory approaches must balance investment and competition Wholesale active access products to deliver widespread investment and competition Options for effective and sustainable competition deeper in the network though passive access Flexible pricing approaches that reflect risks Clear and well managed path to transition 19
21 20 Regulation of NGA Coppe r or Fibre Passive Line Access Passive products will not work everywhere. Active products offer the scope for competition more widely In future these can support more innovation and differentiation, but will still have drawbacks Customer Street Cabinet Fibre Local Exchange Metro Node Core Network High quality active products are fundamental to delivering competition Active Line Access Active Line Access Active Line Access Active Line Access
22 NGA: Ofcom decision BT required to offer an active wholesale access service (VULA) VULA is : Virtual Unbundled Local Access Similar to Local Loop Unbundling in PSTN network Pricing flexibility to reflect risk 21
23 4. Content Regulation 22
24 23 Purposes of content regulation Ensuring a wide range of TV and radio services of high quality and wide appeal Maintaining plurality in the provision of broadcasting Regulating for Quality Applying adequate protection for audiences against offensive or harmful material Applying adequate protection for members of the public against unfairness or the infringement of privacy Regulating to Protect
25 24 Television content regulation achieves quality and protection goals through a map of rules and quotas Quality and Plurality Protection (Harm, Offence, Privacy, Fairness) PSB remits and BBC service licences Advertising minutage and scheduling limits Genre output quotas Accessibility quotas (e.g. for subtitling) Consolidation and cross-ownership controls Independent production quotas C4 Codes to define: Content standards for programmes and for advertising Requirement for clear separation of advertising from programmes Guidelines on fairness and respect for privacy in programming
26 Ofcom regulates broadcast content through licence conditions Communications Act 2003 requires Ofcom to set standards for the content of programmes and advertisements Standards contained in a series of Codes of Practice Ofcom licences all commercial television broadcasters - Includes terrestrial (commercial public service channels), satellite and cable. BBC remains as main public service channel. Not licensed by Ofcom License conditions are a Soft law - not legal procedures, but licensees must comply Duty on broadcasters to ensure: Wide range of programmes High quality programmes Appeal to variety of tastes and interests Effective competition in provision of services
27 26 Licensee obligations Licensees must comply with Codes of Practice Broadcasting Code: standards for programme content Advertising Standards Code: standards for content of advertisements Rules on the Amount and Distribution of Advertising If licensees do not comply, Ofcom can impose a range of penalties Published adjudication Broadcast apology Financial penalty Revocation of licence
28 The Content Board: composition Composition Chair is a non-executive member of Main Board Representatives of diverse backgrounds across UK, including the regions Other content committees include: Fairness Committee judges fairness and privacy cases, Sanctions Committee sets level of sanctions for breaches of the Code Radio Licensing Committee awards commercial and community licences
29 The Content Board: Role and Remit The Ofcom Board seeks advice and recommendations from the Content Board on any content-related aspects of decisions it has reserved for itself. All other contentrelated decisions are delegated to the Content Board. The Content Board serves as Ofcom s primary forum for the regulation of television and radio quality and standards. It is charged with understanding, analysing and championing the voices and interest of the viewer, the listener and citizen. It examines issues where the citizen interest extends beyond the consumer interest, with focus on those aspects of the public interest which competition and market forces do not reach.
30 Principles The Broadcasting Code Broadcasters and audience take responsibility Freedom of expression Protection for under-18s safeguard those too young to make fully informed choices for themselves Areas Covered Impartiality and accuracy in news and current affairs Special impartiality rules at time of elections or referendums Fairness and Privacy Programme sponsorship and commercial influence (advertising regulation delegated to the ASA) Harm and offence Crime Religion
31 30 Cross platform regulation and responsibilities FREE TO AIR TV PAY TV VIDEO ON DEMAND OTHER AV CONTENT Content regulation in Context (e.g. watershed) Navigation standards (EPGs, rating, watershed) Navigation standards and access controls (pins) Choice of control tools (filtering, blocking, safe search) Consumer responsibility Regulatory Controls MEDIA LITERACY
32 5. Spectrum 31
33 32 Ways of Managing spectrum Command & control All decisions made by the regulator Market mechanisms Decisions made in the market Licence-exemption Regulator sets rules, but users not licensed Approach that has historically been adopted for over 90% of the spectrum Preferred approach in UK: Trading, liberalisation, technology & use neutrality Approach currently adopted for 9% of spectrum. Some argue for radical increase
34 33 Spectrum: Ofcom s regulatory principles Spectrum should be free of technology, policy and usage constraints as far as possible It should be simple and transparent for licence holders to change the ownership and use of spectrum Rights of spectrum users should be clearly defined and users should feel comfortable that they will not be changed without good cause
35 34 Spectrum pricing Is more effective than some other constraints (e.g. roll-out obligations which can be difficult to enforce) If spectrum users have to pay a market rate for spectrum they will be more incentivised to use it efficiently This may mean rolling out services more quickly and widely in order to maximise returns on investment Discourages spectrum hoarding A market based price is likely to make speculative acquisitions less attractive Where spectrum was not bought through a market mechanism, but was awarded administratively, the subsequent application of incentive pricing may then encourage the release of spectrum that is being underutilised Ofcom s role is not to raise revenue Reduces spectrum scarcity thus promoting innovation and competition
36 35 Major awards pending Amount 2.6GHz 205 MHz 800 Mhz (Digital dividend) 128 MHz GHz 160 MHz
37 6. Future Programme 36
38 37 Priorities for 2010/11 Consumer & citizen Competition Infrastructure & spectrum Broadband and mobile phone not-spots Encourage consumers to take up and use broadband Ensure consumers can switch between communications providers Update content regulation to meet the changing needs of audiences Implement regulation to support effective competition and efficient investment in super-fast broadband Ensure fair and effective competition in pay TV Ensure wireless services for the London 2012 Olympic and Paralympic Games will be delivered Start successful clearance of 800Mhz band to create opportunities for new services Prepare plans for release of spectrum for mobile broadband
39 38 Ongoing work areas for 2010/11 Consumer & citizen Competition Infrastructure & spectrum Ensure availability, take-up and effective use of communications services Review and promote available consumer information Protect consumers and audiences from harm and unfair practices Understand experiences of business consumers Promote effective competition in fixed and mobile telecoms Review regulatory rules that affect funding of content Enforce competition and resolve disputes Support digital switchover Promote efficient allocation of spectrum Develop stable international framework to underpin spectrum awards programme Understand network capabilities Identify opportunities for deregulation and simplification
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