Ofcom: Challenges in creating a single regulator Creating a horizontal policy and regulatory framework

Transcription

1 Ofcom: Challenges in creating a single regulator Creating a horizontal policy and regulatory framework Ofcom 1 Contents Ofcom: Rationale, Genesis and early decisions The Communications Market in the UK Regulatory Challenges Ofcom 2 Contents Ofcom: Rationale, Genesis and early decisions The Communications Market in the UK Regulatory Challenges Ofcom 3 1

2 The genesis of Ofcom July 1996 IPPR first proposes Ofcom May 1997 Labour Government meanwhile in the Market FTSE 250 December 2000 White paper A new future for Communications June 2001Office of communication s bill enters Parliament March 2002 Ofcom Act marks beginning of Ofcom startup phase Summer 2002 The Puttnam committee November 2002 Communi cations Bill enters parliament July 2003 Communications Act receives Royal Ascent December 2003 Vesting of powers Ofcom Open for business Ofcom 4 Converged Regulation Blurring of definitional boundaries between industries Political Independence Consequent need to have converged regulation of Wireless Spectrum Radio Broadcasters Commercial TV Broadcasters Broadcast Content Telecoms New Public Policy Framework Bias against intervention Ownership liberalisation in the media Need to produce a regulator able to champion the needs of the citizen consumer in the era of global players. Ofcom 5 Mission Further interests of citizens and consumers, promoting competition where appropriate Balance promotion of choice and competition with plurality, informed citizenship and protect consumers from harm Support innovation, creativity and investment in the sector Our Key Principles Operate with a bias against intervention Be research and evidence based Only intervene where there is specific statutory duty with public policy goal markets alone cannot achieve But then be ready to intervene firmly and promptly where required Effective stewardship of the transition to digital Ofcom 6 2

3 Ofcom Structure The Board 830 people, 145 million budget, What we do Competition & Markets Strategy & Market Development - promote competition in broadcasting, telecoms, spectrum - investigate competition complaints - broadcast licensing - frequency planning - strategic planning - market and audience research - specialist technology and economic analysis Content & Standards Operations - enforce Content Codes - TV PSB and radio format obligations - consumer protection - license spectrum use - protect against wireless interference - contact centre Ofcom 7 Contents Ofcom: Rationale, Genesis and early decisions The Communications Market in the UK Regulatory Challenges Ofcom 8 Current state of UK communications market Mobile Fixed 5 MNOs 8 MVNOs Highly competitive (60m active mobile customers, 12% of which are customers of MVNOs) Launch of 3G c70% coverage Digital TV launched 1998: 3 competing platforms 60%+ penetration (7.3m DSat, 5.1m Freeview (DTT), 2.5m+ D Cable) Large / urban business supplied by <10 Altnets and 2 Cable Companies: Highly competitive Residential / small business voice: 4.5m CPS customers, 1m WLR customers, 4m cable voice customers, multiple international call re-sellers Residential data: c55% internet penetration: 10m dial-up & 6m broadband 60,000 broadband connections per week; blended ave speed now 1 Mbp/s; ave price 17.99) Many competing ISPs; mostly Bitstream LLU wholesale (shared line) prices cut by 70% in 2004; now beginning to take off c55,000 lines; significant investment decisions pending. Telecoms Adjudicator Ofcom 9 3

4 Potential penetration of different technologies Analogue age Digital multi-channel age On-demand age Multi-channel television Video-On-Demand Interactive television Broadband Personal Video Recorder 100% Service penetration 0% Mobile Video Home media server HDTV Ofcom 10 Digital television penetration now stands at over 60%, with Freeview accounting for 76% of ongoing net quarterly additions ( 05) Audience share: digital terrestrial homes Platform share of % 40% 39.8% 50 FTV 29.5% 29.2% 30% 25.2% BBC1 20% 10 % 0% 20.6% 22.5% 6.7% 6.3% 4.2% 25.1% % 13. 1% 7.5% % 23.2% 17.6 % % 9.8% 6.9% 22.1%ITV % BBC2 8.4% Dec- 01 Mar- 02 Jun- 02 Sep- 02 Dec- 02 Mar- 03 Jun- 03 Sep- 03 Dec- 03 Mar- 04 Jun- 04 Sep- 04 Dec- 04 Mar- 05 Other 11.3 %C4 Five 25 0 Pay Freeview DSat DCable 37% 70% 49% 21% 14% 9% Ofcom Digital multichannel growth impacts on the Public Service Broadcasting s (PSB) audience share 35% Audience share: all hours 30% 25% 20% 25.2% 24.3% 22.9% 27.6% 23.6% 23.4% 25.1% 24.8% 22.9% Other 27.9% 24.7% BBC1 22.2% ITV1 15% 10% 5% 11.6% 10.1% 10.6% 9.8% BBC2 9.7% 8.8% 9.5% 9.0% C4 6.3% 6.5% 6.9% 6.4% Five 0% Mar-02 May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 Ofcom 4

5 And thus on revenue. Subscription revenue overtook advertising as the primary source of revenue in All putting pressure on the traditional commercial PSB compact Total TV Industry Revenues, by Source Total TV industry revenues, by sector m (2002 real prices) 4,000 3,591 3,500 3,241 3,442 3,077 3,147 3,202 3,000 3,148 2,968 2,500 2,186 2,623 2,233 2,000 1,843 1,725 2,224 1,965 1,697 1,883 1,500 1,451 1, Net Advertising Revenue Subscription Licence Fee Other m (2002 real prices) 10,000 8,000 3,091 4,128 4,039 4,611 6,000 2,276 2,031 4,000 2,736 2,999 3,095 2,729 2,724 2,691 2,000 1,725 1,843 1,883 1,965 2,224 2, BBC Commercial analogue channels Digital sector Source: Ofcom Ofcom This could threaten PSB consensus in delicate balance Paying for commercial PSB - illustrative only (2003) Paying for commercial PSB - illustrative only (2010?) m m Scarcity value of analogue spectrum Annual licence payments Cost of PSB obligations Scarcity value of analogue spectrum Annual licence payments Cost of PSB obligations Ofcom 14 The Radio Market : Radio in good health Radio share of display advertising ('000m) % 4.3% 5% 4.4% 4.3% 4.5% 4.2% % % % 3.5% % % % % 4 1% 2 0% Total display advertising Radio share of total Hours ('000s) Total listening hours '99 '99 '99 '00 '00 '00 '00 '01 '01 '01 '01 '02 '02 '02 '02 '03 '03 '03 '03 '04 '04 (up by 60% since 1993) (7% growth since 1999) Ofcom 15 5

6 Contents Ofcom: Rationale, Genesis and early decisions The Communications Market in the UK Regulatory Challenges Ofcom 16 Ofcom s Annual Plan Workstream Public Service Broadcasting Review /6 Driving delivery Spectrum Framework Review 2005/7 2006/7 Sustaining progress Telecoms Strategic Review 2004/5 2007/8 Review and re-focus Ofcom 17 Spectrum Framework Review Spectrum Framework Balance between liberalisation and property rights Spectrum Pricing Basket of Mobile issues 3G Auction methodology 1/3 of Civil spectrum tradable from 2005 Statement on overarching framework in July 2005 Trading System Liberalisation / Deregulation Policy approach (wifi; Wimax, UWB) AIP (in broadcast incentive to DSO) Ofcom 18 6

7 Telecoms Strategic Review VOB services Leased Lines/ PPCs WLR/ CPS Datastream margin Cost of Copper LLU Pricing and Adjudicator Telecoms First Comprehensive Assessment in 13 years Premium Rate Services ICSTIS and effective consumer protection Overall Approach Balance of Infrastructure and service competition Full withdrawal of ex ante regulation Framework to encourage investment True Equivalence of Access Due to conclude end of Summer Ofcom 19 Media: Regulatory Strategy Strategy PSB Review Digital Switchover Radio Review (underway) Competition ITV Merger/CRR Remedy Air time sales liberalisation Independents codes (terms of trade) Light touch plurality guidelines Licensing ITV/C5/Teletext licences New FM radio system Community Radio Content Broadcasting codes Access codes Co-regulation in Advertising Obesity/Alcohol + Advertising Ofcom 20 Within Strategic Frameworks we ve taken tactical decisions Policy Review of wholesale broadband prices Setting up the Telecoms Adjudicator to make LLU work Spectrum trading and liberalisation Revised NTS Framework New broadcasting standards code Independent production code Competition Contract Rights Renewal Adjudicator Timely Casework (targets achieved in 100% of cases) BT Together investigation Carrier pre-selection Mobile Call Termination Voice over Broadband Leased lines competition Streamlined complaints and compliance process Operational Co-regulation of broadcast advertising New radio licensing process Spectrum trading implementation Tetra development Enforcement to stop radio and TV interference Pirate radio enforcement Facilitating new technology (e.g. rural wireless broadband) Ofcom 21 7

8 Some lessons Creating a converged regulator involves the single-minded removal of pre-existing silos It takes time for stakeholders- industry, political, consumer, international - to come to terms with innovation in regulation The evidential and research base is crucial in the contemporary context, backed up by high quality personnel at least as good as those employed by the industries being regulated Once you ve got it right you ll have to change it again regulation needs to keep pace with the fast-changing communications sector Ofcom 22 Ofcom: Challenges in creating a single regulator Tony Stoller External Relations Director Ofcom 2 June 2005 Ofcom 23 8