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Strategy to deliver best outcomes for consumers from competition in electronic networks (2/12/2002)

A new report from the Strategy Unit published today - 'Electronic Networks: Challenges for the Next Decade' - looks ahead at likely changes in technology, market structure and competition over the next decade, and at how policy and regulation needs to respond.

Electronic networks - including narrowband and broadband internet, and mobile networks - are increasingly integrated into society and the economy. Fast, secure, resilient and widely available electronic networks should help make the UK a world leader in the knowledge economy.

A key conclusion of the report is that today's dominant network operators are likely to remain in a strong position. Balancing their market power will therefore need to be a key priority for OFCOM. The report emphasises the important challenge for OFCOM in ensuring that companies with Significant Market Power demonstrate operating and financial transparency, and provide fair and reasonable access to networks on non-discriminatory terms.

The report also concludes that innovation in electronic networks over the next decade is expected to result from the evolution of existing networks rather than the creation of new networks, and that wired technologies are expected to remain key for data transmission. New wireless networks, including 3G, are expected to complement wired networks for data transmission, but not to replace them. Mobile applications and services are likely to be specifically tailored, and to be different to those designed for wired networks.

The need for effective regulation will therefore remain, although the regulator must aim to lift the regulatory burden wherever possible. Particular challenges for the regulator will include:

• dealing with market power;
• striking the balance between infrastructure and service competition;
• encouraging innovation and removing barriers to competition, while ensuring network resilience;
• protecting the interests of consumers through proportionate regulation where competition does not develop.

The report also reviews the evidence on the importance of electronic networks to the UK's productivity and long-run economic growth. Business-level case studies show that networks can have a major impact on business, consumers and Government, so long as they are supported by the right infrastructure and environment.

Prime Minister, Tony Blair said:

'This report on electronic networks clearly sets out the most significant issues which we will face over the next decade. I hope it will prompt a wide-ranging debate, and look forward to receiving views on how best we ensure a vibrant and competitive market in the UK'.

Stephen Timms, Minister of State for e-Commerce and Competitiveness, and Sponsor Minister for the report, said:

'I believe that this new report sets a clear strategic agenda for OFCOM to address, and proposes strong responses to the major challenges expected over the next decade. I also believe that it will be a valuable contribution to the Parliamentary debate of the Communications Bill'.

David Currie, the new Chairman of OFCOM, said:

'I welcome the Strategy Unit's report on the challenges OFCOM might face over the next decade in regulating electronic networks. I shall be discussing the report in detail with the other members of the OFCOM Board.'

Notes to editors

1. Copies of the report 'Electronic Networks: Challenges for the next Decade' are available on the Strategy Unit website (www.strategy.gov.uk)
2. The Strategy Unit reports to the Prime Minister through the Permanent Secretary to the Cabinet Office. Its aim is to improve Government's capacity to address strategic, cross-cutting issues and promote innovation in the development of policy and the delivery of the Government's objectives.
3. The project was announced by the Prime Minister to consider:
   • The likely range of technology and market developments over the next decade, and the challenges they raise for Government and the regulator;
   • The importance of electronic networks, including the development of broadband, to the UK's productivity and long term economic growth;
   • A strategic view of the Government's objectives in the development of electronic networks over the next decade, with a particular focus on the regulatory goals and approach.
4. The Sponsor Minister was Stephen Timms, Minister of State for e-Commerce and Competitiveness.

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