Effective competition is key to progress with telecoms

04 December 2015

This article by Sharon White, Ofcom Chief Executive, first appeared in the Times on 24 April 2015.

The telecoms business is no stranger to change. This is one of the most vibrant and fast-moving sectors of the British economy. In the past five years alone it has given us the internet on tablets, high-definition streaming, super-fast and 4G broadband - powerful technologies that we already take for granted.

As the communications regulator, Ofcom is constantly adapting its approach to ensure that we have the right framework to support new services, meet consumers’ changing expectations and enable competition and investment among operators.

However, it is not only technology that is evolving. The market itself is entering a new phase of significant change, as operators compete against one another in the race to provide landline, mobile, broadband and TV services over converging networks.

For some, that means investing in new programming to deliver over the internet. For others, it means finding partners who can provide the wires and pipes to bring these products together.

Among the most high-profile moves being planned are BT’s takeover of EE, and the purchase of O2 by the owner of the rival network Three. We have also seen Vodafone planning home broadband and TV products, BT offering its own 4G SIM cards, and Sky planning a mobile service with O2.

Some of the deals are yet to be approved, and will be examined by the appropriate competition authorities on their own merits.

Ofcom will provide advice and analysis as part of the process, so these comments are not views on individual cases. However, I’d like to make some observations about two goals that can really make things happen for consumers: effective competition and efficient investment.

We sometimes hear the simplistic view that more competition means less potential for investment. I don’t believe that such a trade-off is inevitable, or even necessary.

Insufficient competition can lead to insufficient investment; lack of investment can, in turn, undermine choice and quality. At Ofcom we have usually found that it is better to promote competition between providers, and rely on this to spur investment.

There’s no doubting the strength of competition in the UK: we have the most competitive fixed and mobile markets in the EU.

That has been good for consumers and business customers. For example, we’ve seen the cost of a “basket” of mobile services in this country fall from about £40 in 2003 to £13 in 2012. Today, UK customers can pay as little as £7 for a monthly mobile service.

Consumers therefore benefit, but investment has also flourished, whether it is mobile operators each spending billions of pounds on their UK infrastructure, BT investing £2.5 billion in fibre broadband, or Virgin Media planning a five-year, £3 billion expansion of cable.

Nor does this mean that companies cannot deliver for shareholders. See how the UK’s four mobile operators have raced to deploy 4G networks, while also delivering positive cashflow and stable profits. In short, competition delivers. For regulators assessing takeovers, each deal has different implications and requires a tailored approach.

However, so rich are the benefits of competition, our starting point, where applicable, will always be that greater competition - delivered by the greatest number of players - is better than less.

Of course, there may be some consumer benefits arising from deals. For example, operators may find it easier to offer multiple services in a single package.

Such changes do not affect only consumers; boundaries are also blurring at industry level. Home broadband providers are boosting coverage with wireless spectrum, the scarce resource that we normally think of as underlying mobile networks. Conversely, mobile companies rely on fixed lines for transporting data.

Recognising that changing landscape, Ofcom has launched a once-in-a-decade review of Britain’s digital communications markets. We need to assess how new services fit together.

Our aims are simple: to help markets to work for consumers and businesses, and to support the development of the sector through clear and strategic regulation.

We’ll prioritise consumers, with a relentless focus on driving up standards, addressing coverage and fostering new services.

Our review will consider how we prepare for and support fresh technologies on the horizon, such as ultrafast broadband. The next wave of 5G mobile devices won’t be far behind. Decisions regulators take now will deliver landline, mobile and internet services to people and businesses, at a high standard and a fair price, for years.