Certain Uncertainty

Ofcom’s Strategic Review of Digital Communications

Telecom, Media & Technology (TMT) | Economic & Financial Consulting

April 11, 2016

Ofcom Streak

Ofcom published its much-anticipated Digital Communications Review (DCR) statement on 25th February 2016. The statement sets out Ofcom’s initial findings across a range of issues facing the UK digital communications sectors, laying the groundwork for Ofcom’s approach to promoting investment as well as its plans to empower and protect consumers. FTI Consulting’s telecoms regulatory advisory team takes a first look at Ofcom’s statement, reviewing the key proposals and highlighting the challenges that lie ahead for the sector.

The purpose of Ofcom’s ten-yearly strategic reviews is to consult a wide range of stakeholders with a view to informing Ofcom’s approach to regulating UK telecommunications markets in the coming decade. It was always going to be challenging for such a wide-ranging, long term, consultation to deliver concrete and specific action plans. Nevertheless a sense of anticipation had built up as to the direction that Ofcom may take in key areas.

On the key issue of the future of Openreach, Ofcom has taken a middle ground and granted Openreach a stay of execution. Rather than pushing for the most extreme interventions, it is calling for enhanced functional separation, rather than structural separation. Here, Ofcom is effectively inviting BT to present a revised set of Undertakings, with the threat of structural separation waiting in the wings if it considers necessary.

Ofcom has also come out clearly in favour of fibre to the premises (FTTP) as the long term basis for an ultra-fast broadband Britain. It proposes to put in place measures to encourage investment in FTTP networks in order to provide infrastructure competition with Openreach and Virgin Media. Finally, Ofcom places a renewed emphasis on empowering consumers to take advantage of the technologies and services available to them, in turn creating more dynamic and competitive retail markets.

As ever, the devil will be in the detail, and there is a great deal of detail still to thrash out.

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