Ofcom’s Strategic Review of Telecommunications


To read Oliver's update on Ofcom's strategic review of telecommunications, please click here.


At the beginning of the year Ofcom began the first comprehensive strategic review of the UK telecommunications sector for 13 years. The review began in January 2004 and runs until the end of the year. This review forms part of the “three major direction-setting reviews in 2004/5” that are outlined in Ofcom’s proposed annual plan for 2004/5[1]. It is intended that the results of the review will dictate Ofcom’s future approach to regulation of the UK telecommunications sector.

Ofcom has published a paper setting out the terms of reference for the review[2]. In the remit of this paper it states that the Review “will have a particular focus on assessing the prospects for maintaining and developing effective competition in UK telecommunications markets, while having regard for investment and innovation”. This emphasis reflects “Ofcom’s mission” as stated in their proposed annual plan 2004/5, namely, to further the interests of consumers through a regulatory regime which, where appropriate, encourages competition.

Ofcom explains that as the sector as a whole had not been subject to a thorough and open strategic review since 1991 and that as there is now a single regulator operating under a new converged regime, it was an appropriate time to conduct such a review.

Content of the Review

The review will be evidence-based and explore the following issues:

  • the importance of telecommunications to the UK economy

  • the extent to which competition and regulation has delivered the goals of quality, choice and value for money

  • UK consumers’ perspectives

  • investment and innovation trends in the industry

  • scope of effective competition

Research in these areas will allow Ofcom to address the “challenges” that it will face in 2004/5, as outlined in the proposed annual plan. These include the changing attitude of consumers and the change in structure and ownership of companies within the industry, as well as the need for Ofcom to create a regulatory environment that will encourage continued investment. The scope of the review should also act as a basis to further Ofcom’s ‘mission’ to promote competition, by identifying the scope and effectiveness of current competition within telecommunications markets. The annual plan identifies the broadband market as one which Ofcom will pay particular attention to in this regard.

Structure of the Review

The review consists of three phases:

Phase 1 – Current position and prospects for the telecommunications sector

Ofcom will analyse the importance of the telecommunications industry to the UK economy. In particular, the review proposes to assess the level of competition that currently exists in the fixed, mobile, narrowband and broadband sectors.

Phase 1 is due to be completed in Spring 2004 and following a consultation period, a report will be published detailing Ofcom’s conclusions on the current position of the telecommunications sector and the likely prospects for the future.

Phase 2 – Ofcom’s strategic approach to telecommunications regulation

Ofcom will then assess the scope for effective competition at specific levels within telecommunications markets and evaluate its sustainability. Based on this, Ofcom intends to identify the correct regulatory approach to take, including the withdrawal of regulation where this is appropriate. This phase will involve an evidence-based analysis of the underlying economics of competition, including both national and international research.

Phase 2 will be completed in Summer 2004 and a report will be published for consultation. The report will include initial policy proposals as well as significant market developments that occurred in early 2004.

Phase 3 - Proposals

By Autumn 2004, Ofcom intends to produce a detailed final report setting out a review of the key policy issues and challenges that it faces and the strategic proposals for dealing with these points. In addition, it will include an implementation plan for moving forward with the outlined proposals.

[1] http://www.ofcom.org.uk/ - the other two reviews concern public service broadcasting and a strategic review of spectrum trading