In 2009, David Cameron announced in his famous “Bonfire of the Quangos” speech that “Ofcom as we know it will cease to exist,” and in particular that it would be stripped of its policymaking function. Cut to 2014 and the regulator seems to have survived the first wave of austerity cuts in robust health. Ofcom CEO Ed Richards gave this exclusive interview to our Damian Tambini and discusses the regulator’s continued influence in media policy and the recent ruling in their favour in the Sky Pay TV Appeal.
Damian: Do you think there has been a change in Ofcom’s policy function since 2010?
These things do ebb and flow. But if you ask: are we still providing analytical and broad-based policy advice on the communications sector, sometimes to the Secretary of State and others, then the answer is ‘yes’. Over the last few years, the advice included things as diverse as broadband rollout in the UK to the advice and consultation on the Leveson Inquiry.
Ofcom recently released a piece of research on cost and value of communications. That’s a sensitive issue because it’s something the opposition has been pushing, and you’ve used your discretion to commission a review. How did you make that call?
It is an assessment of the historical prices of services in the markets we regulate. It could also be seen as indicative of our regulatory performance and the performance of the sector. It’s certainly true to say that cost of services is an issue for consumers and all the political parties at the moment – and cost and value of services are fundamental to our work. The Government had an audit into energy, water, and communications, which was a catalyst for our study. We did some analysis for ourselves which we shared with the National Audit Office. And we thought we should publish it, because it is in the national public interest. It is an interesting a story. It looks over 10 years at prices in: mobile, broadband, telephony and pay TV. The overarching finding is that prices have fallen – in some cases, very, significantly – in mobile and broadband in particular. And when we benchmark the UK internationally, by comparing baskets of different services, then we come first or second for every single one. So the record looks pretty reasonable, and that’s the backdrop to it. Now, you’re right, it does play into a political debate, but our role has always been to make sure that we present the facts and an authoritative commentary – and that is what we’ve done.
The House of Lords Report on Media Plurality came out recently, and unlike the government, the opposition and the Leveson Inquiry, the Lords are siding with civil society and calling for Ofcom to be more centrally involved in merger decisions in the media sector. What would be your advice on that?
The House of Lords have come to a particular view on that. There’s no doubt that there’s a case for it because of the independence point, but there’s also a case for having elected representatives making those decisions, and I can see that argument very clearly. It’s not surprising that there are different views; it’s also not surprising that there will be a discussion, and we are very happy to be involved in the process in this area. As for that particular issue about the final arbiter, this is one of those cases where I’m going to say that ultimately this is a matter for Parliament.
It looks like there might be wording in the EC’s Connected Continent proposals which for the first time will define in European legislation principles of net neutrality. When you consulted on this in 2010, the Ofcom advice was that this wasn’t necessary. Has something changed in the market?
I don’t know exactly where the Connected Continent initiative will end up. But our view was that we didn’t need to act to prohibit anything. This is because we didn’t see examples of traffic management or traffic discrimination that were of sufficient concern to contemplate that kind of intervention. We weren’t taking the view that there would never be circumstances where we might need to do intervene, because I think there are conceivable circumstances where we might need to do that.
The question is: Do you need to ban or prohibit certain things up front, or do you leave some discretion with the regulator? I tend to be a little more comfortable with the latter. It is possible the Parliament and the Council and the Commission in the end will take a harder line on that, and obviously we would have to work with that if that was the case. It’s an interesting contrast with the US where the net neutrality provisions have been struck down.
I’m nervous about large or significant or material prohibitions in the context of a dynamic market and changing economic circumstances where you’ve got a lot of investment going on. Generally the market is pretty open to innovation. Let’s see where we end up.
There’s a lot of pressure on spectrum for Digital Terrestrial Television: there’s a lot of demand for it, a lot of debate about what should happen in the short term around the 700 MHz spectrum band, and whether in the long term the DTT platform has a future beyond 2030. Do you think it’s going to be possible to maintain universally available free to air television? Is there an Ofcom process for thinking about and advising on this very long-term issue?
Yes, there absolutely is. We do lots of work considering the long-term questions. that blend our spectrum strategy with thinking about the future of broadcasting, which covers competition and also public service broadcasting. I hold the view very firmly that there is a future for all the parties involved. I think it’s highly likely that we will release more spectrum for alternative uses, but it’s also highly likely that there will be a strengthened free-to-air DTT platform as well. That is because of the improvements in compression and transmission standards that enable spectrum to be used more efficiently for broadcasting. There is an opportunity for genuine progress for everybody. Of course, some of the aspects are controversial, and of course there are all sorts of questions about the most efficient marginal use of spectrum and compensation. All of these points need to be worked out and no decisions have been made yet. But if I think about it strategically and in an appropriate timeframe then there is a real opportunity for significantly more efficient use of the spectrum, new opportunity for innovation and investment, and a stronger, credible digital terrestrial television.
Would you go out and buy a DTT set top box tomorrow?
I’d be certainly happy buying a box tomorrow.
You were involved (as a government advisor) at the very start of Ofcom, even in the design of Ofcom, and now in running Ofcom. But if you went back to do the Communications Act 2003, would there be any things you would do differently?
Fundamentally, I don’t think I would. From the strategic perspective, the Communications Act has really stood the test of time; it is in good shape, and you would struggle to find anything profoundly wrong.
But let me say something else: if I could send myself back ten or eleven years, I would take with me the really exceptionally talented group of lawyers we have in Ofcom today. I would also take with me the knowledge I have gained working with them over the last seven or eight years in particular. And I would without doubt re-draft a large number of things. Let me give you a very good example. The well-known Section 316 is concerned with fair and effective competition in broadcasting, and I think people at the time thought it was obvious what it meant, but of course we’ve had to go through years of court cases. And one of the reasons for that is because it was not expressed as well as it could have been, and the consequences are that it is challenged endlessly.
What was your response to the recent Court of Appeal ruling on the pay TV case which overturned the CAT finding against Ofcom?
Clearly we welcomed the Court of Appeal’s decision. It makes it very clear that the earlier judgment of the Competition Appeal Tribunal had failed properly to consider our findings that there was ineffective competition in the market.
Ensuring fair and effective competition in the pay TV market has always been our objective. Our 2010 decision that Sky must offer premium sports channels to other providers was designed to deliver just that – choice and innovation to consumers through greater competition. We always felt that the CAT had failed to grapple with the economic issues that were at the heart of the case and the Court of Appeal decision has taken that view as well.
There will be more opportunity to discuss Ofcom’s role and future with Chair of the Ofcom Board, Colette Bowe at the Oxford Media Convention taking place on 26 February, 2014.