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Big UK Telecoms Operators Strangle Ofcom via Costly Legal Appeals

Wednesday, February 5th, 2014 (9:01 am) - Score 638

Consumer Futures (formerly Consumer Focus), which is a Non-Departmental Public Body that was setup to act as a national consumer council, has joined with Which?, TalkTalk and Three UK to warn the UK Government that big telecoms and broadband ISPs are harming pro-consumer measures by tying the regulator up with long and costly legal challenges.

According to The Guardian, Ofcom has faced 61 appeals over the last 5 years (fighting these cases can allegedly cost between £2m and £4.5m a year) and nearly all of its rulings have been challenged through the Competition Appeals Tribunal (CAT); often after complaints by lawyers acting on behalf of the big telecoms operators.

Readers might recall that last year’s auction of 4G based Mobile Broadband spectrum (800MHz and 2.6GHz) was plagued by years of legal challenges, threats and other complexities that ultimately forced the UK into being a late adopter.

The recent moves to improve switching (migration) between broadband and phone providers has also faced a similar mix of concerns and now won’t be ready until June 2015, although in fairness the proposals have suffered due to complex cost and technical challenges that will affect all ISPs; both big and small alike.

Consumer Futures Letter Extract

There are significant concerns that under the current regime, Ofcom’s decisions can be derailed too easily, through technical challenges that ignore the substance of the regulator’s judgments. The routine use of legal challenges has had a chilling effect on policy. It diverts time and money into legal disputes and away from good regulation. This is bad news for competition, for the industry, and for consumers.”

The move appears designed to support and encourage on-going efforts by the Government, which is working to make it harder for TV operators, telecoms and broadband ISPs to object to Ofcom’s decisions on mere technicalities.

But big operators fear that any changes could make it easier for Ofcom to implement measures that contain mistakes or incorrect assumptions (e.g. Ofcom’s semi failed attempt to loosen Sky’s grip on premium TV film and sports content). By comparison a quicker mobile operator transfer process has been stalled for years thanks to Vodafone’s 2008 legal challenge.

Suffice to say that the Government’s culture secretary, Maria Miller, has her work cut out and is expected to outline some changes in the very near future.

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13 Responses
  1. Avatar dragoneast says:

    Hasn’t every Government/King/Emperor/dictator since the beginning of time moaned about the interfering judiciary (or their equivalent)? Oh what a wonderful world it’d be if the rulers and their acolytes could just do as they pleased.

    How about Government stops interfering, and business and its customers just get on with it? Oh, I know the textbooks, the commentators and the academics don’t allow it.

    1. Avatar GNewton says:

      “How about Government stops interfering, and business and its customers just get on with it? ”

      That would include to put a stop to the wasteful £1.2Billion of taxpayer’s subsidies given to a greedy private telecom company for no ROI.

    2. Avatar New_Londoner says:

      You have a very odd definition of ROI! Suggest you read up about the economic benefits of (faster) broadband, after which you will realise that your often repeated “no ROI” comment is simply wrong.

    3. Avatar JNeuhoff says:

      @New_Londoner: You keep coming up with the same nonsense. Please show us your cost-benefit-analysis. Also, please answer us your question how the public funding agencies will see their £1.2Billion back. They won’t, because it was mainly given to BT, the latter is then still charging the taxpaying customers with additional broadband charges when they use their taxpayer funded VDSL services.

      So yes, GNewton is right here, though I have to disagree with some his other points.

      As I summarized in a previous forum post:

      In the vast majority of cases we can expect the taxpayer’s money never to be seen again once given to BT. BT is basically treated here as if they were a poor charity in desperate need of public donations. They are not, BT is a private commercial entity with quarterly revenues far higher than any of the subsidies given to them.

    4. Avatar MikeW says:

      @gnewton, @jneuhoff

      You both have a blinkered view of the R in ROI. You both focus on whether there is any R coming back directly from BT, without ever considering if there are any wider results… You see the costs, but fail to include the benefits in *your* cost-benefit analysis/rant.

      So, for your benefit, here’s a link to a story on some consultancy that did exactly the cost-benefit analysis you ask for, but including the breadth that your vision lacks.
      It came out as £20 return for every £1 invested.

    5. Avatar MikeW says:

      But even if we keep to your restricted view of return direct from BT, we have to ask what this brilliant asset is that BT has been “given”. What is the cash cow that has BTs shareholders rubbing their hands in glee?

      The fact is that the new assets are something of a double-edged sword.

      If take-up matches expectations, BT will recoup their share of the investment in 15 years, which is higher than the 12 years of the commercial rollout. So if things go to plan, BT make less money out of their investment than in commercial areas. That might raise a glimmer of a smile in that shareholder meeting, but not gleeful ones.

      If takeup is higher than expectations, does that make the smiles bigger? Not really, as the clawback clauses means the extra money goes back to the goverment… So no bigger smiles there. The big smiles only come when takeup is so high that clawbacks have fully run out, leaving the money in BT. But that, by definition, means there is no public subsidy after all.

      And if takeup is lower? Well, BT takes all the risks, so they assume all the losses here, or the reduced profits that makes for payback times longer than 15 years.

      So, the big smiles only happen when takeup is huge. But you keep pointing out just how abysmal the takeup has been so far… and you can’t be right on both of these.

    6. Avatar New_Londoner says:

      @gnewton, @jneuhoff
      I stand by my assertion that you do not understand ROI. if you did, you would surely factor in the positive economic benefits, especially those for small businesses. Remember the govt benefits directly from more competitive, profitable companies through improved corporation tax, possibly reduced unemployment benefits and higher income tax receipts if companies expand, ditto business rates and so on.

      And that’s before you consider the possible direct benefits from the contracts themselves that MikeW has outlined. It’s one thing to take a cup half empty approach, but both of you are failing to even acknowledge that there is a cup in the first place!

      I suggest you remove those blinkers, consider the real meaning of ROI for a government and then perhaps you will understand the full extent of the return, which goes well beyond having some sort of direct stake in what is being built. Once you’ve thought it through properly I think you will finally begin to understand why your previous comments are so far off the mark.

    7. Avatar FibreFred says:

      Good points you two and well presented , I see our resident bt bashers ( sorry single person two names ) hasn’t replied back in the face of your posts

  2. Mark Jackson Mark Jackson says:

    Government has to interfere otherwise it’s not a government at all. The question is always.. how much?

    1. “Government has to interfere otherwise it’s not a government at all.”

      Mark, that is possibly the best definition of what constitutes a Government I have heard in a long long time! 🙂

  3. Avatar dragoneast says:

    Yep, power is the most addictive drug of all, and often just as illusory. The only cure is a bit of cold turkey, but that’s impossible for the addicts. And you can’t say Government intervention has no ROI, the only return the politician is interested in is good publicity.

    1. Avatar ethel prunehat says:

      Despite y’all slapping each other on the back in agreement at how terrible regulation is, how likely do you think it is that we’d have number portability or any kind of broadband migration mechanism at all without regulation? I’ll take a poorly-implemented or enforced MAC system over no migration at all, any day.

  4. Avatar dragoneast says:

    Yes; if you take price as the sole or main criterion then I agree regulation has been a “success”. But I think the result is choice between services that are all patchy and of the same variable quality. As with every lottery there are winners and losers, and it’s nice for the former. But for most . . . I’m not sure. As I read somewhere . . . “change is the modern substitute for progress”.

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