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Ofcom’s New CEO Hints at UK Telecoms and Broadband Deregulation

Friday, April 17th, 2015 (8:14 am) - Score 1,602

BT might be pleased to hear that the new boss of the United Kingdom’s communications and media regulator, Sharon White, is considering whether the entry of “newer players and technology” into the country’s Internet access and telecoms market should result in a “lighter approach” to regulation.

At the end of last year Sharon White, an ex-Treasury official and economics graduate with 25 years’ of experience working in the public sector (albeit little telecoms knowledge), was formally announced to take over from Ed Richards in the technically demanding role of Chief Executive Officer (CEO) at Ofcom (here).

Officially Ms White has only just taken office, replacing acting CEO Steve Unger who briefly held the reins until March 2015, and as a result everybody has been keen to know her viewpoint on some of the markets most pressing issues.

Ms White’s appointment couldn’t have come at less stable time for the industry, which is currently going through a period of significant top-level convergence in the broadband and mobile markets. BT is merging with EE, Three UK is acquiring O2, Sky Broadband is preparing to launch a Mobile service and Vodafone are about to re-enter the consumer fixed line market etc.

At the same time the way we all access and view Television is continuing to change, largely thanks to the new Internet-based platforms like Netflix, NOW TV and so forth, not to mention how TV content itself is licenced and sold (BT Sport vs Sky Sport etc.).

Naturally Ofcom needs to move with the times and to that end the regulator has already launched its first major Strategic Review for a decade (here), which among other things will have to consider what changes might be necessary in order to keep the market fair in an environment where BT’s merger with EE could give the operator a big advantage.

But those calling for more regulation of BT may be displeased to hear that White’s direction is already hinting at a more pro-deregulation approach to boosting competition, which may dishearten those who continue to hope that Openreach, which maintains BT’s national fixed line telecoms network, might someday become a completely separate company.

Sharon White, Ofcom’s CEO, said (FT Paywall):

Convergence has started to happen in a very rapid timeframe, be it fixed and mobile [telecoms] or the blurring [of] the distinctions between the traditional telco and traditional media company. [Ofcom will] see if there are ways to promote competition. Are there areas we can deregulate? But with the consumer at the centre of it all.

One of the big issues in my in-tray is going to be the internet. [The regulatory response] is something we are going to have to look closely at. We will certainly look at whether there is scope for a lighter approach given the entry of newer players and technology that we wouldn’t have dreamt of a few years ago.”

White also hinted that Ofcom would look at the question of “whether the pay-TV world needs a fundamental rethink“, although this won’t take place until after the regulator has completed its on-going investigation into how the Premier League sells their live TV and related rights for football matches (here).

Readers might recall that Virgin Media originally started the complaint after it aired concerns about how the costs for related content could have become too high. Indeed, in February 2015, Sky and BT broke a new record by spending £5.136bn on a huge Premier League TV Rights Deal (here). BT continues to offer much of this content for free to their existing broadband subscribers.

However White also cautioned that Ofcom were not planning a “fundamental review of pay-TV“, which suggests that if a probe does emerge then it will probably remain limited to specific aspects of Pay-TV content or services.

But perhaps White’s biggest challenge will be in learning to understand and navigate the complex world of telecoms and Internet technology. Understanding how computer networks and the Internet actually work is a key requirement for being able to interpret and set new policy, yet White’s seeming lack of experience in this area could be a hindrance.

As a side note, White is also the wife of Robert Chote, Head of the Office for Budget Responsibility (OBR). In addition, White does not appear to have any particular affiliation and has served under both past and present Government’s without any major incident.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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50 Responses
  1. FibreFred says:

    Obviously this won’t go down well with some like Dido but its a welcome hint for sure, the broadband landscape looks nothing like it did and BT has to carry far too much baggage, who knows with less regulation we might see even more investment – from all

  2. DTMark says:

    “We will certainly look at whether there is scope for a lighter approach given the entry of newer players and technology that we wouldn’t have dreamt of a few years ago.”

    Who are these newer players?

    Is she talking about the wireless suppliers that the BDUK programme is busy over-building?

    Or a scattering of FTTP alt-nets in a very few locations one of which BDUK was seemingly busy over-building as well?

    What is this “new technology we wouldn’t have dreamt of a few years ago?” – what new tech has actually been invented in the last few years?

    1. FibreFred says:

      I assume she means 4g, wireless and providers like hyperoptic and cityfibre

    2. Steve Jones says:

      It’s also not just broadband of course. Voice has changed massively. Fixed line revenues are continuing to decline and mobile voice has a higher turnover, but even that is under threat from VOIP and other Internet-based communication services. Much mobile revenue for data is also threatened by use of WiFi networks.

      Even in the area of broadband, whilst infrastructure competition in the rural areas is likely to remain limited for cost reasons, the same is not true in more urban areas. In addition to cable (which is due for expansion), there are urban fibre systems being planned in some cities, more used of fibre-to-the-the-building. There there are the fibre operators in new housing developments.

      The ability to “cherry-pick” by new suppliers will threaten the current fixed cross-subsidy model that exists now as it will undermine revenues. Whether this means an easing of regulation, or a structural change, we will see.

  3. TheManStan says:

    I think in some respect it’s the right call.

    BT needs to be in a situation where regulation is not both helping and hindering, helping as keeping it the main player and hindering by restricting market.

    Other players need to ante up and get in the game properly by building competitive infrastructure or actually making use of PIA (which does work elsewhere, France). Commitments from the VM commitment to extend network goes along way to changing the market landscape and people need to finally admit BT does not have a monopoly but SMP, which are very different things.

    Then we can have a situation where there is minimal SMP and true competition is in effect.

    1. GNewton says:

      Less regulation only for areas where there is sufficient infrastructure competition. And less regulation for BT only when this madness of giving it so much of taxpayer’s money stops. It can’t have it both way!

  4. NGA for all says:

    Ofcom have bet on VULA rather than PIA, so idea of substantive infrastructure competition is at odds with the existing market structure.
    BT FTTC investment has come from its existing capital envelopes for its c52,000 cabinets and the state is picking up the rest for what will include a not insubstantial amount of FTTP. The lesson here is that comparatively speaking overlaying fibre on an existing is dirt cheap, the £5.1bn for FTTC is now less than £3bn – including £1.7bn of state aid, while the £25bn for FTTP is now £15bn and falling.
    Removing BT Group and creating Openreach proper, is about the only way you can hope to reduce regulation. It is also quick way to establish the transparency needed so something as simple as ‘investment’ for NGA is not a function of gaming of costs and propaganda witnessed at various public hearings this past 2.5 years.

    1. FibreFred says:

      Well.. I didn’t read her comments as any suggestion of splitting off Openreach if anything the opposite.

    2. NGA for all says:

      @FibreFred – less regulation could also point to fewer markets. We have gone from 18 to 5. Convergence points to a common wholesale data transport for all bits, so access and wholesale data transport – supesede our notions of fixed, mobile, broadband, even business connectivity.
      BT Goup see fibre as a premium service, Openreach/BTW would instinctively see it as a cheaper medium used to transform its cost base and deliver more capacity.
      Cost recovery on PST service looks at odds when most of the visible investment needed is on a medium called fibre used to reduce our reliance on legacy services.
      Sky, Talk Talk may find it easier to pay >£500m a year to Openreach, if those monies did not find their way to BT Retail investing in content. They may also invest in it as an entity.
      But maybe your right, but it is a interesting moment to examine the options.

    3. FibreFred says:

      “Sky, Talk Talk may find it easier to pay >£500m a year to Openreach, if those monies did not find their way to BT Retail investing in content. ”

      But is that actually happening? (proof of?)

      Or just what people like to assume it happening?

    4. NGA for all says:

      @Fibre Fred – lack of transparency means folk have to work from what is available.

      NGA is a good example. BT Claim they have invested £2.5bn in NGA and promised £1bn match to Government for rural. NAO finds aver cab cost c£24k total so BT commercial investment unlikely to be more than £1.2bn for c52k cabs, yet £1.7bn subsidy for remaining cabs, while in Jan NAO found BT had excess modelled costs of 38% in BDUK cost models, yet no changes to rural plans have been announced.

      Patrica Hodgson Chair of Ofcom said to Comms Select Committee in Dec 2014, the movement of funds from network to football was a legitmate concern.

      So for NGA it is not an assumption but the written record can be acted upon or used should those in command choose to do so. It can equally be ignored.

  5. NGA for all says:

    @fibre fred – I do not have PH quote to hand so it will be the possibility of a movement of funds.. but it demonstrates clearly it can happen.

    1. TheFacts says:

      Possibility does not mean it does. What level of transparency would you like to see on all government contracts?

    2. NGA for all says:

      @The Facts – look for submissions to Ofcom on Regulatory Financial reporting consultation March 30th, – see section 5, some progress but a failed attempt at getting what is needed.
      There is no reason why each county should not report what NAO presented as a sample in January but with details and evidence of BT capital contribution need to be added.
      NAO reported total cost, not the gap funding required or paid.

    3. FibreFred says:

      So in summary there is not one shred of evidence it had ever happened

    4. NGA for all says:

      @Fibre Fred So there is evidence that
      1) BT has not invested £2.5bn in the commercial rollout of NGA, but this is closer to £1.2bn, driven by cheaper costs and switch away from FTTP.
      2) BT did as per NAO report inflated its cost models to BDUK by 38%, an amount not dis-similar to the capital investment they would be expected to invest.

      Based on 1 and 2 it is reasonable to raise as a legitmate concern that funding intended for network investment could be spent on football or other projects, especiially as our institutions of state such as they are, have been mis-led on BT’s investment and costs.

      I think those statements hold up, and point to a pattern of behaviour that has resulted in 3 PAC hearings and 2 NAO investigations to date, with the cases remaining open and evidence building to support those in BDUK and Local Authorities seeking Value for Money.

    5. FibreFred says:

      And do those average cab costs include everything (i.e cabling to the cab etc) or… just the cab itself?

      If they really have not spent 2.5bn then… it is not just a case that… they haven’t spent it end of story. Why should there be any link at all between Openreach money funding BT retail operations?

      Surely OR accounts will show what they have/have not spent. I don’t see how anyone is making the jump from OR money not being spent or BDUK funding to it being funneled into BT Retail?

      Unless there is any evidence I don’t see where this is going?

    6. NGA for all says:

      @Fibre Fred No, I do not have email from BT Director A to BT Director B instructing less money to be spent on one project and more on the other.

      But the numbers available not just support such an assertion but allow the chair of Ofcom to accept such an assertion from a concerned MP as legitmate to raise and record in a House of Commons select committee.

      But there is no DNA on an email so folk are free to do what they can get away with.

    7. FibreFred says:

      Ok well, nothing wrong with concern but that’s all it is at the moment, concern and speculation… roll on the evidence!

  6. fastman2 says:

    NGA bt Group invested 2.5bn on its commercial programme

    1. FibreFred says:

      He seems to think not, who is right?

  7. fastman2 says:

    interesting NGA moaning about about how much of someones elses money either was spent or not spent (not Goverment money or tax payer money)

    1. NGA for all says:

      @Fastman2 – not moaning but we do need an honest public record, so prices and indeed future investment including public investment can be set with confidence.

      If £2.5bn is real, and 19m commercial rollout is real, then this suggusts c52,000 cabinets which means you are saying each one costs £48k in easy to serve areas- we know the NAO identified half that and BT would not let that published unless it was so.

      Given the higher numbers will be used to deny rural communities the services the Government wants and BT is clearly capable of delivering, then perhaps you can show how this higher number is justified.

      I admire greatly the work you personally have done for communities, so forgive me for questioning you on what is an important point for those excluded .

  8. NGA for all says:

    @Fibre Fred – NAO – Cab costs include all cabling, tie cables, planning, pmo, contributions to spine, core, power and the cab, and the averages include cabs from the highlands and islands.

    The sad thing is, the costs of overlay network is so cheap, the only discussion we should be having is how we orchestrate a complete transition to full fibre access over 15-20 years.

    Nobody has said it is happening – no email instructions, only that given the numbers, it could well happen, that’s why more transparency is needed, and using 43/44 discrete confidentiality agreements cannot be consistent with receiving £1.7bn in state aid.

    Note how the state aid will be allocated in BT accounts will remain a secret – see Reg Financial consultation March 30th – section 5.

    1. FibreFred says:

      But what level of transparency is enough ? How do you prove something isn’t happening 🙂

    2. TheFacts says:

      NGA once said he needed details of fibre runs and number of blockages for each cabinet.

    3. FibreFred says:

      I’ve seen hit “figures” been questioned a number of times by numerous people….

    4. NGA for all says:

      @fibreFred – If the BT reported accumulated state aid receipts to Sept 2014 of c£312m and this was reconciled with the total cabinets delivered, then that would improve matters.

      As this point you could confirm, the 40,000 a week translates to c200 cabinets a week, costing an estimated £5m a week of which the state is paying £3.8m. The programme consists of approximately 5,500 FTE. That sort of thing. As it stands it looks like the state is paying £7.5m a week, if we divide the state aid receipts for the last three quarters.

      Futhermore, the excess in modelled costs will have meant those planning the rollout will have planned a smaller rollout than funds would have allowed, because of the excess costs in the models, and what looks like a plan to generate free cash flow at the expense of the UK’s rural economy.

    5. FibreFred says:

      Yes it might improve things but it wouldn’t prove or disprove anything?

    6. NGA for all says:

      @Fibre Fred it would improve the probability of the monies reaching where it was intended.

    7. MikeW says:

      Would it improve the probability that the money ends up in the right place? Really?

      Or would it improve the probability that you’d *believe* that it ended up in the right place?

      Remember that the figures being invisible to you does not make for a complete lack of transparency.

    8. NGA for all says:

      @mikeW – if the original planning assumed higher costs as per the BT model as per clause 3.7, then communities will have been excluded that could have received service, should the actual costs have been used.
      If those excess monies have been caught by the audit process and land in some fund, then those communities will have to wait for yet more bureacracy before they know if they can get service.
      In these circumstamces it is sub-optimal for all parties.

  9. themanstan says:

    It´s pointless… to “NGA for all” overmodelled costs = charges made… which they are , nor are they not mentioned anywhere in the NAO report… imagine not one person in the NAO or CSC noticing this as this would result in OR having been overpaid by hundreds of thousands… but they haven´t… professional auditors have missed this, journos and legions of labour supporters have missed the opportunity to give PH the chance of saying that the government has mismanaged public funds and allowed what effectively would be fraud… i see no headlines…

    1. NGA for all says:

      As it happens NAO did not report on what has been paid, just the underlying costs in this round of its investigation. But BT has reported receipts in its accounts of £300+ million in state aid accumulated to Sept with a further £97m for q3, so price paid is way off. If you multiply av cost £23k or 70% proportion of this by the 8,000 cabs delivered to that Sept date, their is no relationship, perhaps it is 8 or so contracts not in the milestone to cash process.
      But your missing the bigger point which is the entire rollout has been significantly cheaper than expected. The £2.5bn claim for c52,000 cabs is poor, given 1) BT finished 18 months early, 2) FTTP was largely removed and 3) there were efficieny gains.
      Rectifying that number helps to then re-set costs presented in the BDUK and used to plan Phase 1.
      Your arguement that things are ok because nobody has noticed sounds like the Lance Armstrong defence strategy. The evidence is being compiled but the peloton needs to run.

    2. Gadget says:

      one question which may or not be easy to answer – does the NAO (and your) calculations include running and maintaining the cab over say its >10 year payback term?

    3. NGA for all says:

      @Gadget no operational costs not included.

    4. NGA for all says:

      @Gadget – but happy to discuss what operational costs might be on what is a solution whose components benefit from being globally sourced. Note BT contribution to phase 1 from the 43 press releases adds to £753m, – if you take state aid % at face value, the BT capital contribution should be £551m of the £753m, but this seems over generous. I do not think the actual number can exceeed £300m in capital and would reduce further if the 2.6Hz spectrum holding was made available on wholesale rates to all ISPs.

      Ops costs for rural are power for c28k Phase 1 cabs and relacement of a proportion of c56k line cards (2 per rural box) 2.6m BDSL ports and 28k network cards. Is that 5,000 spare cards a year. Is that enough? £500 a card suggests – £2.5m pa for card replacement. BT are counting C£200m for starters as operational costs in their self-certified contribution of £750m to Phase 1.

      Happy to see your estimates, and any re-balancing needed post 2017 although that should be accounted for in any new cost recovery regime for VULA.

      I am not suggesting this is easy, but a globally sourced and efficient supply chain, overlayed on an existing network is efficient and cheap, compared to what went before, and the capital required is very low compared to the historical capital costs associated with the existing portfolio.

    5. MikeW says:

      IIRC, the dimensioning of *an* NGA rollout (which isn’t necessarily BT’s rollout) incorporated a lifespan for the active electronics of 8 years. That implies the long-run part of LRIC needs to contemplate complete new DSLAM electronics over time, and not just extra line cards to support new subscribers.

      Maintenance has to cope with failures – whether inherent ones in the card, or following traffic accidents, or finding that your DSLAM is corroding due to over-harsh cooling.

      I tend to think that the operational costs have been missed out of @NFA’s argument, but I also think there is a lot more beyond that:

      I happen to think that BT’s announcement of their investment will have covered all the legs of their business; to see where the £2.5bn went, you have to contemplate what fibre means to BT, and what their long-term goals are.

      First, and obviously, BTW will have had to grow the core more than BAU would require (FTTC subscribers use twice as much bandwidth as non-FTTC). That includes all their WBC/WBMC infrastructure, BRAS etc.

      Second, but less obviously, BT Retail would have to develop their Infinity brand, and make their organisation capable of selling it – including the marketing.

      All of BT’s back-end systems will have needed upgrading to cope with the new, whether it is ordering, fault reporting, whatever.

      Hidden away is a whole new operational department – the ones tasked with keeping FTTC running on all these DSLAMs. Operational staff tasked with dealing with alarms, deploying mainenance staff, etc.

      But above all, the biggest thing that FTTx enables for BT (before EE’s acquisition) is the ability to include a TV offering. The thing Maggie denied them in the eighties.

      The entire media infrastructure for streaming IPTV could well have been included in the budget for this – from the wholesale element (the multicast infrastructure, and the consequent products that BTW offers) through to the retail element, the production of their own channels, perhaps even including the purchase of content rights.

      To the BT Group as a whole, the actual access infrastructure is only a smallish part of the master plan.

    6. FibreFred says:

      Very good points mike and all missed by nga for all who is just looking at assets and the physicals

    7. NGA for all says:

      @MikeW – if £2.5bn is not NGAccess but NGN stuff including content distrubution platforms, and BT Retail system for retailining infinity and BT sport, then that could be made clear.
      In so far as £2.5bn has been used to create a position to support cost modellers to inflate costs for state aid funded projects which is the case, then it would welcome indeed to state clarify what has been invested in NGA and what is part of a wider NGN activity.

    8. FibreFred says:

      And (with respect) that is the main issue with your calculations it has quite a bit in the way of assumptions.

      I mean just look at one of the points raised, your calculations are focussed on from the exchange to the home, fibre cabling,cabs,street works etc

      But nothing about fibre upgrades (capacity ) etc to the exchange itself which I imagine could be a significant cost, with things like this missing it is no wonder figures do not sync up

    9. NGA for all says:

      @Fibrefred – The NAO numbers include allocations for Core network, and costs include contrubutions to the establishment of a handover point, plus the other elements already referenced. It would be unlikely the NAO publish this until BT has exhaused all opportunities to stop such information emerging.

      I am not saying they are complete but they are getting better as more information emerges.

      However the state aid calculation which can only be a proportion of the costs identified and this has yet to be referenced.

  10. fastman2 says:

    NGA cost of eveything — value of nothing — least common demoninator sound like a procurement background !!!!

    delivered 18th months early and you still moan

    1. GNewton says:

      Haven’t you read NGA for All’s posts here? Where did you find prove that BT actually spent the £2.5 Billion?

    2. FibreFred says:

      Their own rollout (non-BDUK) won’t be in the public domain will it? Is there a need to prove it, is their actual proof its untrue?

    3. NGA for all says:

      @fastman2 Please, not a moan. We should celebrate that a job originally estimated to cost £5.1bn in 2008 will cost less than £3bn and will include some FTTP.

      Once consequence of that success is that the £1.7bn of government STATE AID can be spread so much further, provided the adequate levels of transparency are in place and the excess modelled costs identified by NAO are not just acknowledged but removed.

      In so doing, this opens a very big opportunity for Openreach (or indeed a Government policy makers) to review, in the light of these significantly lower costs their network access strategy and propose a transition plan to fibre access, with its lower long run csts, using an appopriate cost recoevery process based on factual data, not BT Group fuelled propaganda of £2.5bn.

      I understand you cannot comment on the consequences of amending the £2.5bn/ c52,000 cabinets with respect to how the current rural projects are managed, but BT and its shareholders and customers and the economy would benefit from a Plan B arising from factual cost data which is begining to form a usable public record. In so doing BT can 1) reduce the risk of a breech in state aid and 2) remove the percieved need by some to force a complete separation of Openreach.

    4. NGA for all says:

      @ Fibre Fred – Any statements relied upon in presentations to the Public Accounts Committee (and EFRA, and both Communications Select Committees) and used by the Regulator in its industry data should be of the highest probity. This becomes even more improtant where your are intrusted with public funds of £1.7bn in the form of state aid and where BT has promised to PAC and Government the rural roll out will benefit from all the economies of scale in the commercial roll out. If BT is stating publicly that they have spent £2.5bn and this can shown using their own public statements to analysts to be at best dubious, then some re-setting is needed.

      The fact the NAO have found excess modelled costs of 38% in the 2012 BDUK bids and under clause 3.10 in the same document BDUK make clear there process do not assure that BT priced the contracts economically, means more effort is needed to establish a reliable public record. None of this stops BT getting the gap funding needed to complete the job required.

    5. TheFacts says:

      @NGA – surely BDUK and the counties are looking at the numbers?

    6. MikeW says:

      Surely “resetting” only needs to be done if
      a) the £2.5bn was meant for only the tasks you believe; and
      b) was actually underspent, rather than theoretically underspent; and
      c) the contracted plans followed the same path of thinking as the £2.5bn (ie 2010 thinking), and weren’t updated with the addition of 2012-13 hindsight.

      The NAO has provided estimates for what the underspend may well turn out to be. For those counties where underspend happens (which won’t be all), they will be in the nice position to decide what to do with the unspent money – just as they will get to decide what to do with the clawback.

      From my perspective, it looks like the onus is then on the counties to decide what to do – and whether to order further coverage from BT. The onus isn’t on BT to just choose to start spending the unspent portion, and autocratically extend coverage beyond the contracted figure.

    7. NGA for all says:

      @themanstan – it was BT’s decision to inflate its cost models for this stae aid funded project and thereby reduce the possible coverage.
      It is not good to exclude communities that could have been included. Suggesting that Councils can now ask for more suggests the networking planning exercise was sub-optimal and should be re-done using the revised cost models.

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