Government Sets Out Strategic Priorities for UK Broadband and Mobile

The Government has today set out its first ever Statement of Strategic Priorities (SSP) for UK mobile and broadband services, which requires Ofcom to reflect in their work the need to build “world-class digital infrastructure“, look at mobile roaming in rural areas and tackle the so-called “loyalty penalty” etc.

The new SSP, which is a legal mechanism that was formally introduced for telecommunications services as part of the Digital Economy Act 2017, broadly seeks to support the Government’s existing objectives. This includes their aim to extend geographic mobile coverage to 95% of the UK by 2022, a desire to cover the “majority” of the country with 5G mobile by 2027 and to ensure that 15 million premises are covered by Gigabit-capable “full fibre” (FTTP) broadband ISP networks by 2025 (rising to nationwide coverage by 2033).

The core components of this were set out in last year’s Future Telecoms Infrastructure Review (FTIR) and related consultations from Ofcom (5G auctions / spectrum sharing and full fibre). As a result today’s Statement of Strategic Priorities (SSP) largely reflect that on-going work.

The Strategic Priorities

● 1: World-class digital infrastructure
The Government’s commitment to world-class digital infrastructure for the UK, reflecting the conclusions of the Future Telecoms Infrastructure Review.

● 2: Furthering the interests of telecoms consumers
The Government’s commitment to safeguarding the interests of telecoms consumers, including the vulnerable and less engaged, by ensuring they are better informed and protected.

● 3: Secure and resilient telecoms infrastructure
The Government’s commitment to ensuring the UK’s telecoms networks and services are secure and resilient.

● 4: Postal services
The Government’s commitment to a universal postal service and need for industry and Ofcom to work together to secure the long-term sustainability of the sector.

As part of this Ofcom will also be expected to “examine” the costs and benefits of options to introduce mobile roaming in rural areas in a bid to improve consumer choice and tackle partial not-spots (areas where at least one operator is present, but all four are not). They’ll also need to ensure that regulation supports investment in reliable Gigabit-capable broadband networks.

The SSPs further require Ofcom to tackle the so-called loyalty penalty, which sees loyal customers who do not shop around typically paying higher prices than more savvy consumers. “The combined effect of the loyalty penalty incurred by customers of broadband and mobile is £1.3 billion per year,” said the Government as it warned of “new legislation if the regulator believes it does not have sufficient powers.”

The Competition and Markets Authority (CMA) recently concluded a “super-complaint” into the loyalty penalty issue and made several recommendations (here). Ofcom are already in the process of introducing measures to help tackle this (e.g. notification letters) and they’ve recently launched a review of broadband ISP pricing to account for the CMA’s concerns (here).

Jeremy Wright, DCMS Secretary of State, said:

“As the UK’s telecoms regulator, Ofcom has a critical role in realising our shared connectivity aspirations for the UK. As well as ensuring the necessary improvements to broadband and mobile services, consumers must also be protected. I urge Ofcom to tackle harmful business practices and remove barriers to switching.”

Andrew Glover, Chair of the Internet Services Providers’ Association, said:

“The Statement of Strategic Priorities is an important step in helping our members understand the UK Government’s priorities for the sector and how Ofcom will exercise its regulatory functions.

ISPA welcomes the fact that the UK Government has reiterated its support for reducing the costs and barriers to deployment of FTIR. This has been a longstanding priority for ISPA members, so it is encouraging to see this commitment reflected in the report. ISPA also echoes the views outlined about cross platform switching. ISPA wants to ensure that switching processes are easy, reliable and transparent, and ISPA looks forward to further detail on how Ofcom intends to achieve this.

Ofcom’s aim to tackle harmful practices and to improve the support available to consumers is supported by ISPA. It is understandable that Ofcom have proposed to tackle the loyalty penalty within the scope of this aim. However, it is important to ensure that the loyalty penalty is not a blanket regulation that conflates loyal with less engaged customers. It is incorrect to assume that customer loyalty is solely based on inertia, and any attempt to tackle the loyalty penalty needs to demonstrate that Ofcom has a well-rounded understanding of all consumers. ISPA therefore believes the loyalty penalty should be proportionate and targeted to those in need of help.

Finally, ISPA would like to see more detail about the form in which the ‘Outside In’ strategy will take, especially how it will align with the Universal Service Obligation.

ISPA is currently working with its members to explore a range of possibilities about how to respond to this report including through a formal response.”

The new SSPs essentially bring the legislative framework for Ofcom into line with other sectors, such as energy and water, for the first time. On the other hand they broadly reflect work that is already on-going and don’t contain much in the way of new surprises.

Details of the related consultation can be found here and this is open to feedback until 27th March 2019.

UPDATE 4:48pm

Added the ISPA’s comment above.