While not seen as significant as a parallel review being conducted by DCMS, it will set the tone for an important next phase
A review likely to be dominated by a pressing issue: In much the same way Ofcom didn’t want its Strategic Review of Digital Communications to be dominated by the issue of Openreach, it’s hard to see how this one won’t be mostly about the issue of market structure (i.e. consolidation). Speculation about the future of Three and/or Vodafone has shifted attention back to the issue of the number of players in the market. While Ofcom says it’s thinking less about the number of players, but instead the circumstances of particular mergers, the arguments being used by some in the industry about inability to invest don’t appear to be swaying the regulator at this time.
Unpicking the relationship between competition and investment: Do higher revenues and returns lead to more investment in mobile networks, or does competition drive investment? The circle that needs to be squared is the view held by the industry and that of Ofcom on this relationship. In response to publication of the discussion paper, Three’s CEO said “Moving from four to three mobile players in the UK would … improve the quality and scale of connectivity in Britain and would unleash more competition.” But Ofcom has so far found “No evidence to support the hypothesis that service quality and / or investment increases when markets become more concentrated.” Without either new evidence or a different line of attack, Ofcom isn't going to be swayed.
On the fairness agenda and general greater regulatory burden: Ofcom offered a reassuring tone that the scope of regulation in the guise of consumer protection will probably not go much beyond where it is today, and activity in this area will instead turn to enforcement. The industry had wanted a similar certainty commitment that fibre builders got baked into the Wholesale Fixed Telecoms Market Review, but Ofcom argues its hands are tied given it doesn’t regulate wholesale services in mobile markets and so doesn’t have similar regulatory levers to incentivise investment. Ultimately for that to change would require fresh thinking from the Government.
Policy interventions to support investment: In some respects, the regulator has opened a door for industry here. It wants to gather evidence on whether 5G creates wider societal benefits (improved social inclusion, improved access to and quality of healthcare and education, environmental benefits, and greater UK productivity and innovation), that are difficult for operators to monetise. The rationale being that if these benefits were significant, then this could provide a rationale for policy intervention to support investment and therefore mean a quicker and more widespread rollout of 5G.
