David Currie , the chairman of Ofcom the UK telecoms and broadcasting regulator gave his last annual speech this week, ahead of him retiring early net year. In it he paralleled the state of the financial markets today with the condition he found UK telecoms in 2002 when he took charge.
‘Former employees disconsolately clutching cardboard boxes of their office belongings. A wave of corporate failures, forced consolidations and fire-sales of parts of the business that had had millions lavished on their acquisition only a few years earlier. A raft of business models that, with hindsight, were not remotely sustainable,’ he said.
Back in 2002 telecommunications witnessed the collapse of the dotcom boom. British Telecom had just de-merged (sold off) its mobile arm. The other mobile operators had just paid out £22 billion to the government for 3G spectrum and were ‘nervously calculating the investment costs of the network roll-out and marketing that would be necessary, in straitened times, before they would see a penny of that £22 Billion back in revenues.’
Broadband investment has dried up completely. Cable in the UK was owned by American bondholders who had tired of ‘capital expenditure’ and the UK’s first big venture into terrestrial pay television had just gone broke.
When he puts it like that Ofcom and regulators everywhere, have done quite a lot to put things rights
Currie was given the role of pushing broadband and take up broadband is not approaching 60% of households. The next step is to decide if there is a universal service obligation (to reach broadband everywhere) and if so who should pay. Can it be delivered via wireless or satellite or does it have to be fixed?
Another issue he highlighted was the policing of peer to peer file sharing and piracy. ‘On one hand are the content creators and producers, understandably concerned about the fruits of their investment being expropriated by users and professional pirates: ‘internet shoplifting’. On the other hand, the ISPs are understandably not keen to act as policemen over their own paying customers, to prop up unsustainable business models that technology has overtaken, or compensate for content companies’ inability to innovate.’
And he talked about investment in broadband for the next generation being at the £2 billion ($3.5 billion) level or more and said that it might cost £10 billion ($17 billion) to lay universal fiber to the kerb, £25 billion ($43 billion) for universal fiber to the home.
Currie also called for more broadcast content to be produced n the UK and much of it in HDTV.
But he acknowledged that the sector faces these challenges against a very difficult economic backdrop: capital market constraints, a recession affecting personal and business consumer spending; and an advertising market in free-fall, which means that going forward Ofcom has to aggressively encouraging investment.
One thing it could do was make the regulatory framework predictable which is something Currie has done where cable is concerned, by denying open access to their network until it shows any signs of Significant Market Power or dominance.
In mobile, it means adopting a sympathetic approach to access network sharing to free up resources for new investment. And it means that regulators across Europe, while trying to prevent consumer ‘bill shock’ with ucontrolle data roaming charges it should not impose simplistic retail price controls which would stifle that vital investment.
The other thing that it could do is release as much spectrum as possible, and he talked about his regret in not auctioning the 2.6 MHz block sooner.