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OFT eliminates a little ‘faux-differentiation’ but the digital economy needs stronger direction PDF Print E-mail
Written by David Brunnen   
Monday, 01 October 2012 12:21

From last week’s small step forward at the FCC to this week’s small step back for European telecoms regulators and Ofcom (courtesy of the OFT) - both are to be welcomed.  But progress in small steps may not be enough to match the demands of the digital economy.

Head of CommunicationsThe headlines may have shouted ‘Merger’ but the both Telefónica and Vodafone UK would have preferred editors to talk only of a ‘network upgrade’.

Telefónica UK (O2 to you) and Vodafone UK welcome, of course, the news that the regulatory authorities have given them the green light to proceed with previously announced plans to strengthen their existing network collaboration.  It is significant that it was the Office of Fair Trading who could see ‘no substantial lessening of competition’ and shined the green light.

The two companies, they say, ‘will now pool the basic parts of their network infrastructure to create one national grid that will support two independent and competing networks delivering mobile coverage and mobile Internet services to the vast majority of UK households’.

But let’s be clear what this means.  Apart from sharing the physical masts and the hardware hanging on them both companies will retain complete control over their wireless spectrum, intelligent core networks and customer data.  They will, they say, continue to actively compete with each other in all products and services, enabled through the ‘intelligent’ parts of their networks.

So what’s new?  Their joint statement made it clear that that they already collaborated in this way and whilst the impending rigours of extra investment (reportedly40% more base stations) needed for 4G may have focused the mind, much of that is subject to the outcome of Ofcom’s auction of new licences for wireless spectrum that may perhaps happen next year.

What is new is that the two mobile megaliths have set up a new company (CTI Ltd) to own and manage the infrastructure with the assets and responsibilities shared geographically and (courtesy of the OFT) a little bit of the faux-differentiation beloved by Telecomms regulators has been eliminated.

It’s a nod to a decade of technological progress in the commoditisation of connectivity and lessens the burden of undifferentiated investment duplication the like of which would seem faintly ridiculous if proposed for energy, water, rail and road networks.

But that is it.  No radical national plan here to commercially separate the connectivity elements from the services, no plan to mandate national roaming for all mobile operators and no plan to make better, more efficient use of spectrum by adopting a more sensible array of wholesaled utility services that would allow more secondary market entrants.  These things are simply not on the agenda for Ofcom or, for different reasons, the two market leaders.

Ofcom (directed by DCMS and with hands tied by EU-wide agreements) is looking forward to generating new spectrum licence revenues.  These will, like last time, not be spent on digital infrastructure and politicians continue to regard this tax on digital infrastructure investment as a ‘windfall’.  Meanwhile, of course, the leading mobile operators are keen to preserve the status quo and deter new market entrants.

For sure, this collaboration will improve the chances of getting better than 98% UK coverage by 2017 and, sure, it will make the roll-out of 4G services faster and cheaper for those expected to ‘invest’ in owning spectrum.  Whether it really means more competition, more customer choice, better-performing services, more services innovation and a faster-growing digital economy is far less certain.

Stepping back a little from the last-generation policy of passive infrastructure competition is good news.  Not taking bolder steps to reform the mobile industry to match the demands of the digital economy falls short of the policy-led direction of telecoms regulators that European citizens and businesses might reasonably expect.


In a session chaired by the author, 'Developments in the Mobile World' will be explored at NextGen12 by John Cooke (Mobile Operators Association) and Caroline Gabriel of Rethink Wireless.

Last Updated on Monday, 01 October 2012 12:42

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