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Ofcom chief on phone rip-offs, Virgin, and Web 2.0

Here's the evidence

Ofcomwatch blog logoInterview Luke Gibbs, co-founder of the Ofcomwatch blog, conducted an in-depth interview with Ofcom's chief executive Ed Richards last month. You can read the full interview here.

Do you think people are clear what they pay when they make phone calls in the UK?

Well, not always and that's why we have made and are continuing to make the changes we are making in this area. The level of consumer confusion is the fundamental reason for taking action in these areas. Consumer confusion is often very high. And people didn't know what they were paying for 0870 or 0845 or 0871 - indeed they are not always clear what they pay when they dial an 09 number, which given the charges on some of those numbers is a very serious issue.

So I don't think people have previously been clear and we have taken big steps to try and clarify the charging structures. Much simpler, retaining 0800 which people do understand, the 03 introduction which I think will be clear and hopefully greater clarity over the other 08 numbers. It will be a lot clearer than it has been before - it's not perfect but the numbering strategy we have outlined will be a lot better and a vast improvement on what people have had to live with for the last decade.

Where has industry engagement been successful, where has it been less successful? Where has industry put to you a case that has been so persuasive that it has changed the direction of what you have been doing?

There have been quite a few instances where that has happened. Indeed, there are few examples of where we haven't learnt something significant through the process of consultation and discussion. A good current example is that we have refined our approach to call termination prices. I am not going to tell you how because it is currently very market sensitive but we have changed our position on this issue as a result of discussion with industry. We certainly changed our position during the PSB (Public Service Broadcasting) review and in the TSR (Telecommunications Strategic Review) and we do in most spectrum work we do because we have a lot of engagement in that area.

People keep saying to me - "you've made your mind up on DDR' [the Digital Divided Review examines the uses of spectrum freed up by the analog TV-switch off - ed.] But we haven't! We absolutely have not.

We have made some proposals for a way forward, and there are complicated issues - around the HD position, around PMSE, around local TV. We have put a lot into the first consultation but I am not going to sit here and say everything we always say or talk about in the initial consultation is right. Part of the process is to flush out what is or isn't right or develop a different way of thinking about it. Indeed DDR is a very good example on this front. I would be amazed if we don't get information and feedback, which modifies our approach in one-way or another. I am absolutely certain we will see changes in this area. I am thinking for example about the conversation we have had with the PMSE people - from that we have already recognised that it is more complicated than we thought, that we need to think about a wider range of approaches to the issue.

I would be very surprised and suspicious internally of any team which came to me and said - "we have gone through all of the consultation responses, talked to everyone and we are not changing anything. It's exactly as it was.' I would say, "really!' I would certainly want to see all of the consultation responses and one by one read the whole lot myself under those circumstances. I occasionally do. If someone said nothing was changing on this issue all my alarm bells would be going off - and it would make me think that this person hadn't listened, and wasn't open minded. People here usually go to great lengths to ensure that they listen and learn, summarise that work, identify what we have and haven't got right before we take any action. That is the usual process. What we discourage at Ofcom is a culture of "I've got all the right answers' - that is a frowned upon attitude. A culture of trying to find the best approach is what we try and foster. You don't get any prizes here for coming in and saying "the answer is exactly what I told you it was on day one.'

Ofcom has outlined a review of wholesale digital television broadcasting. It now must seem rather timely given the current Sky-Virgin Media dispute. You're at reasonable early stage with that but what can you say about the types of issues that are going to be considered and perhaps the balance between competition law solutions and Ofcom regulations?

Well, not very much. But the first thing to remember is that we are a competition authority as well as a regulator so we can go either route in the event of finding an area where there is an issue. So, firstly, we haven't yet decided whether there is an issue in some these areas and we certainly haven't considered which route we might take. The kind of things we are going to look at in the review are the principle things - the market definitions. And it's going to take quite a while to do. We haven't got any prejudice about where it will all end up or what we will do if we need to introduce remedies. Now clearly in some areas there are already remedies in place - conditional access, EPG, access services. So, we need to assess whether these things are working but again we have no prejudice about where it will end up. It is a complicated bit of work, which will take some months.

It's interesting that statements from Virgin Media suggest that they may look to apply competition law through the courts.

Well it's a standard technique that people seem to use from time to time to go to the High Court and seek damages. It's a civil case, a different approach, and it doesn't mean that they would do that instead of seeking remedy from a competition authority. It's just a way of escalating the process.

Will it speed up the process if the issue went this way?

Well, it can't really speed us up because we are going briskly as we can go on this.

But could it be that the court could come to conclusion more quickly than Ofcom on this matter?

Possibly. There are two routes on looking to resolve this issue. They are free to try both.

There seems to be a presumption in regulating telecoms that where you find a monopoly you tend to act - whether that be a price control or some other obligation. That seems to be out of kilter with the rest of the economy and competition law in terms of abuse of position, which typically doesn't lead to price controls. So one view might be that telecoms regulation works in this way because of a legacy position where you had national incumbents and state owned enterprises and this has then spread out a little to other areas which don't have that history - such as mobile. Is that a fair assessment or do you think that telecoms needs to have a specific regulatory framework and the presumption of monopoly?

I would say that regulation clearly is a product of the history of telecoms. And I guess the question you have constantly got to ask yourself is whether you are extending that historic approach to areas where it doesn't really need to go. Mobile - as you point out - is an interesting case in point. Why is this how regulation works for fixed telecoms? Well we have decades of experience that suggests it errs to monopoly, where there are huge economies of scale and significant barriers to entry and networks effects.

Mobile - it's an interesting question - would you have ended up in the same place if it hadn't been a communications service? It is a difficult hypothetical. I think you probably would have ended up where we are now without regulation but it might well have taken longer. But the big intervention point is obviously call termination and I think you would have got there in the end on that issue perhaps through the competition authorities and the Enterprise Act - but you would have required some external force to get there because of the fact that it's a bottleneck that requires action.

You have a background in government. I was just wondering how that helps inform the work that you are now doing at Ofcom and whether it has been of benefit to have had that experience to bring to this job.

Unequivocally. Of course, just as it's been useful that I have worked in the private sector as well. You bring all of your different experiences that you have got to the fore. Why is it useful to have worked in government? Because, these industries are heavily regulated, probably too heavily regulated from where we would like to be. But also a lot of what we do has an interface of some sort or another with the government. Let's think of an obvious example - digital switchover. You can't do digital switchover - which is a big objective for us - without a dialogue with government or indeed Digital UK and the broadcasters. You have to know how they think and you have to be able to talk to them and discuss things effectively with them. So there is no doubt having an understanding of how they operate is useful.

Is regulation therefore part of government policy?

No. It's absolutely not. I see the principle of independent regulation as a cornerstone of government economic policy. And that is as far as it goes.

And what does that actually mean?

What it means is that there is a well established aspect of economic policy that in key areas you have independent regulators who take decisions on the basis of facts, evidence and impartiality - and that has proven to be a good way of serving consumer interests. So that is the government policy. Then the doing of regulation is delegated to these independent regulators. The interesting thing to me on this point is that this system is almost quasi-constitutional these days. Is there any political debate of any kind about this?

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