Ofcom chief on phone rip-offs, Virgin, and Web 2.0
Here's the evidence
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?
Have you come under direct political pressure at any time?
We are subject to no political pressure at all. We have not been leant on, we have not been pushed, prodded, we have not had people propose to us an answer at any time in the time that I have been here. So, it's just not a problem, not an issue, and not a problem.
We have a board and a senior team who have a mixture of political backgrounds - we have Tories here, we have got Labour people, we have Liberal Democrats, we even have one or two people who are members of nationalist parties. We have a full range of political views and I cannot think of a single occasion when politics or political opinions have ever intruded into any issue - it's never even come up. But we have a diverse political mix at the most senior level of the organisation.
Just to pick up on the theme of public money in communications. Lets talk about publicly funded access schemes. People have suggested that public money will be required if are to have an alternative next generation access network. Do you have any view on those sorts of opinions?
Well, I am not persuaded that it is. And it certainly shouldn't be for large parts of the country.
Let me answer this by analogy - when broadband started in this country people said to me at the time "we have to have broadband all over the country it will never be provided for by the market, the market might go to 60 per cent but there'll have to be government funding for the rest.' Remember that? That's what they used to say. Lots of people - the Broadband Stakeholders Group - lots of people.
And I remember saying in response, "well let's just wait and see shall we, wait and see if there really is a problem.' What level of coverage do we have for broadband now? 99.6 per cent! How much public money was necessary to do that? Zero! Would it have been a waste of taxpayers money to spend it on supporting rollout? Yes! Next generation is the same in my view. It may well be that in due course we feel that a public subsidy ends up being necessary some years down the line but its definitely not where you start.
I would not be surprised if it turned out that we didn't need any subsidy and the bulk of next generation access was done by the market in exactly the same way that current generation broadband evolved.
The Ofcom board meets behind closed doors, with only a written - and often redacted - summary of its actions released later. Shouldn't the Ofcom Board meet in public and broadcast its meetings on the Internet like the FCC?
No. The reason for that is a very straightforward one. My observation about the open model is that it undermines that process of dialogue amongst the board, which manifests itself in collective responsibility. There's the risk of grandstanding, posturing, and positioning.
What we have managed to do here, which the Chairman is rightly proud of is create a board with a diverse range of experience and skills who debate long and hard and then come to a decision and adopt collective responsibility. We don't have leaks, we don't have gossip, we don't have any of that.
If we take the example of Wikipedia as online public service publishing, run, moderated and peer-reviewed by an online community - talk a little about your PSP proposal in that context.
Well that's the kind of powerful community based resource that we hope could be created off the back of something like the PSP. One argument you could probably bring up is that Wikipedia has been achieved without intervention. And that's true. But if you talk to lots of people working in the online creative industries is that there are thousands of ideas and typically the cost of entry is very, very low but the cost of maintaining and scaling up is very high. And that is where most ideas and projects fail. So one of the ideas of PSP is to bridge that gap, so if something has real public value, real public purposes the PSP could be something that enables them to get scale and have impact.
So ideas would have to pass an initial threshold of having done something alone and shown that it had legs...
... has it got legs, does it meet public purposes - you know those are the types of criteria that we envisage PSP projects meeting. It would be great to have loads of these ideas and projects coming out of Britain.
The idea of the PSP in its most simplistic sense is that we want a new media, Web 2.0, or whatever you want to call it, content capacity in Britain, which is British, in the same way that have uniquely British content in the traditional broadcasting world. Otherwise we run the risk that the only good television will be American imports and the rest of it is rubbish. Now, we know why this happens - because the US market is so big, so you can risk far more, spend far more, spend more time in development. And the same is likely to be true with new media once it really finds its feet. So the basic premise is the same as it was for broadcasting - it's just that we live in a different world now. You can do different stuff, new content you can create, there are just all these amazing things you can do in addition to making new programmes.
I want great British programmes to continue to be made as well but I also think we should have the same instinct on new media content creation and production in new media. And if you believe this approach works in broadcasting why on earth wouldn't it apply also in new media?
Let me ask you about 'evidence-based regulation'. You stated at the Oxford Media Convention back in January that 'Ofcom is as evidence based as anyone' and that you 'won't be outdone on evidence by anyone'. What does evidence based regulation mean to you?
You need to take those comments in context. I wasn't trying to brag about our evidence base. My comments were in response to - and the context is very important here - it was in response to a question from Diane Coyle who is on the BBC Trust and she said where is your evidence for introducing a PSP [Public Service Publisher]? And I said in response, sometimes in some areas you can't wait to get ten years of evidence.
Can we categorically prove social networking, user participation and all these other manifestations of Web 2.0 and so on, that they will be prevalent and important in the future? Well, no, we can't prove that because we don't know what the future will hold.
So I can't give you proof that these will be important and play an important role in the future of media communications and the problem is that if I waited ten years to give you that proof it would be too late to do anything about it because the world will have moved on. So sometimes you have to make a judgement about how things might look. And it was in that context that I then said what I said. You have to make judgements like that and believe me that if there was evidence to back our decisions we would always go and get it - and we rely on evidence as much as we possibly can. So my comments were partly to illustrate that sometimes you can't get 100 per cent evidence to make a decision. And that's the problem with excessive emphasis on regulation.
OW - Okay - but what do mean at Ofcom when you use the term "evidence'?
Evidence is, or what it means to me, it means that wherever possible you make policy and decisions on the basis of information which you have analysed and interpreted and which you then discuss and review and consult on with others.
Can you go too far in your search for evidence? And you have almost answered that by highlighting the role of judgement but to reiterate can you go too far?
Yes. Certainly. Death by analysis or death by evidence. You can go too far. I think the reason Ofcom has placed a lot of emphasis on evidence and the evidence base and that is because a lot of the decision making in these sectors used to be based on not very much evidence. You know - and this was much worse in broadcasting than in telecoms - but there was a period of time when fifteen of the great and the good would just gather together and say what do you think about this or that. So I think it was right for us, right from the start to say, and I championed this - building the market research and intelligence team here with colleagues - that we act based on evidence where possible. And all the areas we deal with lend themselves to some evidence gathering and analysis process but of course you can overdo it, absolutely.
I would say that you are looking for three things in good decision-making in this area. You are firstly looking for quantitative evidence, is there data that will tell you something. Secondly, qualitative evidence, what do people think and feel. And thirdly, judgement, you need to be confident in exercising judgement.
I suspect sometimes there is a real danger of trying to quantify everything, which presumably removes that process of judgement...
Of course, but you will always need those three things in a good decision. You will certainly always need the judgement - and sometimes you just can't get the quantitative or qualitative data to support you. I am very comfortable with our notion that the evidence base is important but we are also comfortable that evidence is not the be all and end all of taking a decision. You absolutely can overdo it. I don't think we have, but in some areas you see it. An obsessive reliance on evidence, which results in ten years to make a decision. reg;
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