Competition assessment of future mobile markets: Revised proposals

Ofcom presented its provisional competition assessment of future competition in the communications market during the March 2011 Consultation. As per the Direction of the Government, Ofcom has to assess the competition in order to have an idea about the mobile electronic communications services after the auction. Ofcom invited comments and evidence with regard to the assessment from interested stakeholders. Taking in to consideration of all valuable responses from the stakeholders and the further information received, Ofcom considered it proper to review its competition assessment.

The provisional results of the further assessment and Ofcom’s plan to introduce measures that are proportionate and appropriate to promote competition are discussed here. Ofcom’s view on competition has undergone a change since March 2011 Consultation thanks to the responses received to the March 2011 Consultation.

The supply of spectrum for the use of mobile services will be increased remarkably after the auction and this fact was noted in March 2011 Consultation. The total amount of spectrum would be increased from 350 MHz to 600 MHz. For operators, this auction would be the last chance to obtain prime mobile spectrum. At least for a decade, the competition in the mobile sector will greatly depend on how the spectrum is going to be distributed after the auction. As observed in the March 2011 Consultation, Ofcom expects a positive impact on competition by the increase in the supply of spectrum. It would pave the way for the launch of new services, entry of new competitors and expansion of existing competitors. However, the regulator thinks that in the absence of certain measures in the auction, there won’t be any promotion of competition in the mobile markets, in fact it would have a detrimental effect on competition. Hence Ofcom is of the opinion that certain appropriate and proportionate measures are to be introduced in the auction to promote competition in the mobile market. Views and evidence on this further analysis is welcomed from the interested stakeholders.

Government Direction and Ofcom’s statutory duties Ofcom derives its legal framework for the auction from the Framework Directive and Authorisation Directive and its duties towards both European legislation as well as local legislation. The Directives in the Communications Act 2003 and the Wireless telegraphy Act 2006 which have transposed into national laws, The Directions contained in the Wireless Telegraphy Act 2006 (Directions to Ofcom) and the Article 8 of the Framework Directive which explains the objectives of national regulatory authorities were the basis for Ofcom’s legal framework for the award.

Article 8 of the Framework Directive stipulates that the national regulatory authorities should take all reasonable steps to achieve its objectives. Promotion of network services, promotion of competition, encouraging investment in infrastructure, promoting innovation and efficient use of radio frequencies come under the objectives of the regulator. Among other things Ofcom has to work for the development of the internal market, remove all obstacles that hinder the growth of electronic communications networks, encourage interoperability of pan-European services and avoidance of discrimination.

As per Article 9 of the Framework Directive, member states are required to make sure the effective management of radio frequencies and the allocation and assignment of radio frequencies must be based on transparency and non-discrimination. The member states are also required to ensure technology and service neutrality as per Article 9 of the Framework Directive.

Article 5 of the Authorisation Directive requires the member states to grant individual rights of use of radio frequencies. At the same time the grant of right must be transparent and non-discriminatory. Article 7 of the Authorisation Directive says that if the member states want to limit the number of rights of use to be granted for radio frequencies, then their aim must be the maximization of benefit to users and development of competition.

Ofcom’s general duties as well as the principal duties are defined in Section 3 of the Communications Act 2003. Furthering the interest of citizens relating to communications matters and furthering the interest of consumers in the communications market and promotion of competition are the principal duty of the regulator. As per section 3 (2) Ofcom is to secure the optimal use for wireless telegraphy of the electro-magnetic spectrum. It is also the duty of Ofcom to make available a wide range of electronic communications service through out the UK. Section 3(3) of the Act stipulates that in all its duties, Ofcom should follow the principles like accountability, transparency proportionality and consistency. Where ever possible Ofcom has to follow the policy of non-interference or in other words only when it is absolutely necessary, Ofcom has to interfere.

Ofcom, while performing its duties, should show regard to a number of factors as appropriate and at the same time it should work for the promotion of competition, encourage investment and innovation as per Section 3(4) of the Act. Again making availability of high speed data service throughout the UK is also the duty of the regulator.

With regard to the management of spectrum, Section 3 of the Wireless Telegraphy Act assigned a number of duties to Ofcom. Apart from the other duties, Ofcom has to consider the extent to which spectrum is available for use, the demand for spectrum and the current and future use of spectrum. The desirability of promoting the innovative services and competition among the communications services are also points to be considered by Ofcom.