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Ofcom needs sharper teethThe industry regulator has stuck to a very narrow remit since the general election

Monday 4 October 2010

It is more than a year since David Cameron made a speech in which he said Ofcom would be stripped of its policymaking function under his future administration. Since then, the regulator has focused on maintaining an "irreducible core" of function while delivering an estimated 25-40% cuts in costs. The coalition's recently leaked document on a tersely earmarked Ofcom "merge with Postcomm" and "subject to substantial reform", but no detailed proposals for reform have been made.

But has Ofcom already stopped making policy? Many insiders claim it is retreating from its horizon-scanning role, and consumers will inevitably suffer as a result.

In the first years of Ofcom's existence, the phrase "this is a matter for government" was largely absent from its policy documents and consultation papers. Nowadays hardly a publication comes out of the regulator without it laying down another "matter for government".

Ofcom was given a broad set of duties by the 2003 legislation that set it up. In its hyperactive first six years it carried out strategic reviews of every major communications sector, and two multivolume reviews of public service broadcasting. The regulator even dreamed up whizzy ideas such as the "public service publisher" that was to distribute funding for public service content, top-slicing of the licence fee, and regional news consortiums.

In these early years, many said the regulator went too far. Some rightly pointed out that some of its policymaking and policy advice stretched the limits of its own legitimacy and accountability. Under the former administration relationships between Ofcom and government were also controversial. Eyebrows were raised when ministers directly requested action from Ofcom – as Tessa Jowell did in relation to junk food advertising. And, when the government appointed a former Ofcom chief executive, Stephen Carter, to conduct a major policy review, the relationships got still closer.

But now it appears that the regulator has been halted in its tracks by a single speech.This is not just about cuts. Senior managers at Ofcom warn that cutting too deeply will risk losing what is good about the regulator – its effective use of research and hard evidence, and its mastery of technical issues. But the extent to which Ofcom responds to consultations run by other organisations has already declined. Between 2004 and 2009, it offered policy advice to other public bodies on issues ranging from the impact of advertising on child obesity to prostitution.

Since the election Ofcom has stuck to a very narrow definition of its remit, only pronouncing where it has a clear legal obligation to do so. One former Ofcom executive said that the regulator has recently resorted to asking government permission when it wanted to stray into policymaking territory. "On local TV the government asked the Shott team to do all the policy development work. Ofcom was asked to provide some very narrowly defined 'technical advice'. But only last week the Culture Secretary asked Ofcom for some further work, so we will see if they are given more scope this time."

At a time when issues in a range of sectors (from energy to retail) are affected by electronic communications, is it really sensible to have a regulator that is timid about bringing evidence to bear on policymaking?

The danger is that Ofcom is suspending much of its policymaking, advice-giving and forward-looking activity, without government, or anyone else, stepping into its shoes. For example, there is a danger that the UK has already lost the initiative on some key policy issues, such as net neutrality.

This issue – about how network operators are regulated – was described as one of the most important policy issues we face today in a recent speech by the US counterpart of Carter's successor, Ed Richards. Julius Genachowski, the chairman of the Federal Communications Commission, said that if policymakers get it wrong we will "shrink opportunities for innovators, content creators, and small businesses around the country, and limit the full and free expression the internet promises."

A similar stance is taken in France. But when Ofcom published its discussion paper on net neutrality in June, it chose to define the terms of debate as narrowly as it possibly could, noting that "questions of fundamental rights and industrial and public services policies are beyond the scope of this discussion document as they are matters for government". Ironically, the same Ofcom document says that the key discussion of these wider issues will take place during the European commission debates on the topic. But the consultation response submitted by the UK government to the commission last week states that "these questions are more appropriate for NRAs [National Regulatory Agencies] to answer".

Ofcom officials say that while recent "mood music" stresses the need to pass decisions to government, this has always been the way they worked in practice. Another is to say that the priority is the national emergency of cutting the deficit. There may be something to these arguments, but do they not also show that Ofcom has developed a worrying risk aversion? At the very least, there should be more public debate.

Even some of those regulated by Ofcom are arguing that we need a debate about how to reform its duties, not merely cut its functions. Mike Short, the vice-president of Telefonica O2 Europe, says: "We will not realise the 21st century benefits of broadband in Britain without a clearer investment climate for infrastructure and more joined up regulatory/policy analysis."

Although legislation to reform Ofcom may be necessary, this could take two years. What is needed in the short term is a new protocol for effective working between the regulator and government.

Even those who argue that net neutrality is a non-issue tend to point out important issues where Ofcom might have done more were it not in retreat. Would the Ofcom of old have pushed forward with proposals to support public service content beyond the BBC? Would it have worked more closely with the culture secretary, Jeremy Hunt, in developing his proposals for a rejuvenation of local civic media? Would we be reading Ofcom reports on other pressing questions of the day, such as universal and next generation broadband? How much of the silence is due to cuts, and how much is due to political risk aversion?

A broad debate on the future of Ofcom is to be welcomed. But it could take several years to change the statutory remit of the regulator. These years could not be more crucial in the evolution of communications in the UK. We need Ofcom. Government has made its point. Now it needs to set the regulator free.

Damian Tambini is a lecturer at the London School of Economics and a member of the Communications Consumer Panel. This is written in a personal capacity

Has Ofcom changed since the Tories took over?
Professor Steven Barnett, media professor, Westminster University

The ideological position which says we need less regulation does not work in the media. But Ofcom is facing cuts of up to 40%, and that is going to do tangible damage to regulation. We will see the consequences in two areas; research and competition issues. To some extent they have already become more timid. There is a whole area where they could have been looking, at ways of funding public service content through devices such as levies; but they are not doing that and it would not find favour anyway with the current government. It is right that Ofcom takes its view from the elected government. But it has always had a role in devising policy options.

Sarah Thane, former Ofcom adviser, now a national lottery commissioner

It would be retrograde to emasculate Ofcom at a time of rapid technological global change. There needs to be a place, a repository of knowledge, where people are future gazing, and that does not fit easily into government. But Ofcom was never a policymaker. It could propose solutions and policies, but it cannot enact.

Kip Meek, former Ofcom board member, chairman of YouView

It is nonsense to say that because there is less policymaking, there will be less regulation. The legilsation for regulation is there, it has to be implemented.I am worried that Ofcom is going to lose its ability to change and adapt regulation, which was demonstrated by its radical intervention in the Telecoms Strategic Review (which created BT Open Reach, local loop unbundling, and the spread of broadband). Professor Patrick Barwise, emeritus professor of management and marketing, London Business School, advisor to House of Lord Communications Committee

I haven't noticed that Ofcom's capability has changed recently, but I'll be watching to see what happens over the next months. Since Ofcom has been in existence, the quality of data and analysis has been much higher, and better integrated, compared with the previous regulators, and it's been relatively fearless, including with the big beasts like BT, the BBC and Sky.

If the government is committed to rational, evidence-based policy, even with less regulation, it will still need Ofcom to retain that capability, given that the Department for Culture, Media and Sport is being scaled back so drastically.

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Ofcom needs sharper teethThe industry regulator has stuck to a very narrow remit since the general election

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