Ofcom reported to have picked another civil servant as new boss

There was a time when some degree of telecoms expertise was considered a desirable quality in a prospective head of Ofcom, but that is long gone.

According to a report from the Guardian, former civil service Permanent Secretary Sharon White will be replaced as Chief Exec by former civil service Permanent Secretary Melanie Dawes if Ofcom has its way. While the appointment is made by the Ofcom board, it needs to be approved by the Secretary of State for Digital, Culture, Media and Sport. Since we’re not sure who that will be by the end of the year, Ofcom would apparently prefer to keep its choice quiet until after the General Election.

We asked Ofcom for comment, but were given the standard line about not responding to rumour and speculation, which was expected. We were pointed towards today’s official announcement that Ofcom board member and Chief Exec of the UK Regulators Network will be keeping the seat warm for Dawes, or whoever, until the UK political dust settles a bit. Oxley has ruled himself out of taking the gig permanently.

The Guardian quoted some random anonymous person who they say knows Dawes as calling her ‘a safe pair of hands’ and we have no reason to doubt this mysterious insider. That’s presumably why senior civil servants are now preferred to people with industry expertise – the government doesn’t want Ofcom getting funny ideas about policy and that sort of thing. Just keep quiet and do what you’re told, there’s a good regulator.

Ofcom announces 700 MHz and 3.6-3.8 GHz auction with no coverage obligations

UK telecoms regulator Ofcom has announced that the next tranche of 5G frequencies will be made available to operators via an auction next year.

The spectrum consists of 80 MHz of 700 MHz band and 120 MHz in 3.6-3.8 GHz band. The 700 MHz is a lot more valuable to operators because it covers much greater distances than the higher frequency spectrum. Thus Ofcom is proposing a reserve price of up to £240 million per 2×5 MHz lot of that, compared to a reserve price of up to £25 million for each 5 MHz lot of 3.6-3.8 GHz spectrum. Four lots of 5 MHz of 700 MHz spectrum will also be auctioned for downlink-only.

The big news within the announcement is that Ofcom isn’t attaching any coverage obligations to any of the spectrum, apparently as a result of the deal struck with operators last week. Were it not for that the 700 MHz spectrum was expected to only be offered on the condition that whoever owned any of it committed to the kinds of arbitrary geographical coverage obligations that have become do politicised in recent years.

“We’re pressing ahead with plans to release vital airwaves to improve mobile services for customers,” said Philip Marnick, Spectrum Group Director at Ofcom. “Together with mobile companies’ commitments to improve coverage, this will help more areas get better services, and help the UK maintain its place as a leader in 5G.”

The mechanics of the auction will be similar to the 2018 one, which brought in an acceptable amount of cash for the government so it presumably felt no need to change it. The 37% cap on spectrum ownership still applies, which means EE can only win a maximum of 120 MHz, Three 185, and Vodafone 190. O2 has so little spectrum that it could buy the lot if it felt like it (see below). The auction will take place sometime next Spring.

Vodafone first to take advantage of spectrum sharing rules

Vodafone has announced it has entered into a three-year agreement with StrattoOpencell to share the use of it 2.6 GHz spectrum assets to deliver connectivity in Devon.

Following adjustments to spectrum license rules by Ofcom earlier this year, Vodafone becomes the first telco to share out the valuable airwaves. As part of the agreement, StrattoOpencell will deploy 4G small cells to deliver connectivity services to a holiday site in Devon.

“Vodafone has a long history of innovation, from sending the first text message to conducting the first 5G holographic call,” said Vodafone UK CEO Nick Jeffery. “We are delighted to become the first mobile company in the UK to share some of our spectrum to extend rural coverage.

“By offering some of our 4G spectrum to StrattoOpencell, we are helping to extend fast and reliable mobile network access for people in rural communities. Mobile connectivity in rural areas is just as important as it is for those in towns and cities, which is why we continue to work with others to help improve rural connectivity for all.”

Earlier this year, Ofcom made some amendments to allow for spectrum assets to be licensed off to third-parties by the telco which owns the airwaves. The changes are designed to more efficiently make use of the valuable assets. Vodafone is currently using the 2.6 GHz spectrum band in urbanised areas, though not in the rural communities. The high-capacity is attractive in the cities, though the shorter-range is less so when dealing with the rural areas.

This looks to be a very good example of proactive and forward-thinking regulation. If Vodafone is not making use of the spectrum in certain areas, why shouldn’t someone else? It is after all an asset which Vodafone is entitled to monetize in any (legal) way it sees fit.

Should a telco find a partner it would like to license its spectrum assets to, it has to seek permission from Ofcom detailing the band, location, bandwidth and power required. The regulator looks at it with a positive outcome in mind, though it will look for potential interference. The applications are dealt with on a case-by-case basis.

“Our new sharing approach aims to help more people access the airwaves they need to create local networks around the UK, including improving connections in rural areas,” said Philip Marnick, Group Director of Spectrum at Ofcom.

“Vodafone and StrattoOpencell are the first to take advantage of this. We look forward to seeing how others use our new spectrum access approach to support innovation and enable local communities to have better connections.”

Although this is only in Devon for the moment, the spectrum policy has been altered to enable more creative connectivity solutions in areas where fixed-connectivity is not an option. This might be difficult to reach places, or areas where permanent connectivity is not required. The success of the idea will be dependent on adoption, so it will be curious to see whether EE, O2 and Three elect to join the sharing scheme.

Vodafone challenges new Ofcom rules on leased line rates

Vodafone has lodged a complaint with the Competition Appeal Tribunal, challenging new rules which it believes will give Openreach too much opportunity to abuse customers.

Following the latest Business Connectivity Market Review rules published in June, Ofcom granted Openreach greater freedoms to charge customers more for leased lines. These leased lines underpin home broadband, cloud hosting and 5G, as well as services offered directly to the citizen, such as banking, healthcare, and local and central government online services.

“Ofcom has now changed its approach and is regulating based on what it hopes will happen in the future, rather than based on the evidence of how the market works now,” Vodafone said in a press release.

The relaxation of rules has been based on various investigations over the last few years, though Vodafone has found issue with a few points.

Firstly, the Business Connectivity Market Review suggests Openreach does not have significant market power in the London region. Vodafone disagrees with this, suggesting market share of between 60% and 70%, exceeding the levels defined as market domination by Europe.

Secondly, Vodafone disagrees about the removal of a cost-based price cap in favour of a flat rate price cap. The cost-based approach was much more fluid, moving with the real cost realised by Openreach. Vodafone suggests Openreach costs are only going down, therefore the wholesaler will benefit significantly from the change.

Finally, in some cities Ofcom expects competition to enter the fray, therefore pricing regulations have been loosened. From Vodafone’s perspective, the facts are simple; competition hasn’t yet entered the market, and the regulations should be kept in place until they actually do.

In some parts of the saga, Ofcom has perhaps acted slightly irresponsibly, though you always have to remember this is a PR assault from Vodafone. Weaponising the press, as Vodafone is trying to do here, is often accompanied by emotive language, exaggeration and quoted figures which push right to (or perhaps beyond) the edge of estimate ranges.

This is not to say they will not prove to be accurate, but it is always worth remembering the presence of massaging and manipulation.

Ofcom fines BT for suspect accounting

Ofcom has fined BT £3,727,330 for reporting inaccurate financials to the regulator, leading to the telco paying lower administration fees to the regulator for five years.

One of the ways in which Ofcom funds its activities is to charge certain companies an annual administration fee. This fee is determined by the total revenues generated by the company. As BT reported inaccurate results between 2011 and 2015, it paid lower administration fees throughout this period.

BT has not contested the fine, and the full sum had been paid to Ofcom on July 29.

“BT’s cooperation with Ofcom in relation to this investigation has been extensive and productive,” Ofcom said in the report.

“Upon discovery of its error, BT informed Ofcom and committed to remedying the consequences of its error. BT has also undertaken extensive work to ensure that its final resubmitted turnover is complete and accurate; had Ofcom had to carry out this work itself, it is likely to have required significant resource and time to complete.”

Although BT does not have the most glimmering record when it comes to accounting in recent years, the telco did own up to the error rather than Ofcom being informed by a whistle-blower.

The error seems to have been identified by BT Group CFO Simon Lowth, who had only been in the role for a year at the time. In September 2017, documents were submitted to Lowth to review the submission of annual turnover for 2016. Upon reviewing the document, Lowth ordered an investigation into the previous submissions dating back to the original General Demand for Information in 2011.

BT believes the oversight was down to human error, an employee misunderstanding the data sources used, though it still does not the most complementary light on the accounting practices of the business.

Aside from this oversight, BT is still reeling from the Italian accounting scandal which was unearthed in 2016. The fraud cost the company more than £530 million, with £8 billion being wiped off the telcos market value in a single day. US investors, represented by law firm Robbins Geller Rudman & Dowd, have recently announced a lawsuit to recover some of the losses.

The £3,727,330 fine might be considered a relatively lenient one, though generally regulators are kinder to the guilty party if it admits to wrong-doing without prompt. The sum was calculated by adding the deficit to interest payments. The Bank of England base interest rate during the 2011-15 period was increased by 1% to get the total.

It is difficult to blame the current management team and workforce for this error, it would have been prior to the tenure of many employees, though it does not reflect well on a company which is attempting to prove it is a successful business.

The UK is turning to VoD – Ofcom

Half of UK homes now subscribe to TV Streaming services, reveals a new Ofcom report, as the country increasingly opts for video-on-demand.

The precise proportion is 47%, which is lower than some might expect given the apparent ubiquity of Netflix, Amazon Prime, etc, but still a significant jump from 39% just a year earlier. Furthermore, since many people have more than one service, the total number of subscriptions increased by 25%. If this keeps up it won’t be long before nearly all of us spend our evenings consuming copious amounts of VoD.

This is the headline finding from Ofcom’s latest Media Nations Report, which takes a deep look at the country’s media consumption habits. Any parent won’t be at all surprised to hear that younger people far prefer on-demand video over traditional broadcast and, as a result, consumption of the latter is in rapid decline. Thanks to the oldies broadcast telly is still the most popular form of video consumption, but not for long.

ofcom media nation all video

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ofcom media nation all video change

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“The way we watch TV is changing faster than ever before,” said Yih-Choung Teh, Strategy and Research Group Director at Ofcom. “In the space of seven years, streaming services have grown from nothing to reach nearly half of British homes. But traditional broadcasters still have a vital role to play, producing the kind of brilliant UK programmes that overseas tech giants struggle to match. We want to sustain that content for future generations, so we’re leading a nationwide debate on the future of public service broadcasting.”

The UK state seems to be in a mild panic about the decline in viewership of what it considers to be public service broadcasting, which means any old rubbish that’s publicly-funded. It’s highly debatable how much of the content produced by the BBC provides any kind of public service other than distracting us for a few minutes, but Ofcom seems to still think it’s really important.

This last table is especially illustrative of the current state of play, with younger adults all about YouTube and Netflix. If Ofcom had surveyed teenagers we suspect that bias would have been even more pronounced and as these trends continue the TV license fee is going to become increasingly hard to justify.

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Giffgaff managed to find a way to overcharge prepaid subscribers

UK telecoms regulator Ofcom has fined MVNO Giffgaff £1.4 million for double-charging some of its pay-as-you-go customers.

Giffgaff specialises in prepaid SIM-only mobile phone deals, in which subscribers buy chunks of data, etc, marketed as ‘goodybags’, in advance and then buy more when those are used up. Any data used when a goodybag isn’t active is charged at 5p per MB. It looks like there was some delay in properly recognising when a fresh goodybag had been purchased from a billing perspective, resulting in people continuing to pay the metered rate at the same time.

This resulted in 2.6 million customers being overcharged by a total of £2.9 million, which might seem like a lot but is only a quid per punter. Once Giffgaff realised what it had done it grassed itself up to Ofcom, which proceeded to spend the next ten months ‘investigating’ what it had already been told. This resulted in Giffgaff being fined £1.4 million, which would have been more if Giffgaff hadn’t fessed up and already attempted to refund the overcharging.

“Getting bills right is a basic duty for every phone company,” pronounced Gaucho Rasmussen, Ofcom’s Director of Investigations and Enforcement. “But Giffgaff made unacceptable mistakes, leaving millions of customers out of pocket. This fine should serve as a warning to all communications providers: if they get bills wrong, we’ll step in to protect customers.”

Thanks Gaucho, but didn’t Giffgaff tell you what it had done and hasn’t it already taken remedial measures? What, exactly, have you done to further protect customers other than spend ten months mulling over how much to fine them? Even regulators can never resist an opportunity to self-promote.

Giffgaff seems to have missed a PR trick here too. There is nothing on its website or social media addressing this, so people are largely left to interpret the background to the fine themselves. For a prepaid brand that makes a virtue of transparency and value for money, this apparent shiftiness and surrendering of the narrative could end up being far more harmful than the fine itself.

Ofcom looks to Salisbury for full-fibre experiment

Ofcom has introduced a new public consultation for rule changes which will remove regulatory commitments for Openreach to provide Superfast broadband services over copper wires.

As it stands, rules dictate Openreach has to provide customers access to Superfast broadband services. This is a step-change towards the ultimate goal of full-fibre broadband, with Openreach being forced to incrementally increase broadband services. Although this seems like a sensible approach to walk the path to full-fibre, the worry is offering two different services might disincentivise investment in full-fibre.

“Openreach has announced plans for a trial in Salisbury in which it aims to migrate customers to full fibre and then withdraw copper services there at the end of 2022,” Ofcom said in a statement. “Openreach has requested changes to existing regulation to facilitate the early stages of the Salisbury trial. This consultation sets out our proposals in relation to those changes.”

The proposal open to consultation here is the removal of obligations for Openreach to provide Superfast broadband services, speeds of more than 24 Mbps, over copper infrastructure when full-fibre alternatives are available. This is only when a customer requests an upgrade (when moving to a new house for example) not when a contract comes to an end. Customers will be able to stay on current contracts should they choose.

There are two questions which need to be answered here. Firstly, will removing Superfast options for the consumer help drive more investment into full-fibre infrastructure. And secondly, how will the consumers react to being forced into most-likely more expensive broadband tariffs? Openreach and telcos will have to take a careful approach to pricing if this trial is to prove successful.

The plan for Openreach is to withdraw copper services from various markets as exchanges are upgraded to full-fibre. As each exchange area is upgraded, copper services will be withdrawn, this is the strategy across the UK and is important to support the investment case for full-fibre. Ofcom has seemingly listened to this case and is looking to adapt rules to support this case, and hopefully, accelerate the migration across to full-fibre.

Should the consultation be positive, the new approach would be introduced in Salisbury during September 2020, with the long-term plan to retire all copper-based services in 2022 in the area.

Outside of this trial in Salisbury, Openreach has also recently announced a number of wholesale price reductions to encourage wholesale telco customer to encourage consumers to switch to fibre-based offers.

The new prices will come into effect on September 1, designed to make Openreach’s full fibre platform more accessible, with the same terms and conditions available to all telcos, without any obligation to commit to specific volumes.

Product Price reduction New price
Ultrafast (330 Mbps) 36% £24.28
Ultrafast (110 Mbps) 20% £17.28
Superfast (40 Mbps) 10% £14.28

Openreach also plan to launch 500 Mbps and 1 Gbps variants of its FTTP service during the next 12 months.

“We’re making great progress on our full fibre build programme and our discussions with customers about upgrading the country have been encouraging so far,” said Katie Milligan, Managing Director for Customer, Commercial and Propositions at Openreach.

“Naturally pricing is fundamental to that shift and we want to give our wholesale customers the confidence to invest at scale in their own full fibre products and services using our network. To do that, we’re offering them a greater incentive to switch their customers to a full fibre world, with more competitive pricing and a wider choice of products.”

The UK is pretty far behind the norm when it comes to fibre connectivity, though progress does seem to be accelerating in recent months. Should Ofcom be able to evolve the rulebook at the same time as Openreach taking a new mindset to pricing, the future does look a lot more positive.

Ofcom moves in to protect UK mobile users from loyalty punishments

The UK’s telecom regulator believes out-of-contract mobile users could have saved millions if telcos offered the best deal available, and has released new measures to protect them from being treated unfairly.

After nearly a year’s research the regulator has found that on average the out-of-contract customers, those who have taken out a handset/airtime bundle contract and stay with the operator after the contract runs out, are paying £11 more per month than if they have been offered a better alternative, e.g. a comparable SIM-only deal. This would take the total amount of over-payment made by the 1.4 million out-of-contract customers to £182 million a year.

“Our research reveals a complex mobile market, where not everyone is getting a fair deal. So we’re introducing a range of measures to increase fairness for mobile customers, while ensuring we don’t leave existing customers worse off,” said Lindsey Fussell, Ofcom’s Consumer Group Director.

The new measures introduced today, published in a release titled “Helping consumers to get better deals in communications markets: mobile handsets”, focus on three areas:

  1. Transparency of contract details: mobile operators offering bundle contracts should tell customers the cost of the handset and the cost of airtime separately. This is in line with new EU rules, but Ofcom has decided to introduce it to the UK despite  the decision to leave the EU.
  2. Time limit on “split contract”: this refers to the kind of contacts that a customer would pay for the handsets and usage separately. The new rule would cap such contracts to 24 months, to avoid customers being locked in one contract for to long and to make switching operators easier.
  3. Concretised measure to treat customers fairly, following the more vague “Fairness for Customers” commitment the operators signed up to. Specifically, it requires mobile operators to tell customers that their contract is going to end, and to explain to them the best available deals including SIM-only deals. The easy way of switching operators with a text message that was laid out in June is also coming into effect this month.

Ofcom also declared the first victories in operator endorsements. “All the major mobile companies – except Three – will also be reducing bills for millions of customers who are past their initial contract period,” Fussell said.

O2 and Virgin Mobile will charge their out-of-contract customers the equivalent 30-day SIM-only deal, while both EE and Vodafone are going to reduce the price for their customers out-of-contract for more than three months, though they will only confirm the level of discount by the end of the year. The discount will become effective next February.

“Three is the only major provider that has refused to apply any discount to its out-of-contract customers. As a result, these customers will continue to overpay and will not receive similar protections if they stay on their current deal,” the Ofcom statement said.

The regulator also announced that later this year it will publish its findings on broadband prices, and why some customers find their broadband bills higher than others.

BT faces another Ofcom probe

Ofcom has kicked-off an investigation to determine whether BT has complied with regulations concerning Excess Construction Charges (ECCs).

The ECCs are effectively charges for extra work BT-owned Openreach has to do to meet customer-specific network construction requirements. After the first £2,800 in excess cost, BT has been allowed to balance the spreadsheets with a standard connection charge for all relevant business connectivity services. BT has admitted it may not have applied the charge correctly and could be in-line for some wrist-slapping from the regulator.

“BT has provided Ofcom with information indicating that it may not have correctly applied the ECC exemption to a number of relevant business connectivity orders since the beginning of the ECC exemption regime,” an Ofcom statement reads.

“Having considered the information provided by BT, we have decided to open an investigation to examine whether there are reasonable grounds to believe that BT has failed to comply with its obligations under the following SMP conditions from 16 May 2014.”

Although some might suggest that a wholesaler such as Openreach should wear the cost of constructing its own assets, there are some exceptions. Occasionally, when delivering a new high-capacity leased line, for example, additional costs need to recouped by Openreach. This would be considered reasonable business practice, assuming Openreach plays fairly and by the rules.

Thanks to a prior Business Connectivity Market Review conducted by Ofcom, pricing controls have been placed on Openreach. Since 16 May 2014, the firm has been under these pricing restrictions in the pursuit of fairness.

As with most of these statements from Ofcom, there is little information for the moment. However, as BT informed the regulator of the potential over-charging, it would appear this is a case where judgment has already been reached. All Ofcom has to do now is understand the severity of the non-compliance and dish out a suitable penalty.