OfcomWatch co-founder Luke Gibbs reports on last week’s Ofcom conference entitled - ‘Communications and Convergence - Challenges for 21st Century Digital Economies’ - which brought together international regulators and industry players to discuss the challenges for regulatory frameworks posed by convergence.

First, a brief overview of a couple of the sessions and then some comment on the event as a whole, the questions it posed, and how things might develop.

1.

There has already been significant media coverage and comment relating to James Murdoch’s keynote - and with good cause, he spoke with energy and passion. On the platform in the initial session alongside Vodafone CEO Arun Sarin, it certainly got things off to an interesting start.

Murdoch obviously doesn’t feel the need to make friends with regulators. He longs for a world where they are gone, the desks at Riverside House (Ofcom HQ) or international equivalents empty - the market and competition providing safeguards consumers. I suppose the irony is that that is what regulators claim to want too - although I suspect Murdoch may have a while to wait yet.

He saved particular venom for the regulatory framework around public service broadcasting in the UK. He suggested the BBC had ‘meglomania’ for its forays into every aspect of the broadcasting offering, and criticised regulators and the government for supporting (and actually implementing) a system he called ‘elitist’. Much of this had overtones of Rupert Murdoch’s MacTaggert Lecture way back in 1989. Seems the Murdochs believe little has changed in the UK in the past seventeen years - and they are probably right - although technology is starting to bite it would still be possible to view British broadcasting as a rather cosy little world.

Developing the theme James Murdoch said - “Too many people in [UK] broadcasting have been brought up in this straightjacket of heavily regulated and interventionist structure . . . in an era of constant change, a good umpire sets the rules and watches the game flow unless those rules are flouted. A bad one gets in the way.”

He made reference to the Reithian foundations of British broadcasting, which he believes are still dogmatically embraced by regulators and government and said that it aimed “not to protect people against real harm, but to ensure that broadcasting was a sort of moral and educative crusade. There is a tougher but truer description for this approach. It was and is authoritarian.”

After such a searing critique it was with some irony how positive Murdoch was in responding to a question about the recent appointment of Michael Grade as Executive Chairman of ITV (of which Sky recently acquired a 17.9 percent stake). Isn’t Grade the man who has just fought tooth and nail to ensure that the BBC got its ten year charter, ensure it has scope to extend reach into digital markets and continue its ‘elitist, moral and educative crusade’? There’s that cosy little world again…

One aspect of Murdoch’s comments that struck me as particularly interesting related to the shifting demographics in the UK - and elsewhere. He outlined the work Sky had started to undertake to provide products and services to older people - seeing this as a rapidly growing and important new market. He mentioned a statistic - that 80 percent of the people who had ever lived to 80 and beyond were alive now.

For regulators this new market in oldies will pose yet further questions about the future. Much of the current regulatory rationale stems from protecting citizens and consumers from instances of market failure. Traditionally the communications market has been seen to fail older consumers. But surely - as Murdoch points out - such failure is significantly less likely in the future as older consumers grow in numbers, have greater spending power, more understanding of technology and how it can enable them. The market - be it content, access or device - will respond to these new demands accordingly.

Overall, Murdoch (who was the big crowd puller on day one) gave a solid performance. Certainly his future looks very bright indeed and it is worth noting James Enck’s predictions about James Murdoch (although I think his second one is already in play). Enck says - “a) we won’t see him as CEO of Sky for more than another two years, before he takes over either Fox Interactive or the entire Mother Ship; and b) I wouldn’t be surprised to see him pursue a political career.”

Arun Sarin was a little more measured in his comments. His key message was that regulators should enable re-farming of legacy spectrum to provide 3G services. He said - “I would urge Ofcom and European regulators to look into the question of spectrum liberalisation and please make this a priority so that we can catch up with the rest of the world.” Freeing up use of legacy spectrum (900MHz) - which is currently confined for delivering voice, SMS and GPRS data services - would have some serious implications for the fifth player 3 who don’t hold legacy spectrum.

Sarin’s ask is of course politically compromised. Ofcom is proposing to auction an extension band in the next few months, which could be used for 3G services. And Gordon Brown practically chokes so heavy is the salivation associated with the prospect of a spectrum auction (based on the ludicrous 22.5 billion GBP windfall from past 3G licences). If operators were allowed to re-farm legacy spectrum for 3G ahead of the auction it would seriously impact the likely revenue generated from the extension band.

Sarin also responded forcefully in regard to the European Commission’s recently decision in regard to roaming charges. He said that the Commission’s actions had been illegal under the existing EU framework, that the market had been responding to the roaming issues and that the Commission had taken action before waiting to see the outcome of market changes. On the legal point - are we about to see the ‘Mother of all Battles?’ TeleBusillis thinks so!

The other keynote on day one was that of Fabio Colasanti, Director General, DG Information Society and Media at the European Commission. He tackled the framework review, remedies, roaming and the AVMS directive - and highlighted that little happens in national communications markets that the European Commission doesn’t have had a hand in overseeing. He described the roaming decision as ‘exceptional’ perhaps adding weight to any potential legal challenge from mobile providers.

The afternoon panel, which featured senior representatives from Google, ntl:Telwest, Carphone Warehouse, Hutchison Whampoa, and Channel 4. Asked by Sean Williams, Partner, Ofcom what they would ask for if they could ask anything of Ofcom they all had a very clear view of what the regulator should be focusing on. Again James Enck has outlined the long list of requests -

“Carphone Warehouse - transparency and process in LLU needs to improve; NTL - some action should be taken over a certain someone’s monopolistic behaviour in sports and film rights; Google - some action on copyright release for indexation of printed and archival material would be nice (this is entirely out of OFCOM’s sphere of influence, it must be said); Channel 4 - continuity in the PSB funding formula is essential to ensure a consistent output of quality indigenous content.”

Unfortunately I missed BT’s Ben Verwaayen on day two.

You can watch all the action here.

2.

There is no doubt that this conference pulled in some of the biggest names in the industry and was brilliantly staged and managed. But should a regulator be running a conference about what its own regulatory agenda and framework might look like in the future?

I suppose that this would depend on your view of regulators. I suspect that although James Murdoch attended the conference, he wouldn’t necessarily agree with what appeared to be the overall rationale - to find new approaches to regulating the communications sector.

You have to assume Murdoch’s position would be that technology is pushing regulators out of the game altogether - providing competition and choice without all the policing and enforcement. But for all the innovation it would be hasty and naive for the regulators just to pack up the tents and move off the plain - not least because so much of the innovation has been dependent on the ’space’ made by regulators - particularly at the network level.

It was Ed Richards, Ofcom’s recently appointed CEO whose speech on day one provided a useful framework for the discussions that subsequently developed over the two days. These themes are also outlined in his introduction to a book of essays prepared for the conference - and outline the areas where regulators should be assessing their future role in light of on-going and rapid technological and market developments.

The first issue relates to perhaps inter- and intra- platform competition, where regulatory intervention ensures that there is investment and innovation in new platforms and networks. The second relates to access and the provision of universal service for critical services - after all markets will still tend not serve unprofitable areas no matter what the innovation and investment in other areas - how will universal service be applied and paid for as the monopoly rents of the previous incumbent start to disappear - and which services will incur such obligations?

Thirdly, spectrum liberalisation needs to be advanced as digital devices shift the debate from a point where there is a shortage of spectrum to one where there is a shortage of rights in spectrum. And, fourthly, there is content regulation in this new world - perhaps the area most likely to see regulatory withdrawal - but an area that still requires regulators to assess the levels of individual responsibility and self regulation in regard to how citizens and consumers consume content before it would be politically acceptable for them to leave us all to it.

I think there is little doubt that this conference explored these themes in detail. It offered useful perspectives from a range of genuine experts. But there needs to be an explicit acknowledgement that regulators, although well placed to debate how technology is changing their role, still only implement the will of legislators. Most critical of all in the UK will be how the debate on these issues is communicated to Parliament. And this is becoming ever more pressing. There is still a view in Parliament is that the Communications Act 2003 is good for ten years yet in fact key parts of it will be redundant in less than five!

I think Ofcom are acutely aware on this point - and in the overview to a book of essays produced in conjunction with the conference it says - ‘policy-makers will need to decide whether regulators should labour under the constraints of existing regulatory frameworks or make changes to the legislative structure to take account of convergence.’ With this point in mind it was disappointing that there were no MPs present at the conference (other than Rt. Hon. Margaret Hodge, MBE MP - the current minister with responsibility for the information industries - who left immediately after having read us her speech).

To be fair, this conference was all about engaging with international colleagues not politicians - a chance to discuss the challenges facing communication sector regulators across the world, about the ways in which they were looking to tackle them according to the particular cultural, economic and political concerns of their individual backyards. It was also a chance to share best practice whilst showcasing Ofcom as a leader in its understanding of converged communications markets and the issues likely to impact them. I think Ofcom got the balance about right this past week between lobbying for its own future and providing a platform for discourse and analysis. It is genuinely a world leader in this field - and on it can be proud in how it represented the UK during the conference.

The UK-s communications industry should take most note of the conference. Engagement in these debates is crucial to ensuring innovation and competition. I think Ofcom has raised the bar yet higher this past week - and no doubt some of its ‘thought leadership’ will be intimidating for private companies more used to identifying and serving markets today and tomorrow rather than constantly thinking about how the regulatory frameworks will or should evolve. Of course, this misses the nature of the business they are in, and the best companies will look at regulation as a point of strategic and competitive advantage. The best regulatory framework will be developed as a partnership not as a carrot and stick.

It is interesting to note that of the collection of essays (Communications - the next decade) produced for Ofcom as part of the conference materials, none of the contributions come from anyone working directly in the communications industry. This isn’t to say that the book isn’t impressive and useful - it very much is. And it may be that many of the debates can only be framed by external commentators not those with a vested and specific industry viewpoint. But as a starting point for engagement it would now be useful for private companies to develop and respond to the points made in some of these essays - which are likely to significantly inform Ofcom’s thinking over the next year or so.

In the closing comments for the conference Ed Richards put forward the suggestion that this conference could become an annual event. Certainly, you could support this idea - not least for the excellent networking opportunities and fantastically well located evening drinks receptions. But you would also hope that the conference would increasingly go ’self-regulatory’ as the years passed. I suspect that the regulatory landscape will have changed considerably by let’s say 2012 - and although other issues will always emerge you would hope that as regulators look to deregulate where possible they will in turn require fewer conferences to discuss the nature and detail of their work.