Fool's Eye View

[ December 13, 2000 ]

OFCOM: The Office of Communications

By David Kuo (TMFDragon)

Carburton Street, London – On February 3, 2000, the Secretary of State for Culture, Media and Sport and the Secretary of State for Trade and Industry jointly announced a consultation on a White Paper setting out the Government's reform of broadcasting and telecommunications regulation. This White Paper was published on Tuesday, and promises to change fundamentally the way the telecoms, media and Internet industries are regulated.

The two departments, through the Communications Reform Team, solicited and received views from a wide number of interested and concerned parties. The list of companies and individuals that submitted their opinions on the powers of the new regulator – to be known as the Office of Communications, or OFCOM – read like a Who's Who of the telecommunications, media and technology world. These companies also expressed their fears, concerns and outlook for the communications industry for the year ahead.

What has been happening in the Communications Industry?

It was clear from the submissions that many of the companies were struck by the pace of change in the communications industry. There was a time when each player in the industry could be pigeonholed neatly, and what happened in one sector had very little to do with what went on in another. For example, telecommunications concerned itself purely with providing a channel for two-way transmission that enabled two parties to "talk" to each other. Media, on the other hand, was involved with a one-way delivery of content from a broadcaster into the homes of consumers. The advent of the Internet went a long way to transforming the way communication was perceived by the consumer.

The world of communication has now changed significantly and it is already difficult to differentiate between a streaming video on a desktop computer and a "video on demand service" through one of the cable operators. Consumers can also now send and receive e-mail through their television sets, connected through a digital set-top box. They can conduct their banking transactions through the television or even place an order for goods through the same medium. In future, it will be the demands of the consumer that will dictate how and where a video will be delivered for viewing. It needn't be through a television set but could even be though a WAP-enabled phone or a handheld computer. That, in essence, is the key to convergence and the blurring that now exists between the boundaries of telecom, media and the Internet.

At present, a traditional terrestrial broadcaster that wants to deliver a program down a telephone line has to satisfy a number of separate authorities. These might include Oftel (the telecom regulator), the Independent Television Commission (ITC) and the Broadcasting Standards Council (BSC). In future, these will come under the umbrella of the Office of Communications, OFCOM. The new regulator is expected to give the UK a "world lead" by allowing the industry to "act with responsible freedom, upholding important standards for citizens".

Who Are the Winners and Losers?

Everyone involved in the telecom, media and technology arena will be a winner from this White Paper. The playing field has been levelled greatly to allow every household to be connected to the Internet. At present, only a quarter of the UK's households have access to the Internet but digital television will go a long way to correcting this inequity. Information and knowledge are the right of every citizen and not just the few who can afford to pay for it.

From an investor's angle, the White Paper will open the way for greater intra-business involvement. We could well see a media-based company take an active interest in the telecom sector. Conversely, a telecom company may want to expand its interests to include its interest in controlling media content. The demands of the industry dictate that no single business will be able to deliver the complex mixture of services that consumers require. The White Paper will go a long way to ensuring that those demands can be met.

Towards the end of the last decade, the euphoria that surrounded telecom, media and technology stocks pushed the share prices of these companies to stratospheric levels. This year, many of these companies came back down to earth but the major shake-up and the introduction of OFCOM could herald the start of an integrated telecom, media and Internet industry.

Where Next?

Details of the Communications White Paper
Telecoms sector discussion board
Media sector discussion board