Ofcom becomes Off-com

Ofcom today confirmed plans for a 28%+ cut in its budget over the next four years – with the vast bulk being front-loaded: 22.5% of that cut will come in 2011/2012, with a cut of £27m, taking the overall budget to £116m.

We need to see Ofcom’s forthcoming Annual Plan – due out ‘shortly’ – to see what this means in practice (although the confirmation of the dimensions of the cut seem to indicate that this draft is likely to be substantially unchanged), but (on the back of the experience of year-on-year budget cuts) Ofcom believes it can nevertheless maintain its ‘capability and effectiveness’ in delivering ‘effective and targeted regulation’ and, as if to prove ‘business as usual’, it chose today to launch a new consultation on Openreach’s wholesale pricing. Though this tells us little other than that the regulator is on-message.

Ofcom is already in the process of finalising cuts to 170 jobs – 19.5% of its workforce as at 31 March 2010 (see Table 6) – and it’s difficult to believe that this will not have an impact on regulation in the sector. Cuts to Ofcom’s governance structure and the closure of its Consumer Panel have already been made, while I note that those employees remaining in the companies defined benefit pension plans are faced with the loss of future accrual on top of a two-year pay freeze. We are also likely to see the loss of Ofcom’s role in encouraging digital participation and rationalisation of its research programme.

Time will tell. The earlier removal from last year’s Digital Economy Act of a greater role for Ofcom in promoting investment in the industry is already a critical loss since this would have counter-balanced the existing statutory duty to promote competition which is proving problematic to the shape and direction of the industry. The impact of a smaller – perhaps more focused – regulator on the dynamism of the industry is yet to be seen, as will be its ability to compel the government to see through its ambitious plans for the communications industry (about which this blog has previously been critical – see, for instance, here). The signs are clearly not hopeful – but the ideological gap between what I’ve just said about the role of the regulator in driving the industry forward and the practical reality of the government’s market-driven approach is immense.

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