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.

Racing online (well, jogging there, anyway)

A belated welcome for Martha Lane Fox’s Race Online 2012 initiative, launched last week following Lane Fox’s re-confirmation in her role as Online Tsar (having performed, well, exactly the same role for the Labour government). Continuity can, sometimes, be a good thing even in politics.

Some things in the initiative look a bit odd: figures like how much boost to the economy is given by job applications being filled in by currently ‘non-line’ unemployed job applicants do smack of desperation to grab headlines and of trying to compete in the public space; there may well be 10m ‘non-liners’ in the UK but not all these will be of the initiative’s ‘working age’ target group; there is a somewhat hectoring tone to the initiative’s public comment; and, crucially, public spending cuts mean that this part of public policy is going to be increasingly dependent on private sector support – a tautology, in my view, and an ultimately self-defeating one at that.

Nevertheless, the online world is an exciting one and, even if it’s not for everyone, it’s ultimately socially and economically beneficial for people to be wired up – although the Race Online slogan of ‘We’re all better off when everyone’s online’, apart from being a little cumbersome, does look as if it was sponsored by O2 (‘We’re better, connected‘).

Anyway, I was given the chance to recycle this rather old news by the current edition of The Guardian‘s Datablog – which also gave me the chance to re-hash another old theme of mine: that of the cheapness of broadband in the UK. The Datablog produces OECD figures which show that broadband in the UK is just about the cheapest anywhere, whether in terms of purchasing power parities or at nominal exchange rates.

Two points arise, really:

– firstly, the cost of broadband appears not to be an obstacle to getting people online (or, if it is, we’re really in trouble). It is, consequently, behavioural issues that Race Online will have predominantly to tackle if it is to achieve its aims.

– secondly, where is the money going to come from to roll out high speed broadband across the UK? It certainly ain’t coming from consumers’ pockets – not at these prices – and one of the little-appreciated aspects to the Labour government’s proposed landline duty was that it would have shared back a small part (a very small part) of the declining household fixed voice and internet/broadband consumer bills since 2005 as measured by Ofcom (Figure 4.55). Cheap bills for households might seem to be a good thing on the face of it, but there are two problems: it sets a falsely low value on a worthwhile commodity; and a market trend of more and more bandwidth at ever cheaper prices is, ultimately, going to come crashing down as a result not least of an inability amongst network operators to finance the necessary investment.

Openreach’s Steve Robertson today commented that high-speed broadband requires public funds of around £2bn if the government’s ambitious goals are to be realised – words which critically step up the pressure on the coalition. I await the results of tomorrow’s conference aimed at mobilising companies with interest. But, for now, it is increasingly apparent that confidence and hubris are not going to be enough: public policy goals require a public finance commitment if they are to be achievable.