The UK's OFCOM- A Converged Regulatory Authority
OFCOM, the new Office of Communications, was established by the Office of Communications Act 2002 (the “OFCOM Act”). The OFCOM Act was intended to anticipate and pave the way for the Communications Act 2003 (the “Communications Act”). The Communications Act redefines the regulation of telecommunications and broadcasting in the United Kingdom, and assigns regulatory responsibility for these sectors to the unified regulator OFCOM.
A major reason for the creation of OFCOM was the difficulty of co-ordinating the activities of the previously distinct UK regulators. The need for co-ordination was increased by the introduction of the new EU regulatory framework, and the obligation on the UK as a member state to ensure that all regulation of the communications sector complied with the new EU requirements.
OFCOM replaces and assumes the responsibilities of the following five regulatory bodies:
(a) the Office of Telecommunications (Oftel), previously responsible for regulating the telecommunications sector;
(b) the Radiocommunications Agency (RA), previously responsible for the allocation and management of non-military radio-frequency spectrum;
(c) the Independent Television Commission (ITC), previously responsible for licensing and overseeing independent (non-public) television services;
(d) the Broadcasting Standards Commission (BSC), previously responsible for generally applicable standards in broadcasting; and
(e) the Radio Authority (Radio Authority), previously responsible for licensing and overseeing independent radio broadcasting services.
The BBC (the public broadcasting undertaking in the UK) continues to be governed by the BBC Board of Governors and its Charter. However, OFCOM is given the responsibility of overseeing the BBC’s compliance with its Charter and generally applicable broadcasting standards.
OFCOM will also exercise concurrent powers over the communications sector under the Competition Act 1998 and the Enterprise Act 2002, the competition laws of general application in the UK.
Part 1 of the Communications Act identifies the functions of OFCOM and imposes a number of general duties and obligations related to the exercise of those functions. Among the duties and obligations, OFCOM is required to ensure:
(a) the optimal use for wireless telegraphy [radio-communications] of the electro-magnetic spectrum;
(b) the availability throughout the United Kingdom of a wide range of electronic communications services;
(c) the availability throughout the United Kingdom of a wide range of television and radio services which (taken as a whole) are both of high quality and calculated to appeal to a variety of tastes and interests;
(d) the maintenance of a “sufficient plurality of providers” of different television and radio services; and
(e) the application, in the case of all television and radio services, of standards that provide adequate protection to members of the public from the inclusion of offensive and harmful material in such services.
Part 1 of the Communications Act identifies other obligations that originate with EU Directives and related UK commitments, promoting the interests of EU citizens generally and development of the common European market. OFCOM is also required to ensure it does not impose unnecessary burdens on the industry, must publish statements regarding how it will exercise its functions and must hold public consultations on at least its more important proposals and initiatives.
Licensing and Other Regulation by OFCOM
As required by the implementation of the new EU regulatory framework, Part 2 of the Communications Act (dealing with “Networks, Services and the Radio Spectrum”) replaces individual licensing of telecommunications systems with a new licensing regime based on general authorisation and the application of “General Conditions of Entitlement”. The General Conditions set out the obligations of all network operators or service providers operating under the general authorisation. Part 2 of the Act confirms the authority of OFCOM to set the General Conditions, and identifies the matters to be addressed in those conditions. OFCOM has published a statement identifying the General Conditions, which include:
(a) conditions relating to the provision of network access and service interoperability, including the requirement to negotiate interconnection agreements;
(b) universal service conditions;
(c) the requirement to comply with the national numbering plan;
(d) must carry obligations (where a network is used for the carriage of broadcasting signals);
(e) the adoption of applicable technical standards;
(f) the availability of emergency services, operator assistance and directory inquiry facilities;
(g) consumer protection measures, such as published contracts and terms of service, accurate billing systems, the adoption of industry codes of practice and dispute resolution processes; and
(h) special requirements for consumers with disabilities.
OFCOM has the authority to determine additional requirements applicable to operators that are designated as having “Significant Market Power” (“SMP”) . The permitted SMP conditions include additional interconnection and network access obligations, price controls and the implementation of cost separation or other cost accounting systems; and additional requirements regarding the supply of leased lines. An operator will only be designated to have SMP if it (alone or with others) has a dominant position in the relevant market. In this context, “dominance” has been defined to mean “a position of economic strength affording the person the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers”.
In exercising its powers regarding SMP, the Act requires OFCOM to:
(a) identify and define the relevant communications markets;
(b) review those markets;
(c) determine the extent to which those markets are effectively competitive;
(d) identify any market players which are determined to have SMP; and
(e) set appropriate SMP conditions.
The Act also requires OFCOM to review its market assessments periodically with a view to revisiting any SMP determinations made and deciding whether to add, modify or revoke SMP conditions. If OFCOM finds that an operator to whom SMP conditions are applied (based on earlier reviews and analyses) no longer has SMP, those conditions must be revoked. Where a market is identified by the European Commission as transnational, OFCOM is required to work together with the relevant other national regulators to review that market, identify any SMP operators and set appropriate SMP conditions.
OFCOM has conducted a number of specific market reviews. It has, for example, concluded that BT has SMP in markets such as leased lines, business and residential local and national calls, calls to mobiles and international calls in the residential market (all grouped under the “fixed narrowband retail services market”). Similarly, OFCOM has found that each of the major mobile network operators in the UK has SMP in the mobile call termination market. As a result of these determinations, OFCOM has imposed additional price controls and other SMP conditions.
As indicated above, OFCOM is the successor to the Radiocommunications Authority and so has regulatory authority over the management and licensing of radio-frequency spectrum in accordance with the Wireless Telegraphy Act 1949. Wherever OFCOM decides to limit the right to use spectrum, it must publish details of the frequencies or uses for which it proposes to grant licenses. These details must also set out the criteria it will apply in determining the number of licenses offered and the persons to whom they may be awarded. The Act requires OFCOM to ensure these criteria are objectively justifiable, non-discriminatory, proportionate and transparent in relation to what they are intended to achieve. The spectrum management provisions of the Act also address processes for future spectrum auctions, and introduce a new framework for permitted spectrum trading.
OFCOM also has regulatory authority over television and radio broadcasting. Among the most important features of this part of the Act are the following:
(a) Cable television systems will no longer require additional licenses as “local delivery services” under the Broadcasting Act 1990. Instead, cable systems will be subject only to the general authorisation, and applicable conditions, as electronic communications networks.
(b) Television or radio content services distributed by electronic communications networks will remain subject to the requirement to obtain licenses under Section 13 of the Broadcasting Act 1990, but those licenses will be issued by OFCOM.
(c) OFCOM will implement other features of broadcasting regulation, such as the imposition of “must carry” rules, content production quotas and applicable codes of practice and program standards.
The Communications Act and the OFCOM Act have fundamentally altered communications regulation in the UK, including by merging the functions of five previously distinct regulators with authority over telecommunications and broadcasting into a single unified regulator. OFCOM exercises the full range of regulatory authority over communications networks and services, including all aspects of broadcasting.
The Communications Act has replaced individual licensing of “telecommunications systems” (being any systems used for the conveyance of sounds, visual images or other signals by electro-magnetic or electro-mechanical means) with a general authorisation governing the operation of “electronic communications networks” or provision of “electronic communications services”. Network operators and service providers are subject only to the requirements of the General Conditions of Entitlement, as well as any further conditions determined by OFCOM as a result of a finding of Significant Market Power.
The new authorisation framework introduced by the Communications Act reflects the technological neutrality of the new EU regulatory framework. Accordingly, the operation of networks and the provision of services under the general authorisation are not limited to any particular types of networks or services.
Networks making use of radio-communications will be subject to applicable spectrum licensing requirements and processes. Television or radio content services will continue to be subject to an additional licensing requirement under Section 13 of the Broadcasting Act 1990. Both of these additional licensing functions will be performed by OFCOM.
 Sections 78 to 93 of the Communications Act set out the specific SMP conditions that OFCOM can impose.
 This definition brings the UK and EU approach to regulation of dominant firms more closely in line with the approach traditionally used in North American competition and telecommunications law.
 OFCOM’s powers and obligations in connection with spectrum licensing are set out in Sections 152 to 184 of the Communications Act, which implement the applicable parts of the Framework Directive and the Authorisation Directive.
 OFCOM’s functions in this area are defined by Sections 198 to 262 of the Communications Act.