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By | Andrew Orlowski 12th April 2016 13:02

Ofcom wants you to thank it for resurrecting the spectre of BT's 1980s monopoly

Top Eurocrat could become Brexit poster girl after UK begging letter

Comment Years ago, we used to mock Ofcom for its Ofcom-branded bottled water, and its tediously technocratic “evidence based” approach, something which is actually enshrined in the 2002 Act that created it.

Throughout its first decade, Ofcom chief execs stood regally above the fray, knowing that a regulator’s decision must be empirical and solidly reasoned.

They’d go with what their staff recommended. We were invited to believe that economists were a kind of priesthood: studiously dispassionate, and also above the fray.

Well, although an economist is now in charge at Ofcom, the joke’s on us (and you) today.

Last August, the Competition & Markets Authority - off the back of consultation with Ofcom - agreed BT’s acquisition of EE, creating a monster.

BT became the UK’s largest mobile operator, sole broadband wholesaler and had an increasingly powerful pay-TV presence. Ofcom’s economist chief exec Sharon White brushed aside the concerns of consumer groups to smooth the way.

Recently White has broken with tradition and thrown a very public tantrum about BT getting some real competition in the mobile market. The fourth-placed network (Hutchison, owners of Three) wants to acquire the second placed network (O2). That would reduce four retail networks to three.

Today the Competition and Markets Authority, (for older readers, the Monopolies Commission) has joined in the posturing. Both the CMA and Ofcom have suddenly acquired a desperate need for public approval. They want us to love them.

The CMA has made public a two page letter to EU commissioner Margrethe Vestager that is an encomium to the skills and wisdom of the European Commission. The spectacle of British public authorities praising Brussels bureaucrats, and effectively begging for their help, is not going to be lost on Brexit campaigners.

“The proposed remedies are materially deficient as they will not lead to the creation of a fourth Mobile Network Operator (MNO) capable of competing effectively and in the long-term with the remaining three MNOs such that it would stem the loss of competition caused by the merger,” the CMA’s chief exec Alex Chisholm opines, without offering any evidence. Only if the buyer ditched either the Three network or the O2 network would the takeover be acceptable to him. Otherwise, it should be blocked.

Hutchison’s response is blunt.

“It is interesting to contrast the content of the letter,” they reply, “with the attitude of the CMA (when it was the decision maker) and Ofcom in the BT-EE CMA merger clearance, which was approved without conditions or remedies, creating a dominant fixed-mobile behemoth in the UK market.”

“It is an entirely one-sided argument designed to support a preordained outcome.”

Hutchison’s argument is that the UK needs a healthy market to stand up to BT. Sky and Virgin, both fearing BTzilla trampling wherever it wants, have pledged the cash to keep it healthy: some £10bn. The argument is that with decent regulation, three network operators plus decent MVNOs on top of those is as good or better for consumers than four network operators.

As one reader pointed out, things aren’t quite as clear cut as you might think.

“Given how much of the mobile network infrastructure is now shared between the current four operators, the only real difference between a MNO and MVNO is their investment in the joint ventures. Hence I think Three with their proposals to allow MVNOs to grow to a point where they can also consider becoming direct investors in the joint venture; something I suspect Sky, Virgin and TalkTalk might find attractive are ahead of the game,” he said.

Ofcom is very attached to having four retail mobile networks, having bent over backwards to accommodate Hutch. Ironically, it was Three which was arguing back then that consumers would suffer from, er, having only three networks.

But it’s beginning to look weirdly dogmatic.

In The Times, Alistair Osborne speculates:

Imagine if [Vestager] approves the deal in the face of opposition from both British regulators, so potentially landing UK consumers with higher bills. She’ll end up a poster girl for the Brexit campaign.

I wouldn’t be sure it’s quite so simple as that.

If people think our regulators have colluded with Brussels to reassemble the BT monopoly, dominating the smaller players, few Britons will thank them for it. The BT of the 1970s (and 1980s) evokes little affection with punters who can remember those days.

In a teenage fit of narcissism, and a desperate need for public approval, Ofcom seems determined to recreate the monster. ®

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