There is a lot for the UK telecommunications industry to be getting a move on with at the moment. The Government is consulting on the future of cyber-security in the sector, we have the Product Security and Telecommunications Infrastructure Bill, pending consultations on the secondary legislation and Code of Conduct following on from Telecommunications (Security) Act 2021, two meaty waves of changes to regulations following the transposition of the European Electronic Communications Code to implement, a long-overdue consultation from the Office of Communications (Ofcom) on CLI Authentication, and more. And last week, Ofcom published its much-anticipated statement giving effect to its work on Seamless Switching (or ‘One Touch Switch/OTS’).
OTS is designed to make it easier for consumers to change their provider, by having a system between the gaining and losing providers to facilitate matters. For consumers, read businesses too, because while Ofcom have only mandated it for consumers, the reality is the industry will have no choice but to adopt a single system for all customer types.
Those reading this that are involved with any of the UK’s telecommunications trade associations will be aware of the tight implementation timescale (April 2023) and the fracas it is causing the entire industry of some 450 networks and over 1,000 service providers that will have to agree to the system and integrate with it at some level. Keep in mind that this is an industry that has been unable to reach a consensus to update its number portability manual to replace references to the Director General of Telecommunications, which ceased to be a thing in 2002, so watching it try and agree to a complex system is going to be worthy of some extra butter on the popcorn.
All that aside, Ofcom’s statement does contain one absolute gem. At §3.144 it says;
The section 47 tests include that the GC or modification to a GC must be proportionate to what it is intended to achieve. A cost-benefit analysis is not a prescribed requirement or a pre-requisite to demonstrating that a decision is proportionate under the section 47 tests; nor is there a legal obligation to seek to quantify the impact of our proposals under section 7 of the Act in every case. How we assess the impact and proportionality of our proposals depends on the nature of the decision. [..]
Ofcom suggest that consideration of the costs of their policy interventions-which, in a perfect market are a burden that is placed on consumers as service providers pass on increases in their costs-are, “not a prescribed requirement or a pre-requisite to demonstrating that a decision is proportionate.”
Funnily enough, in Vodafone Limited v Office of Communications [2008] CAT 22, Lord Carlisle allowed an appeal by an Ofcom where the cost-benefit analysis was flawed:
In considering the [Cost Benefit Analysis (“CBA”)] as a whole, the Tribunal finds that it was not carried out to the requisite standard and does not withstand the level of scrutiny which we are required to apply under section 195 of the CA 2003. In particular, for the reasons given above, the CBA contained unreliable estimates of the costs of direct routing, relied upon insufficiently justified or explained benefits, and is therefore flawed to an extent requiring a remedy from this Tribunal.
Ouch. This was also after the Tribunal had admired the ‘attractive simplicity’ of proportionality being equated to the costs outweighing the benefits and stating the essential question being, “whether Ofcom equipped itself with a sufficiently cogent and accurate set of inputs to enable it to perform a reliable and soundly based CBA.”
While Ofcom’s latest logic may be closer to passing the blush test when considering something inherently qualitative, such as equivalence of access to the emergency services for a sign language user, or requiring correspondence in Braille for a blind person; but, when the object of the policy intervention is an ideological interference (I’ll explain why in a moment) in the market, requiring many millions of pounds of systems developments, it is almost as if Ofcom is saying that cost is no object. Of course, we should also note those inherently qualitative examples are also enshrined in law, with the will of Parliament on equivalence for the disabled being clear – no such will has been expressed about Ofcom exercising its discretion in switching systems and processes.
As to why it is ideological. There are three key data points to this. The first is that I can quote (but will not attribute to the person directly) a former senior member of the Ofcom team as saying they considered Ofcom’s approach to switching to be just that.
Secondly, Ofcom’s own data can be used to demonstrate the average consumer is loyal to their provider for over ten years – and we do not have satisfactory evidence as to why this is the case (noting the statutory burden is on Ofcom to demonstrate proportionality, not for others to disprove it). Anecdotally we know that the risk in a post COVID world inherent with switching a utility such as broadband is not worth saving a few pennies a month and that many consumers also have a genuine satisfaction with the value of the service they currently receive. It is not sufficient to simply jump to a conclusion that ‘it’s bad and must be because switching is hard.’
That brings us to the third point – there was no consideration of what I call the ‘pro-active reactive save.’ Many people benchmark their service to the market from time to time and use that as leverage to get a better deal from their incumbent provider – in fact, UK operators are, for all intents and purposes, required to prompt their customers of this every year.
As to whether today’s statement, where Ofcom have formally exercised their Communications Act 2003 powers, causes one or more members of the industry to seek an appeal or judicial review of the exercise will not be known for up to two or three months, respectively. In the meantime, everyone should be concerned about a regulator that seemingly places evidence-based decision making second to ideology.
Oh, and everyone needs to get on with that list I started with, it’s going to be a tough year!
