Mobile Evolution: Ofcom’s mobile sector assessment

Statement published 17|12|09

Executive summary

1.1 Mobile communication has transformed the way almost all of us keep in touch. Ofcom's view is that currently mobile markets are serving UK citizens and consumers well and competition between mobile operators is driving this success.

1.2 As a result, the majority of people in the UK use mobile services. Innovation is flourishing: we are using more text and data services; mobile internet access is taking off; and devices can do more while costing less.

1.3 Additional indicators of this success are the existence of commercially-derived wholesale contracts to supply MVNOs, robust levels of customers switching service provider, and the existence of self-regulatory schemes to address consumer content concerns.

1.4 Our assessment is based on the extent of competition within the current market structure. Any significant change in the market structure may affect competitive pressures in the industry, and we would assess such changes on their own merits.

1.5 There are some areas where performance could be improved, or where today's success does not guarantee future success. For example:

• service availability and quality (particularly of coverage) is not satisfactory for all citizens;
• future mobile technology trends may bring great benefits to some citizens, while others may be unable to access these benefits; and
• there are trends and pressures that may change the nature of competition in the future, requiring us to remain vigilant to ensure that competition continues to be effective.

1.6 However, in assessing each area of concern in turn, we conclude that our continued promotion of sector competition, as a mechanism to address many of these concerns, should remain the primary means of achieving good market outcomes. Specifically, our bias against intervention and our wider telecommunications strategy lead us to continue to prefer to maintain healthy, infrastructure-based competition at the deepest level possible to produce differentiation in mobile services and pricing. We conclude that:

• regulating wholesale services (as we do in fixed telecoms) is not appropriate (nor do we need a wider market review) at this point;
• we should put more focus on the enforcement of rules promoting competition;
• we should continue our spectrum liberalisation programme; and
• we should use competition law as appropriate to assess future market changes.

1.7 There are areas where we need to be prepared to intervene if the market does not deliver good outcomes for citizens and consumers. Our current priorities are to ensure: easy and reliable switching; access to information to allow consumers to get a good deal; effective complaints and dispute handling for new market entrants; protection for consumers from misleading or exploitative practices; and ensuring that vulnerable consumers are not disadvantaged.

1.8 We also consider mobile coverage to be an area of concern. It is not clear whether regulation can play any part in day-to-day coverage issues (although it remains open to government to use coverage obligations to set the framework within which networks are built).

1.9 In our Mostly Mobile consultation published July 2009 we pointed out that, while mobile network availability is generally good, coverage issues persist. There is still a noticeable difference between 3G coverage in rural and urban areas, and also between different parts of the UK. 2G coverage is unlikely to be extended further on commercial grounds. Despite continuing roll-out of 3G networks, 3G is unlikely to extend beyond the 2G network footprint, which may result in persistent coverage problems for some areas.

1.10 We are taking steps to tackle this:

• We are conducting research to determine the causes of not-spots, including those that can occur in areas 'covered' by mobile networks.
• We are working with industry to gain a better view of the end-user experience delivered by mobile broadband networks.
• We are liaising with mobile operators and public bodies to explore the contribution we could make to facilitate better coverage.

1.11 We also provide links to mobile operators' coverage checkers on our website (http://www.ofcom.org.uk/consumer/2009/08/mobile-broadband-coverage-checker).

1.12 In regulating the mobile sector in the future, we will build on the consumer and economic benefits that have been driven by the mobile sector, rather than adopt a new regulatory approach. We see the main areas of our regulatory activity as helping to promote competition and innovation, safeguarding consumer interests, and tackling, where appropriate, problems that the market fails to solve adequately (such as coverage not-spots).

1.13 This statement concludes our assessment of the mobile sector. However, the mobile sector is highly dynamic and subject to ongoing change. Some recent developments, such as the Independent Spectrum Broker's (ISB) report and the proposed merger between T-Mobile and Orange, may well have significant implications for the conclusions set out in this document and for our future work programme.