LONDON (Alliance News) - The chief executive of UK media and communications regulator Ofcom used a speech on Wednesday to lay out concerns about consolidation in the UK mobile market and said the watchdog is observing the issue of rising prices for consumers closely.
Sharon White, speaking to the London School of Economics & Political Science, said that while there has been significant developments in the communications market in the UK in recent years, some concerns remain.
White said there have been signs in recent months of rising prices for landline and broadband customers, but "without the apparent justification of higher costs or improved service". White said BT Group PLC, Sky PLC, TalkTalk Telecom Group PLC and Virgin Media, owned by US cable giant Liberty Global PLC, have all raised rental prices in the past year.
White said that while there remain good offers out there for customers who shop around, those concerned about leaving their incumbent provider, particularly the elderly, are facing higher bills. White said the regulator is "concerned" about these developments and will watch the market closely.
White also spoke about the risks to competition in the UK communications market from consolidation, as the market shifts from one with multiple providers offering distinct services to fewer, bigger players offering a 'one stop shop' for television and telecoms services.
While this can bring convenience for consumers who can get everything they need without having to take out different contracts with different providers, there is evidence that customers are less willing to change providers, which may "dampen competitive pressure", White said.
Turning to specific deals in the mobile sector, White said Ofcom has already published its evidence on the proposed acquisition of EE Ltd by BT in which it highlighted possible weakened competition in the mobile market. "BT would no longer be a new mobile entrant in its own right, and may have an incentive to favour EE over other mobile operators in providing network services," White said.
In addition, Three and O2, along with Vodafone and EE the other two mobile operators active in the UK, are planning to merge. White said this will reduce the number of mobile operators to three from four and said Ofcom continues to believe that four operators is a "competitive number" which has delivered good results for consumers and sustainable returns for companies.
Late last week, the UK Competition and Markets Authority requested that the European Commission refer CK Hutchison Holdings Ltd's proposed acquisition of Telefónica's 02 UK network to the CMA for investigation. Hutchison, which runs the Three network in the UK, has agreed to acquire O2 UK from Telefónica for GBP10.25 billion.
The CMA said it is its initial view that the transaction "threatens to affect significantly competition in the UK retail mobile and wholesale mobile market".
Ofcom's White said that only when operators cannot make an adequate return would she expects investment to suffer, but the evidence suggests this is not the case in the UK mobile market. In addition, overseas, there is growing evidence that consumers are paying the price of consolidation in the mobile market.
White said the European Commission and European telecoms regulators have raised concerns that the specialist European framework which governs the communications sector "may not be sufficiently flexible to allow for the regulation of markets where there is a limited or shrinking number of players - namely an emerging oligopoly."
White said the European Commission is now to consider these issues as part of a review into the telecoms regulatory framework and said she hopes this will leave to a revision to allot more powers to regulators to address concerns in markets where power is being concentrated among only a few players.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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