Power Lunch with Colette Bowe

Date: Wednesday 2 June 2010

Time: 12:45pm - 02:15pm

Title: Why regulate a competitive market?

Colette Bowe, Chairman of the phone and broadcasting regulator Ofcom, was our guest at a Power Lunch in Westminster this week. Her topic was Why regulate a competitive market? – which is a pretty good question. Back in the early 1980s, of course, when the ('Completely impractical, minister') idea of privatizing the telephone end of the Post Office was mooted, the market was of course very different. The monopoly incumbent – British Telecom, as it became known after privatization – then controlled 100% of the UK's telephone system, wires, handsets and all. It now controls less than 50% of the fixed-line sector, one of the lowest incumbent shares in Europe.

Plainly, regulation was needed at the outset to contain BT's monopoly power. Like most privatization, this one cut with the grain of the existing structures, and breaking up BT into little, competing segments would have been even more difficult than keeping it whole, which was hard enough (privatization was then a completely new and unknown thing). So is it still needed, now that BT faces such competition?

Competition, as the first telecoms regulator Sir Bryan Carsberg used to say, is the best regulator. And all regulators say that competition is what they want to encourage. The question is, how do they know when they have achieved that happy state, and can retire. They need to have some premonition of their own sunsets. That is not so easy for people who are deeply involved in the minutiae of regulatory questions, experts who often think they can 'improve' on markets. It is obviously a decision for the boards of the regulatory agencies. But again, are they detached enough?

I am not quite sure why we have so many sectoral regulators any more. What we need, I would say, is tough pro-competition policy – and that applies as much in the gas or water industry as it does in rail or telephones. We should promote competition as a matter of principle, not meddle in particular sectors in detail.

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