Ofcom should do more to promote competition amongst landline providers and making switching suppliers easier, according to a report by the influential MPs’ spending watchdog, the Public Accounts Committee. Nonetheless, it found there was an “overall positive picture of competition” in the communications industry.
In most cases the communications market functions well and consumers enjoy the benefits of competition, such as choice and low prices for a range of products and services, and our report is presented in the overall context of that positive picture. However, there is scope for Ofcom to do more to tackle persistent problems such as the volume of silent calls, relatively low levels of switching between telecoms providers, and limited competition in fixed-line telephony.
The committee struggled with the way Ofcom is funded by the industry, which it felt might limit Ofcom’s ambitions.
Ofcom manages its expenditure within an overall cap, which is agreed each year with the Treasury. In most organisations the intended work plan will determine the budget, but in Ofcom it is effectively the other way round. This has the potential to incentivise Ofcom to make decisions based on keeping within the cap - rather than maximising value.
Conversely, most public authorities have a defined mission and then seek ever-increasing funding to resource their activities. In an age of public sector spending cuts, it might be thought that a spending watchdog would prefer the Ofcom model, but the committee took the view that
“[Ofcom’s fixed budget] means that value for money - optimising the available resources to achieve intended outcomes - is not always the primary focus.”
The committee was also critical of Ofcom for not being sufficiently transparent about what it considers a good outcome in terms of promotion of competition between network operators.
Ofcom needs to do more to demonstrate its focus on value for money and to allow the taxpayers and companies that fund its activities to assess its performance. Ofcom sets out in its annual work plan the activities it plans to undertake, but it does not specify its intended outcomes, explain how its activities will achieve those outcomes, or set out how it will measure success. This makes it impossible to assess whether Ofcom is delivering value for money.
The Public Accounts Committee exists to provide Parliamentary scrutiny of government spending, and is traditionally chaired by an MP from the main opposition party.