The impact of a hung parliament on UK telecom

OvumWith neither the Labour nor Conservative party emerging with an overall parliamentary majority, there is now officially a hung parliament in the UK.

The structure of the future political and regulatory landscape for telecoms and media is now subject to the balance of power between the parties within the inevitable coalition government. Although Labour policy is a known quantity, a Conservative-controlled coalition will drive a shift in the current regulatory landscape. The wildcards are the as yet unknown role of the Liberal Democrats and the effect of a possible second election.

As the incumbent government, Labour’s policy for telecom and media is largely a known quantity. Labour ministers have set out their stall during the past three years leading up to the final Digital Britain report and its transposition into the Digital Economy Act of March 2010, which was controversially forced through the wash-up process prior to parliamentary recess. Any party forming a government will face the tough choice of whether to move forward with the legislative framework set out in Digital Britain or to repeal the Act. In any case, amendments to the Communications Act will be inevitable.

While the Liberal Democrats have pledged to repeal the Digital Economy Act, it is likely that this will be a low priority, regardless of the balance of power within any final governing coalition. Far higher up the agenda will be the complex process of an emergency budget and spending review across the public sector against the backdrop of divergent economic and ideological interests.

In the longer term, if the Conservative party secures enough control over the legislative capacity of a coalition, it will produce the biggest shift in the current media landscape in the UK. ITV is likely to see the terms of Contract Rights Renewal disbanded or adjusted in its favor. Five and BSkyB will benefit from relaxed media ownership regulation and a potential shift in the public sector broadcasting remit. Channel 4 will get a preferential hearing to its funding challenge from a Conservative-run Department of Culture, Media & Sport and a reconsideration of its synergies with BBC Worldwide. The BBC and specifically the BBC Trust would come under fire from any incoming government, including Labour, but the scope of its remit and financing will be hit hardest under a Conservative-led government.

Superfast broadband for all hangs in the balance

While it is likely that all parties would maintain a universal service commitment of 2Mbps for all, the political commitment and funding for superfast broadband remains uncertain. The Conservatives have stated they would abandon Labour’s 50p (€0.58) levy on fixed (copper) lines in favour of an alternative source of funding.

So far, they have touted a possible top slicing of the BBC’s revenues from the statutory license fee, but this is likely to be equally controversial and woefully inadequate in raising the funding required for such a commitment.

One of the most critical issues facing the next government and Ofcom will be ensuring adequate and timely access to spectrum. At the moment the government’s spectrum modernization program has been left in pieces after the draft statutory instrument designed to legislate the necessary changes was not passed in time. At this stage it’s not clear how any party would take this forward or indeed within what timeframe.

The influence of the Liberal Democrats and a potential second election campaign remain wildcards, providing more uncertainty. If the Conservatives have to form a coalition with the Liberal Democrats, Conservative media policy can expect to see dilution, but detail of Liberal Democrat media policy is a relatively unknown quantity.

While ideologically their policies are broadly aligned with Labour (making specific commitments to protect the BBC), the Liberal Democrats have also promised to review the potential partnership between BBC Worldwide and Channel 4, and move to de-regulation of advertising across all media platforms.

The wildcard for the trajectory of UK telecoms and media legislation, and particularly the Digital Economy Act, is that if a stable government cannot be formed then a second election will be called. This could happen before September 2010. Backbench MPs may champion amendments or repeal the Digital Economy Act as a source of cheap political capital in the run up to any eventual new election.

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