Ofcom’s new loyalty scheme

Simon Woodhead

Simon Woodhead

15th September 2021

By Simon Woodhead

Our Regulator has the Statutory power to fine you. Pretty scary right?

Well, it is unless you’re the former state funded monopolist! Then, you don’t just get a Crown Guarantee on your pension scheme, as well as your ‘competitors’ needing your permission to do anything, as well as them funding your forays into TV through Weighted Average Cost of Capital calculations, and as well as being able to introduce a loyalty scheme to kill off infrastructure competition with the Regulator’s blessing.

Oh no, as if this deal isn’t sweet enough, it seems to me Ofcom have now introduced a loyalty scheme for penalties. The more you collect, the less they are! Bargain!

BT has been fined by Ofcom repeatedly in the past and had myriad disputes but this most recent case is about inaccuracies in response to formal requests empowered by Section 135 of the Communications act, i.e. not a casual conversation but a very formal and official request for information. We get these and sometimes they’re hard, without considering the tangled web of BT’s business, so mistakes are not inconceivable. One man’s mistake is another man’s barefaced lie of course, but it certainly isn’t our place to cast judgement on that, it is Ofcom’s and they have; case closed. Regardless, let’s just use the word ‘mislead’ to be factual and non-accusatory.

The dice is already weighted though as the maximum fine for ‘misleading’ the regulator is £2m. Fine one of our customers £2m and it’d be game over, fine BT £2m and it is less than the CEO’s bonus. That isn’t Ofcom’s fault, that’s the law, but they apply it and they have to be proportionate to disincentivise such ‘misleading’. So a company with over £21 billion of revenues would surely be at the top end? That would be just 0.009% of revenues at the maximum level. That doesn’t qualify as a disincentive in my book, it is noise, and I’d suggest the Regulator should be seeking modification of that in Statute. But it has to work with what it has.

So in today’s judgement, Ofcom have determined they were mislead and have fined BT the enourmous sum of £42,500. Yes, that is just 0.000199%! Being fair and proportionate that would be like fining Simwood a tenner, and I’m sorry, but that wouldn’t be a disincentive for anything.

Now there’s a Stephen King quote:

Fool me once, shame on you.

Fool me twice, shame on me.

Fool me three times, shame on both us.

Stephen King

Why is that relevant? Well lets ignore the industry disputes, the Italian accounting scandal and heck, lets even ignore all of Ofcom’s other enforcement action which has lead to fines for BT. Let us look exclusively at the act of ‘misleading’ the Regulator because surely this tiny fine must be a first offence? Oh no, no, no.

A quick search on the Ofcom site gives all of these since 2015:

2016 – Investigation into BT’s compliance with statutory requests for information
2017 – Investigation into BT’s compliance with a statutory information request
2018 –Investigation into EE’s compliance with Section 135 and 136 information requests
2020 – Investigation into BT response to Connected Nations data request

So yes, this is the fourth time Ofcom have investigated BT Group for misleading it since 2015, and one of those cases relates to three incidents alone. But surely the fines have gone up I hear you cry! Oh, no, no, no. It seems the more you collect the lower they go.

2016 – £300,000
2017 – £70,000
2018 – No fine.
2020 – £42,500

In all seriousness, I’m grossly simplifying these cases and Ofcom have had to weigh up multiple factors and consequences in arriving at their penalties but that is wasted on the man in the street or small CPs. If a business turning over £1m can expect a proportionate fine of less than £1 for ‘misleading’ his Regulator, what signal does that send? There are enough scrotes out there already willing to play the probabilities game that they won’t get caught, let alone telling them if they are it’ll cost them less than £1. That isn’t a disincentive, it barely qualifies as a cost of doing business!

Now Ofcom aren’t strangers to fining BT. We’ve left out the £42m fine relating to ethernet for which the summary included the words:

There is evidence that this was deliberate conduct carried out by senior management at Openreach with the knowledge of the Openreach Executive.

Ofcom 2017 decision

So it’d be wrong to conclude that Ofcom are in BT’s pocket but those are words I hear with alarming regularity around the industry. As articulated in our response to Equinox and our own experience in mobile, I’m increasingly of the opinion that Ofcom favours oligopolies. Fining the former monopolist 0.000199% of turnover for ‘misleading’ for at least the fourth time does nothing to remedy that. Nor does it disincentivise the scrote who sees such a fine and thus the act of misleading the Regulator as inconsequential. Ironically, the fact they don’t expect to be treated fairly and proportionately and could be fined up to £2m might keep them more honest!

I learned at an early age that faced with a bully, you need to kick them in the nuts; everyone else will leave you alone then too. I was lucky in doing various martial arts for most of my childhood and early adulthood. I was never any good, but it gave me the confidence to do this on several occasions. Simwood has that moral code and attitude in how we conduct ourselves and I’m proud of that. Ofcom really need to kick BT in the nuts but would do so with the full force of the law behind them and the respect of the industry. This opportunity may have been missed but I have no doubt there’ll be plenty more!

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