New online reform regulatory system of Ofcom could cost nearly £170m

The implementation of a new online reform regulatory system in the United Kingdom could come with a hefty price tag. Ofcom, the country's communications regulator, says their proposed system for the Government's new online safety regulatory reforms could cost around £170 million by the end of 2024/25.

The new regulatory system, outlined in the Online Safety Bill, aims to hold online platforms accountable for tackling illegal and harmful content, including hate speech, misinformation and child exploitation. It requires platforms to implement measures to safeguard users and establishes an independent regulatory body responsible for oversight and enforcement.

The passage of the Online Safety Bill has since faced delays and is currently in the House of Lords. A report by the National Audit Office (NAO) praised the progress Ofcom has been making even before the Online Safety Bill becomes a law.

Ofcom's thorough assessment of the financial implications estimates indicates that the setup and operation costs of the new regulatory system could amount to approximately £170 million over a five-year period. These costs include recruitment, training, technology infrastructure, research, and enforcement activities.

Critics of the proposed reforms argue that the financial burden could place undue strain on online platforms, particularly smaller companies and startups. They express concerns that the costs associated with compliance could hinder innovation and create barriers to entry for emerging players in the digital market.

However, proponents of the online reform regulatory system argue that financial investment is necessary to protect users and create a safer online environment. They emphasise the importance of tackling harmful content, promoting digital literacy, and safeguarding vulnerable individuals, especially children.

The NAO warns that there are still quite a few "challenges remaining" for Ofcom in terms of recruiting extra staff. As of February, it is estimated that more than 450 new workers will be needed by the end of 2023/2024 for them to monitor the compliance of services and to evaluate their own effectiveness.

Gareth Davies, head of the National Audit Office said: "As of April 2023, it had yet to seek the agreement of DSIT (Department for Science, Innovation and Technology) or HM Treasury to the funding it requires."

He further added: "Securing adequate protection of citizens from online harms is a significant new role for Ofcom, and its preparations to date have been good. Ofcom will need to manage several risks in a way that delivers value for money. It will need to move quickly to cover any gaps in its preparations should the scope change between now and implementation.

"And it will need to cover its costs by introducing fees so that the regime becomes self-financing. As ever, access to good quality data will be essential for Ofcom to monitor the compliance of services and to evaluate its own effectiveness and for DSIT to know that the regime is working."

Ofcom, in collaboration with the government, is also exploring different funding options to mitigate the financial impact on online platforms. These options include exploring fees paid by larger platforms and considering a tiered funding structure based on company size and revenue.

Critics of the expensive cost of the system have also raised questions about the allocation of funds and the prioritization of online safety within the broader context of public expenditure. They argue that additional investments in education, mental health, and other social services could have a more immediate and tangible impact on improving societal well-being.

As the Online Safety Bill progresses through the legislative process, discussions on funding mechanisms and cost-sharing will likely intensify. Balancing the need for robust online regulations with the financial viability of the industry will be a key challenge for policymakers and stakeholders involved.

The final financial implications and funding arrangements for the new online reform regulatory system are yet to be determined. It remains to be seen how the government and industry players will navigate the financial landscape and ensure that the desired outcomes of a safer online environment are achieved without stifling innovation or burdening smaller platforms disproportionately.