This year will see the setting-up of Ofcom, the new super-regulator for the communications industry, due to be fully operational in 2003. So how should this new body be organised?

This question may sound premature. Surely we should first decide Ofcom's scope and objectives and then work out how best to execute them? But in practice, the right strategy depends on the ability to execute - core competences and all that. Critics say Ofcom will be unwieldy and too powerful, out of touch with ordinary people, not transparent, too expensive, too interventionist (or not interventionist enough). Whether they turn out to be right will depend crucially on how well Ofcom is designed, governed and managed. Early decisions in these areas will be hard to reverse later.

The task will be challenging. Ofcom will have a range of partly conflicting objectives; cover diverse and emotive economic, social, cultural, political and technological issues; have political links with two ministries (DTI and DCMS); face huge uncertainties about markets and technologies; and upset some very powerful people. And that's if its remit excludes the BBC. Faint-hearts should not apply.

In response to this challenge, it is already agreed that it will report to a commission rather than a single, all-powerful individual.

It is also widely agreed that the government should make Ofcom's objectives, and their ranking, as clear as possible, and ensure that its decisions are transparent and take formal account of stakeholders' views. What all this means in practice is controversial and will be hotly debated.

In these debates, Ofcom's direct cost should not be the main consideration. The five current regulators (ITC, Oftel, the Radio Authority, Radiocommunications Agency and Broadcasting Standards Commission) have a combined cost of £120m, a trivial amount relative to the importance of the issues. There are arguments for a "lean and mean" Ofcom, but saving direct costs is only a minor one.

Whatever its objectives and scope, three further factors will determine how well Ofcom works.

The first is governance. There should be a clear and transparent distinction between the commission - the formal regulator with collective responsibility for decisions - and the executive and staff. The commission should have a chairman, deputy chairman and just three or four other full-time commissioners with the required expertise.

Second, leadership. The chief executive will need to be an outstanding manager who can create a new organisation with its own culture, while preserving the expertise of the existing regulators and ensuring that the less salient areas such as radio and broadcasting standards do not get submerged.

Successfully managing the merger itself will require rare skills. True mergers are unusual.

There are many managers with experience of takeovers and some with experience of reverse takeovers (where the small firm is the acquirer). Very few have created an entirely new organisation such as SmithKline Beecham from a merger of equals, in which neither of the parent firms' "genes" (managers, systems, culture) is dominant. The chief executive will need to be an experienced manager who can achieve this. The organisation will also need a single head office as soon as possible, to break down barriers and create a new culture.

Finally, the commission's decisions must, as far as possible, be seen to be legitimate, even by those who disagree with them. At the very least, every decision must be defensible - including under judicial review if necessary. Part of this is procedural. The commission must have, and be seen to have, clear, fair and transparent processes for consultation and decision-making, using discussion documents, advisory committees, consumer panels and so on.

But procedural justice is not enough. Ultimately, Ofcom's success will rest on the quality of its analysis. This means developing a convincing integrated strategy and an excellent analysis of each decision which takes into account its indirect effects on other parts of the strategy. Achieving this will be extremely difficult and will take time.

This is where the thinking to date has been too timid. The commission will need to support its decisions with world-class data and analysis. It must be a research powerhouse, expert in economic analysis, understanding of technology trends, real-world strategic decisions by businesses and consumer behaviour, and use integrated modelling to bring all these together. It must use international benchmarking where appropriate - while being sophisticated enough to know its limitations.

These requirements go well beyond what has so far been proposed. The recent Towers Perrin "scoping report" proposes that research should continue to be based in the big departments such as network planning and what it calls audience interests. Integration would be done by the small but high-level strategy unit.

This seems unlikely to achieve the required breakthrough. Instead, the strategy group will need a high-powered central, multidisciplinary research and analysis team, and the clout to ensure that the results are reflected in the commission's decisions.

The quality of analysis needed for Ofcom is such that it will need to attract top-quality commissioners, executives and staff, including people with relevant experience in industry, consulting and investment banking. To achieve this it will need to pay close attention to market rates.

On the plus side, the government's timing is immaculate for the second time in two years. It auctioned the 3G mobile licences just before the bubble in technology, media and telecoms stocks burst in spring 2000. It will be in the market for TMT talent (and office space) for Ofcom when the markets are likely to be still scraping along the bottom of what Sir Martin Sorrell predicts will be a "bath-shaped" recession. With that kind of luck, the naysayers will be left eating their words.

pbarwise@london.edu

Professor Patrick Barwise is chairman of the Future Media Research Programme at London Business School