Mr Andrew Robathan (Blaby, Conservative)

I beg to move amendment No. 62, in

clause 28, page 25, line 19, leave out paragraph (b) and insert—

'(b) such of the following as are used, by the person providing the system, for the conveyance, including switching or routing, of the signals—

(i) apparatus comprised in the system; and

(ii) software and stored data.'.

Mr Roger Gale (North Thanet, Conservative)

With this we may discuss the following: Amendment No. 217, in

clause 28, page 25, line 24, leave out from 'service' to end of line 26 and insert

'which consists wholly or mainly in the conveyance of signals on electronic communications networks but excludes content services'.

Amendment No. 63, in

clause 28, page 25, line 28, leave out paragraphs (a) and (b) and insert—

'(a) is available for use incidentally to the use of an electronic communications network or service; and

(b) is so available for the purpose of—

(i) making the provision of that network or service possible; or

(ii) otherwise supporting the provision of that network or service.'.

Amendment No. 227, in

clause 28, page 25, leave out from beginning of line 30 to the word 'and' in line 31.

Amendment No. 218, in

clause 28, page 26, line 14, leave out from 'means' to end of line and insert

'any service which consists wholly or mainly'.

Amendment No. 219, in

clause 28, page 26, line 21, leave out from 'the' to the end of line 22 and insert

'transmission services in networks used for broadcasting but excluding services providing content'.

Mr Andrew Robathan (Blaby, Conservative)

I can assure you that I shall not dwell on how many angels can dance on the head of a pin, Mr. Gale, although that is quite topical.

Chapter 1 of part 2 sets out the new regulatory framework for electronic communications largely according to the European Commission communications directives. Therefore, to a certain extent, it is not controversial, although we may have some discussion about the interpretation of the definitions in the clause. We are entering upon a technical subject in which my physics with chemistry O-level will, I am sure, come in very useful—as, indeed, will the time that the Minister for Tourism, Film and Broadcasting spent at Hornsey college of art.

We welcome the Minister for E-Commerce and Competitiveness to the Committee for the first time. He was not here last week, and it is nice that he has turned up. I was interested to learn that in 1986 he wrote a book or pamphlet entitled ''Broadband Communications: The Commercial Impact'', and another on ISDN. He used to work for a company called Ovum, a consultancy in computing and telecommunications, and was a major shareholder before he sensibly put the shares into a charitable trust. Those of us who stopped at chemistry O-level in 1966 look forward to him enlightening us on one or two technical issues.

Amendment No. 62—and the others in the group—tease more out of the definitions. We are concerned about gold-plating the definitions in the Bill. As drafted, the definition of ''electronic communications network'' includes apparatus comprised in the transmission system concerned; apparatus used for ''switching or routing'' the signals; and ''software and stored data'' used

''by the person providing the system and in association with it, for the conveyance of the signals''.

The amendment would simplify and clarify the definition by eliminating the words ''in association with'', which seem unnecessary and might make the definition dangerously wide. The amendment would eliminate the confusing duplication of the term ''apparatus'' by ensuring that the ''software and stored data'' referred to—the mention of ''data'' is for my hon. Friend the Member for Lichfield (Michael Fabricant)—is the software and data stored in exchanges to ensure that calls are properly routed. The clause currently allows regulation to spill over unpredictably into other areas—one area that might be affected is the billing system. The Government should bring certainty to the markets and encourage investment by clarifying what they want.

Amendment No. 217 to the definition of ''electronic communications service'' would represent or translate the wording of the framework directive. It would substitute the test of ''mainly'' for the test in the Bill of ''principal feature''. The distinction is important, because under the tests contained in the EU directive, a service can be regulated as an electronic communications service only if it consists wholly or mainly in the conveyance of signals.

Mr Michael Fabricant (Lichfield, Conservative)

To follow on from my hon. Friend's point on amendment No. 62, does he agree that the entire nub of amendment No. 217 is contained in the last four words, ''but excludes content services''?

Mr Andrew Robathan (Blaby, Conservative)

My hon. Friend is right. The amendment proposes that ''wholly or mainly'' should replace ''principal feature'', which would mean that if more than 50 per cent. of a system were to consist of other services, it could not be regulated as an electronic communications service. If the Bill's ''principal feature'' test is used, a service may be up for regulation if, for instance, 30 per cent. of it is a conveyanced service but it has seven other features that each make up 10 per cent. The 30 per cent. service would be the principal feature, even though the service group consisted mainly of non-conveyance activities.

Amendment No. 63 is intended to find out from the Minister the exact meaning of ''associated facility''. As the Bill is currently drafted, that term is defined extremely widely. It could bring within the scope of regulation all sorts of facilities that the directives did not intend to be regulated. The framework directive offers conditional access systems and electronic programme guides as examples of associated facilities, as do the Government's explanatory notes to the Bill. However, unless the term is limited in some way, it could leave a variety of other facilities open to regulation: for example, poles, ducts and trenches could fall within the current definition. Do we want the companies that dig trenches for telecoms companies to be subject to communications regulations? Does the Bill intend that the regulations should cover firms that sell content, marketing or distribution services to companies that provide electronic communications services?

Amendment No. 227 also addresses the definition of ''electronic communications network''. It currently includes apparatus, but the definition in article 2 of the European framework directive is significantly narrower in scope; it refers to systems and equipment that

''permit the conveyance of signals''.

We believe that the Bill should follow the wording of the definition in article 2 of the framework directive, where electronic communications network means,

''transmission systems and, where applicable, switching or routing equipment and other resources which permit the conveyance of signals''.

In the context of associated facilities, and the broadband objectives, one recommendation of the Broadband Stakeholder Group is that barriers to third parties providing similar infrastructure—which could

include the ducts and trenches—should be removed. We think that clause 28 should be revised: the words in brackets in subsection (3)(a) should be excised:

''(whether or not one provided by the person making the facility available)''.

That would align the provision with article 2(e) of the European framework directive, and it would allow the regulation of the third party providing civil infrastructure to fall outside Ofcom's scope.

Amendments Nos. 218 and 219 approach the same confusion from a different angle. They also address the definition of electronic communications service, and they seek to ensure that broadcasting is excluded from its scope. It is clear that, under the definition set out in the framework directive, broadcasting is not an electronic communications service because it is a content service—as my hon. Friend the Member for Lichfield said—and because it does not ''wholly or mainly'' consist in the conveyance of a signal. It is a service that is mainly, if not wholly, the provision of content to end users, and therefore should not be categorised as an electronic communications service. Although the signals used to transmit the contents services could theoretically constitute a service, under the ''wholly or mainly'' test they should not be treated as a separate service, and, in any case, they are not necessarily provided by the broadcaster. Therefore, broadcasting should not be regulated as an electronic communications service under part 2 of the Bill.

In essence, we are concerned about changes in the definition from the European Union framework directive and that it may constitute gold-plating of the EU legislation. I am sure that the changes have been introduced by good legal minds with good intent, but, in an international environment, it should be easier to see the international agreement clearly placed in legislation. Why have the changes to article 2 of the framework directive taken place? Do they represent gold-plating and might not sticking to the definitions in the directorate lead to divergence and confusion?

Mr Richard Allan (Sheffield, Hallam, Liberal Democrat)

Although we are pushed for time, it is worth trying to get some more clarity from the Minister on the definitions in this group of amendments. As the hon. Member for Blaby (Mr. Robathan) said, the Minister, who has a distinguished record in information technology consultancy, is in an ideal position to clarify matters.

Clarity of language is important. As we introduce legislation to take us through the 21st century, it is interesting that we are talking about impartations of things between people and actuations of apparatus. Some of the language, which has presumably been deemed necessary by parliamentary counsel, will be difficult for people outside the House to understand without clarification.

The definition of the content service, as mentioned by the hon. Member for Blaby, will become increasingly important. My understanding of the clause as drafted is that the intention is to exclude those parts of the business that are primarily about producing and creating content. We have moved on from the issue of content regulation to try to define how we regulate an electronic communications

network. I understand that the clause is not trying to regulate the bit that is involved in the production of content. To what extent does the Minister believe we can do that in an age of vertical integration—that horrible phrase—when the real life examples that people will think of are companies such as AOL/Time Warner?

The whole logic of the business of such companies is to bring together content and network provision. How does the Minister see the provision operating in practice, when such companies have deliberately brought together the two services as part of their business model? Is the intention or expectation that companies will somehow be easily able to separate out the content elements? That could happen with a traditional broadcast network, and I understand that satellite networks are covered when programme providers can clearly be defined. However, with the internet, it may be less straightforward to define the provision of content as being a content service as opposed to part of the network service.

How will the provision work on an international basis? Again, the integration processes of companies are increasingly international. We are attempting to regulate people who may conduct the greater part of their business outside United Kingdom jurisdiction. With a satellite broadcaster the point is specific—the satellites are clearly not in the UK. How far in practice can we regulate satellites that have UK footprints in terms of the definition in the Bill?

New media and internet companies conduct a large part of their business outside the UK. If one is an AOL/Time Warner subscriber, the data—the important part of the content of the network—are stored in the United States. Questions surrounding telecoms charges make it viable for companies to base most of their service in the US, where international calls and the bandwidth are cheaper than in the European Union. That is a wider debate, but there is a question over the way in which the definitions that are tested by the amendments will be applied to companies who have elements of their business that form one network but are scattered across different jurisdictions. That particularly applies to those who operate in the US and in the EU. Through the directive, we are heading towards a single framework, which is logical and sensible. However, the US has gone its own way as regards data protection law, taking a direction that is much less regulatory and much more laissez-faire. The US might cry foul and say that we are seeking unfair restraint of trade by insisting that it has our data protection standards. To what extent do the definitions allow us to have the regulatory regime that we want within our agreed EU framework while applying it to a communications network that spans the Atlantic?

Mr Andrew Lansley (South Cambridgeshire, Conservative)

I want to ask the Minister one question. Clause 28 and subsequent clauses of chapter 1 of part 2 substantially implement aspects of the EC directives—in this case, as my hon. Friend the Member for Blaby said, article 2 of the framework directive. It is curious that, presumably for drafting reasons, some of the

language is not precisely the same as that in the framework directive, although it is presumably intended to deliver exactly the same result. It is particularly odd because the Joint Committee took the view that it might be desirable to emphasise the point by including a provision analogous to the section 60 of the Competition Act 1998, whereby competition provisions should be interpreted in a way that is consistent with European law in order to align the two. The Government's response was that as regards competition law we were in some respects acting within the UK, with UK legislation, for UK purposes, but intended to align ourselves with EU law and therefore needed to instruct the UK courts to do so because they would not do it automatically. Under the Bill, however, they will do so, because article 249 of the treaty requires us to transpose the EC directive into UK law. Therefore, the definitions and provisions in the chapter will necessarily be interpreted by UK courts in a way that is consistent with the originating EC directives.

Clause 74 refers to the necessity that a reference

''to dominance of a market must be construed in accordance with . . . provisions of Article 14 of the Framework Directive.''

Why does at least one other part of the chapter need to cross-refer to the provisions of the originating directive, given that across the chapter as a whole all the definitions and provisions will be interpreted in line with the EC directive? Will the Minister explain how that has come about? I recall that in the scrutiny Committee on the draft Bill we had a piece of paper that directly related the provisions in the Bill to the originating provisions in the Community directive. I do not have a piece of paper that does that in relation to the new Bill. I imagine that it is available, so will the Minister provide it to help the Committee?

Mr Roger Gale (North Thanet, Conservative)

Order. I will now do what I should have done earlier and welcome the Minister of State for the Department of Trade and Industry to his place.

Mr John Whittingdale (Maldon & East Chelmsford, Conservative)

Before the Minister replies, Mr. Gale, I want if I may to add one or two points to those made by my hon. Friend the Member for Blaby.

As the clause relates to definitions, the whole scope of Ofcom's activities will be determined by getting those definitions right. I particularly seek clarification in respect of last week's debate on clause 13 on consumer research. I questioned the fact that the current draft of the Bill appears to allow Ofcom to commission research about the views of consumers of electronic communications services. The definition of electronic communications services, as it stands, suggests that it could include television broadcasts, even though the Independent Television Commission and Oftel accept that television broadcasts are not such services. In his response to me on Thursday, the Minister said that my point was technically correct and that we could, perhaps, discuss it later and get greater clarity. As we are discussing the clause that deals with the issue of definitions, this is a good opportunity for us to obtain the clarity that the Minister promised.

I will make some additional points, not to repeat those that have already been made by my hon. Friend,

but to support what he said about the definition and meaning of electronic communications networks. My hon. Friend has already pointed out that the definition in the Bill is different from that of article 2 of the framework directive. My hon. Friend the Member for South Cambridgeshire (Mr. Lansley) also referred to that matter.

A potential problem exists regarding the definition in clause 28 that includes, as my hon. Friend said, apparatus as well as software and stored data. That could open up a panoply of ex ante regulation in an area of economic activity in which there is not a strong case for regulation. There is some inconsistency here: Ofcom can only regulate licensees, or those who come under its general authorisation, and an attempt to widen its remit in terms of the definition of networks which is contained in the clause might lead to confusion about who is a licensee under Ofcom. That could lead to a conflict between Ofcom and the Office of Fair Trading, in which the OFT would have an overarching responsibility for matters relating to competition. There might be a problem if Ofcom started to involve itself in industries that went beyond the narrow scope of electronic communications networks.

Mr Brian White (North East Milton Keynes, Labour)

The Bill is about the movement and merger of different industries. Does the hon. Gentleman mean to say that when non-regulated industries move into this area regulations should cease, or does he mean that it should be the other way round—that Ofcom should seek to divest itself of regulation? In effect, much of the regulation will cease to exist.

Mr John Whittingdale (Maldon & East Chelmsford, Conservative)

I agree with the hon. Gentleman that flexibility is necessary, because technological change will happen more rapidly in this sector than many others, and it is difficult to predict precisely how providers will evolve and what kind of services they will provide in future. I accept that there is a need for flexibility. It is important, however, that we should set Ofcom's boundaries at this stage. We should make it clear that where providers are presently supplying services that do not seem to fall under the narrow definition of the EU directive, the Bill should not allow Ofcom to expand its remit into such areas and create confusion. I accept the hon. Gentleman's point about flexibility, but it is important that we should get on record something from the Minister about those areas in which it would not—certainly not at present—be appropriate for Ofcom to get involved.

The third issue I wanted to touch on is that of associated facilities. That refers directly to the recommendation of the Broadband Stakeholder Group that issued a report in November 2002. I am sure that the Minister is familiar with the report, because he is responsible for that group. The report said:

''For such a model to work, it would be necessary to address the regulatory . . . barriers to third parties providing such facilities. The regulatory issues include making the Code Powers currently applicable to communication companies available to civil infrastructure providers and ensuring that the provisions of the Communications Bill accommodate this requirement.''

It is quite easy to think of several ways in which third parties could assist in the provision of all sorts of parts of the network, from ducts, trenches and masts to cable. If that is to be allowed to happen, it is quite important that the clause does not act as a barrier to that third-party provision. That is another reason why it is particularly important that there should be a precise definition of ''associated facility'', and why we have tabled amendment No. 227, which would take

''whether or not one provided by the person making the facility available''

out of clause 28(3)(a). I invite the Minister to address those points.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

I thank the hon. Member for Blaby for his kind words of welcome—at least, I think that is what they were—and must also say how pleased I am that you are in charge of our proceedings this morning, Mr. Gale. I vividly recall your participation in the Committee that considered the Broadcasting Bill in 1996. I also served on that Committee, as did several hon. Members present. We can be confident that our deliberations are being presided over by a Chairman who is extremely well informed on the matters raised in the Bill.

We are discussing a chapter of the Bill that deals with the regulation of electronic networks and services, and are implementing some important obligations arising from four European Union directives. My hon. Friend the Minister for Tourism, Film and Broadcasting referred to those four last Thursday. They were adopted by the EU earlier this year. They are the framework, the authorisation, the access and the universal service directive. Together with the new directive on privacy and electronic communications, they are the main building-blocks of the new EU regulatory framework for communications networks and service providers.

The UK was constructively engaged in the negotiations for that framework, which is a comprehensive overhaul of existing European law on the regulation of this subject. The framework will provide a harmonised structure for communications regulation across Europe. That is very much needed, given the increasingly international nature of communications, as the hon. Member for Sheffield, Hallam (Mr. Allan) rightly said. Certainly, the UK strongly supports the new framework.

The current legislation, under the Telecommunications Act 1984, is focused on the running of systems. A licence is required for the running of any system. The relevant regulatory requirements are largely set out in the conditions attached to the licences. The Bill will abolish the requirement for licensing and will repeal the relevant sections of the 1984 Act. The new regulatory framework, set out in the Bill, starts from the same point as the directives with the proposition that persons wishing to provide electronic networks and services should be free to do so without having to obtain prior permission. That is the fundamental difference between the old regime and that set out in the directives and the Bill.

Those wishing to provide electronic networks and services may, however, be required to make an appropriate notification to Ofcom. They will have to comply with the regulatory obligations set out in the new framework. The three key definitions in the clause are those of ''electronic communications network'', ''electronic communications service'' and ''associated facility''. Those three are fundamental to the new framework.

On amendment No. 64, let me make it clear that I entirely understand that there are some concerns about the way in which ''software and stored data'' has been included in the definition of ''electronic communications network''. I am aware that the industry is concerned that the explicit mention of ''software and stored data'' might be caught as part of the network for the purposes of UK regulation even if they were not being used in connection with the network. I understand that concern, but I can assure the Committee that that will not happen.

The specific examples of remote dial-up access software and encryption software have been mentioned. They are typically used by users, not network providers. If they are not used by the network provider, they are not caught under the definition. Concerns have been expressed that software used by the network providers in other contexts might be caught, but it will not be if it is used for something other than the conveyance of signals. The definitions set the boundaries at the right point.

Mr Richard Allan (Sheffield, Hallam, Liberal Democrat)

Will the Minister clarify that encryption software built into the network by the network provider—as in the Government's network—would be caught by the definition, as opposed to personal encryption software that a user might choose to use?

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

That is certainly my understanding. If software is used for the conveyance of signals in the way that the hon. Gentleman describes, it is caught within the definition.

Mr Brian White (North East Milton Keynes, Labour)

There are several examples of hardware, which would be currently caught, being translated into software. Does the Minister intend that such software should be caught by the definition?

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

I am not quite sure which examples my hon. Friend has in mind, but as he has described the situation, the answer would be yes. If the software were being used to perform a function that in the past was performed by network equipment, it would come within the definition.

Mr Andrew Lansley (South Cambridgeshire, Conservative)

I wonder whether the example of encryption software is a good one. My interpretation is that it is an associated facility for the purpose of the Bill, rather than part of the electronic communications network. It might, for example, be part of the conditional access system that would be used. Under the EC directive, that would be seen as an associated facility.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

It would depend on the situation in which the software was used. The software will be caught only if it is associated with the system and used

for the conveyance of signals. I thought that that was the example that the hon. Member for Sheffield, Hallam had in mind.

Mr Richard Allan (Sheffield, Hallam, Liberal Democrat)

That is precisely what I was suggesting. Satellite systems have conditional access systems, which use encryption as an associated facility. The supplier of the computer network may want to build in encryption software for all its users. I am grateful to the Minister for clarifying that building in the encryption would probably be caught under the definition.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

That was a helpful clarification of the position.

More generally, it has been suggested that software should only be caught to the extent that it is used in switching and routing. That would be too narrow a view. The directive clearly recognises that there can be other resources besides switching and routing equipment that permit the conveyance of signals. Such resources, of which software is one, are not limited in the directive to the context of switching and routing. It would be wrong to include them only in that context.

Amendment No. 62 deals with a slightly different issue. It excludes from the definition of an electronic communications network any apparatus used for the switching and routing of signals, if that apparatus is not comprised in the system. That would not be consistent with the directive. It provides that an electronic communications network means transmission systems and, where applicable,

''switching or routing equipment . . . which permits the conveyance of signals''.

Switching and routing equipment that is not comprised in the system may nevertheless be included in the definition where it is involved in the conveyance of the signals. The Bill has the effect that the directive sets out, but the amendment would not.

Amendment No. 219 would remove two helpful clarifications from the Bill. The first is that conveyance of signals can include parts of signals as well as whole signals—that may be a little esoteric, but in our view it is helpful to have it in the Bill. The second is that conveyance of signals includes the broadcasting of signals for general reception, an established concept in UK legislation.

Mr John Whittingdale (Maldon & East Chelmsford, Conservative)

Does the Minister nevertheless accept my earlier point that television broadcasts do not come under the definition of electronic communications services?

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

Yes, but the transmission of material to be broadcast around the networks does come under that definition. There are terrestrial networks around the country used for conveying material for broadcast from television transmitters, and it is important that that element comes under the definition here. That is one reason why we are not able to accept some of the amendments. We need to make sure that this tight set of definitions is precisely right.

Amendment No. 63 would substitute a new definition of ''associated facility''. Instead of applying to facilities available for use ''in association

with'' an electronic communications network or service, that definition would apply to facilities available for use ''incidentally to the use of'' such a network. I am not sure whether that is a very significant change, but the amendment would omit the useful clarification that the associated facility can be supplied by someone other than the provider of the network or service. Amendment No. 227, too, expressly removes that clarification, which is helpful and should stay in the Bill.

Under amendment No. 218, all electronic communications services would be classified as either content services or non-content services. However, the directive explicitly specifies that transmission services in networks used for broadcasting fall under the definition of an electronic communications service. That was the point that I just made to the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale). The Bill, therefore, excludes from the definition of an electronic communications service only those parts of such a service that consist of content provision or the exercise of editorial control over content. We have been very careful to transpose the fundamental definitions properly.

I now turn to some other points made in our interesting discussion. I am very pleased that the hon. Members for Blaby and for Maldon and East Chelmsford referred to the civil infrastructure code. That was highlighted in the excellent recent report of the Broadband Stakeholders Group. The Bill makes the change that that group called for. The civil infrastructure code is dealt with in clause 102 and following clauses, so we shall discuss it fully when we reach those clauses. The change is important because it opens up the possibility for others to contribute to the establishment of communications infrastructure, such as local authorities. The Broadband Stakeholders Group was right to highlight that significant matter, and I am pleased that we have been able to include it in the Bill. Certainly, nothing in the definitions in clause 28 undermines that change.

The hon. Member for Sheffield, Hallam asked about distinguishing content services and transmission. The question there is whether particular services fall under the definition of electronic communications services. I suggest to him that that can be decided by considering the service. In future, I am sure that tricky judgments will have to be made, but, as far as the definition is concerned, and as far as putting the directive into UK law is concerned, the position is reasonably clear.

The hon. Member for South Cambridgeshire asked for a table showing how and where the directives have been implemented. I think that what he was asking for is in appendices 2 and 3 of the explanatory memorandum. If anything is missing, the hon. Gentleman may wish to raise the issue again. He felt that there was inconsistency because some parts of the Bill, but not others, contain references to the directives. He is right to say that there is an explicit reference in clause 74. That is there because the directives are especially complex at that point and

there was a real possibility of ambiguity. The parliamentary draftsmen concluded that it was not possible to produce a full transposition without the reference to the directive. However, that is very much the exception; in this part and most other parts of the Bill, the position is as set out in the Government's response to the point raised by the Joint Committee.

I think that I have covered the points that have been raised and I hope that the hon. Member will feel able to withdraw the amendment.

Mr Andrew Robathan (Blaby, Conservative)

The Minister has given a full and thorough explanation of what is intended. I am still a little concerned about some of the changes to definitions, but I assume that that has been done with the best of intentions and with the best legal minds in the civil service hard at work. I hope that that will lead to greater clarity and not to confusion. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 28 ordered to stand part of the Bill.