Mr John Whittingdale (Maldon & East Chelmsford, Conservative)

I beg to move amendment No. 89, in

clause 34, page 32, line 9, leave out from beginning to 'or'.

Mr Roger Gale (North Thanet, Conservative)

With this it will be convenient to take the following amendments:

No. 90, in

clause 34, page 32, leave out line 23.

No. 220, in

clause 35, page 34, line 46, at end insert 'or'.

No. 221, in

clause 35, page 35, line 1, leave out paragraph (c).

No. 222, in

clause 35, page 35, line 10, at end insert 'or'.

No. 223, in

clause 35, page 35, line 11, leave out paragraph (c).

No. 224, in

clause 38, page 38, line 4, leave out paragraph (b).

No. 225, in

clause 41, page 41, line 3, leave out subsection (7).

No. 87, in

clause 41, page 41, line 3, leave out 'either'.

No. 88, in

clause 41, page 41, line 4, leave out from 'condition' to end of line 5.

No. 226, in

clause 41, page 41, line 6, leave out 'services'.

No. 91, in

clause 41, page 41, line 12, leave out subsection (9).

No. 92, in

clause 42, page 42, line 39, leave out subsection (9).

No. 93, in

clause 46, page 46, line 14, leave out subsection (6).

No. 115, in

clause 98, page 93, line 3, leave out 'or 97'.

No. 96, in

clause 98, page 93, line 4, leave out 'or contravening supplier'.

No. 97, in

clause 98, page 93, line 10, leave out 'or the contravening supplier'.

No. 116, in

clause 98, page 93, line 14, leave out 'or 97'.

No. 98, in

clause 98, page 93, line 15, leave out 'or contravening supplier'.

No. 117, in

clause 98, page 93, line 23, leave out 'or 97'.

No. 99, in

clause 98, page 93, line 32, leave out 'or contravening supplier'.

No. 118, in

clause 98, page 93, line 39, leave out from '96' to end of line 40.

No. 100, in

clause 131, page 120, line 42, leave out paragraph (e).

No. 101, in

clause 139, page 128, line 24, leave out subsection (2).

Mr John Whittingdale (Maldon & East Chelmsford, Conservative)

Despite the fact that I am about to speak to a lot of amendments—23 in all—they all relate to a simple point, which deals with the provisions under clause 89 and Ofcom having the

power to determine that a supplier of apparatus has significant market power. I take apparatus to mean telephones or equipment that is plugged into the network. Not that long ago, there was significant market power in the supply of apparatus—indeed, there was one supplier of apparatus. That was in the days of nationalisation when BT, in a former incarnation, said that if we wanted a telephone, it would let us have one in six months' time and the telephone would be square and it would be black.

The world has moved on since then and, if we visited Dixons today, we would find a vast array of different types of telephone that can be plugged in. There would be different colours and shapes; some of the telephones would look like Mickey Mouse and others would be even more exotic. The one point that is fairly clear is that there is a fairly aggressive competitive market in the supply of apparatus.

Mr Michael Fabricant (Lichfield, Conservative)

My hon. Friend has made a series of powerful points. Is he aware that the Minister is likely to say, ''Ah, but what about those telephones that are hard wired into the wall and cannot be replaced by equipment bought at Dixons or Currys?''

Mr John Whittingdale (Maldon & East Chelmsford, Conservative)

I congratulate my hon. Friend on his telepathy and on knowing what is going through the Minister's mind. I agree with him. I intended to talk about hard-wired telephones.

Mr John Robertson (Glasgow, Anniesland, Labour)

I know a little about hard-wired telephones. Can the hon. Gentleman say how many there are? I have not seen one for about 10 years. I should be interested to know the answer.

Mr John Whittingdale (Maldon & East Chelmsford, Conservative)

That is an interesting question. The hon. Gentleman has anticipated the point that I am about to make. Some 200,000 hard-wired telephones with a circular dial are currently attached to BT's network. I am not as great an expert as my hon. Friend the Member for Lichfield, so I do not quite know why one needs a hard-wired telephone, although I understand that Kingston Communications also operates some.

The Government might well consider it necessary to include provisions covering the supply of apparatus to take account of the specific instance of hard-wired telephones, but such provisions potentially go further than hard-wired handsets and might suggest that Ofcom's scope will extend to the whole market for the supply of telephone apparatus. That would go considerably beyond the requirements of the European directive, which makes no provision at all for regulating the supply of telephones and other electronic communications apparatus, whether based on the supplier having significant market power or not.

The amendments would remove references in the Bill to Ofcom acting in a market for the supply of apparatus in which it is determined that there is significant market power. The provisions are a flagrant example of gold-plating and they are completely unnecessary under the terms of the EU directive. If there is a need to address hard-wired telephones specifically, which Opposition and Government Members identified—although, as the hon. Member for Glasgow, Anniesland (John Robertson) said, few

are left—there must be a better way of narrowly focusing the Bill to do that.

Mr Michael Fabricant (Lichfield, Conservative)

My hon. Friend said that he did not know whether there was a necessity for phones to be hard wired or, indeed, why they are hard wired. Would it be helpful if I told him that there is no earthly reason—nor any technical reason—why they must be hard wired? They are hard wired only because no one has gone around homes to fit new connectors to allow the phones to be soft wired and connected with a plug.

Mr John Whittingdale (Maldon & East Chelmsford, Conservative)

That is a helpful intervention, which confirms the fact that the number of such phones is likely to continue to shrink. A specific provision therefore becomes steadily less necessarily.

My real concern is not the provision to deal with the few hard-wired telephones, but the way in which provisions could be used to extend Ofcom's power to a huge sector of the market in which strong competition exists and in which it is completely unnecessary for Ofcom to have a remit.

Mr John Robertson (Glasgow, Anniesland, Labour)

I shall make a few points about what the hon. Member for Maldon and East Chelmsford said about hard-wired telephones. The people who have hard-wired telephones are probably those who want them. They will have them either because the phones are antique, or because they like having a phone that is different from those that belong to other people.

Mr Michael Fabricant (Lichfield, Conservative)

I take the hon. Gentleman's point about antiques—I have a friend who has a red telephone from Lancing fire station in his home in Lichfield, which is interesting to me because I originated in the area near Lancing. However, my friend has had the telephone connected with a plug that fits in the standard BT-type socket. He therefore has an antique phone—if a 30-year-old phone can be called antique—that is soft wired. Such phones do not have to be hard wired.

Mr John Robertson (Glasgow, Anniesland, Labour)

The hon. Gentleman addresses my next point. Hard-wired phones represent fewer than 1 per cent. of all phones. These days, we plug phones in. Conservative Members seem to be hung up on the fact that things must be plugged into a wall, but we have to look forward, and onwards and upwards. Ten years from now, the number of people with plug-in telephones will be roughly the same as the number of people who currently have hard-wired telephones.

Mr Andrew Robathan (Blaby, Conservative)

A wager?

Mr John Robertson (Glasgow, Anniesland, Labour)

I will have a chat with the hon. Gentleman after this sitting.

It is important that the Bill consider other apparatus. We must look ahead. If we keep looking backwards, there will be nothing in the Bill worth talking about in six months, because we will have moved on. In all cases, we have to provide for the future, not for the past. I will win my bet in 10 years' time, when it will be important that the Bill covers telephones that are no longer plugged into anything.

Mr Richard Allan (Sheffield, Hallam, Liberal Democrat)

I have a point to make on hard-wired telephones, so I look forward to clause 89, which deals with them.

The provisions deal with a small section of the telephone-using population—we have heard that there are 200,000 such phones. The thrust of the Bill is to create competitive markets and use competition law generally to deal with the telecoms and broadcasting market as with other spheres of activity. The solution—it would obviate the need for the specific provisions to be in the Bill—would be for the incumbent supplier of the hard-wired telephones to make a binding commitment, saying that anyone who sought to leave the hard-wiring arrangement could go to a normal socket at the expense of the supplier and therefore avail themselves of the huge array of phones that start at £9.95 or whatever. Then primary legislation need not include specific provisions in relation to significant market power status for those telephones.

Will the Minister clarify whether at any point the supplier of those 200,000 phones—I understand that, historically, BT has the obligation—has ever come forward with such an offer? Would he welcome it as a way to avoid legislation that will become redundant in time?

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

The hon. Member for Maldon and East Chelmsford is right: there is no requirement in the directives. However, member states are free to impose their own regulatory requirements if they want to do so. In the United Kingdom, we want Ofcom to be able to regulate the position for the benefit of the consumer.

As we have heard, slightly more than 200,000 hard-wired telephones are still in use—I understand that one of them is used by the sister-in-law of my hon. Friend the Member for Ellesmere Port and Neston (Mr. Miller), but there are 199,999 others. In addition, 3 million people still rent a handset from their operator. Therefore, the matter is not tiny; it remains significant.

Mr Michael Fabricant (Lichfield, Conservative)

The Minister raised an interesting point about the fact that 3 million subscribers rent their handsets, but are they not free to terminate that rental at any time?

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

The hon. Gentleman is right. The licences of BT—it is the principal operator, although Kingston Communications is involved too—currently provide for price control of charges for hard-wired phones and for the possibility of accounting separation of apparatus supply from other aspects of the business. So long as hard-wired telephones remain on the system and so long as significant numbers of users continue to rent apparatus from the dominant supplier of services in their areas, there will still be a need for some protection of the consumer.

Mr Andrew Robathan (Blaby, Conservative)

I have to say that I do not know a great deal about hard-wired telephones, but I am concerned to discover that 3 million people still rent their telephones—largely, I suspect, from BT. They are likely to be elderly people, who may not have realised that they could buy their telephone, paying for it out of the annual rental. I am not in favour of a nanny

state, but is there some way to lead such people to understand that they might not be getting a good commercial deal?

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

The hon. Gentleman makes an interesting point. It may be that many of those 3 million people could be better off if they were to make that change.

John Robertson (Glasgow, Anniesland) rose—

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

It is likely that, over time, the regulations set out in clause 34—and, as the hon. Member for Sheffield, Hallam said, in clause 89—will become unnecessary. I do not think that we have yet reached that point, but it likely that we shall. That is why we have included in the Bill a mechanism to enable the Secretary of State by order to remove or restrict Ofcom's power to set significant market power apparatus conditions when Ofcom informs the Secretary of State that there are no dominant providers in the relevant market.

I hope that I have reassured the Committee that is there is a mechanism to remove the provision if it is not needed in future. It is in BT's and Kingston's current licences. Our view was that we should not simply remove it given that there are significant numbers—

Mr Michael Fabricant (Lichfield, Conservative)

Will the Minister give way on that point?

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

No, because I must give way first to my hon. Friend the Member for Glasgow, Anniesland. Before I do so, let me say that it would not be appropriate simply to scrap the provision now. However, it may be appropriate to do so in future.

Mr John Robertson (Glasgow, Anniesland, Labour)

On the subject of elderly people who do not know any better than to rent their telephone, I must tell the hon. Member for Blaby that renting has been on the go for some 20 years and that those elderly people were not elderly when they first started renting. It is quite insulting to anyone of that age to be told that they did not know any better.

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

My hon. Friend makes a telling point. However, Ofcom does have a duty to give information to consumers and perhaps that ought to be publicised.

Mr Michael Fabricant (Lichfield, Conservative)

Did the Minister say that the reason why he felt that the amendments should not be accepted was that Ofcom could tell the Secretary of State that there was not a significant market domination? Should it not be the other way around? The point of the amendments is to prevent Ofcom from imposing its will on the market. If the Secretary of State cannot say to Ofcom that it has no locus because there is no significant market domination, there is a need to include the provision in the Bill. Will the Minister clarify whether Ofcom needs to go to the Secretary of State, or can the Secretary of State impose the condition on Ofcom?

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

The question here is whether it is possible to have SMP apparatus conditions at all. If the amendments were to be agreed to, it would not be possible to have those conditions. My argument is that, at the moment, it is appropriate that those

conditions remain in the BT and Kingston Communications licences. At some time in the future, however, they may no longer be necessary. It would then be for Ofcom to take the initiative in the way that the hon. Gentleman describes. Ofcom would be under a duty to approach the Secretary of State in those circumstances—that is set out in clause 81.

Mr John Whittingdale (Maldon & East Chelmsford, Conservative)

This has been an extremely illuminating debate. I was slightly surprised to find that so many people still possessed hard-wired telephones. I was even more astonished to discover from the Minister that 3 million people still rent their telephones, although my surprise was lessened when I discovered that two of the 3 million appear to be sitting beside me—both confessed in my ear that they still rent their telephones. Perhaps there is a great body of people in need of Ofcom's protection.

The one thing that the Minister has clearly stated—I am grateful for his confirmation—is that the provision goes way beyond anything that is required under the EU directive. Time and time again, we hear complaints about the Government gold-plating directives. They usually deny the allegation vigorously, but it is obvious that that is occurring in this case. I suspect that there is a more focused way in which to address that concern about half our telephones than including a general provision to allow Ofcom to regulate any part of the apparatus supply market in which it believes there is significant market power.

I take the Minister's point about giving direction to Ofcom and I do not want to press the amendment to a vote, but I hope that he will keep the matter under review, because there needs to be strong justification for gold-plating directives. I am not saying that it should never be done—there may be circumstances in which it should be done, but the Government need to be certain that to go beyond the terms of a directive is a real necessity. On the basis of what the Minister has said, I am not convinced that there is such a necessity in this case. None the less, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr Andrew Robathan (Blaby, Conservative)

I beg to move amendment No.66, in

clause 34, page 32, line 30, after 'statement', insert 'published'.

Mr Roger Gale (North Thanet, Conservative)

With this it will be convenient to discuss amendment No.67, in

clause 34, page 32, line 33, at end insert—

'(3A) Before making a statement under subsection (3), OFCOM must consult such of the persons who, in their opinion, are likely to be affected by it as they think fit'.

Mr Andrew Robathan (Blaby, Conservative)

The fixing of charges derives from articles 6, 12 and 13 of the authorisation directive, but surely it is not the Government's intention to give Ofcom unlimited power and free rein without any requirement to consult. I am concerned about the charging principles. How will Ofcom determine the charging principles to which the provision refers? I am concerned that, unless something is inserted in the Bill, Ofcom may not be restrained in its behaviour. We should be wary about giving Ofcom powers that we may come to regret.

Our amendment proposes inserting the word ''published'' because we want transparency, as does the Better Regulation Task Force. That principle is also included in the framework directive, which the amendment attempts to implement. The Minister should note that the collection of administration charges for these purposes is not necessary for the implementation of the provisions in the authorisation directive. Is this more gold-plating?

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

Let me first refute the charge about gold-plating. It is true that the provision that we just discussed was not set out in the directive, although it is included in the existing BT and Kingston Communications licences. Not everything in the Bill has emerged from directives, including that provision. My case, however, is that it is appropriate for that to be included in the Bill, so the charge of gold-plating cannot be made—in fact, we are anxious to avoid gold-plating.

The hon. Member for Blaby makes a fair point about the importance of consulting and publishing when a charge is envisaged, but clause 35(5) states:

''Before making or revising a statement of charging principles, OFCOM must consult such of the persons who, in OFCOM's opinion, are likely to be affected by those principles as they think fit.''

The hon. Gentlemen's point is a fair one, but it is dealt with in clause 35.

Mr Andrew Robathan (Blaby, Conservative)

That is an extremely good answer. In fact, it is irrefutable, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr John Whittingdale (Maldon & East Chelmsford, Conservative)

I beg to move amendment No.68, in

clause 34, page 32, line 43, at end insert

'and reflect the extent to which those persons on whom it will fall to pay charges under this section will be the beneficiaries of the regulation under this Part of other persons'.

This is, to some extent, a probing amendment. It relates to the provision whereby Ofcom will levy charges on those that it regulates. I do not necessarily argue with that. It flags up the paradox that the benefit of the regulation is often felt more by those that are outside its scope and are not regulated, but compete with a dominant market player that is. The more a body, company or provider is regulated, the more likely it is, as a result of the provision, to have to pay the charges that Ofcom is to levy. The object is to encourage the Minister to explore whether it would be fair if the regulations' beneficiaries as well as their sufferers contributed to the costs.

Mr Richard Allan (Sheffield, Hallam, Liberal Democrat)

The amendment is helpful in that it allows us to explore the link between the benefits of regulation and the amounts paid by those being regulated. The principle works for the individual regulators that will form Ofcom, but it could prove to be quite contentious for the operators in that we are bringing together under one roof—the Ofcom roof—different charging regimes operated by the existing regulators for different services. Committee members would welcome some background information about

the current charging regimes so that we can project forward to what Ofcom might do, although I know that that will be difficult because Ofcom will set the charges in future.

I am particularly interested in the points about convergence. How are we, in the spirit of the amendment, to relate the benefits of the regulation to the value in the business, when those are not clear? One can see a difference between a low-value, small reseller of telephone or internet services and a large broadcaster, but we will increasingly encounter conglomerates that bring together a range of interests. They will want to see a clear relationship between the value of their businesses and what they have to pay to their regulator. That relationship is not currently apparent. There are settled conditions under the existing regulators, because people have accepted those formats, but they might jockey for position as the new framework is established. It would be helpful to have clear information from the Minister to flesh out the charging issue now or in a background briefing.

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

The basis of existing telecoms licence fees, with which the industry is familiar, is a simple percentage of turnover. That has the advantage of being transparent and broadly equitable, and it has on the whole worked well. The directive acknowledges that a turnover-related charge would be fair, simple and transparent, so that is the basis on which Oftel is working up proposals for the charging principles that will be used by Ofcom. When that work has progressed a little further, I shall send information to Committee members.

I cannot see an advantage in the more complicated and uncertain approach envisaged in this admittedly probing amendment. I suggest to the hon. Member for Maldon and East Chelmsford that the assessment would be difficult to make and, very likely, controversial. There would be a wide range of views about what the correct outcome of the assessment ought to be. That would create uncertainty, and it would be different from the basis on which charges are currently levied.

I think that on the whole the approach that has thus far been used, which it is intended that Ofcom use, is the right one. However, it might be helpful to the Committee if I circulate some more information about the way in which we expect those charging principles to be developed.

Mr John Whittingdale (Maldon & East Chelmsford, Conservative)

It was my intention that the amendment should be probing. To some extent I share the reservations that the Minister expressed about the way in which it would work in practice. Its purpose was to draw from the Minister helpful suggestions such as the one he made about circulating more information about the charging principles. I am grateful to the Minister and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 34 ordered to stand part of the Bill.

Clause 35 ordered to stand part of the Bill.