Mr Andrew Lansley (South Cambridgeshire, Conservative)

Thank you, Mr. Gale. Happy new year to you and the rest of the Committee.

In its way, clause 97 is exactly like clause 96, but applies to apparatus supply rather than the provision of services. As we previously discussed, article 10(5) of the authorisation directive covers clause 96. In line with that, clause 97 allows such a penalty to be imposed in circumstances of persistent contravention of the conditions.

I have a problem with the clause. EC directives are not intended to govern apparatus supply. For reasons

of complementarity, the Government have chosen to extend the structure of industry regulation that applies to services to apparatus supply. As we move through this part of the Bill, we are examining two complementary systems: the EC directives on the one hand and the structure of penalties and competition rules contained in the Competition Act 1998 and the Enterprise Act 2002 on the other. Wherever possible, we have sought to establish a direct parallel between the penalties available under this legislation in relation to the telecommunications industry and those available in other industries for contravention of competition prohibitions under the Competition Act. We are looking at those two regimes side-by-side.

Clearly, the two regimes cannot be directly parallel when the EC directive has a different penalty in mind. The directive goes beyond stating that there should be penalties for contraventions and specifies that there must be a power to require a provider to suspend service under certain circumstances. I understand that we cannot escape from that. However, there is no requirement on us to depart from the structure of the Competition Act penalties to control apparatus supply. The question is whether it is necessary to have a power to require an apparatus supplier simply to suspend its business altogether in order to secure compliance with the conditions.

Nobody has suggested that there should be such a power under the Competition Act. That Act looks to construct penalties in terms of a fine in relation to relevant turnover and exactly the same power is available to Ofcom to secure the compliance of apparatus suppliers with this regime. Why is it necessary for there to be a power that goes beyond what is available even under the Competition Act? We would literally be telling apparatus suppliers that they had to go out of business immediately, for some period of time or indefinitely.

We have discussed a fine of 10 per cent. of turnover, which is intended to be a penalty and, I suspect, is intended to be not only proportionate but to have a deterrent effect. The clause proposes more than that. It would put companies out of business. Why is it necessary to stretch the regime to that extent when the decision to apply penalties is at the Government's discretion?

Mr Andrew Robathan (Blaby, Conservative)

I am grateful to my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) for raising questions about the Competition Act, but we really want the Minister to justify the clause. As we have discussed in the past, apparatus has nothing to do with the EC directive, so any mention of it seems to us to be gold plating the EC directive.

Perhaps the Minister will say yet again that the reason for this gold plating relates to current licenses to British Telecom and Kingston Communications. I would like to witness a discussion between Kingston Communications and the right hon. Member for Hull, East (Mr. Prescott) as to how they deal with these inquiries—as well, I am sure, as we do in the House.

As there is no provision in the directives to suspend apparatus supply, according to page 16 of the explanatory notes, paragraph 72 states:

''This new regulatory framework implements a significant proportion of the harmonised framework for the regulation of electronic communications networks and services established by EC Communications Directives''.

That has nothing to do with apparatus so why is it included? We have discussed this before. The Minister must put it in black and white. We should not be regulating at all in that area. Apparatus should have nothing to do with Ofcom.

What could be the consequences of this huge, extra power given to Ofcom? If Ofcom finds a supplier to be in contravention, it gives a direction. According to subsection (2):

''A direction under this section is—

(a) a direction to the contravening supplier to cease to act as a supplier of electronic communications apparatus''.

The next subsection says that this should apply:

''for an indefinite period beginning with the time at which it is notified''.

I am sure it is unintentional, but this is a draconian power. Who will be covered? A supplier is not defined. I have checked the definitions but cannot find one. Presumably Motorola and other manufacturers will be suppliers, as well as retailers such as Carphone Warehouse, Dixons, Comet, or even a little electrical supplier in Blaby or Lutterworth—such as the one as I used during the Christmas holidays—or perhaps even in East Ham. The Minister needs to expand on this and tell us exactly what is the purpose of the clause. He needs to justify it entirely to explain why Ofcom should need extra power that is totally contradictory to the Government's stated purpose of implementing EC directives.

Mr Michael Fabricant (Lichfield, Conservative)

May I also wish you a happy New Year, Mr. Gale, and say how refreshed you look?

I come from a slightly different angle on this. The Minister, in answering my question, can easily put a number of people's minds at rest.

Over the Christmas recess, through the miracle of electronic communication, while I was in Brownsville, Texas—

Mr John Robertson (Glasgow, Anniesland, Labour)

Name dropping.

Mr Michael Fabricant (Lichfield, Conservative)

The honourable Gentleman says ''name dropping''. I can tell him that if he had ever been to Brownsville, Texas, he would want to drop the town, not the name. Austin was far more pleasant.

While I was there I was contacted by a couple of equipment suppliers who were concerned that the Bill may affect them. Let me give a couple of examples of where they feel that there may be a problem. I am sure that the Minister will be able to satisfy them that the clause does not apply to them. First, let me give a brief personal example.

In the early 1990s before I came to the House, I was involved in the setting up of a radio station in south-east England in which I had a minority shareholding. The radio station did not pay my company, which was

also supplying it with technical equipment. Fortunately the Independent Broadcasting Authority intervened. The Radio Authority is now that part of the Independent Broadcasting Authority, which will become part of Ofcom when the Bill is enacted. The IBA was able to put pressure on the radio station to ensure that we were paid. Otherwise the IBA would have taken away its licence. Let me express my belated thanks to anybody from the Radio Authority at the time who might read this debate.

I should like clarification that clause 97 could not have been applied in that instance. Can the Minister confirm that clause 97 will not apply to suppliers who supply a company that is in breach of its licensing agreement? A couple of suppliers were concerned about that. Can he confirm that if a supplier—who is, I believe, not covered by this clause—is supplying equipment to a firm that is in breach of its licence, there is no fear that a supplier's contract with the licensee will be broken by virtue of clause 97? If it could be broken, that would be a vicarious application of justice—by punishing the licensee, the supplier would also be punished. Manufacturing industry is in the deepest and longest recession since the 1970s, and electronics manufacturers and suppliers would be very worried if they thought that they could be caught under this clause.

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

The Committee has had several discussions about whether there should be provision in the new framework for significant market power conditions on apparatus, and it has agreed with the view that I have propounded that there should be. I will not rehearse the arguments again now, but having accepted that there should be such conditions, it is right that the framework set out in the Bill covers all the requirements to make such a framework work. That is why clause 97 is included—it suspends apparatus supply for contravention of conditions.

The unremarked upon clause 96 is about suspending service provision for contraventions of conditions, and one could argue that that is also a draconian provision. However, I think that the Committee has accepted that it is a necessary part of the framework that we are putting in place—and, indeed, the directives require it. If it is accepted that that should be in the legislation, I hope that the Committee will accept that clause 97 should also be included, because the package would be incomplete without it. Clause 97 allows Ofcom to suspend or restrict a provider's entitlement to supply electronic communications apparatus in the same way and subject to the same procedures as network services and associated facilities can be suspended or restricted under clause 96.

In our previous discussions, I made it clear that those conditions could be imposed in only a very limited set of circumstances. The hon. Member for Blaby has referred to our interesting debates about the fact that more than 3 million people still rent a telephone handset from their operator—such as BT or Kingston Communications—and just over 200,000 people still rent hard-wired telephones. The licences for BT and Kingston Communications include a protection for customers in those circumstances and

we want to maintain those controls and carry them forward into the new framework that this legislation will provide. I have argued that case to Committee members on several occasions.

In previous discussions, it was revealed that there has been concern that it might appear that the circumstances in which we intend to use these powers could be rather broader than those that I have described. The hon. Member for Lichfield (Michael Fabricant) raised concerns about that in his remarks of a few moments ago, and I notice that hon. Members have tabled amendment No. 119 for our debate on clause 146 later this afternoon.

In case we can have only a brief debate on that clause, I wish to make the following statement now. We are considering tabling a Government amendment to make more explicit the rather limited circumstances in which we expect the powers to be used. I hope that that will be of some reassurance to the Committee.

Mr John Whittingdale (Maldon & East Chelmsford, Conservative)

Before the Minister leaves the interesting point raised by my hon. Friend the Member for Lichfield, I should mention, in case we do not have time to explore the matter at length under clause 146, that my hon. Friend referred to circumstances in which clause 97 might be used to bring pressure to bear on suppliers of equipment to firms in breach of their authorisation conditions. Might not there be a similar concern that the clause could be used to bring pressure to bear on suppliers of equipment to those who are not authorised at all? I was thinking particularly of those broadcasting illegally, perhaps from the high seas—I know you have had some experience of that, Mr. Gale, as has one of my hon. Friends. The Department has had great difficulty finding ways to deal with illegal broadcasts. The clause seems a rather attractive means of tackling the problem. I wonder whether that has crossed the mind of the Minister.

Mr Roger Gale (North Thanet, Conservative)

Order. It is the duty of the Chairman to try to facilitate debate, and there is no doubt that some of the issues under clause 146 are related to those under clause 97. I will allow the Minister to respond to the hon. Gentleman, but I find it unsatisfactory that it appears to be thought necessary to create artifices and devices in order to work into the debate matters that should, properly, be taken later.

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

I am grateful to you, Mr. Gale. The point made by the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) had not crossed my mind. I do not think that the clause would be an appropriate way of addressing that concern.

The hon. Member for Lichfield asked whether clause 97 could be applied to a company in breach. In principle it could not. However, that would depend on the contractual arrangements that had been entered into. Ofcom would need to take account of the individual circumstances between a supplier of apparatus whose entitlement was being suspended

and a company with which it had a contract for the supply of, for example, components.

Mr Michael Fabricant (Lichfield, Conservative)

I am now 90 per cent. relieved that the Minister has said that the answer is no, but he threw some doubt on the matter. Is he saying that there is still a possibility that an innocent company—a third party—that is not in breach of any regulation, and certainly not in breach of the Bill, could be penalised simply because it is a supplier to a company that is in breach of the Bill? Is not that profoundly unfair?

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

If the company were innocent, it would not be caught. I cannot give the hon. Gentleman the definitive no for which he is pressing. Circumstances would depend on the contractual arrangements that were in place.

Let me comment on the concerns raised by the hon. Member for South Cambridgeshire. As the Committee knows, Ofcom will be under a duty to use the Competition Act 1998 rather than the sectoral powers when that is the best way forward. Indeed, I understand that Oftel is currently carrying out an investigation of British Telecom's handset rental activities under the Competition Act. However, the sectoral regime allows for the maintenance and application of some specific obligations, notably price controls, which, at least for the time being, we consider it necessary to retain.

We discussed in Committee the fact that in future it may be appropriate to take away the possibility of such controls being imposed. However, for the time being, our view is that we need to retain them. At the moment, given the importance—from many viewpoints—of making sure that apparatus supply to consumers is made on reasonable terms and conditions, our view is that it is right to have sectoral powers to regulate that activity directly, if necessary, by directing restriction or suspension if the conditions that Ofcom imposes on those with a dominant position in the area are repeatedly or seriously breached. We cannot rely solely on the Competition Act, as it would not allow us to do that.

Mr Andrew Lansley (South Cambridgeshire, Conservative)

The Minister will recall that it was previously considered desirable that there should not be a structure of penalties that would cause Ofcom to choose a sectoral approach—the imposition of conditions rather than reliance on Competition Act powers because of a difference in the availability of penalties. If apparatus applies, the situation is different from that of services. If services are involved, significant market power conditions must be imposed and, therefore, the structure flows through. Does the Minister accept that there is a risk at the outset that Ofcom will say that a penalty would be available to it through the imposition of conditions and not through the application of Competition Act powers alone, and there might be a distortion in favour of applying conditions rather than relying on Competition Act powers?

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

I hoped that the hon. Gentleman would feel that that would not be a danger, given the restricted circumstances in which the powers will be

used. Ofcom will be under a duty to use the Competition Act rather than sectoral powers in circumstances in which that represents the best way forward. We will make proposals on how the apparatus that we are discussing should be narrowly defined. In view of that, I hope that the hon. Gentleman will accept that there is no danger of the sort about which he is understandably concerned.

Mr Andrew Robathan (Blaby, Conservative)

The Minister might recall that I mentioned the definition of a supplier; he then mentioned a later clause that we do not want to address now. Does he foresee that a supplier will end up being fined under the amendment that he will table?

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

The amendment that might well be tabled will address the apparatus, not the supplier.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 14, Noes 6.

Mr Roger Gale (North Thanet, Conservative)

Before we proceed, I meant to mention the following at the start of our proceedings, and it was an oversight on my part that I did not do so. Hon. Members will have noticed that we have been relegated to Room 10 because the Hunting Bill has apparently attracted large numbers of Members and other interested parties in Room 14. I have asked the officials of the House to see whether there is a Room that might conveniently accommodate the guests of Members who wish to be here.

Hon. Members will appreciate that we do not usually recognise the Public Gallery, but it has come to my attention this afternoon that the Hansard staff who traditionally use the Public Gallery have had difficulty accessing this end of the Room when they need to do so. I believe that Officers of the House should be able to do their duty expeditiously and I therefore suggest that if Hansard staff wish to use the Press Gallery, they may do so.

Clauses 98 and 99 ordered to stand part of the Bill.