Clause 149 - Duties of OFCOM when carrying out spectrum functions
Communications Bill
10:15 am
Mr Andrew Lansley (South Cambridgeshire, Conservative)
I beg to move amendment No.15, in
clause 149, page 136, line 32, leave out subsection (3).
Clause 149 sets out the range of matters that must be taken into account by Ofcom when managing spectrum. I hope that the Committee will forgive me, but I shall have to take a tour back through history. The purpose of section 2 of the Wireless Telegraphy Act 1998 was to set out the matters to be taken into account by the Secretary of State or the Radiocommunications Agency, on his behalf, when exercising the power to prescribe fees payable in respect of wireless telegraphy licences. In effect, that was the introduction of administrative incentive pricing for wireless telegraphy licences. The matters that must be taken into account are reflected directly under clause 149.
Let us consider clause 149(1)(a), (b) and (c). Such measures cover the supply, demand and prospective demand for spectrum and are translated from section 2 of the Wireless Telegraphy Act 1998. Subsection (2) of clause 149 sets out further factors that are not concerned with supply and demand for spectrum, but wider matters that relate to the economic management for spectrum for the delivery of benefits to society as a whole, such as efficient management, economic and other benefits, development of innovative services and competition. Such matters have been separated under the clause. It may be asked why were they not set out in a group in the same way as they were set out under section 2 of the Wireless Telegraphy Act.
I refer to the debates on the Wireless Telegraphy Act 1998 in Standing Committee A on 13 November 1997.
Mr Andrew Lansley (South Cambridgeshire, Conservative)
Yes. I was there. The hon. Member for Milton Keynes, North-East was there, as was the Minister. If the hon. Member for Broxtowe (Dr. Palmer) were with us, he might recall it. My purpose in that debate was to establish that the matters to be taken into account under section 2 of the Wireless Telegraphy Act should be taken into account in relation not only to administrative incentive pricing on wireless telegraphy licences, but spectrum auctions. The then Minister, the hon. Member for Leeds, West (Mr. Battle) said about spectrum auctions that
''clause 2 matters may be taken into account in assessing bids''.—[Official Report, Standing Committee A, 13 November 1997; c. 151.]
The hon. Gentleman was resisting the point that not only might such matters be taken into account, but that they should be taken into account. The legislation did not require the Secretary of State to take them into account because the structure of the Wireless Telegraphy Act meant that they were related specifically to wireless telegraphy licences and administrative incentive pricing, and were expressly excluded from applying to spectrum auctions. It meant that the Secretary of State could then prescribe in regulations those matters that he or she wanted to take into account in a spectrum auction. The Secretary of State went on to do so, for example, in the 3G auction and in relation to a range of issues, such as the efficient use of the spectrum, the promotion of competition, optimum efficiency in spectrum use, the promotion of effective and sustainable competition and the delivery of full economic value.
Words and interpretations differ. It could be said that delivering full economic value comprises many of those other factors, but it is interesting that the development of innovative services, which was one of the matters to be taken into account under section 2 of the Wireless Telegraphy Act was not specified in relation to the 3G auction. I shall not go into a long rigmarole about the auction, but I contend that the Secretary of State was not required to apply those matters when considering an auction and chose not to do so. Whether she was right is secondary: it ought to have been a requirement. That is the history and what the Conservatives argued back in 1997.
The Government have changed the structure with clause 149 and done something different. Instead of disapplying the further factors in subsection (3) so that they applied only to administrative incentive pricing, in respect of grants of recognised spectrum access or in relation to spectrum trading, they have constructed things differently so that those factors apply to everything—to the whole of spectrum use. That is what the clause sets out.
However, as I understand it, subsection (3) disapplies those matters in relation to anything other than the prescribing of fees for wireless telegraphy licences for administrative incentive pricing purposes. It refers back to section 2 of the Wireless Telegraphy Act 1998 which, as we will discover when we debate schedule 17, will be amended to relate to the grant of wireless telegraphy licences or recognised spectrum access under section 1 of that Act. Subsection (3) means that the additional matters to be taken into account in subsection (2):
''efficient management and use of the . . . spectrum . . . economic and other benefits . . . development of innovative services . . . and competition'',
which I contend should be taken into account in spectrum auctions and in the administration of spectrum trading, may be disapplied. They would then apply only to administrative incentive pricing and recognised spectrum access.
Those matters should be taken into account throughout the activity of spectrum management. Therefore, amendment No. 15 would remove
subsection (3), which has the effect of disapplying those factors in relation to matters other than those relating to section 1 of the Wireless and Telegraphy Act.
Mr Chris Bryant (Rhondda, Labour)
Unlike others, I shall be very brief. I could not find a better place to raise this issue Mr. Gale, and I hope that you will be lenient with me because it is not directly related to the amendment. However, it is relevant to the clause and I presume that there will not be a stand part debate later.
Mr Chris Bryant (Rhondda, Labour)
Oh well. I will proceed.
As other hon. Members have already mentioned, because the spectrum function issues relating to Ofcom are drafted in a convoluted, not to say terpsichorean way, it is difficult to perceive exactly how in five or 10 years time Ofcom will understand its relationship in terms of charging public service broadcasters—Channel 4, S4C, BBC, ITV and others—for spectrum. Will the Minister clarify whether, by virtue of including subsection (3) or this clause, Ofcom will have a new power to decide to charge those television stations for spectrum use, not least by virtue of the requirement that it should examine the efficient use and management of part of the electromagnetic spectrum and the economic and other benefits arising from the use of wireless telegraphy?
Mr Roger Gale (North Thanet, Conservative)
In order to facilitate the debate and as we have already started to go down this road, I am prepared to call the hon. Gentleman. The Minister will then, no doubt, deal with all the issues at once, on the understanding that there will be no stand part debate.
Mr Michael Fabricant (Lichfield, Conservative)
I specifically wanted to ask about the BBC and its use of spectrum. Last year, I mentioned in Committee that the BBC had in the past sat on frequencies to the detriment—in my opinion—of independent broadcasting in the United Kingdom. I gave the example of a frequency in Essex that is used for BBC local radio. Despite the Radio Authority's attempts to get the BBC to swap frequencies, it refused to do. A fourth independent national radio network was prevented from being established because that frequency was not made available.
Under clause 149, which is about the duties and powers of Ofcom, will Ofcom have the power—quite clearly lacking at present in relation to the Radio Authority or the Independent Television Commission—to instruct the BBC to surrender frequencies to commercial radio stations? Under clause 149(1)(c), Ofcom is to have regard to
''demand that is likely to arise in future''
and to the most efficient use of available spectrum. Indeed, it has power to instruct commercial broadcasters to surrender frequencies to the BBC if necessary. This is an important issue. It seems that there is no such power at present. Will the Bill give Ofcom the power to make such changes, either under clause 149 or elsewhere?
Mr John Whittingdale (Maldon and East Chelmsford, Conservative)
I did not intend to speak on the clause, but the hon. Member for Rhondda has drawn me out. Like him, I was puzzling when we could raise the interesting question of broadcasters being charged. I thought that we might be able to do so under clause 158, but I agree that that clause would not be a very satisfactory vehicle, so it might be better to raise the matter now.
It is particularly interesting that the report of the Select Committee on Trade and Industry says that incentive pricing provoked quite a response from broadcasters. That is not entirely surprising, as they are likely face additional charges. One can understand why they might view the measure with a degree of concern. The report says that the response from broadcasters has been mixed. ITV accepted the rationale for some kind of spectrum pricing, but said that it already paid a licence fee and that the fee should go towards the payment, adding that, on that basis, it should not have to pay any more. That is perfectly understandable. However, the measure raises interesting questions for other broadcasters, all of which are in different circumstances.
As the hon. Member for Rhondda pointed out, S4C is directly financed by the Government, so in a sense, if S4C were to make a payment, it would simply be giving the Government their money back. It would, no doubt, ask the Government to give it more money so that it could give it back to them. Similarly, I have no doubt that if charging were to be introduced, the BBC would say that the licence fee must be increased—the BBC uses every opportunity to say that, and I am sure that it would not let that one pass. In the BBC's view, the licence fee is far too low and delivers value for money, and most people would applaud an opportunity to pay more. The case of Channel 4 is interesting. It does not receive public money, but is subject to a full public service remit. It has had financial difficulties recently, especially as a result of the advertising downturn.
It appears that the Government intend to proceed with requiring broadcasters to pay for spectrum usage, but such charges will have a different effect on each broadcaster. In some cases, it seems that there will simply be a transfer of money from the Government to the broadcaster and then back again from the broadcaster to the Government. As Professor Cave originally pointed out, that is a logical part of a market mechanism. Furthermore, as my hon. Friend the Member for Lichfield has said, the system will at least provide an incentive for the BBC to make available frequencies that it does not use, by enabling it to benefit from doing so. Although there is a clear market advantage in having it, the system will be complicated to administer and there are potential problems, as was highlighted in the Select Committee report. Now that the hon. Member for Rhondda has raised the matter, it would be helpful if the Minister were to take the opportunity to respond.
Mr Roger Gale (North Thanet, Conservative)
I apologise if my well-intentioned ruling has allowed the waters to be muddied slightly. We are discussing an amendment. I invite the Minister
to address that first and to deal with other issues as he sees fit.
Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)
Thank you, Mr. Gale. I acknowledge both the desire of the hon. Member for South Cambridgeshire to ensure that Ofcom's spectrum management duties are harmonised and consistent, and his consistency and tenacity in pursuing the matter since 13 November 1997. I imagine that he worked through the pre-legislative scrutiny Committee as well, because the point was mentioned in its conclusions. We have added clause 149 to the Bill in response to Joint Committee recommendation 67. It imports those considerations in section 2 of the Wireless Telegraphy Act 1998 that are specifically about charging, and applies them to Ofcom's spectrum management functions as a whole, in the way that the hon. Gentleman described.
Spectrum management involves a wide range of activities from international allocations to domestic television interference. Clause 3 imposes on Ofcom a general spectrum duty to achieve optimal use of the radio spectrum, and the factors listed in the clause underpin that high aim. However, not all of the functions listed in subsections (1) and (2) are relevant to all of Ofcom's spectrum management functions.
The original purpose of the section 2 factors included in the Wireless Telegraphy Act 1998 was to provide a safeguard against the use of incentive pricing to raise revenue. They were intended to encapsulate the specific considerations that were to be taken into account in setting licence fees, but not all of them will necessarily be relevant to designing an auction, for example. Some are likely to be, some are not. The objectives of an auction might include other matters such as quality of service, speed of roll-out and geographical coverage. In an auction, fees paid will be determined not by the regulator, but by the bidders, so there is no need to specify factors to be taken into account in setting fees. Nor is it easy to relate the section 2 factors to Ofcom's function of investigating and assisting with interference.
Subsection (3) makes it explicit that if the factors in subsections (1) and (2), and in the Wireless and Telegraphy Act 1998, related to spectrum pricing are not relevant, they can be disregarded. The aim of that is to avoid confusion about the things that Ofcom should take into account in carrying out any part of its work. However, Ofcom may not disregard a factor that it is required to consider by another provision, nor may it choose not to take into account any of the listed factors relating to the specific function of setting fees, both for licences and for recognised spectrum access. We do not want to weaken the safeguards that prevent spectrum fees from being used as a revenue-raising device. Clause 149 is intended to introduce the elements of consistency and coherence that the Joint Committee recommended, while retaining the necessary flexibility for Ofcom in exercising its various spectrum management functions.
Subsection (3) makes it explicit in the Bill that Ofcom may exercise a sensible measure of discretion to set to one side factors that simply do not apply. However, I can tell the hon. Member for South Cambridgeshire that if the items listed in subsections
(1) and (2) were relevant—in a number of cases involving auctions, they certainly would be relevant—they would apply as the clause is drafted. Subsection (2) is difficult to follow, but the way in which the clause is constructed is more helpful to the hon. Gentleman's long-held aspirations than some of his remarks implied. I hope, therefore, that the amendment will not be pressed to a Division.
My hon. Friend the Member for Rhondda asked about Channel 4. We have made it clear that we envisage all spectrum users, including broadcasters, being embraced by the new regime. We want pricing to support the efficient use of the analogue broadcasting spectrum as well. For all broadcasters, spectrum pricing will not be introduced before 2006, and it will be introduced in such a way as to provide an added incentive to achieving full digital switchover—that refers back to our discussion of the previous clause. It will take into account the effect of the pricing proposals on what the broadcasters can do to achieve the conditions for early switchover, the ability to meet their public service obligations and the need for the incentives to be workable in practice. There will be a great deal of consultation and discussion about the arrangements before the charges are introduced. The answer to the question, ''Do we envisage charges being introduced specifically for Channel 4?'' is yes.
Mr John Whittingdale (Maldon and East Chelmsford, Conservative)
On a point of information, once the process of consultation has been completed and Ofcom is in a position to proceed, will there be another opportunity for the House to consider the issues, or will everything be done by regulation?
Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)
I imagine that the answer is that it can be done by regulation, without further debate by the House, but if I am mistaken, I will, no doubt, be informed of the fact. There will be wide discussion of the matter and those who are affected will have every opportunity to comment and to make suggestions. There is every prospect that we can take the proposals forward in a consensual way, given the wide recognition of the benefits for everybody of spectrum charging. I hope that that will be the case.
Mr Chris Bryant (Rhondda, Labour)
I am grateful for the Minister's comments, although slightly surprised by them. Will he comment on S4C, which exists under a different regime? Its financing and its relationships as a public service broadcaster are rather different from those of others. Does he expect that S4C will also face charging?
Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)
The regime set out in the Bill will apply to all spectrum users. We will not make exceptions for individual broadcasters. As I said, I am confident that we will be able to develop arrangements that meet the obvious concerns that arise when people face the prospect of new charges. However, I do not envisage S4C being left out of the arrangements.
The hon. Member for Lichfield asked whether the BBC might be forced to give up spectrum. That would not happen as a result of the impact of anything in clause 149, but the hon. Gentleman returns to the topic from time to time.
Ofcom will have the same powers as the Radiocommunications Agency has now to manage
spectrum, including unused spectrum, efficiently. We are not providing draconian new powers that are not available elsewhere, much though the hon. Gentleman might wish that we were. However, the charging arrangements will provide significant new incentives for spectrum users to relinquish spectrum that they do not use. That will be one of the major benefits of the new arrangements, and a number of people who are occupying spectrum now will find it to their advantage to give it up.
Mr Michael Fabricant (Lichfield, Conservative)
The example I gave was not of unused frequency. What I had in mind happens, sadly, with some regularity. If the frequency used for a local radio transmission such as BBC Radio Essex—I do not know whether that was the one—had been surrendered and swapped for another VHF frequency, a national radio network could have been established, but that did not happen, with the result that there are now three, not four, national radio networks operating under the auspices of the Radio Authority.
Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)
The charging and trading arrangements that we are putting in place will provide new incentives for spectrum users to make the sort of change that the hon. Gentleman is calling for, and to relinquish or swap frequencies. A valuation mechanism will increase the incentives for them to do so. That will help to achieve the objectives that he describes, which everyone would support.
Mr Andrew Lansley (South Cambridgeshire, Conservative)
I am grateful to the Minister for the nature of his response, and I do not want to appear churlish. I understand that clause 149 has travelled some distance, and that it is much more explicit about the potential for a harmonised set of duties to be applied across all spectrum use and management.
I confess that I had not understood that there were particular circumstances—I would hard-pressed to find them—in which the duties in subsections (1) and (2) or the factors to be taken into account would not be relevant to the activity of spectrum management by Ofcom. However, given the Minister's explanation that they would have to be literally not relevant for Ofcom not to have regard to them, I am content. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 149 ordered to stand part of the Bill.
Clause 150 ordered to stand part of the Bill.