Clause 3 - General duties of OFCOM

Communications Bill – in a Public Bill Committee at 12:30 pm on 10 December 2002.

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Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire 12:30, 10 December 2002

I beg to move amendment No. 1, in

clause 3, page 3, line 3, leave out subsection (1) and insert—

'(1) It shall be the principal duty of OFCOM to further the interests of consumers in relevant markets, where appropriate by promoting competition.

(1A) It shall further be the duty of OFCOM, in carrying out their functions—

(a) to secure the optimal use for wireless telegraphy of the electro-magnetic spectrum;

(b) to secure the availability throughout the United Kingdom of a range of television and radio services which (taken as a whole) are of high quality, sufficient to appeal to a variety of tastes and interests, and of a plurality of views sufficient to meet the diverse interests of citizens; and

(c) to secure that standards falling with subsection (2) are applied in the case of all television and radio services.'.

Photo of Roger Gale Roger Gale Vice-Chair, Conservative Party

With this it will be convenient to take the following:

Amendment No. 150, in

clause 3, page 3, line 3, at beginning insert—

'( ) It shall be the principal duty of OFCOM to promote and further the interests of consumers and citizens.'.

Amendment No. 195, in

clause 3, page 3, line 3, leave out subsection (1) and insert—

'(1) It shall be the principal duty of OFCOM in carrying out their functions—

(a) to further the long-term interests of all citizens—

(i) by ensuring the availability of a diversity and plurality of high quality content in television and radio;

(ii) to secure that standards falling within subsection (2) are applied in the case of all television and radio services;

(iii) to secure the optimal use of wireless telegraphy of the electromagnetic spectrum; and

(b) to further the long-term interests of consumers by promoting the efficiency of electronic communications networks and services, and broadcasting

and to do so wherever possible by promoting effective competition in national, regional and local communications markets throughout the United Kingdom.'.

Amendment No. 151, in

clause 3, page 3, line 3, after 'the', insert 'further'.

Amendment No. 130, in

clause 3, page 3, leave out lines 4 to 13 and insert 'to further the interests of consumers and citizens—

(a) wherever possible by promoting effective competition;

(b) by securing the optimal use for wireless telegraphy of the electromagnetic spectrum;

(c) by securing the universal availability of a wide range of diverse and high quality communications services throughout the United Kingdom; and

(d) by securing standards falling within subsection (2) which are applied in the case of all television and radio services.'.

Amendment No. 29, in

clause 3, page 3, line 4, leave out 'where appropriate by promoting competition'.

Amendment No. 124, in

clause 3, page 3, line 13, at end insert—

'(e) to secure, so far as practicable and in the manner that best takes account of the need to protect personal data, in order to protect copyrighted content, and to empower parents to protect children from harmful content, that open standards for technological security systems are established and implemented.'.

Amendment No. 127, in

clause 3, page 3, line 13, at end insert—

'(e) to protect and promote the interest of citizens.'.

Amendment No. 27, in

clause 3, page 3, line 13, at end insert 'and in carrying out their functions, OFCOM shall have regard to the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed'.

Amendment No. 196, in

clause 3, page 3, line 20, at end insert—

'(2A) In performing their duties under subsection (1), OFCOM must observe the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed.'.

Amendment No. 48, in

clause 3, page 3, leave out lines 21 to 23 and insert—

'(3) It shall also be the duty of OFCOM in carrying out their functions, and in the performance of their duties under subsection (1), to comply with the principles of good regulation, namely that regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed.

(3A) Subject to subsection (3), it shall be the duty of OFCOM in carrying out their functions, and in the performance of their duties under subsection (1), to have regard in particular to such of the following as appear to them to be relevant in the circumstances—'.

Amendment No. 153, in

clause 3, page 3, leave out lines 21 to 23 and insert—

'(3) It shall also be the duty of OFCOM in carrying out their functions, and in the performance of their duties under subsection (1), to comply, except where issues of national security preclude compliance, with the principles of good regulation, namely that regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed.

(3A) Subject to subsection (3), it shall be the duty of OFCOM in carrying out their functions, and in the performance of their duties under subsection (1) to have regard in particular to such of the following as appear to them to be relevant in the circumstances—.'.

Amendment No. 46, in

clause 3, page 3, line 24 after 'promoting', insert 'long-term and sustainable'.

Amendment No. 152, in

clause 3, page 3, line 24, at end insert—

'(aa) the rights of the citizen to access services which inform, educate and entertain;'.

Amendment No. 28, in

clause 3, page 3, line 25, leave out paragraph (b).

Amendment No. 47, in

clause 3, page 3, line 32, after 'encouraging', insert 'long-term and sustainable'.

Amendment No. 125, in

clause 3, page 4, line 3, at end insert—

'(n) the desirability of open standards for technological security systems to prevent unauthorised use of personal data and copyrighted content.'.

Amendment No. 131, in

clause 3, page 4, line 6, leave out 'and value for money' and insert 'value for money, universal access, fairness, information and redress'.

Amendment No. 34, in

clause 10, page 10, line 30, at end insert 'and'.

Amendment No. 35, in

clause 10, page 10, line 34, leave out from 'put' to end of line 37.

I reiterate that I am quite prepared to have a comprehensive debate at the start of discussion on the clause, but if so there will not be a stand part debate.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

As I said a moment ago, part of my purpose will be to suggest to the Committee some issues that were not properly resolved by the Government's response to the joint scrutiny committee. Among those, perhaps the most important is the question of the structure of general duties. The Minister knows how important that is. During the proceedings of the Committee that considered the then Utilities Bill, he said that general duties lie at the heart of the regulatory process. They set the framework in which regulators exercise their functions under the Acts. That is clearly true in

relation to the Bill as much as it was to that legislation. My hon. Friend the Member for Maldon and East Chelmsford rightly referred to the questions that have arisen over the years about how regulators have interpreted their general duties, or felt obliged to do so in order to secure their objectives most effectively.

A principal difficulty that Ofcom faces is the breadth and complexity of the duties placed on the regulator. Not only is a range of duties set out in clause 3(1) and (2), but a range of factors to which regard has to be shown is set out in clause 3(3), some of which take the character of additions to the duties rather than factors as such. We will go on to debate the extent to which they should be characterised as duties rather than matters to which Ofcom must have regard. In practice, they add to the complexity of the range of objectives that Ofcom needs to meet.

The duties do not stop there. I will not go on about it at length, but clause 4 gives a range of duties related to Community legislation, some of which stand in a prior position, so Ofcom has a requirement to meet those above and beyond any other duties. When we get into subsequent parts of the Bill, there will be duties in relation to the wireless telegraphy spectrum, which amplify on the optimal use issue, and so on. The complexity of Ofcom's duties is a characteristic of the regulatory issue, and, if anything, goes substantially beyond most other regulatory Acts or the establishment of regulators seen in recent years.

It has been clear that one of the ways in which one can deal with the issue is to ensure not only that those duties are as clear as one can make them, but that, wherever possible, Parliament states its intentions as to the manner in which those duties are to be considered, one against another.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

I follow where my hon. Friend is going, but I want to question him. He says that the primary purpose of the amendment is to promote competition, from which much will flow. Does he believe, for example, that the Radio Authority is wrong—I do not think that it is—to say that in a given region it seeks diversity, rather than competition? The point applies throughout the United Kingdom, though in the west midlands, for example, where there is a pop radio licence, it might look for, say, a black rock type radio licence—something that is different, but not competing, in order to give diversity. Would not that be in conflict with the new subsection (1) proposed in the amendment?

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

I appreciate my hon. Friend's intervention, because it gives me an opportunity to describe the structure of the amendment, in relation to a reasonable example of the way in which it works. By way of clarification, I should say that my objective is not for Ofcom's principal duty to be the promotion of competition, even though that is the first community requirement in relation to telecommunications. The principle duty of Ofcom is to further the interests of consumers. It is simply an observable fact that the best way of promoting the interests of consumers is to allow competition to deliver, in circumstances in which it is appropriate to do so. The best interests of consumers are normally met by the presence of effective competition. To be clear, I do not simply

structure the amendment around a pro-competitive approach.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

This is a matter of quite substantial concern to people who would like to see broadband services delivered across the whole of the United Kingdom, but are frequently told by BT that competition law prevents them from bringing broadband to individual exchanges, until such time that they can prove they are not subsidising them. That means that in some exchanges, 600 people must be registered before broadband can be introduced. Does the hon. Gentleman think either that what BT says might not be true, and that competition law does not force it to do that, or that there are situations in which competition law and the needs of competition might conflict with the needs of consumers?

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

I am stacking up a series of examples that I will try to work through. If the Committee will forgive me, I shall try to work with two examples, to illustrate the point of the amendment. In relation to the examples that my hon. Friend the Member for Lichfield and the hon. Member for Rhondda mentioned, it may not necessarily be the case that competition will deliver the desired outcome. Notwithstanding that, however, does one regard competition and furthering the interests of consumers through competition where appropriate in the same light as a duty of Ofcom that may subsequently be specified, or is there a principal duty for Ofcom to promote competition?

On the point made by my hon. Friend the Member for Lichfield, it is true that the amendment takes forward the structure of legislation, which says that one of the objectives—or duties—is to secure a variety of television and radio services is to secure a variety of television and radio services to satisfy a wide range of tastes and interests. I have added

''a plurality of views sufficient to meet the diverse interests of citizens''

because those are not reflected in the present structure of general duties, which implies that there are some specific circumstances in which competition will not necessarily deliver them. If it were true that competition can in all circumstances deliver radio and television services that meet the variety of tastes, or diversity of views, of consumers and citizens, we would not need an additional duty. If competition could deliver that, competitive markets would suffice.

My hon. Friend has already referred to the point that each regulator has to think hard about the manner in which it pursues and achieves objectives—that is true of the Radio Authority today. During the discussion on the draft Bill, one of the continuing themes that the Joint Committee had to address was the extent to which the regulator would deal with an issue by the application of licence conditions, ex ante regulations and, in the case of the Radio Authority, format controls. The regulator might also want to move towards competition. If that were so, we will want to know what competition gives us. Is

competition able to meet the interests of consumers and citizens that we want it to?

The balance between ex ante regulation and competition regulation is at the heart of the Bill. For both telecommunication and broadcasting, the objective of the legislation is to move the new converged regulator towards the pursuit of competition to a far greater extent than was the case for the pre-commencement regulators—including Oftel, until it made its statement four or five months ago. If we want the regulator to take an essentially pro-competition stance to deal with issues relating to emerging markets, and to future-proof the legislation against technology and market changes, let us make that clear in the structure of general duties and leave the set of specifics to flow from that.

I shall respond to the question raised by the hon. Member for Rhondda, because broadband is interesting in this context. We might not discuss the specifics of that later so it is important to consider them now. As the hon. Gentleman said, the use of ex ante regulations versus the use of competition powers is at the heart of one of the issues relating to broadband. As the Joint Committee observed, for two years Oftel pursued the route of ex ante regulation: 37 directions and determinations were given by Oftel to BT to secure local loop unbundling. I might over-characterise the situation, but essentially it did not happen because BT said that things would not work out like that. An aggressive view might suggest that BT was saying that it had failed to control the market with a mechanism by which other competitors were not able to offer broadband services, so it now wanted to move to the other option: cutting prices.

There are two ways in which one can exercise market dominance. One is foreclosure by technology, which is essentially what happened in the first place. The other is foreclosure by market power. Subsidisation of the wholesale offer of broadband by BT will lead to a much greater market penetration of broadband, but not necessarily to competition. It is not satisfactory for the regulator to be constantly nipping at BT's ankles, while BT is deciding for itself at which point it will stop providing services to people by putting in a second telephone line and offering them broadband access. That will not deliver a competitive market. Ofcom will have to pursue the issue through the competitive route—happily, at least today, I do not have to examine precisely how it will do so. That means that the reduction in wholesale costs that BT has offered to broadband is absolutely right, but the extent to which that places BT is in a position of dominance in relation to the retail supply of broadband then becomes a wholly separate issue. If we can reach the point where broadband has not only a low wholesale, but a low retail cost, there is no reason why it should not achieve a much larger penetration.

Photo of Kim Howells Kim Howells Parliamentary Under-Secretary, Department for Culture, Media & Sport 12:45, 10 December 2002

The hon. Gentleman gives a brilliant exposition of the dilemma that has faced Oftel and BT. He seems to be describing something that has been carved out of a very peculiar history, and I rise, really, in enthusiasm for his remarks. Through the Bill, we must change history to ensure that those mistakes do

not recur and that we construct a regulatory framework that ensures both competition and the opportunity for new entrants and real entrepreneurial spirits to make an impact on the scene.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

Rewriting history is not given to us to do, but we can write a new kind of pro-competitive opportunity for the future. I am grateful for the Minister's comments, but I shall not follow him too far in criticising the past. I speak as someone who was involved in the Telecommunications Act 1984 and BT privatisation as an official at the Department of Trade and Industry. If we had only realised what competitive opportunities existed, we would perhaps have gone much further, but it seemed bold at the time. The idea of RPI minus one seemed bold to BT. We put RPI minus three into the original formulation, and I think that we got as far as RPI minus 12. We put Mercury alongside BT as a competitor, but perhaps we should have been much bolder at an early stage and thought in terms of a range of competitors. As my hon. Friend the Member for Maldon and East Chelmsford said, there was probably a point, perhaps in the mid–1990s, when the market, technology and opportunities to introduce competition existed, but they were not taken. Instead of allowing Mercury to lose its competitive position against BT, we should have created opportunities for new entrants to the market. Now, that will happen anyway, because of the presence of mobile phones. Plenty of people have given up on BT's fixed line system and use only mobiles. We shall arrive at some pretty competitive circumstances in any case, but we want a regulator who will promote that rather than otherwise. The hon. Member for Rhondda asked how it would do that. The answer is that I do not know. I do not know the extent to which broadband will be available to people merely as a consequence of the application of competition. I do know, however, that we will get quite a long way down that path, and that if there is a residual issue—as there always was with fixed telephony—there may one day be a need for universal service obligations for broadband.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

The issue concerns people in many constituencies. I am worried that moving away from the universal service obligation—the oldest form of ex ante rule—to rely solely on competition law may disadvantage the most disadvantaged areas of the country as regards broadband. That is a difficult Gordian knot to cut through.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

The hon. Gentleman is right—it is difficult. I do not dispute that by its nature Ofcom will have to consider the extent to which competition is able to deliver the needs of consumers, but it will not be able wholly to do so. That is implied by the structure of Community legislation, the first requirement of which, as reflected in clause 4, is the promotion of competition. It is stated rather more baldly there than it is in my amendment. The structure of Community legislation entirely accepts that where competition cannot deliver, conditions will be applied. That includes the structure of conditions under the universal service directive. The promotion of competition and universal service obligations are not

mutually contradictory. It is a question of where one strikes the balance between the two.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State for Culture, Media and Sport

I have a brief observation. My hon. Friend the Member for South Cambridgeshire began his remarks by saying by raising one of the most important issues that we face. He was not sure if he would have another opportunity to do so. If it appeals to you, Mr. Gale, when you look at the amendments, the reason that we have drafted an amendment concerning the universal service obligation to consider broadband is not because we think that that is the answer—I am not persuaded that it is—but it is essential that we should have a proper debate about broadband.

My hon. Friend made the observation that there is growing competition from the mobiles to fixed line telephony. That is correct for voice messaging. However, on the crucial issue of data I hope that we will get to the position when mobile technology can offer fast downloading of data. That depends on 3G, which I hope will happen, but does not seem to be an immediate prospect. For the moment, fixed line systems will be the main providers.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

I am grateful to my hon. Friend. I think that I have talked enough about broadband, which I used as an example to illustrate the purpose of the amendment. If there are substantial issues relating to broadband, there may be later and better opportunities to raise them.

I will explain the structure of amendment No. 1. I propose to speak to that amendment only because none of the other amendments are in my name—although I support some of them. Amendment No. 1 is not set out precisely in the terms of the recommendation of the Joint Committee. Amendment No. 195 is in those terms, but although I regard with affection the consensus reached by the Joint Committee, that does not mean that it wholly reflected my view in every circumstance. It always seemed to me—if the hon. Member for Milton Keynes, North-East (Brian White) will forgive me—that the defect of amendment No. 195 is that it represents a range of duties as the principle duty of Ofcom. To that extent, it does not present the hierarchy of duties to a sufficiently desirable extent. I am essentially looking to understand, and reflect in the general duties clause, the primacy of competition as a means of delivering benefits, while recognising that there are a range of specifics that act as constraints, which we must deliver if competition is not competent to do so.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

My hon. Friend said earlier that he was seeking to ''future-proof'' the Bill through the amendment, but does he accept that he is being a little too forward looking? In order to allow competition to achieve the consumer benefits that he wants, the means by which the services are delivered should be various and include broadband, radio or whatever. Does he think that he is being a bit too futuristic when there are only limited channels—I use the word channel in the broadest meaning of the word—in seeking to allow competition, whether it be in broadband, radio, television or other market segments in any given area?

Photo of Roger Gale Roger Gale Vice-Chair, Conservative Party

Order. We have now had two rather lengthy interventions. Can I say to the Committee that interventions are exactly that, not speeches? We must try and keep them brief.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

Thank you, Mr. Gale.

The short answer to my hon. Friend is no. I do not think that I am being too futuristic. In all of the markets with which we are dealing, competition is present to a greater or lesser extent. In most of them, the possibilities of arriving at a much more efficient competition solution are already there. As we shall discuss later, it would be better if we were to pursue a competition solution, even in relation to many of the media markets, rather than the application of prior controls and rules on media ownership.

The purpose of setting out the principal duty in new subsection (1) is to set out the hierarchy of duties and to make the first such duty the furtherance of interests of consumers through competition. That would not remove any of the other duties.

Photo of Roger Gale Roger Gale Vice-Chair, Conservative Party

Order. The Committee will sit again at 4.30 in Committee Room 14, with Mr. Atkinson in the Chair.

It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Four o'clock.