Communications Bill

HL Deb 20 May 2003 vol 648 cc703-68

3.39 p.m.

The Minister of State, Department for Culture, Media and Sport (Baroness Blackstone)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Baroness Blackstone.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Lord Avebury

moved Amendment No. 105: Before Clause 91, insert the following new clause?

"INVESTIGATION OF CONTRAVENTION OF CONDITION

(1) Where OFCOM determine that there are reasonable grounds for believing that a person may be contravening, or may have contravened, a condition set under section 42, they may undertake an investigation.

(2) Where OFCOM decide to undertake an investigation under subsection (1), they shall give the person concerned a notice in writing which?

1. (a) indicates the reasons for the investigation being conducted by OFCOM;
2. (b) specifies in sufficient detail the condition and alleged contravention in respect of which the investigation is being undertaken; and
3. (c) specifies the period during which the person has an opportunity to make representation about the matter.

(3) Subject to section 95(3), the period specified under subsection (2)(c) must be a period of at least one month beginning with the day on which the notice is given.?

The noble Lord said: This group of amendments seeks to implement correctly Articles 10.2 and 10.3 of the authorisations directive which require a national regulatory authority—in our case, Ofcom—to give a company a month to state its views or to remedy breaches where it finds—I stress the word "finds"—that the company, does not comply with one or more of the conditions of the general authorisation or the rights of use".

We do that by providing for Ofcom to carry out an investigation during which the undertaking has the right to make representations and present its case before Ofcom initiates the enforcement process.

Under Clause 91 Ofcom is able to initiate enforcement action on the basis of "reasonable grounds for believing" that a telecoms provider is contravening the conditions. If it is to avoid a possible fine, the provider will have to take remedial action that may include paying a person compensation for loss or damage, at the same time as it makes representations to Ofcom to rebut the allegations. We believe that the approach used in Clause 91(1), particularly when combined with Clauses 92(2)(b) and 93(2)(b), represents an incorrect and unfair way of implementing Articles 10.2 and 10.3 of the authorisations directive.

Article 10.2 requires an NRA to give an undertaking a month to state its views or to remedy breaches when it finds the undertaking to be in breach. By contrast, Clause 91(1) enables Ofcom to do that where it has "reasonable grounds for believing" that the person is in breach. The real significance of the provision appears when Clauses 92(2)(b) and 93(2)(b) are contrasted with Article 10.3 of the directive. That article enables the NRA to take enforcement action and/or to impose financial penalties if the undertaking does not remedy the breaches within the period referred to in Article 10.2; that is to say, the period of one month from the notification of the finding of the breach.

By contrast, Clauses 92(2)(b) and 93(2)(b) respectively enable Ofcom to serve art enforcement notification and to impose a penalty if the notified provider has not taken the necessary steps to remedy the breach during the period allowed under Clause 91; for example, the period of one month from the notification of there being "reasonable grounds for believing" that the provider is in breach. That is plainly not what the directive requires or allows and the Bill should be amended to ensure that enforcement action can be taken and/or a penalty be imposed only where the provider has failed to remedy the breach within the period of a month after notification of a finding that he is in breach.

Amendments Nos. 105, 106 and 107 seek to do that by providing for an investigation to be undertaken by Ofcom before it initiates the enforcement process, although allowance is made for urgent cases under Clause 95. The new clause in Amendment No. 105 starts the process by giving Ofcom the power to undertake an investigation where it has "reasonable grounds for believing" that a condition set under Clause 42 has been contravened.

Amendment No. 106 assumes that the investigation has been conducted, which allows Ofcom to conclude that a person has contravened, or is contravening, a condition set under Clause 42, and the one month's notice is given on a finding rather than on "reasonable grounds for believing". Of course we accept that there may be urgent cases where something needs to be done immediately, and allowance is made for that by the reference across to Clause 95.

We believe that it is in any event wrong in principle for an undertaking to be obliged effectively to take remedial action, including paying compensation, or risk a substantial financial penalty during the period given for making representations in response to "reasonable grounds for believing". It is illogical that a person should have to pay compensation and in effect admit guilt at the same time as he is disputing the allegation of a breach with the regulator. Indeed, this provision could create a charter for the making of spurious allegations of breach.

Amendments Nos. 108 to 118 set out to establish in a similar way a proper three-stage process as in the Competition Act, leading up to the imposition of fines on communication providers for breaches of the general and other conditions of entitlement. Here again, if Ofcom believes that the provider is committing a breach, the proper course of action is, first, to investigate whether that is the case, secondly, to make a decision as a result of that investigation and, thirdly, to take enforcement action including, where appropriate, the imposition of a fine.

Your Lordships can see that we are not wedded to any particular wording, but in these two sets of amendments we are trying to be as flexible as possible. We would like the Government to concede that as it stands the Bill omits a vital stage that is implicit in the directive and that Ofcom cannot be said to find that an undertaking does not comply with a condition unless there is a process by which the undertaking has a proper opportunity to rebut the allegation before a determination is made. If we and the Government can agree on that principle, we can discuss with them which of the methods that we suggest would best implement that principle or, as occasionally happens, the Government could come up with a third way of achieving that which would be better than either of the ones that we propose. I beg to move.

3.45 p.m.

Baroness Buscombe

I shall speak to Amendments Nos. 105, 106 and 107 to which my noble friend Lady Wilcox and I have added our names. I shall also speak in support of the remaining amendments in this group. Clauses 91 to 101 of the Bill deal with the enforcement of conditions imposed by Ofcom under Clause 42 of the Bill. Under Clause 91, if Ofcom determines that there are reasonable grounds for believing that there has been a contravention of such a condition, Ofcom can give the person contravening the condition a notification. That notification must specify a period during which the person in contravention must make representations, comply with any conditions of which it is alleged he remains in contravention and remedy the consequences of the alleged contravention. Under Clause 92, if the person in contravention has failed to take all the steps which Ofcom considers appropriate for complying with the condition and remedying the consequences of the alleged contravention, Ofcom can serve an enforcement notification. This imposes a duty on the person in contravention to comply with the enforcement notification.

It is important to note that Ofcom can serve a notification under Clause 91 where there are only reasonable grounds for believing that a person is contravening or has contravened a condition. In contrast. Ofcom can give an enforcement notification only if it is satisfied that there has been a contravention. That means that a much higher standard of proof is required under Clause 92.

Under Clauses 92 and 93 Ofcom can impose a penalty not exceeding 10 per cent of the turnover of the business carried on by the person alleged to be in contravention if Ofcom has given a notification under Clause 91 and the person alleged to be in contravention has not taken the

appropriate steps to comply with the condition that he is alleged to have breached and remedying the consequences of the alleged contraventions.

The oddity of these provisions is that a person alleged to be in contravention of one of the conditions must take the appropriate steps to comply with the condition that it is alleged he has contravened and must remedy the consequences of the alleged contravention even if he believes that he is entirely innocent; otherwise he runs the risk of a substantial financial penalty. He must take those steps when Ofcom merely has reasonable grounds for believing that there has been a contravention rather than being satisfied there has been a contravention. Such a person must take the appropriate steps before Ofcom is satisfied that there has been a contravention and serves an enforcement notification.

That oddity is somewhat like the trial of the Knave of Hearts in Alice's Adventures in Wonderland where the Queen of Hearts decreed, sentence first—verdict afterwards". We respectfully submit that the jurisprudence of the Queen of Hearts is inappropriate for the enforcement provisions in the Bill. I raised that point at Second Reading. We believe that it is important.

Lord McIntosh of Haringey

It is being asserted that this part of the Bill is in contravention of Article 10. The Government's view is that Clauses 91 to 98 implement Article 10 of the authorisation directive. I hope that I shall be able to demonstrate that.

I shall deal first with the present situation and the defects in it. In some cases, under the present system, by the time that effective enforcement action could be taken, those affected by the breach could already have suffered substantial and possibly irreversible adverse consequences. There are limits on the way in which we can remedy that situation, and we do seek to remedy it. As the noble Lord, Lord Avebury. said, we must conform to the directive that, other than in exceptionally serious and urgent cases, at least a month must normally elapse between the time when Ofcom issues a contravention notice and the time when the issue is finally decided before any remedial action can be taken. In the Bill, we conform to the directive.

We provide adequate safeguards for the subject of action. In particular. if the subject of notification takes appropriate remedial action within the period—whether or not they also make representations against the notification—Ofcom cannot impose any financial penalty or take any enforcement action against them. To that extent, we believe that the interpretation of the directive and of the clauses by the noble Lord, Lord Avebury, is incorrect. Of course, there is a full right of appeal on the merits.

The amendments would not only put the clock back to the unsatisfactory situation that we have at the moment but would make things considerably worse. What would the amendments provide for? First, there would have to be a formal investigation, which would have to take place after—secondly—the giving of notice and—thirdly—the

opportunity for representation. If, as a result of that investigation, it were found that there was a potential breach, there would have to be, fourthly, notice of intention to declare a breach; fifthly, the opportunity for further representations; and, sixthly, another formal notice. The opportunities for delay and failure to enforce the regulations in the directive are very great. During that period, it would be possible for a breach to continue and for those who are the subject of a breach to continue to suffer. lf, in those circumstances, we have to take sides between the operators and the customers for their networks and services, we are on the side of the punters, of those who use the services.

The noble Lord, Lord Avebury, and the noble Baroness, Lady Buscombe, seemed to think that taking action on the basis of reasonable belief was contrary to the directives. We disagree. Article 10 of the authorisation directive requires that, if the regulator "finds" that there is a breach, it shall notify the operator of that finding and give them a reasonable opportunity to state their views and remedy any breaches within a specific period. If they do not do so, the regulator is required to take measures to ensure compliance, including imposing financial penalties when appropriate.

It would be in breach of a person's right to a fair hearing and against natural justice to make a conclusive determination before allowing a person to make representations. Given that the directive requires representations to be capable of being made and remedial action to be taken, following the finding, it is legitimate to interpret the reference to "find" in that context as meaning that there are reasonable grounds for believing that a contravention has occurred or is occurring.

It would be wrong to impose remedies or penalties before reaching a final decision on the breach. If the intention of the directive was to require the regulator to take a conclusive decision on the breach before it could even begin enforcement action, it would be pointless for the directives to prescribe, as they do, a subsequent period for representations before remedies could be imposed. The urgency provisions in Clause 95 are not as open as noble Lords opposite seem to think. They are extremely limited.

The provisions correctly implement article 10 of the authorisation directive. They properly respect the natural rights of those who may have to complain—the users of networks and services. The amendments would take us not only back to the present unsatisfactory situation but to further complexity, bureaucracy and delay.

Lord Avebury

We must disagree on the matter. I disagree particularly with the idea that Clause 95 does not give a satisfactory possibility of dealing with the cases that the noble Lord mentioned, in which substantial and possibly irreversible damage may be caused to one of the customers of an operator who is alleged to have breached the conditions. In Clause 95, there are adequate powers to take action, if there are, serious economic or operational problems for persons … who are communications providers". That fits exactly the case that the Minister mentioned, in which the consequences to the victim of the breach may be so serious that he would be driven out of business.

There is another fundamental disagreement between us on the ordinary use of the English language and the use of the word "finds". I use the word "finds" as meaning that one has carried out an investigation. I hope that most noble Lords would do the same. One does not find something to be true out of thin air. Evidence must be produced. In particular, if one is examining a case that involves substantial penalties, one must allow the person who is being accused the opportunity of rebutting the allegations.

I shall not waste the Committee's time this afternoon. I see clearly that we shall have to return to the matter on Report. For the time being, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 91 [Notification of contravention of condition]:

[Amendments Nos. 106 to 116 not moved.]

Lord McNally

moved Amendment No. 117:

Page 88, line 27, leave out -the most" and insert "a more"

On Question, amendment agreed to.

Clause 91, as amended, agreed to.

[Amendment No. 118 not moved.]

Clauses 92 to 100 agreed to.

Clause 101 [Civil liability, for breach of conditions or enforcement notification]:

Lord Aveburymoved Amendment No. 119 Page 97, line I , leave out paragraph (a).

The noble Lord said: Under the Telecommunications Act 1984, third parties can sue licence holders, once Oftel has determined that there has been a licence breach, for any damages that have flowed from the breach. Clause 101 will allow any third party to sue a communications provider, if they believe that an operating condition is being breached, before Ofcom has made any determination.

On Report in another place, the Government recognised that such litigation might cause problems and moved an amendment—now subsection (4) of Clause 101—that required third parties to obtain Ofcom's consent to proceedings alleging breaches of licence conditions. That was an improvement on the Bill, but there was no indication as to what criteria Ofcom would use in deciding whether to give consent to the action, and the communications providers remain exposed to the cost and risk of litigation.

It also raises the question of whether Ofcom, by giving leave to bring the case, would prejudice a fair hearing even though it had taken no formal decision. This new encouragement to third parties to litigate against communications providers has been stuck into the Bill without any justification in terms of the potential benefits to consumers who, in any event, have access to a free ombudsman or alternative dispute resolution. Nor have the Government identified cases of existing detriment which might be remedied by the litigation they are encouraging. No attempt has been made to found the novel concept of pre-determination in litigation on any general principle or to say whether it is now the Government's policy to introduce similar measures in other areas of regulation.

I can see no requirement in the EU directives for such a provision, which is likely to be deployed by large corporations attempting to use the courts as an alternative to regulatory procedures. Enforcement powers, including Ofcom's right to impose substantial fines, are already being strengthened in the Bill. We do not need this extra process. I beg to move.

4 p.m.

Baroness Buscombe

Her Majesty's Opposition supports this amendment.

Lord McIntosh of Haringey

That was a very wide-ranging attack on what is a simple provision in the Bill. I am surprised to find both opposition parties adopting this position.

Amendment No. 119 appears to be aimed at removing the right conferred by Clause 101 on those who may be adversely affected by a breach of a condition of entitlement under Part 2 to bring court proceedings for damages or other appropriate redress without Ofcom having first found a breach. We have already discussed the time element of this, so I shall not go into it again.

Clause 101(1)(a) allows affected persons to bring proceedings against providers of networks, services and associated facilities who are in breach of a condition of entitlement set out under Clause 42. By removing that provision, the amendment would limit the right to bring proceedings to cases in subsections (1)(b) and (c); that is, where Ofcom had previously issued an enforcement notice or a direction and the conditions of that instrument had been breached. That would be roughly equivalent to the position as it is.

Section 18 of the Telecommunications Act 1984 provides a right of action where the director general has issued an order to enforce compliance with a licence condition imposed under the Act and the licensee has breached that order. The noble Lord, Lord Avebury, asked why we are proposing to change it.

We propose to do so because, as a matter of principle, we consider it important that obligations such as those laid down by conditions of entitlement set by Ofcom under Clause 42 should provide worthwhile safeguards and benefits to businesses and consumers who deal with the suppliers of network services and associated facilities. In order to make those worthwhile, they must he readily and effectively enforceable, which means that all those adversely affected by a breach should be able to attain adequate financial or other redress for their loss without delay or difficulty.

That is not what happens at the moment. Oftel has no power to award compensation and the only express right set out in the 1984 Act for third parties to bring proceedings is where a licensee is in breach of an enforcement order issued by the director general. It means, in effect, that a licensee in breach of an order, which is the only time that it can in fact be made to work, will in effect be committing a second or subsequent breach of the licensed condition in respect of which the order was made. What that will do is give a "free strike" to the operator. There will be no right of redress for the initial breach, however serious its consequences for those who suffer as a result.

I do not apologise for the fact that we have introduced measures to improve the rights of customers and others in this area. Those are the provisions for customer redress schemes set out in Clauses 49 to 52, and for Ofcom to require the payment of compensation when it orders a provider's service to be limited or suspended in urgent cases under Clause 95, or for serious or repeated contraventions under Clause 97.

The provisions of Clause 101(1), in particular those set out in paragraph (a), are not only desirable, but a necessary complement to these measures. They extend the possibility of obtaining compensation to those who are not "consumers" and so would not be entitled to use the redress schemes envisaged elsewhere in the Bill. They allow third parties the possibility of bringing proceedings in the civil courts on their own account rather than having to depend on Ofcom to take action and secure redress.

It may not always be appropriate for Ofcom to take the lead in this. If, for example, a small number of people or firms have suffered, then the wider public interest might declare that it was not a matter for Ofcom. But that would mean that for those people the loss of the right to compensation and the possible extra delay in ensuring additional compliance could he very serious. This should be a matter for the courts. It is right to allow third parties to take action on their own account if they think that it is worth their while.

In saying that I am not issuing an open invitation to anyone to take action against operators. People do not resort to court action unless they are seriously aggrieved. Why should they involve themselves in the risk and possible expense of doing so? In order to take advantage of this, they must show that they have suffered loss or damage; there is a defence of due diligence provided in subsection (3); and in subsection (4) they have to acquire Ofcom's consent. I suggest to the Committee that those protections are sufficient to justify the protection which we are providing for consumers and third parties.

Lord Avebury

In his reply, I noticed that the Minister did not say anything about the ombudsman, although that procedure is available to those who feel that they have a grievance. One would imagine that the Government would want to encourage that kind of resolution process rather than everyone having to go through the courts. Furthermore, if ultimately a remedy is available from a determination by Ofcom, the person could go to court with the support that such a determination had been made. He would then be on much stronger ground than if Ofcom merely were to give him "leave" to go to court. The noble Lord also

did not comment on the prejudicial effect on the view of the court if Ofcom gives leave for the proceedings to be brought.

For all those reasons, I find his reply profoundly unsatisfactory and I hope that we shall not go on like this. If we keep on receiving the same kind of response from the Minister, it will mean an awful lot of work left over for the Report stage. However, under the circumstances, it is clear that I can do nothing but—

Lord McIntosh of Haringey

I have tried to confine myself to the provisions of the amendment. If the noble Lord, Lord Avebury, wants to talk about other matters such as the ombudsman, he is welcome to do so, but the amendment does not provide anything which would enable me to talk about the wider matters to which he referred.

Lord Avebury

I say only that the Minister appears to think that people in this situation would not get redress from the ombudsman because he did not even bother to mention him. Therefore he is seeking to encourage them to go to the courts, when they have the opportunity to do so and when they get leave from Ofcom to proceed with such litigation. I do not agree with that attitude and I am sure that we shall see these matters dealt with again on Report. For the time being, however, l beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 101 agreed to.

Clause 102 agreed to.

Clause 103 [Application of the electronic communications code]:

Lord Avebury

moved Amendment No. 120: Page 98, line 41, at end insert— ( ) In this section persons to whom the electronic communications code may be applied shall not be restricted to telecommunications operators. The noble Lord said: I hope that we have come to a matter on which we shall be able to reach a certain amount of agreement between the two sides of the Committee. I am sure that once I have set out the arguments, we shall have a satisfactory response from the ministerial Bench.

These amendments deal with code powers originally set out in the Telecommunications Act 1984 and now, as amended by Schedule 3, renewed in this legislation. Under these powers, certain owners of transmission towers and masts are protected from site landlords either terminating the lease on the availability of the land, thus removing the operators from the site, or from trying hugely to increase rents when contracts come to an end.

Code powers provide the tenants of land on which the mast and towers are located with the option of a fair market review or a court review in the case of such action. This would, in turn, encourage more telecomms operators who hold code powers to protect their individual sites and to use shared sites provided by independent operators, enabling those operators to protect and retain key national broadcast network sites.

The situation regarding the application of the code to planning legislation is not specifically addressed in the Bill. Although this creates an anomaly as to what the position is regarding the interaction between this and the new code, in the absence of express provisions, it is likely that planning legislation will be interpreted and treated in the same way as is the case prior to the Bill.

The consultation paper, The Granting of the Electronic Communications Code by Oftel, says that all providers of electronic communications networks can apply for the grant of code powers under the Bill. The paper deals with the need to encourage sharing of apparatus. In the case of radio masts, it says that planning considerations make sharing desirable and sometimes necessary. Paragraph 2.13 of the paper says that they would look favourably on more applications where evidence is produced showing the applicants' willingness to share infrastructure. This is encouraging to the owners of towers and masts, where there is a strong business case for sharing, but we consider that it would be useful if the Bill reflects the ideas in the paper.

We are in any case concerned that the providers of towers and masts will have to renegotiate a significant number of contracts with their landlords and customers, placing them under a significant additional financial burden if the issue of charges and the existing contractual arrangements is not clarified. The impact of the delay on these operators' ability to carry on their business should not be underestimated, arid could severely impact on the future of the timely development of existing sites for shared telecomms networks and their financing of the ongoing roll-out of DTT and DAB, jeopardising the Government's proposed switchover to digital date of 2010.

Presumably, Oftel will begin to consider applications for code powers only after 1st June when the consultation period ends. We suggest that the Government address the problem of uncertainty and expense which the Bill imposes on the operators of towers and masts, whose optimum utilisation of their assets and delivery of services is so essential to several aspects of Government policy. I beg to move.

Lord Evans of Temple Guiting

I listened carefully to the noble Lord, Lord Avebury. I was fortunate enough to have a discussion with him yesterday about the amendment. We fully understand that it is related to a concern expressed by Crown Castle about the current procedures for control of rents as based on shared transmitter masts. The electronic communications code is not really the applicable instrument for this concern. The market review of broadcasting transmission services will determine what regime is applied in the future. However, I have listened carefully to the concerns raised by the noble Lord and have agreed to give a full written response to his concerns which he will have before Report.

Amendment No. 317 rightly identifies that the change in terminology under the new regime will have a knock-on effect on planning law. However, Clause 399 already provides the Secretary of State with the power, by order, to amend secondary legislation to ensure that the terminology they use matches that of the Bill. All secondary legislation, including the general development orders, will, wherever we consider it necessary, be amended by an order made under Clause 399.

In the light of what I have said, I ask the noble Lord to withdraw the amendment.

4.15 p.m.

Lord Avebury

I am very happy to withdraw the amendment on the basis of the Minister's kind offer to let us have a paper on this matter. We will discuss that with the industry and it will, I hope, resolve the matter so that we do not need to return to it on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 103 agreed to.

Schedule 3 agreed to.

Clauses 104 to 107 agreed to.

Clause 108 [Enforcement notification for contravention of code restrictions]:

Lord Evans of Temple Guiting

moved Amendment No. 121: Page 103, line 7, leave out "making of the payment" and insert "taking of the steps The noble Lord said: The amendments correct two inconsistencies. Clause 108(4)(b) incorrectly limits the fixing of enforcement timescales to the making of payments. However, a notified provider can be ordered to take steps other than the making of a payment under Clause 107. Thus the amendment of Clause 108 will correct this divergence.

Clause 111 uses the term "operator" everywhere except subsection (5); this discrepancy could lead to ambiguity. This problem is rectified by the amendment. I beg to move.

Baroness Buscombe

I am grateful to the Minister for giving us prior notification of these technical amendments. In a Bill this complex, it is essential that terminology is consistent, and we are happy to accept the amendment on that basis.

Lord Avebury

We, too, are very happy to accept the amendments. However, if, at this late stage of the Bill, we are still discovering inconsistencies within a single clause, we worry that other matters, which so far have not been picked up by the Bill team, may find their way into the Bill when it finally reaches the statute book, by which time it will probably be too late to deal with them. Of course, in a vast piece of legislation of 500-odd pages, it is inevitable that a few such muddles will occur.

On Question, amendment agreed to.

Clause 108, as amended, agreed to.

Clauses 109 and 110 agreed to.

Clause 111 [Procedure for directions under s. 110]:

Lord McIntosh of Haringey

moved Amendment No. 122:

Page 106, line 37, leave out "contravening provider or contravening supplier" and insert "operator".

On Question, amendment agreed to.

Clause 111, as amended, agreed to.

Clauses 112 to 115 agreed to.

Schedule 4 agreed to.

Clause 116 agreed to.

Clause 117 [Conditions regulating premium rate services]:

Baroness Buscombe

moved Amendment No. 122ZA: Page 110. line 15, after "promotion" insert ", provision of information to consumers The noble Baroness said: My noble friend Lord Lucas apologises for his absence and has asked me to speak to this amendment on his behalf. It gives me an opportunity to raise one or two additional issues within the context of the amendment.

The amendment relates to premium rate phone lines that are used as a payment method for games such as scratch cards included in magazines or competitions or radio and television programmes. These games are characterised by a lack of information for consumers as to their chance of winning, the real nature and value of the prize and often the identity of the promoter—an accommodation address is used—as well as the real cost of participation.

The purpose of the amendment is to ensure that Ofcom has the power to require the promoters of these games to provide a proper level of information to consumers. My noble friend asked whether the Minister could show that that was already the case.

We are aware that the Minister responded to a question in relation to premium rate services in a letter addressed to myself, dated 30th April. There he stated that early amendments in the Bill—Amendments Nos. 1 to 4—provide for a premium rate service regulatory regime, contained in Clauses 117 to 121, to cover an additional category of electronic communications network provider. That is a category of provider whose network is used for the provision of premium rate services under circumstances in which the agreement that permits such use is with an intermediary, or a provider of an electronic communications network or service. The amendments aim particularly at the problem of premium rate services provided from electronic communications networks or electronic communications services overseas, via what is known as an international direct dialled number. That question was raised by the noble Baroness, Lady Gould of Potternewton, during Second Reading on 25th March.

I should like to add a comment from the Advertising Association in relation to the issue. The association says that it fully understands and supports the concerns originally raised by Her Majesty's

Opposition in another place that there should he proper regulation of advertisements promoting premium rate services. However, the fact that the Advertising Standards Authority was not mentioned at all during the debates worried the Advertising Association, given that there seemed to be an inadequate impression of regulation in this area.

The original aim in setting up Ofcom was to reduce regulatory overlap. However, the government amendment in the Commons has increased regulatory overlap in the association's view. Any advertisement featuring a premium rate number will now come within the remit of the code of ICSTIS, the existing statutory television and radio advertising code or within the British codes of advertising and sales promotion, administered by the ASA for non-broadcast advertising. The ASA has sanctions available to it that are not available to ICSTIS; for example, the media will refuse to carry advertisements likely to be, or found to be, in breach of the code. In January, the ASA published an adjudication banning a clearly irresponsible advertisement for air guns that had been placed in the Daily Sport and advised customers to call a premium rate number in order to make a purchase. ICSTIS had considered the matter but declined to investigate the case on the basis that it did not think there had been a breach of its code.

The Department of Trade and Industry has given the ASA some reassurance that there is no intention to undermine the current balance of responsibilities between ICSTIS and the ASA, but it would be extremely helpful to have a statement to that effect from the Minister. I beg to move.

Lord Thomson of Monifieth

I would like to support the comments of the noble Baroness, especially the part about the concerns of the Advertising Association with the regulatory framework that the Bill is creating. I shall expand a little on the points that she made in the second half of' her remarks.

I speak with a degree of expertise in this matter, if I may say so immodestly, since in a previous life I was chairman of the Advertising Standards Authority, regulating print advertising and associated things, before going on to be chairman of the Independent Broadcasting Authority, which regulated advertising on television. The measures in the Bill, and the creation of Ofcom in particular, show the need for a revised regulatory structure that prevents the kind of overlap to which the noble Baroness referred.

At yesterday's annual luncheon of the Advertising Association, where the noble Baroness was a fellow guest, the new chairman of Ofcom sought to describe that wider framework that we seek. It would be helpful to have the Government's reaction to those ideas. My own experience—which is interesting, given that I come from a background of a working politician—in general led me to believe that self-regulation is much better than statutory regulation, all things being equal. The trouble is that things are rarely totally equal, and this matter is a prize example of the overlap that can occur.

In yesterday's interesting address, the noble Lord, Lord Currie, spoke about the very useful task force that he helped to set up with other interested parties, and referred to a system that he called "co-regulation". That co-regulation existed, in a sense, in the situation to which the noble Baroness referred, in the relationship that Oftel had with ICSTIS in the area of premium rate telecommunications. However, the matter should be seen in a wider context, and I hope that by the time we reach Report stage we shall have a clearer picture of a wider system of regulation in this field.

From the remarks made by the noble Lord, Lord Currie, I understand that the task force has made some eminently sensible institutional proposals for such a scheme of co-regulation between the Advertising Standards Authority and the new arrangements set up for Ofcom. I am happy to see in his place my distinguished successor but two as chairman of ASA, the noble Lord, Lord Borrie. The proposals that are now under active discussion build on the widely acknowledged strengths and reputation of the ASA, but in a way that keeps the broadcast scheme wholly separate from the ASA's traditional role and arrangements in relation to non-broadcast advertising. Of course, that is a necessary separation to achieve.

It is hoped that the further details of those arrangements will be revealed shortly, as a result of further consultations during the summer, according to the noble Lord, Lord Currie.

I confine my final remarks to saying that we have had before us for a couple of years the provisions of this major reorganisation of the world of telecommunications and broadcasting. In a sense, this is the third legislative discussion of these matters, so it is strange that it is at the tail-end of this process and in your Lordships' House that we have to press the Government for some clarity. I hope that we shall hear from the Government on this amendment, which addresses the question of premium rate telephone calls but is the tip of a much wider issue. Perhaps they will tell us how they propose to respond to the proposals put forward by the noble Lord. Lord Currie.

4.30 p.m.

Lord Baker of Dorking

I express support for the general tenor of the regulation envisaged in these clauses, and the regulation that we debated earlier—the general powers of Ofcom—as they are all interrelated. I should declare an interest in that I am chairman of an ISP that provides Internet services to small and medium-sized companies, and of a company that provides mobile services, some of whose revenue is drawn from premium rate services.

Because I have experience of those industries, I am convinced that the regulation envisaged in the Bill is necessary and appropriate. I bring a certain amount of experience to this debate. It fell to me in the 1980s to introduce the original legislation establishing Oftel, and to privatise BT and Cable & Wireless. It was the first time that we had had to grapple with the concept of the regulation of a major industry.

I think it is generally recognised that Oftel was the most successful of all the regulators of privatised utilities. It was lucky in having three outstanding directors-general: Professor Carlsberg, Donald Cruickshank and David Edmonds. They created the possibility of growth in a very competitive and huge industry. The services referred to in Clauses 29 to 145 represent billions of pounds a year. In the clauses on premium rate the figure is £1 billion a year. It is rather ironic—and it rather spells the fate of Ofcom—that these clauses are being taken at full gallop. I was present on Thursday afternoon to make a contribution; I slipped out to do a half-hour radio interview, and when I returned 30 clauses had been added to the Bill. There are the inevitable sexy debates on television, radio and newspaper mergers—for all of which I once had ministerial responsibility, and I know how sexy they are—but the clauses that we are now debating affect the economic well-being of hundreds of thousands, if not millions, of people in our country. So I strongly support what the Government are doing.

The clauses on premium rate services were not in the original Act in 1984, because premium rate services were not then offered. They were not offered until the 1990s. That indicates the strength of the developing nature of this market. I only hope that the Government have built in to their provision some flexibility in terms of definition.

The next group of amendments seek to amend the Bill before it becomes a statute because some loopholes have been discovered. Other loopholes will emerge in the course of the next five or 10 years as new services come about. I only hope that somewhere in the Bill there is a mechanism for adapting to that without having to change legislation on the face of the Bill.

I turn specifically to the responsibilities of ICSTIS. Until I was involved in this industry I did not know very much about ICSTIS—it was not a regulatory body which I had established or for which I was responsible. It is a very effective body. As the noble Lord, Lord Thomson, said, the most effective regulation is self-regulation. I certainly support his observation from considerable experience. ICSTIS is a very good example of an industry that is regulating itself. The point was made previously by the noble Lord, Lord McIntosh, that quite a lot of the regulatory powers for which Ofcom is the umbrella will be exercised by bodies funded by the industries that they will regulate. That is a very effective way of operating.

ICSTIS has considerable powers. It deals with some rogue companies, where the consumer can be exploited, particularly the young consumer. It has quite severe powers. It can stop such a company operating; or it can issue a fine of up to £50,000. When I inquired of ICSTIS what was the statutory backing for the fines, I discovered that there was none so here was a body issuing fines with no statutory backing. I suppose that it has been given some statutory backing in the Bill.

However, I commend its method of operation very strongly indeed. I should have thought that the Press Complaints Commission—another body of self regulation—could effectively look at ICSTIS. ICSTIS not only has "bark", it has "bite"; the Press Complaints Commission has a great deal of bark, but not very much bite. This is not the occasion on which to debate this matter—there will be an opportunity later in the Bill—but I should have thought that those of us who would like to see a strengthened Press Complaints Commission could look at the practices that have been developed by ICSTIS.

I am very glad, therefore, that under these four clauses in the Bill the operations of ICSTIS have been brought within the umbrella of Ofcom. I commend to the Committee the effectiveness with which I have seen ICSTIS operating. It is a very effective regulator, and is a good example of how the industry has to develop. I am sure that the Minister will be able to give the assurances sought by my noble friend on the Front Bench. There may be some degree of overlap with the ASA. I was not particularly aware of that. The Minister will probably say that ICSTIS has powers to affect not only the nature of advertisements but the way in which companies operate. So I am generally supportive of what the Government are doing in these matters.

Lord Borrie

It is extremely interesting to hear both the general and the particular remarks of the noble Lord, Lord Baker of Dorking. I do not know whether Ministers will reflect on the general attitude he has expressed to chunks of the Bill going through unamended and without too much discussion. Ministers have said on several occasions in Committee that, if we continue in the way in which we dealt with Clause 3, we shall be here for an incredible length of time. But the noble Lord, Lord Baker, made some useful points.

The noble Lord commended the way in which ICSTIS operates, under its distinguished chairman, Sir Peter North—principal of Jesus College, Oxford, and a former vice-chancellor of that university. He also commended the way in which the Government propose in these clauses to bring operations under the umbrella of Ofcom. I heartily agree.

In my capacity as chairman of the Advertising Standards Authority I was grateful to the noble Baroness, Lady Buscombe, and the noble Lord, Lord Thomson, for their comments—particularly when the noble Baroness mentioned that the Advertising Standards Authority had published an adjudication early in the year banning a clearly irresponsible advertisement that had appeared in the Daily Sport advising customers to call a premium rate number in order to make a purchase of airguns.

The ASA has some sanctions available to it which are not available to ICSTIS, and vice versa. But in that instance the sanction that the ASA had available—which was to issue a so-called "ad alert" to the media regarding the carrying of advertisements likely to be contrary to the code—was immediately effective and useful.

The noble Baroness, Lady Buscombe, and the noble Lord. Lord Thomson of Monifieth, expressed some concern about regulatory overlap, to use shorthand. I do not feel all that bothered about it. If two bodies have a power to some extent over the same field—in this case misleading or irresponsible advertisements—and have a range of sanctions and powers as self-regulatory bodies, does it matter a great deal if there is overlap? I suggest that it would matter a lot more if there were a hole or a gap between the self-regulatory bodies. The fact that there is overlap means that the publisher of an advertisement such as the one I mentioned relating to the use of airguns, obtainable through the use of premium rate services, comes under the aegis of two sets of sanctions. That is certainly better than having none. If it is too difficult to organise precisely where the lines should be drawn, the present position does not seem too bad.

I strongly agree with the later points made by the noble Lord, Lord Thomson of Monifieth—particularly drawing on the carefully thought-out speech made by the noble Lord, Lord Currie of Marylebone, the chairman of Ofcom, at the Advertising Association annual lunch yesterday, which I attended. It was in immediate reaction to the Advertising Association's task force, which had proposed a self-regulatory body to deal with broadcast advertising, modelled on the system that operates for non-broadcast advertising. It is a very promising indication by Ofcom that it will use the powers that we have discussed in Clause 3 to support and promote self-regulatory systems so long as they are effective and financially viable. That was a very useful comment.

Lord McIntosh of Haringey

This has been a wide-ranging and well-informed debate about important subjects—which has almost nothing to do with the amendment before the Committee. If we are to make progress, strictly speaking, I ought to confine myself to the amendment; but I shall have to respond to one or two of the points made.

The amendment seeks to add the phrase, provision of information to consumers", to the existing wording of these clauses, which refer to the provision, content, promotion and marketing of such services.

After the debate in the Commons, which was about the amendment—it was about the type of things that customers are told about premium rate services—I can give the assurance that the wording in the Bill covers the concerns raised. For example, the present ICSTIS code requires that, the service provider must state clearly in all promotional material the likely charge for calls to each service". That is exactly what the noble Lord, Lord Lucas, and the noble Baroness, Lady Buscombe, are looking for. The provisions are being carried over into the code, which will be established for the regime once the Bill has been passed. Currently, ICSTIS is consulting on the draft code. I suggest that we should not add unnecessary words to the statute.

We were chided for not making reference to the Advertising Standards Authority. The ASA is not the body concerned. I am happy to confirm that premium rate service providers are not exempt from the rules that govern all advertisements and promotions in non-broadcast media. They are not exempt from the advertising industry's self regulatory standards regime, which is set out in the British Codes of Advertising and Sales Promotion and administered by the Advertising Standards Authority.

The provisions of Clauses 117 to 121 do not detract from the work of the ASA as an effective regulator of non-broadcast advertising. The combination of statutory regulation with self-regulation is exactly what we seek. Action by the ASA can result in posters, advertisements, and promotions that are not, legal, decent, honest and truthful". being withdrawn and misleading advertisers being reported to the Director General of Fair Trading.

The remits of the ASA and ICSTIS extend to advertising in the new media, including e-mail. Internet banners, pop-ups, and so on. So I can give all necessary assurances about the role of self-regulation and the balance between self-regulation and statutory regulation. I have nothing to say against the speech yesterday of the noble Lord, Lord Currie. I was not able to accept the invitation to the lunch, but clearly he was talking about co-regulation of broadcast advertising. We support the line that he has taken, that Ofcom should be proportionate and targeted and should not be too bound by convention in looking for effective regulatory solutions. The noble Lord, Lord Currie, already acts as the Bill envisages.

Finally, I can assure the noble Lord, Lord Baker, that there is plenty of provision for flexibility. The Bill provides the outer envelope of what can be regulated. However, as matters develop they can be covered by the code made by ICSTIS and approved by Ofcom. That should provide the required flexibility.

Baroness Buscombe

I thank the Minister for his response. I was not surprised to hear his reference to a wide-ranging debate. I believe that it was important to raise the issues on which I touched. I am grateful to the noble Lord, Lord Thomson, my noble friend Lord l3aker and the noble Lord, Lord Borrie, for their contributions to this important debate.

As my noble friend Lord Baker said, in terms of, in a sense, balance with regard to the scrutiny of the Bill, there has perhaps been a galloping through of the clauses both in this House—

Lord McIntosh of Haringey

I shall certainly not apologise for us taking 30 clauses without amendment. That is an achievement and nothing to apologise for. If no one proposes amendments to clauses they should go through. I wish it could happen more often.

Baroness Buscombe

While I accept the Minister's intervention, I was not looking for an apology. I was not suggesting that that was a problem. But it is important that we show regard to this enormously important electronic communications network and services industry which contributes so much to the well-being of the nation. Those parts of the Bill to which we referred are extraordinarily important.

I thank the Minister for his response in relation to the amendments of my noble friend Lord Lucas. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.45 p.m.

Lord McIntosh of Haringey

moved Amendment No. 122A: Page 111, line 13. leave out "or (11)" and insert ", (11) or (11A) The noble Lord said: Amendments Nos. 122A, I 22B, 122C and 122D respond to the concerns expressed by the noble Baroness, Lady Gould of Potternewton, at Second Reading on 25th March. We have further discussed the matter with ICSTIS. We recognise that there is a potential loophole in the arrangements in Clauses 117 to 121, which these amendments seek to close. Amendment No. 122B is aimed at ensuring that, even when a premium rate service provider is located abroad and the arrangements for the use of the electronic communications service for the provision of the premium rate service in this country is via an intermediary, there is still a person who is subject to regulation—a person who, in the last resort, can be required to take action in respect of a premium rate service which falls foul of the regulatory arrangements.

So, even if an unscrupulous provider of premium rate services tries to avoid regulation by operating via a foreign network, Ofcom can, should the need arise, still impose conditions on the UK provider of the electronic communications network which is used for the provision of the service.

Amendment No. 122D defines what is meant by an intermediary service provider for the purpose of these provisions. Amendments Nos. 122A and 122C are consequential on the other two amendments. The amendments seek to ensure that the premium rate services regime will operate effectively. I beg to move.

Lord Avebury

We object to these amendments because they inappropriately extend the regulation of premium rate services. They also reverse a government amendment which was correctly made at the Report stage in another place.

In the UK, premium rate service providers establish a service, which may be, for example, telephone voting for "Big Brother" by having a telecommunications provider, such as BT, allocate one, or a multiple, of its telephone numbers to the service in the 09XXX range. BT undertakes to deliver all calls to the PRS provider, wherever they come from, in return for a share of the revenue generated from the incoming traffic. In the industry jargon, BT is acting as the "terminating operator".

The PRS provider, if in the UK, is bound by the ICSTIS code to promote and sell its service in accordance with the rules set down by ICSTIS. The "terminating operator- has a condition in its Telecommunications Act licence to use its commercial leverage over the PRS provider to make sure that it abides by the ICSTIS code.

Not all calls to PRS services are made by BT customers. They could come from anywhere—the customers of mobile operators, cable operators and overseas operators. The network operator whose customer makes the call to the PRS provider is known as the "originating operator". Through the interconnect and call-routing agreements, the call is passed to the terminating operator and is then delivered to the PRS provider.

The originating operator is paid for the conveyance of the call but does not receive a share of the revenue from the premium rate service. In fact he has no commercial leverage or relationship with the PRS provider. He does not form part of the PRS value chain and has no liability for—or way of—enforcing the ICSTIS code.

The rationale for the inclusion of the PRS in the Communications Bill is that, after the abolition of the Telecommunications Act licences, Ofcom will need to maintain a requirement on terminating operators to exercise leverage over the PRS providers. There is no disagreement between us on that point.

The version of the Bill that emerged from the Committee stage in another place resulted from agreement between the industry and the Government that the definition in the Bill of a PRS provider was slightly wrong, in that it unintentionally defined the originating operator as forming part of the PRS value chain. The definitions in Clauses 117(10) and (11) were introduced with industry agreement on Report in another place so as to exclude the originating operator by stipulating that there had to be a commercial relationship between the PRS content provider or aggregator and the electronic network communications provider for a business to be defined as supplying PRS. It is simply unreasonable and unworkable to expect the originating operator to exercise leverage over the PRS content provider to bring it into line with the PRS code.

As we understand the amendments—and as was confirmed by what the Minister just said—they are an attempt to regulate PRS content providers that reside overseas. That is the Vanuatu problem, as it has been defined by ICSTIS, where a call may be originated from the United Kingdom but the content provider is in a foreign location and the call may pass through many intermediate service providers before it reaches its destination. Clearly, BT or whoever is the originator of the call cannot exercise direct control of those providers, so the Government are trying to regulate any communications network operator that passes traffic through them, including the originating operator.

There are two possible scenarios under the amendments. Either the traffic is passed to what is called an intermediary service provider, or it is passed direct to a terminating operator. In the first case, where there is an agreement between an originating operator and the intermediary service provider, which is presumably an international carrier, the concept of a UK terminating operator is redundant. Any calls to an overseas premium rate number would go straight from the originating operator to the international service provider—it might transit through BT, but that is not relevant to the amendments.

It is unworkable to place PRS regulation on originating operators in that way. To the extent that the intention is to cover UK intermediary service providers, the provisions are unnecessary, because all the possibilities are dealt with in Clause 1 17(9)(c) and (d). In the second case, where there is, an agreement subsisting between that person and… a person who is a provider of the relevant service by virtue of subsection (10) or (11)", the originating operator is again drawn into the value chain of PRS supply, which is surely not the Government's intention.

In fact, the effect of the amendments is to throw out the baby with the bathwater. They have undone the good work of the previous amendment and threaten to introduce a measure that is unworkable and an unwarranted extension of the scope of premium rate regulation. So I hope that the Government will reconsider what they have done at the last minute by the amendments.

Baroness Buscombe

Her Majesty's Opposition also object to the amendments. They are intended to clamp down on unscrupulous foreign premium rate service providers. We are absolutely in favour of that. However, in attempting to tackle the problem, the amendments cast the net across the whole of the premium rate services industry. The Government have acknowledged that that will expose United Kingdom mobile operators to further regulation, despite assurances that the Bill would not extend the scope of regulation in that area, but they believe that we should not mind that if the amendments are the only way to tackle the problem.

The UK mobile industry disagrees with the position adopted by the Government. No pre-legislative consultation was undertaken; the mobile industry was not consulted in any way about the amendments. That demonstrates the confused attitude that the Government have acquired over premium rate services regulation.

The effect of the amendments is to reverse the government amendment made on Report in the House of Commons, as agreed with the industry and with ICSTIS, and threatens to put in place a measure that is unworkable and impractical. The originating operator—that is, the network operator whose customer makes the call to the PRS provider—will be unable to exercise leverage over the PRS content provider to bring it into line with the ICSTIS code.

We believe that the Government should withdraw the amendments immediately and undertake consultation with the mobile industry on how effectively to tackle the problem of unscrupulous foreign PRS providers. The Government should not adopt a blanket approach that will extend the scope of regulation in the area of premium rate services. Indeed, we have heard that the Department of Trade and Industry Bill team this morning met the UK mobile operators, together with Cable & Wireless, to discuss the amendments. That is the first time that they have met the Government to discuss that whole area.

Unfortunately, there is no sign of the Government moving on the issue as a result of that meeting. Although we all agree that there is a problem with offshore premium rate service providers, we need more time for discussion and consultation on the issue. The premium rate service provisions are the part of the Bill least consulted on, as they were not in the draft Bill scrutinised by the Joint Committee. We urge the Government to rethink and withdraw the amendments, because they are not helpful to the industry or to the future working of the Bill.

Lord Phillips of Sudbury

I declare an interest, in that my firm has acted for ICSTIS since it was formed. I concur with what the noble Lord, Lord Baker, said about the success of ICSTIS during the years of its existence. When one considers that it is an entirely voluntary body, the success that it has achieved—which is now being followed in Europe, where ICSTIS is the model—says a great deal for both the flexibility and creativity of its functioning.

Although I agree with the noble Baroness, Lady Buscombe, that if there has been insufficient consultation with the mobile phone operators, that is an unhappy state of affairs, my sense is that Clauses 117 and 118 give discretionary powers to Ofcorn in effect to underpin and support the work that ICSTIS is doing and has still to do.

The market that we are discussing here is enormous and is growing at a phenomenal rate. Premium rate calls constitute a market of more than £1 billion as it is, with a huge expansion in prospect. It is also worth noting—I am sure that many Members of the Committee are aware of it—that premium rates can be as high as £15 per 10 minutes of call. ICSTIS is bombarded with complaints—especially with regard to services provided from abroad, where bills often run into thousands of pounds. Telephone users are vulnerable to abuse of phones by children, relatives, neighbours and passers-by.

As I see it, the aim of the government amendments is to ensure that the conditions imposed by Ofcom under Clause 117, and hence the codes promulgated under Clause 118, regulating premium rate services, can deal effectively with those services on international numbers—that is the nub of it—to such places as Guyana. It is vital that, so far as possible, the regulatory arrangements do not allow regime shopping by those international providers—often, of course, of porn and the like—designed to circumvent the consumer safeguards that ICSTIS has so successfully provided hitherto.

ICSTIS is not a law unto itself; it is susceptible to judicial review. Many cases have been contemplated against it; a few have been brought; but none that the High Court has thought fit to uphold. So it is subject to the law of the land. Many premium rate services are intrinsically volatile and susceptible to abuse. It is partly because of that that consumers can be grievously misled by rogue services and providers.

The attempt to bring the intermediate links into that regulatory net is essential. Otherwise, frankly, I do not see how that rather fragile web of constraint can survive. But we must be confident that regulators—ICSTIS in this case—can act decisively with the UK networks to stop access to unacceptably harmful international services, even where the foreign network does not have a direct contractual relationship with the UK content providers, as is generally required under the original terms of the Bill.

As I said, some breaches of ICSTIS rules by overseas Internet services have resulted in avalanches of complaints. On the understanding that the amendments now under debate affecting call-originating networks are restricted to the circumstances that I described, and subject to the oversight of the High Court, which is not to be underestimated—indeed, that court would strike down any provisions by ICSTIS or by Ofcom that were unreasonable—I suggest that the amendments are not misconceived.

5 p.m.

Lord McNally

Judging by what has been said, it is clear that there are misgivings. In the past, I have given the Government Front Bench the assurance that noble Lords on this side would not divide during the Committee stage. However, that does not apply to government amendments which, if allowed to go through, would then be inserted in the Bill. I ask the Minister to consider whether it would be more prudent to withdraw the amendments at this stage, so as to allow for the consultation that both Front Benches on this side of the Committee have requested.

Lord McIntosh of Haringey

It is most interesting to hear the views of the mobile phone industry as expressed by noble Lords opposite—though more tactfully, perhaps I should say, as reflected by noble Lords opposite. It is not as if we had not heard about such concerns previously. But I must take seriously the comments just made by the noble Lord, Lord McNally. He is threatening rather than promising in his approach. Nevertheless, I shall not be tactless with him or, rather, I shall not be any more tactless than I have already been.

Let us start from where we are in agreement. We are in agreement that we do not want to regulate unnecessarily. We do not want to stifle the growth of the premium rate services industry, because it provides a valuable service; otherwise, we would be shutting it down rather than seeking to regulate it. I believe that we are in agreement that there is the potential for abuse here indeed, there have been, and are, abuses, as outlined by the noble Lord, Lord Phillips.

Most premium rate services providers are honourable, but there are those who use the services to fleece the unsuspecting public, including children. Again, that is common ground. I believe also that we are in agreement that we do not want to leave loopholes in the legislation. There are loopholes here, especially with international providers. I did not hear any noble Lord express the view that we should not be seeking to achieve something of what these amendments seek to achieve.

We must decide where we are in disagreement, how far those disagreements are the result of misunderstanding, and how far the result of genuine disagreement. One misunderstanding needs to be dealt with at this point; namely, the suggestion that, somehow, what we are doing here is to reverse amendments made in another place. That is certainly not the case. I shall gladly write with both chapter and verse to all those who have taken part in the debate. We made amendments in another place, but those now before the Committee complement them. They do not contradict the amendments made in another place.

Then there is the issue of where we may be in disagreement; namely, the degree of regulation of originating operators. It is important to understand how the regulatory regime for premium rate services operates. As I said to the noble Lord, Lord Baker, when dealing with the previous amendment, the Bill provides the outer envelope of services that may be subject to regulation. But the code, or, in the absence of a code, an order made by Ofcom under Clause 119, coupled with the conditions to be made under Clause 117, will provide the detail of the regulatory regime.

Ofcom is already constrained when it comes to approving a code for regulating premium rate services. In accordance with Clause 118 (2)(d), (e), (f) and (g), Ofcom cannot approve a code unless it is satisfied that it is "objectively justifiable", that it does not discriminate unduly, that it is proportionate to its intended effect, and that it is "transparent". The latter are significant constraints. In my view, they are adequate and will provide the right balance to ensure that any code does not unnecessarily constrain innovation. Given the scope for abuse in this area, I do not believe that the Committee would feel comfortable with subjecting customers to new ways of ripping them off. I cannot imagine that any self-respecting, responsible network provider would object to being subject to regulation if it is the only entity in the United Kingdom capable of being regulated. I cannot believe anyone would say that we are prepared to do nothing to help protect customers from being exposed to unscrupulous PRS providers.

I stand four square behind the purpose of these amendments. I do not believe that there is any case to answer of the sort alleged. The only issue upon which I am prepared to give way is that of the alleged lack of consultation. I recognise that a meeting took place this morning, but that those who attended it were not able to influence the Government's thinking on the amendments. I also recognise that it is proper for us to consult. I am grateful for the implied undertaking from the Opposition parties that they will always do the same rather than force us to a vote—

Baroness Buscombe

I thank the Minister for allowing me to intervene. We believe that the mobile phone industry has got this right. We are all in agreement in principle as regards what we are trying to achieve, but there is deep concern that the amendments, as currently drafted, threaten to put in place a measure that is simply unworkable and impractical. Therefore, would it not be better to withdraw the amendments at this stage and arrange a further meeting between now and the Report stage that could involve the DCMS as well as the DTI?

Lord McIntosh of Haringey

When I am in this position—that is, waiting to discover whether or not the Opposition will press an amendment—I stay silent. I wait until those concerned make up their minds on what to do. Then, if a Division is called, I rush out of the Chamber and put a message on the pager. The noble Baroness, Lady Buscombe, could have given me that credit. I was leading up to say that, on the issue of consultation—and only on that issue—I think it would be preferable for the consultation to continue. Therefore, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 122B to 122D not moved.]

Clause 117 agreed to.

Clause 118 [Approval of code for premium rate services]:

Baroness Buscombe

moved Amendment No. 123: Page 112, line 18, at end insert— ( ) that the provisions of the code will not discourage innovation and investment in new forms of content-based communications services; The noble Baroness said: Clauses 117 to 121 set out the basis for regulation of premium rate services (PRS). UK mobile phone operators welcome the Bill's requirement for co-regulation in this area. However, there is concern that the new powers being granted to the existing PRS regulator, the Independent Committee for the Supervision of Standards of Television Information Services (ICSTIS), could be used to regulate new forms of mobile content. Despite falling under the definition of PRS in the Bill, such services may not warrant regulation.

Premium rate services offer consumers a wide range of information and entertainment services—such as news and weather, sport, traffic updates, competitions and adult content—via fixed telephone, fax, PC (email/Internet). interactive digital TV and mobile telephone, which would include voice, text, WAP or the Internet. The cost varies between 10 pence per call to £1.50 per minute. The money paid for the call is shared between the telephone company carrying the service and the organisation providing the content.

PRS regulation was originally invented to deal with pricing transparency of telephony offered over BT's network by service providers. As the money was collected via the BT bill, the service provider had no relationship with the customer and, therefore, had no incentive to behave scrupulously towards consumers. Hence the need for regulation. The UK mobile phone operators and ICSTIS have been working closely with the Government to ensure that the Communications Bill continues to provide consumer protection in the area of PRS.

However, third generation (3G) mobile phone networks will offer innovative new content services, such as news video clips. Such services are likely to be defined as PRS under the Communications Bill, despite many of these services being directly provided by a network operator to its customers. Therefore, there is every incentive for a network operator to ensure a transparent and competitive price for such a service, with little room for unscrupulous behaviour. The failure of a network operator to behave responsibly would result in that operator losing customers to its competitors. In such circumstances, competitive forces rather than prescriptive regulations will ensure that consumers are adequately protected.

A good example of that is an Internet service that is accessible via a fixed-line or mobile network for video conferencing. Under the existing ICSTIS code, on-line services are not to cost more than £20 and must be terminated by forced release; that is, the call is automatically cut off. For the most part, that is a sensible way of ensuring that consumers do not unwittingly run up large hills. However, for specialist applications such as video conferencing, that limit could render the product unusable because the consumer could not spend more than £20. Therefore, the amendment seeks to ensure that regulation is not applied in a manner that will discourage investment and innovation in new mobile content services and where there is no obvious consumer detriment warranting regulation. I beg to move.

Lord McIntosh of Haringey

I do not want to inhibit debate, but I said all that I want to say about this amendment in our debate on the previous amendment. I merely add that the £20 limit can be revised and almost certainly will be. I suggest that we add this issue to the matters that will be discussed when we consider the amendments that we have just debated.

Baroness Buscombe

I am grateful to the Minister for his response. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 118 agreed to.

Clauses 119 to 130 agreed to.

5.15 p.m.

Clause 131 [Restrictions in leases and licences]:

Baroness Buscombe

moved Amendment No. 123A: Page 123, line 24, at end insert— ( ) The question whether consent has been unreasonably withheld in any case falling to be determined in accordance with subsection (5) shall be determined by OFCOM. ( ) Where OFCOM has made such a determination, proceedings for breach of any provision of a lease or other agreement falling within subsection (2), which consists of or includes failure to obtain consent before doing anything to which that provision relates, shall not be instituted or continued in any court. The noble Baroness said: This amendment, Amendment No. 125A and a new clause were tabled and debated in another place. I return to them again to probe a little further. The answers provided by the Government at the time were rather brief and lacking in detail. It would be helpful if the Minister gave some additional guidance.

I shall first give some background. At present, many occupiers of leased and rented properties, as well as many freehold property owners, are prevented from obtaining television and telephony services from the provider of their choice because of restrictions in their leases, tenancy agreements or—in the case of freehold property owners—a restrictive covenant. For example, if one lives in Milton Keynes, one cannot put an aerial or satellite dish on one's house, whether one owns or rents it. Unless one breaks the law, one must take television from the cable company. That denies the residents of Milton Keynes a choice that they may want and it leads to considerable dependence on one provider. As we saw with the demise of Aberdeen Cable, it also has unfortunate consequences for the householders who, in that case, were left without telephony services.

Landlords, as well as landowners and property developers, impose such restrictions for a number of reasons. Sometimes they consider, for example, that the installation of a satellite dish will damage the fabric of their building or somehow cause it to be perceived as a less desirable place in which to live. Sometimes it is simply force of habit to impose such conditions. Very often, those restrictive covenants will have found their way into standard leases and other freehold agreements and are put forward by the lessor or vendor, or his solicitors, with little thought at all, other than a desire to retain as much control over the premises as possible for the lessor or vendor. It is acknowledged that lessees and owners can try to have such restrictions removed but unless the landlord or those with an interest in the covenant willingly agree to that—in that case, why are the restrictions imposed at all?—the process is slow, expensive and cumbersome, involving the Lands Tribunal and arcane law.

The fundamental fact is that lessees and owners generally want to continue to live in their accommodation and are disinclined to do anything that may irritate or upset their landlord or other neighbours and be in breach of their leases or covenants. As a result of the risks involved, the bureaucracy that I have already outlined and quite understandable human behaviour, many lessees and owners are denied a choice of supplier when it comes to television or telephony. I venture that that is contrary to their human rights under Article 10 of the European Convention on Human Rights. I also suggest that it is unhelpful to the Government's objective to switch off analogue television and to achieve higher levels of broadband penetration and Internet access for all. If, for example, a householder is unable to receive digital terrestrial television and there is no cable in the street, unless he can erect a satellite dish, he will be unable to switch to digital television. In many vital areas, he will also be unable to receive broadband.

The Government have acknowledged that a problem exists and are consulting on the deregulation of planning rules, which restrict or prohibit the installation of satellite dishes. The amendments would help them to achieve their objectives.

That is the background which Clause 131 as drafted seeks to address. In other words, we believe that it has good intentions. It permits lessors not to grant their consent to the occupier's request to consent regarding any relevant restriction provided that he—the lessor—does not act unreasonably. That was seen to be an appropriate balance between the rights of lessors and lessees. I believe, however, that Clause 131 does not go far enough to give lessees and tenants true freedom in practice to choose their television or telephony supplier or make it easier for them to exercise that choice. In particular, it does not address the issue of restricted covenants in freehold property. That is the purpose of the new clause and the amendment.

In another place, the Government indicated, in principle at least, that there was some support for the logic of the clause but failed to go much further. The best that they could offer was that they would review the issue in their review of the working of the new provisions in the Bill. The reasons provided were that making changes to property law is a hazardous undertaking with unintended consequences. Consultation and consideration of any proposals would take significantly longer than the time available during the passage of the Bill.

It is difficult, however, to see why the inclusion of the new clause in the Bill would present such problems. The amendment would require the Secretary of State to consult Ofcom and such other persons as appeared to her to be appropriate, before bringing the clause into force. In other words, under the amendments it would be possible to iron out any potential problems before implementation. I therefore suggest that the Government should accept the proposal because it meets their concerns.

Further, at present, whether a provision is unreasonable is determined under Clause 130(5). Presumably, that will be done by the courts, although the clause is silent on that matter. Therefore, protracted judicial proceedings may still be involved to secure the lifting of the restriction. Clause 131 therefore maintains a situation in which the onus is placed on the lessee or tenant to request the lessor's waiver of the restrictions. However, it turns an absolute restriction into a qualified one. The contractual effect of that is that if the lessor withholds his consent unreasonably, it puts him in breach of contract. That does not give the lessee carte blanche to proceed as if the restriction were not there; rather, the lessee would need to take action against the lessor for breach of contract via judicial proceedings, which may be time consuming and costly and which many lessees will consider too troublesome to pursue.

We therefore need a much simpler and less daunting process. Accordingly, we seek to amend Clause 131(5) so that the question of whether something is not unreasonable shall be determined in accordance with Clause 131(5) by Ofcom. Where Ofcom acts, proceedings shall not take place in the courts. That means that, if Ofcom decides that a lessor has unreasonably withheld his consent, the lessee may proceed as if the consent had been given. That would not put the lessee in breach of his contract with the lessor.

In another place, the Government indicated in response to the amendment simply that the courts should consider the test and that that was not an appropriate role for Ofcom. No further reasons were given. That was not an adequate response. That is why I return to the issue. Why, for example, is it not an appropriate role for Ofcom'? Ofcom is, after all, responsible for looking after the interests of the community and consumers in relation to electronic communications networks and services. It is well placed to deal with that issue. Why are only the courts able to deal with the issue? Surely, if there is a way in which the difficulties for lessees that I have described can he addressed fairly and in a quicker and less costly manner, it deserves more careful consideration and explanation. I hope that that is what the Minister will give as. I beg to move.

Viscount Falkland

The noble Baroness has done the Committee a service in moving these probing amendments, which cover tricky, sensitive problems. We look forward very much to the noble Lord's response. My understanding is that the amendments would alter the current position on restricted covenants and other restrictions relating to satellite dishes and so on. It is still a difficult, complicated business that need not necessarily fall entirely within Ofcom's remit.

Committee Members may have been involved, as I have, in disputes about dishes. Satellite dishes, to which I shall restrict my remarks, are now smaller and less obtrusive, if that is the basic cause of a covenant or restriction. Nevertheless, there is still a difficulty in landlords allowing leaseholders a free-for-all to erect such dishes. They may or may not cause the problems on which a restriction was based originally.

I look forward very much to hearing the Minister's response to the noble Baroness's remarks. We remain to be educated on the issue. If it is produced at a later stage, perhaps we will he clearer about where we stand.

Lord McIntosh of Haringey

We must consider two key points behind these amendments. The first is whether it is right to give Ofcom a role that would otherwise be performed by the courts; that is, to decide, in the case of a dispute, whether it is reasonable for a landlord to withhold consent for something related to the provision of electronic communications services to a tenant. The second is the extension in Amendment No. 125A to freehold premises.

On the issue of Ofcom's role as compared to that of the courts, I emphasise that it is not a matter of Ofcom's expertise of the technology involved and nor is it a regulatory matter. Neither of the principal roles of Ofcom are involved. It is a matter of striking a reasonable balance, based on quite general legal principles, between the rights and legitimate interests of the parties, taking full account of relevant precedents, particularly from the field of property law. Those are matters on which the courts, rather than Ofcom, are well versed, and on which they have appropriate expertise. I see no advantage in transferring that responsibility to Ofcom.

The second issue is the extension of the approach of Clause 131 to freehold covenants. I declare an interest, as I am engaged in a battle with a building society from which I wish to raise money. It is causing difficulty about a covenant that has existed on my freehold house since 1925. Because the house was built on the site of a tennis club, there is a covenant that no alcohol shall be sold on the premises—I can live with that—and that no alcohol shall be consumed on the premises. My solicitor has advised me that it cannot be enforced.

Having opened my remarks on the matter in that way, I must say that we are not opposed in principle to taking an approach on freehold covenants comparable to that for leasehold agreements in Clause 121. But we are not convinced that any problems are being experienced, and I have not heard any evidence to that effect. The noble Baroness, Lady Buscombe, fairly reflected the answers to her arguments, which were put in another place. As she said, the main point is that we do not think it is right to issue new legislative requirements on such an issue, affecting the law on property, without full consultation on the substance of what we propose. If the analogy of Amendments Nos. 122A to 122D is to be taken seriously, I hope that the noble Baroness will appreciate that point.

Property law is complicated, and the precise form of any change must be carefully considered in consultation with all the relevant interest groups and professional interests. There is simply no time to deal with that in the context of the Bill. In the absence of convincing evidence of an overwhelming difficulty, I do not think that we should pursue the amendments.

The noble Baroness, Lady Buscombe, also said that, to an extent, the problem is answered by Amendment No. 329. But there is a difference between consulting on the substance of a provision and consulting on bringing into force a provision that has already been made. In this case, the consultation argument goes against the amendments.

Baroness Buscombe

I thank the Minister for his response. I take his point that perhaps this is an instance where it would be very difficult to seek to change a complex area of law. However, perhaps we could agree that at some point the Government might need to return to the issue if the situation changes such that it becomes more of an overwhelming difficulty, to use the Minister's words. That could happen through, for example, the development of technology or a wish by users to increase their choice of, and access to, different types of services. For now, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Evans of Temple Guiting

moved Amendment No. 124: Page 124, line 8, at end insert— ( ) The consent of the Secretary of State is required for the making by OFCOM of an order under this section. The noble Lord said: The amendments are in response to concerns raised by the Select Committee on Delegated Powers and Regulatory Reform as to why orders made under Clause 131 were not subject to parliamentary procedure. They will provide that the consent of the Secretary of State will be required for the making by Ofcom of orders under this clause, and that such orders are to be subject to the negative parliamentary procedure. That is consistent with the procedure for orders under Section 96 of the Telecommunications Act 1984, which previously dealt with those matters. I beg to move.

Baroness Buscombe

We welcome these amendments. As the Minister explained, they were tabled in response to concerns raised by the Select Committee on Delegated Powers and Regulatory Reform. It is entirely right that Ofcom's order-making powers under Clause 131 are subject to parliamentary procedure. I understand that the matters were dealt with previously under Section 96 of the Telecommunications Act 1984, and that the procedure therein was negative. We are therefore content with the form of the amendment.

Viscount Falkland

We support the amendment.

On Question, amendment agreed to.

Lord Evans of Temple Guiting

moved Amendment No. 125: Page 124. line 9, at end insert— ( ) A statutory instrument containing an order made by OFCOM under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament.

On Question, amendment agreed to.

Clause 131, as amended, agreed to.

[Amendment No. 125A not moved.]

Clauses 132 and 133 agreed to.

Clause 134 [Restriction on imposing information requirements]:

Lord Avebury

moved Amendment No. 126: Page 126, line 21, at end insert— ( ) In a case where requirement for information under section 132 or 133 includes a requirement for any person to answer a question, make a statement, provide an opinion or otherwise to provide information, whether orally or in writing, such answer, statement, opinion or other provision of information shall not be used by OFCOM in relation to any action to be taken against that person under any of section 34, 38, 93, 109 or 136 without the consent in writing of that person. The noble Lord said: This amendment would provide that there should be protection against self-incrimination in cases where the request for information under Clauses 132 and 133 may be a preliminary to action under the clauses mentioned and the imposition of penalties. As we have noted several times previously in Committee, Ofcom will have the power to fine companies up to 10 per cent of relevant turnover for breaches of condition and lesser amounts for other types of breach. These penalties are civil but they may be just as severe as, or in some cases more severe than, criminal penalties and are, in effect, akin to criminal penalties.

Human rights law in relation to the right to a fair trial provided under Article 6 of the ECHR provides such protection in relation to criminal matters. There is a very good precedent for providing similar protection in relation to civil penalties. The Joint Scrutiny Committee considering the draft Bill which became the Financial Services and Markets Act 2000 recommended the insertion of a provision which became Section 174(2) of that Act. preventing the use of compulsory statements obtained under Section 123, as a result of which civil penalties might be imposed for market abuse.

The circumstances are directly comparable in that the Financial Services Authority has, and the Bill proposes that Ofcom should have the power to impose significant penalties. Parliament accepted the principle that in those circumstances there should be protection against self-incrimination on the lines of Article 6. That is what this amendment sets out to achieve. I beg to move.

5.30 p.m.

Baroness Wilcox

I support the noble Lord. Lord Avebury, on tabling this amendment, which simply asks no more than that this Bill is consistent with principles upheld in the Financial Services Act. As the noble Lord has explained, the amendment seeks to provide protection against self-incrimination in cases where penalties may be imposed. This is standard practice in criminal cases and is in accordance with human rights law; that is, in relation to the right to a fair trial provided for in Article 6 of the European Convention of Human Rights.

With the Financial Services Act, this House accepted that the protection against self-incrimination also applied to civil cases where the penalties imposed could be significant. As, in this instance, we could be talking about up to 10 per cent of the relevant turnover of a company, it is only appropriate that similar protection is provided.

Lord Evans of Temple Guiting

This amendment appears to be identical to one which was tabled in Committee by the Opposition in another place but was not reached there. It appears to be aimed at giving further protection against self-incrimination to those responding to Ofcom information requests under Clauses 132 and 133. For our part, we consider that the general law, together with the provisions in this group of clauses, will provide an adequate level of such protection and that specific provision of the kind proposed here is both undesirable and unnecessary.

In our view, there is already sufficient legal protection for the privilege against self-incrimination, which was created under the common law, without the need to include additional express protection on the face of the Bill. As we explained to the Joint Scrutiny Committee in our response to Recommendation 51 on what were then Clauses 98 and 99 in its report on the draft Bill, such provision is not necessary to ensure that the privileges in question are fully protected. We take the view that where a proposed safeguard is coextensive with the protection guaranteed by the Human Rights Act, the safeguard need not be repeated in a subsequent Bill. The Human Rights Act applies to all legislation. It would be confusing and superfluous to draft on the basis that its provisions do not apply to a particular Bill or that they need repetition in order to take effect. As we further explained to the Joint Committee on Human Rights, in response to its first report, the Government do not believe that it would be sensible to adopt a practice of drafting Bills in a way that expressly limits all enabling powers, or other executive powers, so that they may not be exercised incompatibly. That limitation is achieved unambiguously by Section 6 of the Human Rights Act, so that an act done under the purported authority of an Act of Parliament that enables, but does not require it, will be unlawful. If Parliament wishes a decision-maker to act incompatibly, the Bill will have to make that intention very clear. But where compatibility is intended, we believe that it is redundant to say so.

Given the further observations of the Joint Committee on Human Rights in paragraph 44 of its fourth report, in which the Committee suggests that it is good practice to ensure that procedural and other safeguards in this area are expressly provided for on the face of the Bill, we have reconsidered this matter. But, after due consideration, we continue to be of the view, for the reasons explained, that it is neither necessary nor appropriate to make express provision for such matters in this case.

The information provisions in the Bill need to strike a fair balance between the need, on the one hand, to ensure that Ofcom has the information it requires in order to monitor and if necessary enforce compliance and for related purposes and, on the other hand, the need to protect human rights. We believe that the provisions, as drafted, achieve this balance and furthermore they are compatible with the European Convention on Human Rights.

Before I ask the noble Lords to withdraw this amendment, I turn to one point made by the noble Lord, Lord Avebury. Since the Human Rights Act 1998 came fully into force on 2nd October 2000, it is no longer necessary to include express protection for the privilege against self-incrimination in order to ensure that that privilege is properly protected. Having said that, I would ask the noble Lords to withdraw this amendment.

Lord Avebury

I am not absolutely sure whether the reply from the noble Lord means that, because the Financial Services and Markets Act 2000 was passed before the Human Rights Act came into force, it was necessary to insert a provision of this kind in that legislation, but it is not now because it is taken care of by the Human Rights Act. The noble Lord is nodding, so I suppose that is what he means. If the Financial Services and Markets Act had been in front of your Lordships now, we would not have been contemplating the insertion of such a provision.

Moreover, am I correct in thinking that what the noble Lord has told Members of the Committee is that if a person makes a statement under Clauses 132 or 133, it cannot be used for any of the purposes mentioned in our amendment, even though it would, in effect, lie on the table? It could not be used in settling any civil penalties which might be imposed under the powers that Ofcom possesses, but would have to be disregarded because, as the noble Lord explained, the powers against self-incrimination are already contained in the Human Rights Act. If that is the case, I am very happy to withdraw the amendment. Of course, we shall be able to reassure those who pointed this matter out to us, that the protection they were seeking with this amendment is already achieved by some other means. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 134 agreed to.

Clauses 135 to 147 agreed to.

Clause 148 [Interpretation of Chapter 1]:

[Amendment No. 127 not moved.]

Lord Avebury

moved Amendment No. 128: Page 135, line 41, after "the" insert "initial The noble Lord said: The Government have amended the Bill in order to narrow the definition of electronic communications apparatus from that originally used in the Bill. They were apparently afraid that the definition used could include many items not typically thought of as terminal apparatus, such as ducts and poles, and that that could have had unintended and distorting effects. We are not sure whether the Government intended to narrow the definition to that of terminal apparatus—the last piece of apparatus at the end of a network, such as a telephone, fax or computer terminal. If so, the clause, as now drafted, uses a different definition of apparatus than that used in Annex A of British Telecom's licence—apparatus by means of which messages are initially transmitted and ultimately received.

The definition in Clause 148 appears to include intermediate apparatus such as switches and Internet servers and other equipment used by the hundreds of ISPs in the UK. This has the potential to extend regulation into competitive areas that to date have been working fine under market forces without unnecessary intervention. Consistent with the principle of keeping regulation to the minimum necessary, the proposed amendment would limit what may be regulated in a clear and unambiguous way using time-tested terminology understood by the industry and the regulators alike. I beg to move.

Baroness Wilcox

I support the amendment. As the words I have in front of me are almost identical to the words used by the noble Lord, Lord Avebury, I shall leave it at that.

Lord McIntosh of Haringey

BT sends its briefings to more than one person, does it not? I recognise so many of these briefings, whether they are from Sky, BT or mobile phone operators, that I refrain from commenting all the time on them.

The directives we are implementing define the provision of electronic communications networks and services. Apparatus is a different matter. We are free to regulate and define apparatus as we think fit. We define "significant market power" apparatus in Clause 148 simply to provide continued protection for the benefit of those consumers who still rent handsets or other equipment from their communications suppliers. Fewer and fewer people do so, but some people do and they should still be protected. The reference to "significant market power" appears because we are proposing that in future Ofcom will be able to impose this kind of obligation only on persons found to have a significant market power in a relevant market.

In deciding to carry forward this consumer protection related to apparatus, which is not required by the directive but which has been a feature of UK telecoms licences since they were first issued in 1984, we believe that it is right to modernise the framework in this way. Of course, nearly all rented apparatus is rented from BT, for historical reasons if no other.

Amendments Nos. 128 and 129 seek to restrict the scope of the definition of electronic communications apparatus for the purpose of regulating SMP apparatus so that only the first and last parts of the communications chain would be caught. We understand that the concern behind this is that the definition as it stands would catch apparatus such as switches and Internet servers and other equipment used by service providers, including Internet service providers. In other words, it would catch network equipment.

We agree that it is not necessary or appropriate for that kind of equipment to be caught by the definition but we do not believe that there is a real problem. In the context of this definition, "sending" and "receiving" have to be read as meaning the first act of sending the signal and the final act of receiving it. We do not think that there will be any confusion with those kinds of equipment which occur in the middle of the chain of transmission and which could more properly be said to be "conveying" a signal than sending or receiving it. So we do not believe that the amendments will make any difference.

Lord Avebury

From the Minister's reply it would appear that he also received the BT note. It is well and good that he should have done so. Obviously this is an important point that BT has taken up with noble Lords and it has been the subject of a useful discussion. If what the Minister said is correct, the matter can be discussed between the department and BT and it can be given the reassurances that it seeks—that is, that it was not intended to catch apparatus other than that which it calls "initial sending" and "ultimate receiving" apparatus; and that the definition in the Bill will deal only with apparatus of that kind even though we still believe that there may be some advantage in using the terminology in the BT licence because of its well understood provenance.

If the Minister is certain about the legal meaning of the words in the definition as it stands, and we can satisfy those outside the House that that is the case, we shall not need to pursue this issue at a later stage. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 129 not moved.]

Clause 148 agreed to.

Clauses 149 and 150 agreed to.

Clause 151 [Duties of OFCOM when carrying out spectrum functions]:

5.45 p.m.

Lord Avebury

moved Amendment No. 130: Page 140, line 30, after "economic" insert ", social, cultural The noble Lord said: This is the first of a number of amendments dealing with spectrum use, where Ofcom has important functions such as the provision of advice and services for the purpose of securing compliance with the UK's international obligations.

Ofcom's general duties under Clause 3 require it to secure the provision of a wide range of TV and radio services appealing to a variety of tastes and interests—so the spectrum duties are not limited by economic considerations—and the wording of Clause 151(2)(b) refers vaguely to "other benefits". We believe that services for minority groups and the important concept of the "access for all- development of broadband communications should be acknowledged by adding the words "social, cultural" to make clear what these benefits are.

In granting recognised spectrum access under Clause 156, Ofcom could indirectly have considerable power over the content of television services, and potentially over the cost of satellite services to end users, which in turn would adversely affect plans to develop broadband connectivity in remote and rural areas.

The wording proposed reflects that of the International Covenant on Economic. Social and Cultural Rights, to which the UK is a party and which is therefore one of the international obligations that Ofcom's advice and services are meant to secure. Article 15 of the convenant, recognizes the right of everyone…to take part in cultural life", and requires state parties to take the steps, necessary for the conservation, the development and the diffusion of science and culture". Therefore broadcasting and access to the Internet, the most important means of diffusion, must be regulated in a manner that promotes science and culture and that is not purely concerned with entertainment.

In the last report by the UK on implementation of the covenant there is a factual summary of what is provided on TV and radio and how many people have access to the Internet, but nothing about government policy on how they intend to see that electronic communications are used for the diffusion of culture across the range of communities that make up the United Kingdom. The amendment would at least give Ofcom a duty that parallels the objectives of the convenant and help to ensure that we have positive things to say about the use of the spectrum in pursuit of ICESCR objectives the next time we report.

As to Amendment No. 131, subsection (2) gives Ofcom the duty to have regard to a number of issues outlined in paragraphs (a) to (d) and then subsection (3) states that it may disregard such of the matters mentioned in the preceding subsections as appear to Ofcom to be matters to which it is not required to have regard, apart from Clause 151. This is not elucidated in the Explanatory Notes but it would appear to give sweeping powers to Ofcom to disregard important factors that are key in any decision about RSA.

So far as paragraph (b) is concerned, there may be circumstances in which some or all of the factors in subsection (2) have no application, but Ofcom has to have regard to them in order to conclude that they are not relevant. I beg to move.

Lord McIntosh of Haringey

We do indeed come to spectrum, which is the "techie" subject of all "techie" subjects. The two amendments concern Ofcom's duties in relation to the management of the spectrum.

I agree that radio spectrum is at the heart of the communications revolution. Its effective management is crucial to fostering a competitive and dynamic—I am sorry. I beg the Committee's pardon. I "mispeak" myself, which I believe is the correct phrase, but it is right that we should debate Ofcom's duties.

Amendment No. 130 concerns the insertion of the words "social, cultural". The noble Lord, Lord Avebury, gave illuminating examples. We agree that it is necessary to take into account non-economic benefits of essential public and safety of life services, defence, cultural and scientific pursuits and a range of social and educational applications. These transcend economics and cannot easily be valued in monetary terms. We would all be the poorer if Ofcom focused exclusively on economic benefits.

The diversity of spectrum use is fully reflected in the Bill. Clause 3 makes clear that Ofcom should manage the spectrum in the interests of all those who wish to use it. This includes not just commercial enterprises but also those with cultural, educational, social or scientific aims. Clause 3 also requires Ofcom, in exercising its functions, to pursue the cultural objective of securing the availability of a wide range of high quality programmes.

Turning to Clause 151, subsection (2)(b) requires Ofcom to have regard to the desirability of promoting not just economic but also other benefits. There is no need to add a reference to social or cultural benefits. Indeed, if one did, one would be in danger of excluding other forms of non-economic benefit, such as scientific benefits, and of giving the impression that they were somehow second class. The provision for other benefits combined with the great specificity of Clause 3, makes the amendment unnecessary.

I understand the point made on Amendment No. 131 about the need for spectrum management duties to be harmonised and consistent. Indeed, we included Clause 151 in the Bill with that in mind. That was in positive response to a recommendation of the Joint Scrutiny Committee chaired by my noble friend Lord Puttnam.

The clause applies the considerations currently contained in Section 2 of the Wireless Telegraphy Act 1998 in relation to spectrum pricing, with the addition of the non-economic benefits we have just discussed. to all Ofcom's spectrum management functions. I hope that the Committee will let me explain the reason for including subsection (3).

Spectrum management involves a wide range of activities from international agreements on spectrum use to domestic television interference. The factors listed in subsection (3) had their origin in the Wireless Telegraphy Act 1998, where they were included to provide a safeguard against the use of incentive pricing to raise revenue. They encapsulate the specific considerations that were considered necessary for setting licence fees. Not all of them are equally relevant to Ofcom's other spectrum management functions, however.

For example, the objectives of an auction may include other matters such as quality of service, speed of roll-out or geographical coverage. Furthermore, in an auction, the fees paid will be determined by the bidders, not imposed by the regulator, so the context is very different from that of administrative incentive pricing under Section 2 of the 1998 Act. Nor is it easy to relate the Section 2 factors to Ofcom's function of investigating and assisting with interference.

Subsection (3) simply provides that Ofcom may disregard such of the factors that do not appear relevant to a particular function. But this is constrained and it is important to appreciate that it does not extend to a factor that Ofcom is required to consider by another provision or to setting fees for licences or recognised spectrum access. Subsection (3) does not weaken the important safeguard that fees should reflect spectrum management considerations.

Clause 151 is intended to bring the elements of consistency and coherence that the Joint Committee recommended while giving Ofcom a necessary degree of flexibility in exercising the wide range of spectrum management functions.

Subsection (3) makes explicit that Ofcom may exercise a sensible degree of discretion to set aside factors that do not apply. I hope that that explanation will be sufficient to persuade the noble Lord, Lord Avebury, not to press the amendment.

Lord Avebury

I accept, I think, the Minister's argument that Amendment No. 130 may not be necessary because of the general duties that are imposed on Ofcom under Clause 3, which reflect the objectives which I sought to bring into the clause we are discussing. The only point I make about that is that in other parts of the Bill the Government have been careful to ensure consistency of terminology and wording between one section and another and between different subsections within the same clause. I shall need to reflect whether it would be sensible to pursue the matter to try to insist on the inclusion of the relevant words or whether I am satisfied on the basis of the advice available to me that the general duties of Ofcom make it unnecessary to repeat them in this clause.

With regard to Amendment No. 131, I accept what the noble Lord said in explanation. I am perfectly satisfied that I do not need to pursue the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 131 not moved.]

Clause 151 agreed to.

Clause 152 agreed to.

Clause 153 [Directions with respect to the radio spectrum]:

Lord Avebury

moved Amendment No. 132: Page 141, line 33, leave out "3A" and insert "3 The noble Lord said: We now come to the controversial process whereby parts of the radio spectrum, particularly those used by satellites, are to be subject to grants of what is called "recognised spectrum access" under a procedure which is set out in Schedule 5. As the Minister is aware, there is a great deal of opposition to the idea from sections of industry, notably from the organisation Intellect, which represents over 1,000 companies in the information technology, telecommunications and electronics industries based in the UK, whose use of the radio spectrum generates some £12 billion to 15 billion worth of business. They employ collectively some 400,000 people. They say that a high value for RSA would mean that satellite operators, and others in the future, would not take up Ofcom's proposed grants, but they particularly disliked the threat that if operators did not sign up, the satellite downlinks would be subject to interference.

Once the concept of RSA is established, they believe that it could be extended to licence-free areas of the spectrum such as those at present used by 802.11, stifling development in those areas. They foresee that a satellite operator looking to provide a European service might have to pay for 25 RSAs on each of the uplinks from EU member states after the next enlargement in 2004, and as many as 40 in the medium term future as more eastern states join, and if they all adopt the policy of RSA in the form that it takes in the Bill.

I know that the Minister in another place, Stephen Timms, was due to meet representatives of the European satellite industry on 8th April, and it would be useful to know whether they succeeded in persuading the Government to shift from their present position on the matter. If the Minister would like to respond in writing to save time in Committee, that would be fine because my crystal ball tells me that the Government will not accept these amendments and that we shall inevitably return to the subject on Report. Very briefly, what we are aiming to do in Amendments Nos. 132 and 136 is to knock out the auctions for grants of RSA; and in Amendments Nos. 134 and 135 we substitute, first, a requirement that Ofcom determine that there is a spectrum management need, and, secondly, that when it has done that, RSA is granted at the cost of administration.

On Amendments Nos. 134 and 135, the Government said in their response to the Trade and Industry Select Committee report: In particular, the Government accepts that RSA should not be applied, and that fees should not exceed cost recovery, in the absence of a spectrum management need". The amendments seek to mirror that commitment back at the Government. I beg to move.

6 p.m.

Baroness Buscombe

I wish to speak to the remaining amendments in the group; that is, Amendments Nos. 134A to 134E, 135, 136, 136A to 136F, 138A to 138D, 140A and 141A.

I shall start with Amendment No. 134A. Recognised spectrum access introduces a system enabling charges to be made for satellite downlinks for the first time. There has been extensive consultation by Professor Martin Cave, the Government and the Radiocommunications Agency on the subject. Despite the views opposing RSA consistently expressed by satellite operators and broadcasters, and reflected in amendments tabled in Committee in another place, the Government have retained the proposal for RSA.

In so doing, the Government appear to take refuge in the fact that RSA will be "voluntary"; that there will be further consultation by Ofcom on implementation and pricing methodology; and that Ofcom would have to consider whether RSA was appropriate having regard to all its duties. The Bill contains no such commitment. Ofcom could simply decide to proceed with the issue of RSA. Accordingly, Amendment No. 134A seeks to amend Clause 156(1) to reflect those commitments.

That issue was raised in Committee in another place. The Minister there explained that the principles sought were already firmly embedded in the Bill, by virtue of the fact that Clause 156 refers to Clause 396, which includes a requirement to consult and take account of the representations received. However, that reassurance has provided little comfort to those who stand to be regulated. I hope that the noble Lord, Lord McIntosh, might feel able to move further in that regard.

Clause 396 relates only to Ofcom's powers to make regulations, orders and schemes, requiring consultation on them prior to their being put to Parliament. I recognise that consultation is required in that instance. However, it is very much at the 11th hour. The real concern that remains is the absence of any provision for extensive and detailed consultation on fundamental RSA principles, which should take place well before any statutory instruments as to their precise mode of implementation come to be drawn up.

I would like the Minister to explain why the Government appear to be hiding behind such inadequate provisions for consultation. On what has clearly become a sensitive issue for industry, would it not be far better to place a commitment to consult on the principle of RSA and its appropriateness to specified circumstances, as we propose, rather than to rely on limited provisions elsewhere in the Bill?

Amendment No. 134B concerns Ofcom's ability to impose unrelated conditions in Clause 156(5), (6) and (7). Although it may be legitimate to provide that the protection afforded by RSA applies for so long as the holder keeps his signal within certain technical parameters, it is totally unacceptable to seek to use the grant of RSA to censor the content of what is broadcast over the satellite downlink. Clause 156(2) gives Ofcom power to impose conditions for the former purpose. However, Clause 156(5) seems to give Ofcom very wide powers to decide what should or should not he broadcast on the signal that is given RSA protection. There are no criteria to which Ofcom should have regard in setting the conditions.

I would like to go back for a moment to the alleged purpose of RSA, which is to protect the holder against interference to his satellite signal. There can be no circumstances in which positive conditions are imposed on the RSA holder relating to his signal or what he broadcasts on it. His protection may be limited if he does not stay within the boundaries set out by Clause 156(2), but that should be the extent of it. The power in Clause 156(5) is irrelevant, unnecessary and disproportionate in the context of RSA. Our amendment seeks to delete it and the connected clauses that follow.

"Grandfathering" commitments from government for terrestrial licensees should also apply to existing satellite transponder leases. In their response to the review of radio spectrum management, the Government indicated that spectrum trading and pricing as regards terrestrial broadcasters is not to take effect while they have existing licences which did not anticipate such pricing. For example, paragraph 8.23 of the response states: Digital broadcasts of ITV and Channel 4 are carried on a multiplex operated by Digital 3&4 Ltd, while digital broadcasts of S4C and Channel 5 are carried on a multiplex operated by S4C Digital Networks Ltd (SDN). The first 12-year term of these multiplex licences expires in 2010. The Government is committed to not charging under the Broadcasting Act 1996 until this point". Paragraph 8.24 makes a similar commitment with regard to the BBC's own multiplex, stating that, the Government believes that it is appropriate to introduce spectrum pricing for the BBC multiplex on the same basis as the other multiplexes awarded at the same time—from 2010, 12 years after the award of that multiplex". With regard to the three further digital television multiplexes, paragraph 8.26 makes another similar commitment, stating that, any operator awarded a digital television multiplex licence under the Broadcasting Act 1996 between May 2002 and the date of this publication will not be subject to administrative pricing for the use of spectrum to support that multiplex before the renewal of that licence in 2014". There appears to be a strong case, therefore, for applying the grandfathering proposals to pre-existing satellite transponder agreements, which have not factored in the possibility of RSA. The Minister in another place went to some lengths to seek to justify the proposal for the RSA regime and its proposed charging mechanism, based on an argument that to do otherwise would be discriminatory between satellite broadcasters on the one hand and terrestrial broadcasters on the other.

I would he grateful if the noble Lord, Lord McIntosh, could explain the Government's policy on grandfathering. Would he not agree that, in order for the provisions to be fair and non-discriminatory between satellite and terrestrial broadcasters, similar commitments in favour of satellite broadcasters should be made?

It would seem perverse not to do so. I am sure that the Minister will recognise that many new satellite broadcasters have undertaken significant risk and investment to enter the United Kingdom market, encouraged to an extent by the policy framework to date. They have increased competition and expanded viewer choice in line with the Government's aims. Consider the contributions of 24-hour news channels to coverage of the Iraq war; of the many documentary channels on offer; of new arts and music services; of channels for ethnic minority audiences; and of new forms of public service, such as the Community Channel, the first UK-wide channel dedicated entirely to the voluntary sector.

Those providers are also contributing to another UK policy objective—digital switchover—by providing services that have already incentivised millions of homes to acquire digital television. Indeed, they have helped to make the UK a world leader in that area. I hope that the Government will keep that in mind, not only in respect of grandfathering, but in the context of their RSA policy overall.

I move on to Amendments Nos. 134C, 134D and 134E, which relate to Ofcom's ability to modify or revoke a grant of RSA under Schedule 5. Once an. RSA is granted, Ofcom may, by virtue of paragraph 5 of Schedule 5, revoke a grant of an RSA, or modify the restrictions or conditions to which a grant is subject. There appears to be no constraint on the grounds on which Ofcom may modify or revoke a grant, other than when it includes in an RSA the self-denying ordinances in paragraph 7. Paragraph 6 states simply that Ofcom must state the reasons for its proposal to modify or revoke the grant of an RSA.

I believe it to be contrary to the legitimate rights of an RSA holder for Ofcom to have such unfettered power to amend or remove, albeit after the RSA holder has been able to make representations, an RSA during the period for which it has been granted. That raises the question of whether there would be any value at all in obtaining an RSA. It is supposed to give the holder protection against the possibility that terrestrial frequencies will be licensed during the term of the RSA that would interfere with his signal.

If Ofcom is able simply to revoke a grant of RSA, however, no such protection is given at all. The holder knows he has protection only until such time as Ofcom wishes to revoke it because, for example, it wishes to license terrestrial frequencies which may interfere with the satellite signal of the RSA holder. That means that the RSA holder is in no better position than he would have been had he not taken out an RSA at all. Once granted, RSA should not be revocable and should last its full term. My amendments seek to ensure that that is the case.

The Minister in another place indicated that, because the communications sector is subject to rapid and unpredictable change, Ofcom needs, sufficient powers to modify or revoke RSA when necessary and after due process". Few examples were given, however, as to precisely what those changes might be. One was, the need for spectrum refarming". Another was, problems of harmful interference arise due to some unforeseen problem—which may happen despite the best efforts of the spectrum manager".—[Official Report, Commons Standing Committee E, 9/1/03; col. 3921 These are hardly convincing explanations for what are draconian measures to interfere in something which has, after all, been granted to provide security and peace of mind.

I should be grateful if the Minister could provide some further and, it is to be hoped, more concrete examples of the circumstances in which he envisages Ofcom would use these powers to amend or remove an RSA which would justify the erosion or RSA holders' rights. The Minister should recognise that the removal of RSA protections could sound the death-knell to a satellite broadcaster whose signal becomes unreceivable due to interference.

I turn to the amendments relating to Clause 158(3). It provides for the auctioning of RSAs. There are some outstanding questions on the proposal which we believe the Government failed to answer adequately in another place. I hope that the Minister will be in a position to remedy this today.

In another place, we tabled amendments seeking to delete the proposals for the auctioning of RSAs, which is what today's amendments also seek to do. The argument for that is simple. While it makes sense to auction an actual scarce frequency, it does not make sense to auction an RSA which is merely protection against a particular terrestrial frequency from being deployed to create interference. Surely if there is a risk of interference from a number of satellite broadcasters from the deployment of a terrestrial fixed link, all of them should be able to obtain protection against interference and not just one lucky winner.

I turn to Amendments Nos. 136A, 136B, 136C, 136D, 136E and 136F. They relate to Ofcom's ability to limit spectrum use in Clause 161. Clause 161 provides that Ofcom may specify frequencies for which it will grant or make available only a limited number of RSAs or specify uses for which, on specified frequencies, Ofcom will grant or make available only a limited number of RSAs. In effect, these provisions enable Ofcom to ration the protection which is to be afforded by RSA and to impose restrictions on the use of satellite frequencies which are already subject to international co-ordination and agreement.

In another place, amendments were tabled which sought to delete these provisions. The amendments are retabled here. It was argued, quite rightly, that if RSAs are to be made available, they must be available to all satellite operators and broadcasters. Why should Ofcom be able to limit the number of RSAs available and, indeed, how would it be able to do so in practice? After all, RSAs are simply intended to enable satellite broadcasters to guard against terrestrial interference, and therefore the number of RSAs granted should be determined wholly by the demand for them and nothing else.

The Government's reasons for these decisions are difficult to understand. In another place, the Minister indicated that the removal of RSAs from Clause 161 would lead to a great loss of transparency and would mean that Ofcom would not be able to follow the necessary procedure if it intends to limit the use that may be made of spectrum. That answer clearly misses the point. It is our contention that no limitation on RSA should ever exist, so whether or not Ofcom can follow the necessary procedures provided for in Clause 161 is irrelevant.

I would very much welcome some further explanation from the Minister on this point. For example, in what circumstances does he envisage that Ofcom might limit the number of RSAs or specify uses for which, on specified frequencies, Ofcom will grant or make available only a limited number of RSAs? So far, we have heard no explanation for this and no convincing explanation for resisting the amendment.

Amendments Nos. 138A, 138B. 138C and 138D, Amendment No. 140A and Amendment No. 141A relate to spectrum trading in Clause 165. We are all agreed that RSAs should be capable of being transferred from one person to another. However, concerns were raised previously in another place that Clause 165 would allow Ofcom to alter the condition of an RSA, require further payments to be made or financial security to he given, before giving its consent to any transfer. Such provisions, it is feared, could alter fundamentally the rights and value of the RSA originally granted and is inconsistent with the underlying principles of property and human rights.

It has the effect that on a sub-licensing of transponder capacity, it will not be possible to transfer any of the associated RSA protection. This will create problems for secondary trading and transponder capacity, which I understand the European Commission has been keen to see flourish. My amendments tabled for debate today seek to address that concern again. They do not remove RSAs from the trading provisions, but reduce significantly the ability of Ofcom to alter conditions, require further payment, or to require its consent to be given. These are, I believe, fair and reasonable amendments which the Government have yet to provide a clear reason for opposing.

In response to the same amendments tabled in another place, the Minister simply said that they would reduce the scope for trading. But how is that the case? It will, indeed, be the case that the scope for interfering in the rights of RSA holders will be reduced, but I do not see how the scope for trading will be reduced. It would be helpful if the Minister could explain why the Government believe this to be the case. Do they agree with the concerns that I have outlined with regard to the secondary market in transponder capacity?

6.15 p.m.

Lord McIntosh of Haringey

Clearly, this is the most important single subject in the whole of Part 2 and it well deserves the detailed attention which is being given by the noble Lord, Lord Avebury, and the noble Baroness, Lady Buscombe. I am grateful to both of them for it.

The need for recognised spectrum access derives from the fact that some frequency bands are shared by licence services and services that, for whatever reason, cannot be licensed; that is, terrestrial fixed links used in telecommunications infrastructure and satellite downlinks. In that particular example, it is necessary to limit the deployment of fixed links in order to protect satellite service from interference. Therefore, giving satellites exclusive access to frequencies constrains other services.

That is the problem with which RSA seeks to deal. RSA will enable Ofcom to adopt a more even-handed approach to managing spectrum in these cases. The noble Baroness, Lady Buscombe, referred to the independent report on spectrum management by Professor Martin Cave. He recommended that RSAs should be used because it will enable Ofcom to treat different groups of spectrum users more fairly and apply spectrum pricing and trading to services that, for whatever reason, cannot be licensed. I want to make it clear from the beginning that RSA is not a revenue-raising tool but a way of extending sound spectrum management practices where licensing, or lack of licensing, is a problem.

We have said that RSA will not be compulsory and that has been questioned in debate. It is only not compulsory in the sense that if one does not apply for recognised spectrum access, there is a price to pay in terms of risk of interference in particular. That is a commercial judgment which has to be made by operators. They have to decide whether the benefits of enhanced security and quality of spectrum given by RSA are worth the fees that Ofcom charge.

I cannot determine in advance how different operators will make that judgment and I do not believe that Ofcom can either. Clearly, it will be a trading situation. Fees will be determined which will at some stage match willing buyers to willing sellers. This is not a matter which can be laid down in regulations, still less on the face of the Bill. Those who choose not to take advantage of RSA and not to pay the fees will be free to continue to transmit to the United Kingdom without RSA. They will be legitimate spectrum users and they will continue to be protected from interference from illegal sources. That option might be attractive to them if, for example, they are aiming their services at another company but spilling over into the United Kingdom, which is only a marginal market for them. But if they want to avail themselves of the privilege of exclusive access to spectrum, surely, as a basic principle, it is fair and reasonable that they should pay for that advantage on the same basis as licence users.

Lord Avebury

Is the Minister saying that that would never occur? Is he saying that if an operator declines to negotiate for RSA that that frequency would be offered to another operator by Ofcom?

Lord McIntosh of Haringey

No, I am saying that an operator will be protected from illegal use, but there will be risks of security and quality of transmission. Clearly, spectrum is a continuum; it is not a series of discrete positions. That is the whole meaning of the word "spectrum".

Inevitably the powers in the Bill are enabling powers. It will be up to Ofcom to decide in which frequency hands RSA should apply, the timing of its introduction and the level of charges. We have not taken decisions on those matters. The noble Baroness, Lady Buscombe, and the noble Lord, Lord Avebury, commented on consultation but I believe that they recognise, as required by Clause 396, that there will be full and detailed consultation before decisions are reached. That means that in responding to the debate I cannot give answers on matters that have not yet been decided.

The amendments relate to the way in which RSA is introduced, charged for and regulated. In so far as they are intended to probe our intentions that is fine. I am happy to give such assurances as I can, but some of the issues, as I have made clear, cannot yet be determined.

I now turn to the detailed amendments. Amendment No. 134 would restrict the introduction of RSA to where Ofcom sees a spectrum management need. Amendment No. 134A would require Ofcom to consult all interested parties before making regulations to apply RSA on whether they are appropriate and proportionate.

I have no problem with the principle underlying either of those amendments, but they are not necessary. The introduction of RSA will be subject to the duty in Clause 151, which requires Ofcom to have regard in particular to specified spectrum management considerations. As I have already said in response to earlier amendments, it is Ofcom's duty to regulate in a way that is proportionate and appropriate and this will apply to RSA as well.

Ofcom will also be required by Clause 396 to consult and to take representations into account before making the regulations. No decisions have yet been taken on the frequency bands. That will be a matter for Ofcom. But the Bill already requires decisions on R SA to be based on spectrum management considerations and subject to consultation.

Amendments Nos. 132 and 136 would remove Ofcom's power to auction RSA. Amendment No. 135 would restrict RSA fees to cost recovery. The common theme of these three amendments is that RSA fees should not exceed the cost of managing the spectrum. That is what the Trade and Industry Select Committee of the House of Commons said in its report. We have already set out our response to that report. There has been widespread support in principle both for auctions and for spectrum pricing. The Trade and Industry Select Committee endorsed those principles for spectrum licences. Why should we distinguish between licences and the spectrum that cannot be licensed?

Whether for RSA or for licences, charging an economic fee gives incentives to use spectrum more efficiently. Users can take economically rational decisions based on their knowledge of the market and an assessment of the value of the spectrum. That will open up more opportunities for new services to benefit consumers and the UK economy because of more efficient use of the spectrum. Professor Cave endorsed spectrum pricing and recommended that opportunity cost pricing should be applied to satellite systems' use of spectrum where such use shares with, and constrains, the deployment of UK-based terrestrial services.

Auctions have advantages. They have transparency and economic efficiency and ensure that the licence or RSA in question passes to the person who attaches the highest value to it. But they are not suitable in all cases. They need to be applied selectively. There is provision for administrative prices where that would provide more efficient use of the finite spectrum resource. Again, the decisions on the use of auctions will be a matter for Ofcom. I cannot predict what use Ofcom will make of auctions, but it will be required to act in accordance with spectrum duty in Clause 151 and to consult as required by Clause 396.

I know that some satellite operators have been concerned about the level of administrative incentive pricing fees that may be charged. Let me give the assurance that they are looking for. The charges will be no higher than necessary for spectrum management purposes. Clause 151 gives that assurance statutory backing.

I hope it is clear that we take the concerns expressed in this debate and by the satellite industry seriously. Ofcom will do so as well. The noble Baroness, Lady Buscombe, raised an interesting issue about the balance between satellite and terrestrial, and particularly about grandfather rights. The timing of the introduction of RSA will he a matter for Ofcom but I am sure that Ofcom will take account of what the noble Baroness, Lady Buscombe, has said about grandfather rights. I have some sympathy with the argument that she used, but it is not a matter to be put on the face of the Bill.

Amendments Nos. 134B to 134E, 136A to 136F, 138A to 138D, 140A and 141A relate to the way in which Ofcom will grant and regulate RSA. It is entirely understandable that those who may be granted RSA should look for as little restriction as possible on the spectrum, maximum security of tenure and freedom of trade. But the amendments would reduce Ofcom's flexibility. They dilute or remove the powers to manage spectrum efficiently. They would not be in the best interests of achieving optimum use of the radio spectrum.

The communications sector is undergoing rapid and unpredictable change and we should not tie Ofcom's hands. So we entrust Ofcom with broad enabling powers, including on RSA so that it can react to changes in an uncertain world. But the powers are balanced by duties and as to how they should be exercised. That applies to overall objectives and to matters to be taken into account in Clause 3 and to the avoidance of unnecessary burdens in Clause 6. As I have said over and over again, there are obligations to have consultation and there are extensive rights of appeal.

In addition, where spectrum is concerned there are additional duties in Clause 151 stipulating matters to which Ofcom must have regard, including availability of spectrum, present and expected future demand, efficient management and use of spectrum, economic and other benefits, innovation and competition.

Amendments Nos. 134B and 134C would effectively remove Ofcom's power to make the grant of RSA subject to terms and conditions. It is not possible to anticipate what terms and conditions they may find it necessary to impose. They may need, for example, to impose conditions on RSA that technical criteria equipment should meet to obtain a desired quality of service, or to deal with extraneous symptoms that may be received, or to deal with restrictions on the frequency limits or on geographical boundaries. Ofcom has to have that power to impose conditions and restrictions in order to manage the spectrum.

Amendments Nos. 134D and 134E relate to revocation and modification. Ofcom may have the need to revoke or to modify RSA for a number of reasons but it does not need to be limited to those listed in Amendment No. 134D; for example it may be in the best interests of consumers to free up spectrum for a new service to be established. Of course, they have to act reasonably by giving a suitable period of notice, and decisions on revocation or modification of RSA will be subject to the full appeal procedure in Clauses 189 to 193 including the competition appeal tribunal on the merits of the decision.

The noble Baroness, Lady Buscombe, asked specifically about security of tenure. Ofcom will be required to act reasonably while modifying or revoking RSA and the answer is that there is the same regime for RSA as there is for licences. There is that protection in both cases. Ofcom will also be able to offer greater security by fettering its discretion under paragraph 7 of Schedule 5. RSA holders have the assurance that modification or revocation of RSA will be subject to full rights of appeal.

Amendments Nos. 136A to 136F would remove references to RSA from Clause 161. The purpose of the amendments may be to probe how Ofcom might use its discretion to impose limitations. Although it is difficult to predict how it could be used, we can see how it is needed. Radio spectrum is a scarce resource. In some frequency bands, the need to protect one service from interference can constrain the deployment of other services in bands shared by satellite downlinks and terrestrial point-to-point fixed links. It is necessary to limit the grant of RSA, to prevent other services from being unduly restricted.

The remaining amendments in the group—Amendments Nos. 138A to 138D, Amendment No. 140A and Amendment No. 141A—relate to the regulation of secondary trading. The amendments would dilute Ofcom's powers and would prevent Ofcom from requiring consent or approval in advance for transfers of RSA and from prohibiting or imposing conditions on transfers of RSA. That would not be helpful. Again, the important point is to maintain comparability between licences and RSA.

I am conscious that I have set out what the amendments would do and why they are undesirable. I am also conscious that there was a raft of questions, asked by the noble Baroness, Lady Buscombe, and the noble Lord, Lord Avebury, that I did not answer fully. I shall write them a very long letter indeed between now and Report, to deal with all the points. However, the Government must resist the amendments.

6.30 p.m.

Baroness Buscombe

I am grateful to the Minister for his full response to the amendments. I would appreciate it if he were able to write to me concerning several questions that I raised.

I am also grateful for the Minister's suggestion that Ofcom should take account of what I said about grandfathering rights. I was disappointed by his response on some of the issues. I kept finding myself repeating the word "interfering" in connection with the clauses. A balance must be struck. When I have read in Hansard what the Minister said and when I have considered the contents of the Minister's letter, we will decide whether to take the matters further.

Lord Avebury

I do not know whether it is becoming a habit, but we seem to refer frequently to Professor Cave in our deliberations. His words appear to have taken on the status of holy writ. I remind the Minister—if he has not already thought of it—of the way in which we accepted for centuries, if not millennia, that Aristotle was right. The spell was broken when. I think, Bacon thought to dispute Aristotle's assertion about the number of teeth in a horse's mouth by counting them. He found that Aristotle was wrong.

It may be that Professor Cave is not always right. We should not automatically assume, in proceedings in your Lordships' House, that what he has said is laid down as holy writ for all time.

Lord McIntosh of Haringey

He knows a lot more than I do.

Lord Avebury

He probably knows a lot more than I do, as well. In fact, I am sure that he does. However, the combined wisdom of many people outside the House is brought to bear on our deliberations, as the noble Lord said earlier with regard to BT. We obtain advice from various sources and from the industries that will be affected by the provisions in particular. The decisions that we make are of immense importance to vast industries and many hundreds of thousands of workers.

I welcome the noble Lord's undertaking to write about the matters covered in the debate that have not already been dealt with in his speech. We should take that assurance as satisfactory, as far as it goes, but without guaranteeing that, as the noble Baroness, Lady Buscombe, said, we shall not return to some of the matters on Report. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 153 agreed to.

Clause 154 agreed to.

Clause 155 [Special duty in relation to television multiplexes]:

Lord Avebury

moved Amendment No. 133: Page 142, line 39, at end insert "and that there is sufficient remaining capacity for at least two local digital services in every locality The noble Lord said: Clause 155 concerns the reservation of spectrum for digital terrestrial television. Clause 241 makes provision for the possible introduction of digital local television services. That builds on the experience of analogue local and community television services, set up as a result of legislative changes introduced in the Broadcasting Act 1996. There are 21 local and community television services licensed by the Independent Television Commission.

As we know, it is the Government's intention eventually to switch off analogue television services and move to a digital-only terrestrial television environment. The future of local and community television therefore depends on future access to digital local television spectrum. Although Clause 241 provides an enabling mechanism for the licensing of digital local television services, it does not guarantee that they will have the parts of the spectrum that they need.

The Government are said to be considering three replanning scenarios for the future conversion of all terrestrial television services to digital-only transmission. Under the most radical of those scenarios, there would be insufficient spectrum for any significant development of digital local television, and existing local and community television services would be obliged to switch off for ever. The spectrum savings resulting from radical re-planning would be transferred to non-broadcast use.

Under the two other re-planning scenarios—I am sure that the Minister will correct me if I have got it wrong—there would be spectrum remaining for development after the needs of existing national services had been met. That could be utilised for a tier of local and community television services throughout the UK, although there might be other competing demands that would have to be taken into consideration.

I shall give an example. Channel M in Manchester, which has operated on a four-year restricted service licence since February 2000, offers local programming to a potential audience of 600,000 adults and has its own dedicated production team, as well as contributions from the students at the University of Salford's international media centre. That is exactly the kind of innovative venture that Ofcom should encourage under Clause 3, which calls for a wide range of TV and radio services, appealing to a variety of tastes and interests. A local service such as Channel M is a fine example of that. Assuming that the channel's licence is renewed in February 2004, will investors be ready to put in the capital that may be needed, if the station may have to close down in 2010 because there is nowhere for it to be re-housed in the spectrum?

The amendment would guarantee a commitment within the spectrum re-planning process to ensure that sufficient spare capacity is reserved for at least two local digital television services in every locality, before spectrum is re-assigned to non-broadcast use. Digital local television would bring an innovative addition to the range and diversity of television services on offer, but, to ensure its development, it is essential that there is a commitment by the Government to adequate digital terrestrial television spectrum. I beg to move.

Baroness Howe of Idlicote

I support the amendment. It is clear that there is demand from the consumer and the citizen for local television and radio. I see from yesterday's Hansard that, once the Bill becomes law, a new tier of access radio stations will be considered. Clearly, the Government are reacting favourably to the demand for local radio and television.

I shall not repeat what the noble Lord, Lord Avebury, said. We have all been well briefed by community media on that point. However, I hope that the Minister will consider reassuring us that the needs of that group of people and of the citizens who want local radio and television will be satisfied.

Baroness Blackstone

Clause 155 is part of the mechanism in the Bill that will ensure universal access to public service channels on all main platforms and secure that digital multiplex capacity is made available for qualifying television broadcast services. The specific part played by this clause is to ensure that when Ofcom reserves frequencies for television broadcasting, it includes appropriate terms and spectrum licences to ensure that there is sufficient capacity for digital multiplexes to carry qualifying services, which are the public service channels.

I should like to stress that, while we recognise the value of local television, there is and will be a wide range of services, some of them purely commercial and without any public service remit or character. It will be for Ofcom to determine, within the framework of its statutory duties, what spectrum should be available for those different types of services.

Of course we fully support local television and radio, and we support its expansion. That is why the existing regulators are working on spectrum planning options that will identify spectrum that is suitable for local and regional services. I understand that some possibilities have already been identified by the planning groups. The work is not yet finished and it will have to take account of international negotiations on the use of spectrum.

Because of the uncertainty, it is not possible at this stage to be confident that there will be sufficient spectrum available for two local services in every locality, which is what is being sought by the amendment. Furthermore, coverage of television multiplexes tends not to be neatly tailored to single localities. We think that the practical implementation of such a provision would raise many complex technical issues.

However, I can assure the noble Lord, Lord Avebury. and the noble Baroness, Lady Howe, that we fully support local television and of course we wish it well. However, even with the increased spectrum efficiency offered by digital technology, I have to say that the amendment raises certain practical difficulties.

I hope that, in the light of my explanation, the noble Lord, Lord Avebury, will feel able to withdraw the amendment.

Lord Avebury

I am not terribly happy with the response of the noble Baroness because we have received no assurance that these services will be able to continue after the switchover to digital in 2010. As I explained when introducing the amendment, people will not invest capital in the development of new local services if they cannot see a time horizon of more than seven years. It would be totally unreasonable to expect investors to put in large sums of money, given that their existence will be threatened at such a short time in the future.

The noble Baroness said that some frequencies have been identified which may be suitable for these purposes. I wish that she could be a little more forthcoming both on the nature of the investigation of the frequencies that has already taken place and on the discussions being held between the existing regulator and the community services providers, on whose behalf these amendments have been moved.

I do not think that we shall be able to deal with this matter easily in Committee; it must be covered in discussions with the industry. In the hope that we shall make further progress between now and Report stage so that the industry can be given at least some of the reassurances it has sought, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 155 agreed to.

Clause 156 [Special duty in relation to television multiplexes]:

[Amendments Nos. 134, 134A and 1348 not moved.]

Clause 156 agreed to.

Schedule 5 [Procedure for grants of recognised spectrum access]:

[Amendments Nos. 134C to 134E not moved.]

Schedule 5 agreed to.

Clause 157 agreed to.

Clause 158 [Charges in respect of grants of recognised spectrum access]:

[Amendments Nos. 135 and 136 not moved.]

Clause 158 agreed to.

Clauses 159 and 160 agreed to.

Clause 161 [Limitations on authorised spectrum use]:

[Amendments Nos. 136A to 136F not moved.]

Clause 161 agreed to.

Clauses 162 and 163 agreed to.

6.45 p.m.

Clause 164 [Bidding for wireless telegraphy licences]:

Lord Avebury

moved Amendment No. 137: Page 149, leave out lines 23 to 29 and insert— (ab) require that amount to he expressed in terms of a single payment but shall give the applicant the choice of the making of annual payments; The noble Lord said: Amendments Nos. 137 and 138 deal with the manner in which payment is made for wireless telegraphy licences under the 1998 Act. As drafted, Clause 164 would allow Ofcom to specify that payment is made as a single lump sum, as a series of instalments over time, as a combination of the two, or in any of those ways at the applicant's choice. In the 3G auction, the option was given of a series of payments, but at an interest rate set so high that it was not taken up.

If up-front payments are required, that clearly would give an advantage to the major companies with cash, which may not be compliant either with the existing Licensing Directive 97/13/EC, Article 10(3) of which requires licensing to be "non-discriminatory", or Article 9(1) of the Framework Directive, which uses the same language.

Single payments also undervalue future years when compared with current usage, because of discounting. Even if there was a zero interest rate, that would be the case since a bidder would place a greater value on income in the near future. Such arrangements do not, therefore, achieve the stated objective of, securing the optimal use of the spectrum", as required both by the Bill and the new directives. Annual payments would go some way towards correcting that.

Amendment No. 138 would put an obligation on Ofcom to set a rebate when services start. That will deter speculators who are not going to provide any service, but who are intending to sell the frequencies if their bids are successful. While speculators might have a theoretical contribution to make in taking risks on future spectrum value, based on falling equipment costs and improvements in technology, that must be balanced against the need to use the spectrum immediately to achieve Ofcom's other objectives as laid down in Clause 3. In the extreme case, spectrum could be passed on and on, never to be used. Professor Cave—I have already pointed out that his words are holy writ on these matters—has argued that paying for the spectrum is sufficient incentive to use it. But the investment needed might not make use as profitable as resale, even though use would attract consumer surplus or consumer benefit. The operator is not interested in consumer surplus, and that is why we believe that there is a need to redress the balance with a further rebate. I beg to move.

Lord McIntosh of Haringey

Both of the proposals set out here are things that Ofcom may well want to do. Certainly I can see the circumstances in which they would be appropriate. Auctions are held in which spectrum trading situations arise and where a series of annual payments would be appropriate as opposed to a single up-front lump sum scheme. Certainly there are circumstances where it would be desirable to find some kind of incentive to prevent speculation rather than trading, which 1 think is the legitimate point that the noble Lord, Lord Avebury, is seeking to make here. There is a power to do that, of course—Section 1(3)(c)of the Wireless Telegraphy Act 1998 gives the power for the Secretary of State, and now for Ofcom, to make refunds following an auction. But I really do not think it is a good idea to make it mandatory.

Ofcom will have the experience of conducting these auctions; it will have to judge on which occasions it should demand all upfront payment or annual payments and whether it needs to protect against speculation by providing for a refund. It has all the powers--it does not need a restriction which would make it a duty in all circumstances.

Lord Avebury

The question between us is whether these stipulations should be de rigeur or an option for Ofcom. The noble Lord has asserted that Ofcom should be given this freedom without any indication of his reasoning for that conclusion. I cannot imagine any circumstances in which Ofcom might have a legitimate reason for demanding the whole of the payment upfront instead of allowing the person concerned the choice of making annual payments. Similarly. I cannot think of any circumstances in which it would not he a good idea to encourage the use of the spectrum by providing for a rebate as part of the normal process. But as I am obviously not going to get a more thorough explanation of the reasoning behind these provisions at this stage, I shall hope that perhaps we can discuss the matter behind the scenes or even that the noble Lord may write to me in due course.

Lord McIntosh of Haringey

I would be delighted to discuss this with the noble Lord, Lord Avebury, or write to him about it. The flexibility that I am talking about allows for a more precise discrimination between the value of different bids, because these other items can be taken into account. But I am not at all against the noble Lord's arguments.

Lord Avebury

It may well be that the use of some practical illustrations will clarify the matter. I am very happy to accept the noble Lord's undertaking, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 138 not moved.]

Clause 164 agreed to.

Clause 165 [Spectrum trading]:

[Amendments Nos. 138A to 138D not moved.]

Baroness Wilcox

moved Amendment No. 139: Page 151, line 31, at end insert— ( ) In authorising the transfer of rights and obligations under a wireless telegraphy licence or grant of recognised spectrum access under this section, OFCOM shall have regard to the impact of such a transfer on music provision. The noble Baroness said: This amendment seeks to include a provision at the end of subsection (3) of Clause 165 in order for Ofcom to consider the impact of a spectrum transfer on music provision.

The Joint Scrutiny Committee assessed that the capacity of Ofcom and the Government to cope with the real risks associated with spectrum trading—which the Government themselves identified will depend upon the regulations made by Ofcom as spectrum trading is gradually phased in.

In theory, the expanding radio environment should increase innovation and diversity because there should be more stations reaching new and different audiences. However, in practice, music creators are deeply concerned that the Government's proposed regulatory regime will put less than a handful of players in control of access to our radio communications networks, with centralised playlists limiting musical diversity. Music creators are concerned at the propensity of radio operators to walk away from licence obligations relating to music programming when ownership is transferred.

Therefore, the amendment is designed to ensure that the impact of spectrum trading on music diversity is specifically assessed by Ofcom as the current general criteria offer no guarantee that this will be the case. Unless this is put on the face of the Bill, the regulator will not have a defined responsibility to consider the consequences of these changes on music provision. I beg to move.

Baroness Warnock

I strongly support the amendment because I believe that there is a lack of overt protection for diversity of music in the Bill. Sometimes it is easy to overlook the fact that when independent local radio began, there was an enormous difference between one station and another and people were very proud of the fact that they had their own taste in music and their own performers. It was very much a local matter.

Things have changed greatly, I know, in the past 30 years, but there still is and should remain a sort of residual respect for the quite surprising difference in music tastes in different local radio areas, not just between Northern Ireland and Newcastle but between Birmingham and Wolverhampton—things that one might not expect. This diversity, along with the employment of local musicians, which we shall come on to later, need to be protected on the face of the Bill. There is very little in it about radio and very little about music, so I support the amendment strongly.

Viscount Falkland

This is clearly a probing amendment, and we share many of the views expressed by the noble Baroness, Lady Wilcox. It would clearly be wrong if a digital spectrum trade allowed a particular digital radio broadcaster to dominate the relevant market in a way that allowed him—or it—to compete unfairly. In the event that this is likely to occur, one would expect Ofcom to require clearance or consent prior to a proposed trade.

Authorisation by Ofcom would, one hopes, be needed in order to prevent any particular worrying trade from taking place. Distortions of the market can take place, as has already been said. The music industry has been worried about a large radio broadcaster arriving at a position where it would dominate the market and have a disproportionate amount of influence on the spectrum. However, these are interesting issues and one looks forward to the Minister clarifying the situation and, I hope, allaying some of our concerns.

Lord Gordon of Strathblane

It may well be that the music industry would love there to be a single dominant provider. In that way, you have to lobby only one person to ensure airplay for your product. That, of course, existed with BBC Radio 1.

The great advantage of the number of radio stations we have in this country is that in their own self-interest, they try to cater for musical tastes that are particular to the area. I do not know enough about the difference between Birmingham and Wolverhampton to know whether there is a difference. I have a horrible feeling that nowadays, with programmes such as "Big Brother" and "Pop Idol" being virtually universal, tastes have become somewhat homogenised. But nearly 30 years ago, when I started Radio Clyde, we managed to exploit local tastes which nobody, including the BBC, could exploit. I refer to people like Billy Connolly, who, of course, went on to somewhat greater things and is where I think I should be this evening—in Seville, to watch Celtic tomorrow.

Lord McIntosh of Haringey

There is no accounting for taste.

The Committee will forgive me if I do not repeat the arguments about the benefits of spectrum trading, nor those about the degree of regulation and the dangers of excessive regulation holding back the development of a market in spectrum to the detriment of everybody—communications providers, consumers and all of us.

Amendment No. 139 is a very attractive piece of special pleading—much more so than some of the special pleading that I have heard over the past few hours, without being too specific about that. I very much share the enthusiasm for music expressed by Members of the Committee, although when the noble Baroness, Lady Warnock, speaks about tastes in music, I remember that sonic years ago she allowed herself to undertake testimonial advertising for Classic FM. As a devotee of Radio 3, I was strongly resistant to that at the time. However, I have come round to her point of view to an extent, particularly when there is so much of what is called "world music" on Radio 3 in the evenings, to the detriment of proper classical music. However, that is the end of that bit of special pleading.

Music provision, of course, is only one of the factors that must be taken into account when Ofcom is making decisions about spectrum trading. If we singled out music, we would be in all sorts of dangers. It would also be unnecessary, because Clause 3 already sets out the context within which Ofcom will exercise its powers, including on trading. That specifically involves securing a wide range of high quality broadcast services, which includes music as well as non-music content.

The Committee will remember that when we refer to national radio licences, of which there is a scarcity, one condition is that one channel should be non-pop music. That is a negative condition, but it is a helpful one for securing diversity, and it is what allowed Classic FM to gain one of the three licences when it first started, to the great benefit of many of us.

I am very sympathetic to the idea of diversity and quality, but it would be undesirable to put music into the Bill at this place. Radio communications embrace a whole range of uses for which music is not appropriate, such as business radio used by taxi firms. We do not want to distort trading by mentioning music provision explicitly, when there is such good protection in Clause 3.

Baroness Wilcox

I personally welcome our Deputy Chairman, the noble Countess, Lady Mar, back to her place after her long illness. It is lovely to see her here.

I was very grateful for the support of the noble Baroness, Lady Warnock, who described radio stations that I remember so well. The noble Viscount, Lord Falkland, also supported the amendment, although he identified it as a probing amendment.

I listened carefully to the Minister's comments, and was interested in his rendition of a negative condition. I agree with him, as I remember how it has worked in practice. He will know that I am not very good at special pleading, because I am a rampant free trader, and it is unusual for me to stand up and plead cause for a particular area.

I cannot see that we shall get any further on this matter, so I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Avebury

moved Amendment No. 140: Page 151, line 31, at end insert— ( ) OFCOM shall require that the transfer from a service or content provider of rights and obligations under any wireless telegraphy licence (or grant of recognised spectrum access), has the approval of OFCOM in advance and that OFCOM will consider other parties and the provision of public services in their decision. The noble Lord said: We are concerned, as is the industry body called Spectrum, that when spectrum is traded, the original rights and especially the obligations attached to the grant of RSA may not be transferred to the new licensee. Therefore, we should like Ofcom to have a duty to preserve those rights in any transfer. We would go further than that and say that Ofcom should have a duty to approve all transfers made under the clause.

Subsection (3)(c) and (e) contains provisions allowing Ofcom to make regulations requiring its approval and consent to a transfer of a wireless telegraphy licence or grant of RSA, and to direct that a transfer be made only subject to any conditions that it may see fit to impose. We want to go further than that and say that, in every case, the transfer must be approved in advance by Ofcom. In doing so, it would have to consider existing users, third party licence holders and the provision of public services.

Leaving matters entirely to a free market in spectrum, without those safeguards, would be likely to concentrate spectrum in the hands of licence holders who can profit the most from it, to the detriment of the interests of third parties, existing users and public services. Even if services are maintained, trading will put upward pressure on consumer prices, because the cost of spectrum has to be recovered ultimately from the end-user. That may not mean that spectrum trading is not useful, but that if we have any sense, we should build extra safeguards into the Bill, which could be relaxed in a few years' time if experience showed that they were not needed. I beg to move.

Lord McIntosh of Haringey

Again, I shall spare the Committee my general remarks on the desirability of spectrum trading and the necessity for a certain degree of regulation. A spectrum market, like any other market, will require a regulatory framework to operate effectively and fairly, prevent distortions of competition, minimise harmful interference and ensure compliance with international obligations.

The balance between market forces and regulation will change over time, so the Bill gives Ofcom a wide measure of discretion in how to introduce and regulate spectrum trading. An essential element of the regulatory regime is Ofcom's power to require that spectrum transfers should take place only with its approval. The noble Lord, Lord Avebury, correctly identified that power in subsection (3)(c). However, that power needs to be exercised with a degree of flexibility if it is not to act as a drag on the development of a secondary market in spectrum. Such a secondary market would not necessarily be wrong; it could lead to improvement and freeing up underused spectrum, which would benefit consumers.

Amendments Nos. 140 and 141 would require Ofcom to clear certain spectrum transactions in advance and, in doing so, to consider other parties and the provision of public services. Amendment No. 141 specifies the relevant parties. That would be too inflexible. Spectrum transfers will be of many different types and on many different scales. There is a world of difference between a change of ownership of a taxi firm and the realignment of a national communications network. The degree of regulation will need to be appropriate to the size and characteristics of the people involved.

There is a concern that spectrum trading might lead to undesirable outcomes. That is why we need regulation. However, the sorts of cases that could be mentioned, such as a mobile telephone network withdrawing from a significant part of the country and thereby reducing competition, are unlikely. It would be too inflexible and burdensome to make prior approval mandatory in all cases. I appreciate that the amendment is limited to disposals of spectrum by service or content providers, and I applaud that caution, but those terms are not defined. Even assuming that they relate only to public telecommunications networks and broadcasters, the amendment would be disproportionate.

The matter of prior approval is better left for Ofcom to judge within the framework of the duties that it has. I am sorry that the noble Lord, Lord Currie, has left us, as I look for a metaphorical pat on the back whenever I say that. Surely, it is Ofcom that is making the regulations in the clause and, within the overall framework of its duties, the body will understand perfectly well the concerns expressed, perfectly legitimately, by the noble Lord, Lord Avebury. I hope that he will leave it to Ofcom, rather than impose an additional restriction.

Lord Avebury

The noble Lord gave the example of a mobile telephone network withdrawing from a rural area. He said that it would be unlikely to happen in practice and to introduce this kind of requirement would be to reduce the flexibility that Ofcom needs if it is to carry out its functions properly.

Clause 3 acts as a backstop to ensure that some of the points in the amendments would have to be considered by Ofcom in deciding whether to make use of the regulatory powers that it already has. The noble Lord pointed to subsections (3)(c) and (3)(e). It would be useful if we could have some greater knowledge of whether Ofcom does indeed think that these powers are adequate or whether it would prefer the kind of formula that we have suggested in the amendment.

We feel that, notwithstanding any protection that may exist for the public service broadcasting requirements and the rights of third parties, there remains the residual area of concern that the trading process will lead to an upward pressure on consumer prices because, as I have said, in every trade an increase in price has to be passed on to someone, and that is the end user.

However, I am sure that we shall not reach a solution to this problem this evening. We need to discuss it further with those outside the House who are advising us. So, in the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 140A to 141A not moved.]

Clause 165 agreed to.

Clauses 166 to 172 agreed to.

Clause 173 [Amount of penalty under s. 172]:

Baroness Buscombe

moved Amendment No. 142: Page 160, line 12, at end insert— and should be appropriate and proportionate to the contravention in respect of which it is imposed and the size of the entity on which it is imposed. The noble Baroness said: This amendment seeks to ensure that any penalty imposed by Ofcom for a contravention in respect of any provisions or limitations of a general multiplex licence is appropriate and proportionate to the extent to which the licence has been breached and the size of the body on which it is imposed.

As the Bill stands, the penalty may be determined,

as OFCOM think fit". There is no requirement that the penalty imposed should reflect the extent to which the licence has been contravened. Without qualification, this provision would allow Ofcom to impose a fine that could be totally disproportionate to the actual contravention of the general multiplex licence. The only limitations placed on Ofcom, regardless of the contravention, is the maximum amount of fine that it can compel a body to pay—being £250,000 or 5 per cent of a company's relevant growth revenue. The clause fails to address the impact such a provision would have on small companies, for which a hugely disproportionate fine could be critical.

The amendment would ensure that not only would any penalty imposed be proportionate to the licence breach, but, additionally, that fines imposed by Ofcom would be enforced in a consistent manner, taking account of the nature of the contravention. I beg to move.

7.15 p.m.

Lord McIntosh of Haringey

I fully sympathise with the thinking behind the amendment. But I can assure the noble Baroness that the principle of proportionality which is embedded in the Bill—it is one of the essential features of Ofcom as a regulator—is universal and covers penalties as well. Under Clause 3, Ofcom is required, in carrying out its functions, to observe both the principle of proportionality and any other regulatory best practice. That covers Clause 173.

The noble Baroness has raised an additional, perfectly valid point; namely, that any penalty should be proportionate not only to the scale of the offence but also to the size and resources of the offender. That is exactly what Clause 173 does. It allows for a maximum to be either £250,000 or 5 per cent of turnover. That is a limitation, not an extension. It is an extreme case. I cannot imagine many cases where there would be a temptation to impose a penalty that was more than 5 per cent of turnover. But the point here is that we are recognising the size of the entity as a relevant consideration.

Following a recommendation of the Joint Committee on Human Rights, we have included a provision in Clause 385 which requires Ofcom to prepare and publish a statement of the guidelines that it proposes to follow and to which it must have regard in determining the amount of penalties that it imposes. I hope that the noble Baroness, if she has heard what I have just said about Clause 385, will recognise that that is a valuable principle. Were Ofcom to impose a penalty that was unreasonable or which was in contravention of its general duties or the principles set out in Clause 385, that could be challenged by way of judicial review.

I would add finally that similar powers under the Broadcasting Act exercised by the Independent Television Commission have not given rise to any problems of which we are aware. I believe that the amendment, however well meaning, is unnecessary.

Baroness Buscombe

I thank the Minister for his response. I absolutely accept what he says in terms of where we might find assurance, confidence and guarantees in other parts of the Bill.

I feel that this is one instance where, notwithstanding the fact that we should be adding to the wording of the Bill, the amendment would add clarity and reassurance. However, I accept what the Minister says and am grateful for his assurances. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 173 agreed to.

Clauses 174 to 177 agreed to.

Schedule 6 agreed to.

Clauses 178 and 179 agreed to.

Lord Thomson of Monifieth

moved Amendment No. 142A: After Clause 179, insert the following new clause—

"PAYMENT ARRANGEMENTS FOR TV LICENCES UNDER PART 2 Nothing in this Part shall be interpreted as applying to the payment arrangements for a TV licence fee in lieu of installation of a television receiver, as set Out in section 356.

The noble Lord said: This amendment stands in the names of my noble friends Lord McNally and Lord Falkland. II relates to problems regarding the enforcement of payment of the television licence fee. Many Members of the Committee will have received strong representations on the matter from the Citizens Advice Bureau. It is the policy of my party to support the main thrust of those representations.

To sum up the CAB's proposals, they indicate that in contemporary circumstances the present arrangements, which eventually make the nonpayment of a licence fee a criminal offence, should be softened and changed so that, instead, it becomes an offence for the civil courts; and that at the same time we should seek to update the law in line with social and technological change.

By way of preface, I should say that the present arrangements relating to the broadcasting licence fee date back a very long time—in fact, to the days when the BBC was the only broadcasting organisation—and they have not changed a great deal since that time, despite the advent of new television channels. Now, in a world of 300 television channels, these arrangements require a serious review. Personally, I am not at all sure what is the final answer. The matter will require very serious consideration when the BBC charter comes up for review in 2006.

I noticed that at one stage the Secretary of State made a remark about the BBC licence fee. She said about, it being totally improbable that such a splendid arrangement should in any way come to an end".

I think that she was being unduly optimistic. There will certainly be a very fierce debate about the best methods of financing the vital role played by the BBC in our public service broadcasting system. Meanwhile, we must deal with the present situation.

Not many years ago, enforcement of the television licence fee resulted in a substantial number of people going to prison. There has been a softening of that approach. The notes from the BBC indicate that, in 2002, the Home Office's provisional figures suggested that only 14 people were imprisoned for non-payment of the licence fee. That raises another significant issue. I am bound to say—we have all had representations from the BBC about this—that the BBC, conscious of the sensitivity of the issue in a multi-channel age, very properly makes vigorous efforts to provide easier methods to pay the television licence fee. It provides a whole range of options to make it easier to pay the licence fee, including "Cash Easy Entry" arid "Monthly Cash Plan" by means of direct debits and stamps from the Post Office.

More than 95 per cent of people pay. Those who pay resent those who do not pay and get away with it. That is human nature. The present arrangements which keep the matter a criminal offence deserve a serious review. The evidence from the Citizens Advice Bureau sets out some fairly harrowing cases of how the arrangements work out in practice for some people, perhaps especially single mothers and so on, who are in financial difficulties and find themselves being hauled before the court.

The Citizens Advice Bureau argued in its report TV Sinners that, summons and prosecutions in the Magistrates Courts are wholly inappropriate methods of licence fee enforcement; the effect is to criminalise people for failing to pay a bill for installation of a television—hardly an offence that harms others—and to bring them into the criminal prosecution process, which for many people can be a profoundly intimidating experience. Invariably having any sort of criminal record—registered with the Criminal Records Bureau"—

especially in these days of the "all-inclusive databanks"— has a negative effect on employment prospects, social inclusion and ability to get credit".

I hope that, in their opposition, the Government will give a sympathetic ear to the suggestion that these arrangements should at least be softened and made more gentle.

In the totality of the system in this country for parking fees and all kinds of fines and penalties, there are much more serious matters than the non-payment of a licence fee if one is in serious financial difficulties. A sense of proportion is required. The situation was understandable when the BBC was the dominant figure in our broadcasting landscape. However, those circumstances have changed greatly. The Government would be wise in looking to the future and the review of the charter to look at a radically different approach to the financing of the BBC, rather than this form of poll tax, which in a world of 300 channels becomes increasingly difficult to defend. When it creates cases of hardship it unnecessarily brings the BBC into some disrepute. I beg to move.

Baroness Whitaker

I support Amendments Nos. 309A, 309B, 309C and 309D for all the reasons given by the noble Lord. In view of the hour I shall say no more.

Baroness Howe of ldlicote

I shall also be relatively brief. It is highly desirable that the BBC should do its best to collect the revenue from those who do not pay their licence fee. However, I go back, probably about 20 years, to when I chaired a committee for NACRO which looked at fines on those who had not paid the licence fee. The fines were strongly levied against women because it was women who came to the door. Those women immediately went before the court on a criminal charge.

The time has come to change the law and to change the offence to a civil offence. I certainly hope that there will not be many defaulters. Nevertheless, if there are, it should he under that kind of procedure. I hope very much that the Government will give attention to this very serious point.

Lord Lipsey

I am moved, as I am sure the Committee has been, by the cases of hardship that we have heard about. On the other hand, we should look at the other side of the coin. There are those who do not want to pay the licence fee. Although most of us fall into that category, there are some who take the matter a step further and do not pay although they perfectly well could.

The licence fee is an absolutely stinking, lousy tax. No one has ever doubted that. It is a poll tax. Unfortunately, however, no one has yet found a better way to finance the BBC. However, if we reach a situation where there is more widespread evasion of the licence fee, the arrangement will simply crumble and the option of keeping it will simply go. I hope that we will have a balanced approach to these matters. I cannot say that 14 prosecutions a year puts the fear of God into me, but I do not know each individual case.

Although there should be a balanced approach which takes account of the hardship that can be caused by payment, at the same time there is a need to keep the integrity of the tax and to do justice to those who go off and struggle very hard. On the Davies committee I calculated that it could take a low-paid worker a week of his working year to pay the licence fee. Many people struggle to do so. Let their efforts not be eroded by our making it too easy for the minority who simply choose not to pay.

Baroness Blackstone

The Auld report concluded that full decriminalisation of TV licence enforcement was not a straightforward option. It would mean that people would no longer risk a penalty as a consequence of using a television without a licence. Instead, detection would result only in the threat of county court proceedings to recover the cost of the licence.

There would therefore be no incentive to obtain a licence ahead of contact from the enforcement agency. So I very much agree with what my noble friend Lord Lipsey has just said. The Auld report therefore recommended that the use of a television without a licence should remain a criminal offence, but that it should be dealt with in the first instance by fixed penalty notice, discounted for prompt purchase of the licence and payment of penalty, and subject to the defendant's right to dispute guilt in the courts. The Home Office has been carrying forward work on that recommendation and, in consultation with the BBC. is exploring a number of options for dealing with TV licence evasion, including that of a fixed penalty notice. The aim is to put an options paper to Ministers in the summer. Of course, the Government share the aim of diverting people from the criminal justice system and of lessening the burden on the courts. However, it is essential that any new arrangements are really effective.

I note the provision in new subsection (2)(c) in Amendment No. 309D for regulations to waive the requirement to pay the licence fee in cases of hardship. No matter how hardship was defined for those purposes, such an exemption would effectively result in means testing as a requirement of paying the licence fee. Free or concessionary television licences are already available, as I am sure the noble Lord, Lord Thomson of Monifieth, is aware, to about 4 million households, many of whom are on low incomes. However, means-testing concessions would be expensive to administer and would be resented by those who marginally failed to qualify.

To allow the courts to waive the requirement to pay in individual cases would discriminate against the many people on low incomes who pay their licence. It would also compound the cost of decriminalisation to the BBC, which would incur the cost of pursuing evaders through the courts with no certainty of recovering the licence fee, let alone the costs.

The Government are anxious to ensure that the television licence fee is as easy as possible for people, especially those on low incomes, to pay, and a range of instalment options is available. Those include the cash easy-entry scheme, under which payments are made first in weekly and then in fortnightly instalments, and the savings stamp scheme. As the noble Lord, Lord Thomson, is aware, the longer-term arrangements for funding the BBC will need to be considered in detail as part of charter review. We shall consider all the funding options and review the concessionary, easy payment and enforcement arrangements in the light of our conclusions.

The amendments are also flawed. Amendments Nos. 142A and 309D are based on the assumption that the Wireless Telegraphy Act 1949 will continue to provide the framework for the television licensing system. However, the Bill repeals all the television licensing provisions of the 1949 Act and introduces new provisions in their place.

Clause 359 also gives the BBC or Ofcom the power, with a warrant issued by a magistrate, to enter and search premises to check for unlicensed use of a television receiver. The powers conferred on Ofcom under a warrant to enter and search premises are exercisable in relation to an actual or suspected contravention of a condition of a television licence relating to interference with wireless telegraphy.

TV reception equipment, such as aerial amplifiers, has been known to malfunction and cause much interference to safety of life and other communications. So it is essential that Ofcom has the necessary powers to deal with interference from such sources. Those powers exist under the 1949 Act, and are re-enacted here with additional safeguards. So to remove Clause 359 would make proof of unlicensed use of televisions and investigation of interference more difficult. That is just another technical reason why the Government must resist the amendments. I therefore very much hope that the noble Lord, Lord Thomson, will withdraw his amendment.

Lord Thomson of Monifieth

I am grateful to the Minister for the tone with which she replied to the amendments and the new clause. We shall of course want to study carefully what she said. I take her point about the imperfections in the amendments. The paper that we have received from the BBC, for example, points out the anomalies in relation to the view that we have taken on the operation of the Wireless Telegraphy Act 1949. It tried to console us—it did not console me much—by stating that the penalty for licence fee evasion, instead of being at level 5 on the standard scale, will remain at a fine not exceeding level 3, which is currently £1,000.

There will need to be a serious review of a fundamental character about how the BBC is to be funded in a multi-channel age. I have previously canvassed the purely personal view that, as the BBC is one of the great national institutions of this country, it should be given an entirely separate form of direct funding—perhaps comparable to the Civil List, I do not know. But I do know this. I am bound to say to noble Lords on all sides of the Committee that when we read some of the tales of people who finally get on the wrong side of that law and end up before the courts and, in some cases, even though they are few, in prison for non-payment of the licence fee—

Baroness Blackstone

I am sorry to interrupt the noble Lord, but they do not end up in prison for nonpayment of the licence fee. They may, very occasionally, end up in prison for non-payment of their fine—of course, that applies to any unpaid fine.

Lord Thomson of Monifieth

I understand that, hut I think that for some of the poor creatures involved. it is a distinction without a difference. I was only going to say that that makes me a little uncomfortable in this House, where so many of us—in my case, for many years—have been relieved of the necessity of paying any licence fee at all, because of the generosity of successive governments in enabling senior citizens to enjoy that privilege. When I think of those who do not enjoy that privilege and what happens to some of them, I feel strongly about the amendment, but for the moment, I beg leave to withdraw it.

Amendment, by leave, withdrawn.

Schedule 7 agreed to.

Clauses 180 and 181 agreed to.

Lord Evans of Temple Guiting

I beg to move that the House do now resume. In moving the Motion, I suggest that the Committee begin again not before twenty-three minutes to nine.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.