HC Deb 11 March 1998 vol 308 cc703-13 '.—The Director General of Telecommunications shall report to Parliament annually on the use of electro-magnetic spectrum as it affects the United Kingdom, and may recommend to the Secretary of State measures for more efficient use of the spectrum.'.—[Mr. Boswell.]

Brought up, and read the First time.

1.30 am
Mr. Boswell

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this, it will be convenient to discuss the following: New clause 13—Report of Director General of Telecommunications: adverse effects on competition— '. The Director General of Telecommunications shall report to Parliament whenever he believes that the allocation of electro-magnetic spectrum has had an adverse effect on competition, and, when such a report is made, the Secretary of State may re-allocate the electro-magnetic spectrum as he sees fit to encourage competition.'. New clause 14—Radiocommunications Agency— '. It shall be a duty of the Radiocommunications Agency to oversee the management and regulation of the electro-magnetic spectrum, to ensure the effective operation of plans for the efficient use of the spectrum and to make recommendations to the Secretary of State on the most efficient use of available capacity.'. Amendment No. 4, in clause 2, page 2, line 38, at end insert— '(d) a report from the Director-General of Telecommunications as to the likely effects on consumers and other users.'. Amendment No. 11, in page 2, line 38, at end insert— '(2A) In exercising his powers under section 1 and in his consideration of matters specified in subsection (2) of this section, the Secretary of State shall have regard to the views expressed by the Director General of Telecommunications; and he shall not make any regulations under section 1 unless he has previously received an opinion from the Director General of Telecommunications on the implications of the proposal for competition and consumer benefits.'.

Mr. Boswell

This is a somewhat more manageable group of new clauses and amendments or, to use more modern phraseology, a rather more focused group, which centres on Conservative Members' concern for consumers' interests. They are very much informed by the contribution of Oftel, and that of my hon. Friend the Member for South Dorset (Mr. Bruce) in reading some aspects of that report, on which he is a greater expert than I am, into the record.

The Minister has shown some encouraging signs of response to the Opposition's position, and it is important that the interests of the consumer and user of radiocommunication services should be built into our consideration and, more particularly, the operation of the spectrum allocation in practice.

My hon. Friend the Member for South Cambridgeshire (Mr. Lansley), who restrained himself during our previous debate, mentioned earlier his concern that the Radiocommunications Agency, which is essentially a technical body with great expertise in that area, might not be by itself the most appropriate vehicle for representing that consumer interest. Our position on the new clauses and amendments is that there should be an Oftel input. That is written across the group.

An analogy could be drawn with the relationship between the Radiocommunications Agency, where the technical experts look at the frequencies and the parts of the spectrum from the point of view of their technical compatibility, and the Radio Authority, which issues licences for broadcasting services with regard to other factors, including the entirely welcome growth of community radio. We may have some reservations about the exact way in which that may be done in future, but it is broadly along the right lines and has been positive for the commercial radio industry.

New clause 8 provides a consumer input into what might become an annual version, albeit perhaps a rather shorter one, of tonight's debate. We could have a debate every year on the annual report. We could ask questions about it and see where we were going. It would not merely be a report in the narrow, historic and archival sense; it would enable the Director General of Telecommunications to recommend to the Secretary of State measures to achieve a more efficient use of the spectrum. We envisage a rolling process of review, assessment and update.

As my hon. Friend the Member for West Dorset (Mr. Letwin) said in his very powerful contribution on the previous group of amendments, we realise how fast technology is moving. Therefore, it will be necessary annually to analyse the position—partly the demand side and partly the supply side, such as the new availability of compression. It is terribly important that that process has a consumer input, and that would meet the Oftel case for involvement.

Many aspects of telecommunications services have an Oftel input, almost by definition. It is important to bear that in mind, given the success—I think I can reasonably claim—of the previous Government, the inclination of the present Government not to reverse at least the basis of that thinking and the structure of regulation in the industry. Of course, the consideration is not specifically about licensing; it is about the policy issues that have arisen, in the director general's opinion, during the year.

The House will appreciate that new clause 13 is closely related to that matter. However, rather than having a technical efficiency test, it has a rather different one— whether the allocation of the spectrum has had an adverse effect on competition. In other words, to take the hypothetical case mentioned by my hon. Friend the Member for South Cambridgeshire (Mr. Lansley), there might be a problem with someone hoarding a series of licences and unfairly occupying an attractive part of the spectrum. That could be deemed to be anti-competitive, which would generate an adverse comment from the director general. In turn, that could lead the Secretary of State to reallocate the spectrum as she thought fit.

I envisage that process of report and decision making strengthening the Secretary of State's position, not least in administrative law. If the Secretary of State were disposed to make the reallocation, it would not be easy for her to establish the grounds under which it would be made. If there had been a separate report from Oftel, that would provide a much stronger basis for her decision. That would be principled, and a good way of going forward.

New clause 14 imposes a duty on the Radiocommunications Agency, and invites it to oversee the management and regulation of the electromagnetic spectrum. Indeed, that is essentially its remit. The new clause is worded to ensure the effective operation of plans for the efficient use of the spectrum and to make recommendations to the Secretary of State on the most efficient use of available capacity. That, again, would underpin her position in administrative decisions, whether on pricing or on reallocation of spectrum, because there would be some principled basis on which she could proceed, rather than it being done arbitrarily. That would help to safeguard her position.

The important point about the three new clauses is that, in different ways, they provide a means of running past both the House and public debate—as well as providing advice to the Secretary of State—some important and sensitive issues relating to the operation of the Bill's objectives.

Amendment No. 4 relates to clause 2, which lists some issues to which the Secretary of State should have regard when exercising powers under section 1 to prescribe sums payable in respect of wireless telegraphy licences". The list is pretty comprehensive, but the amendment would provide for the fact that, if there is to be a pricing structure, and the Secretary of State is to make decisions to modify the existing practice, that is likely to affect consumers.

The effects could be direct—for example, how much people would pay for their radio services. They could also be more oblique—if services were no longer available, were priced out of the market or suddenly became increasingly attractive. One of the most attractive features of the radio regime to which I referred is that it has brought in many operators with quite small catchment areas.

The arrangement may not be ideal, but it is certainly a step forward. Oftel could rightly comment on such matters. The overall track record is of a great deal of market liberalisation and some world leadership in the allocation of scarce resources.

Amendment No. 11 would require the Secretary of State to take Oftel seriously. The regulatory process would allow matters to be discussed in the House, so we could look at them and see how they shake out.

The amendments come from slightly different directions, and taken together they send an important signal—from the Opposition and, I hope, from the Government—that the consumer should come first. The new clauses and amendments would provide a suite of measures to ensure that our objective—I hope that it is shared by the Government—can be delivered.

We hope that the Minister will consider whether our proposals are the best way of building the consumer element explicitly into the Bill and whether there are alternatives or, at least, give us the assurances that we, and the consumers that we claim to represent, would want.

Mr. Lansley

New clause 13 and amendment No. 111 concern two important aspects of the Bill that were debated in Committee but were in a sense remitted to a later stage.

As the Minister will recall, it was said in Committee that, if the Minister did not feel able to accept the amendments that had been tabled—their objective was that the duty to pursue consumer benefits should be included in the Bill—the Government should consider, and perhaps table, amendments on Report. Although four months have intervened, the Government clearly have not seen fit to table an amendment in such terms, but it is very desirable for us to achieve a related but different objective by means of the intervention of the Director General of Telecommunications.

1.45 am

Although the Minister was careful to reflect accurately in Committee the representations made to her by the director general, it should be said that the director general has been quite clear about the advice that he would give. Let me pre-empt my hon. Friend the Member for South Dorset (Mr. Bruce), and quote from the letter that the director general sent to my hon. Friend. The director general takes the view that An unambiguous primary statutory duty to promote the interests of consumers would ensure their welfare underpinned all regulatory decisions. I well understand why the director general takes that view. Under the Telecommunications Act 1984, he has an obligation to ensure that there is a statutory duty to promote the interests of consumers. On the basis of what is now approaching 14 years' experience of promoting competition and consumer benefits in the telecommunications industry, he rightly sees no reason why he should not, and every reason why he should, impress on the Government the view that the Bill should provide for a similar duty. That is clearly not the route that the Government wish to take, but, if they object, there could be a valuable proxy in the form of the intervention of the director general in the way provided for by amendment No. 11.

Under clause 3, consumer benefits might readily be assumed to be realised in the economic utilisation of the spectrum arising from the auction process, because—in theory, at least—those who are buying will do so on the basis of their best estimates of the economic value that can be derived, and on the assumption that that will be achieved by provision for consumer benefit.

The amendment is therefore not designed to have an impact on clause 3. It is designed to add to clause 2 the provision that the matters that the Secretary of State must take into account in exercising powers under section 1—as it will become—will be circumscribed, in that the powers can be exercised only when the director general has expressed a view on, in particular, the competition and consumer benefits. Until he has expressed such a view, regulations under section 1 should not be made. That will bite on the issue of licences where auctions do not apply.

The point was not responded to in Committee. The Minister may have had a chance to reflect on it since then, and may wish to answer now, but in Committee the Government asserted that all the matters to be taken into account under clause 2 would also, of necessity, be taken into account in issuing licences under clause 3 where auctions applied. It is a matter not just of selling to the highest bidder but one of taking other matters into account.

The Government's clear intention in the Bill was to ensure that the matters specified in clause 2 were dealt with in clause 3. However, curiously—as Ministers have been told—clause 1(5) is designed specifically not to include in clause 3 the regulatory power of clause 1. Moreover, the duty that amendment No. 11 would impose on the Secretary of State to consider the opinion of the Director General of Telecommunications should not be read as implying that an opinion from the Director General of Telecommunications must be received on competition and consumer benefit before, for example, a licence is sold at auction.

It might be useful if the Minister were to tell us whether she has had an opportunity since our debates in Standing Committee to reconsider whether our construction of the Bill was accurate. The question—which is perhaps best dealt with in debate on the next group of amendments—arises of how, despite Ministers' assertions, those important matters to be considered are dealt with in clause 3.

The debate in Standing Committee on consumer benefits was important. Although the Director General of Telecommunications is not the final arbiter of consumer benefit—in all markets, the consumer is the final arbiter on that matter—that person is a good proxy as the final arbiter.

As Members on both sides of the Committee felt that it was desirable that consumers should be the ultimate beneficiaries of the process, I was surprised at the length to which Ministers went to specify in the Bill provisions that they themselves regarded as something of a proxy in delivering benefits to consumers, and at the fact that they would not make that clear. In Standing Committee, the Minister said, for example: Consumers are important, but why should they be singled out above all other interests, such as operators and manufacturers?" —[Official Report, Standing Committee A, 13 November 1997; c. 120.] That is a very strange approach.

If I were to talk to operators and manufacturers, I do not think that they would say, "We think we should be treated on an equal basis with consumers; we all have interests as stakeholders in this industry. The Government should not put consumer interest above the interests of mobile telephone operators or of fixed-link radio operators." I think that they would say, "Yes, you should put consumer interest first, because we think that that is the primary interest. If we in industry do not serve consumers first and provide them with benefits, there is no purpose in being in industry or in utilising spectrum for commercial purposes."

If—as I have always found to be true—industry is prepared to put consumers first, it is extraordinary that Ministers should themselves be unwilling to put them first, as can readily be done. The possibility open to Ministers is to use the Director General of Telecommunications, who has proved to be a tried and tested pursuer of consumer benefit.

In the past few days, we have been reminded—by the strictures of the retiring Director General of Telecommunications to mobile telephone operators on their charges for fixed-link calls to mobile telephones—of the vigour with which the director general pursues consumer interest. It would be very difficult to dispute that the current director general, or his successor, is anything but a useful and valuable proxy in establishing consumer benefit.

The second value of new clause 13 and amendment No. 11—the point was well made by my hon. Friend the Member for Daventry (Mr. Boswell), so I shall not elaborate—is that, by taking that route, we diversify the sources of advice to the Secretary of State on the utilisation of spectrum, not only for technological purposes but in relation to the development of compression techniques and other uses which are not necessarily in the commercial arena.

The advice of the Director General of Telecommunications will enable the Secretary of State to link decisions taken on the allocation and use of spectrum to an economic analysis—with which the Director General of Telecommunications is increasingly concerned, because of the pricing control mechanisms applied in the telecommunications industry generally—and to an analysis of the convergence of different technologies of broadcasting, telecommunications and radio telephony.

I take the point made by my hon. Friend the Member for Esher and Walton (Mr. Taylor) that, as those technologies converge, legislation should not become too tied to technology. If we include the Director General of Telecommunications explicitly as a source of advice to the Secretary of State on issuing licences, the Secretary of State will be better equipped to take decisions, having benefited from an intimate understanding by the appropriate regulatory body of the convergence of communication industries and of telecommunications services. That will improve decision making.

We need not elaborate the advantages that the Radiocommunications Agency brings to these questions. Notwithstanding those advantages, the agency would not necessarily assert that its specific expertise on telecommunications industries generally, or its economic analysis, was superior to that of the Office of Telecommunications. I believe that the Radiocommunications Agency would acknowledge that the Office of Telecommunications can add value to decisions taken in this context.

I single out for the Minister, from the valuable group of new clauses and amendments before us, new clause 13 and amendment No. 11 as measures that would especially serve to improve the Bill. They would help the Secretary of State to take decisions, and they would provide reassurance. The latter aspect has been strongly emphasised tonight by Conservative Members, and it was emphasised in Committee by Liberal Democrat Members, who are not now present.

The benefits of explicitly providing for the consumer interest were very much to the fore in our deliberations in Committee. The Minister has an excellent opportunity to respond positively to the debate in Committee by amendment on Report.

Mr. Ian Bruce

I am grateful to be called to speak at this early hour, and I do not intend to make a long speech on this group of amendments.

Mr. Ivor Caplin (Hove)

Hear, hear.

Mr. Bruce

I am grateful to the hon. Gentleman, who has just come into the Chamber.

Mr. Caplin

I have come in specially.

Mr. Bruce

I am pleased to hear that he came in specially. I am even more grateful because, obviously, all this will make the newspaper headlines.

I shall be brief. An aspect to which we drew attention by tabling the new clauses and amendments was that we felt that there was ambiguity as to which regulator did what. In Committee, I made a detailed speech about the large number of regulators. I said that, in every Bill of this nature, one regulator seems to be asked to do everything, even though it is not quite appropriate, and I said that it was difficult to choose the appropriate regulator for the purpose.

In these new clauses and amendments, we have tried to express our preferences in terms of who does what—the Office of Telecommunications or the Radiocommunications Agency. One factor is the consumer interest, which we touched on earlier. I always rely on the Director General of Telecommunications—or the two that we have had—to give us an honest answer. When he is leaving his job, no one can suggest that his comments are directed at trying to play himself in for another five years. Mr. Cruickshank's valedictory message was that the legislation should be consumer-oriented. I also think that, as well as a convergence of technology, we must ensure a convergence of regulators.

What I am saying is Labour party policy. Before the general election, Labour came to certain conclusions about reducing the number of regulators.

Mr. Clive Betts (Sheffield, Attercliffe)

Can the hon. Gentleman take a little more time?

2 am

Mr. Bruce

The Whip would like me to spend a long time explaining that the Radiocommunications Agency is one agency, the Telecommunications Agency is another and they are both in new clauses 8, 13 and 14 and the amendments. I can go into more detail if the hon. Gentleman would like, but I would rather sit down in a couple of minutes. I hope that he will contain himself a little longer.

We must try to bring the agencies together, to ensure that we have the most appropriate agency in the short term. We have tried to draw up helpful new clauses and amendments to ensure that. In the longer term—not too long, I hope—we must try to bring the agencies together.

I should like to give a plug to a report by EURIM—I must spell that for Hansard, because I am always sent a note otherwise: E-U-R-I-M. It stands for the European Informatics Market group—I seem to be the only person who knows that. The report concluded that, instead of some 15 agencies dealing with the issues, there should be just one. That is a radical proposal, because it would require the removal of 14 director generals of other agencies. I understand the difficulties of the proposal, but I should like to flag it up in my short contribution.

We cannot look at legislation in isolation. We cannot simply say, "This is a radiocommunication; this is a telecommunication; this is broadcasting; this is satellite." They are all electromagnetic signals. They are all caught in some ways by the relevant legislation. It would be logical to bring them all together as soon as possible. That would help us to use electromagnetic spectrum in the most efficient way.

I promised to make a short speech. I hope that we can rely on the Minister to spend a bit more time telling us either that she will accept the new clauses and amendments or how she will work towards the issues that they deal with in the near future.

Mrs. Roche

I have listened carefully to the debate. It is right to have a discussion about consumers, but I hope to convince Conservative Members that the new clauses and amendments are not necessary.

New clauses 8 and 13 deal with reports by the Director General of Telecommunications. Section 55 of the Telecommunications Act 1984 requires the director general to report annually to the Secretary of State with a general survey of developments during the year, on matters falling within his functions. The Secretary of State is then required to lay the report before Parliament. Therefore, that is already laid down in the Act.

The director general also has a specific duty under section 51 to advise on licensing under the Wireless Telegraphy Act where that involves telecommunications, and to give advice to the Secretary of State on spectrum management issues. I consider, and the director general agrees, that new clause 8 is completely unnecessary, as it merely duplicates the effect of existing provisions.

New clause 13 also requires the director general to report to Parliament if he believes that the allocation of spectrum has had an anti-competitive effect, and empowers the Secretary of State to act to reallocate the spectrum, to encourage competition. The director general already has a general duty under section 3(2)(a) of the Telecommunications Act to maintain and promote effective competition in telecommunications and, under section 49, to consider any matter that relates to telecommunications services. The director general therefore already has an obligation to report to Parliament on developments in spectrum management that adversely impinge on competition.

I understand completely where the hon. Member for Daventry (Mr. Boswell) is coming from; I understand his concerns, but the legislation is already in place to enable the director general to do just what the new clause would require. I consider, and the director general agrees, that the first leg of the new clause is completely unnecessary, as it merely duplicates the effect of existing provisions.

The second leg of the new clause is also unnecessary. The Secretary of State already has inherent power to allocate and reallocate spectrum and has wide discretion in the granting of licences. She may already pursue the promotion of competition in the exercise of spectrum management power. I hope that that provides some reassurance for the hon. Member for Daventry.

Amendments Nos. 4 and 11 also refer to reports from the Director General of Telecommunications. In supporting them, Conservative Members raised important issues about consumers. I emphasise, as I did in Committee, when we had a lengthy debate on a similar amendment, that the Government attach considerable importance to consumer interests both generally and in the context of spectrum pricing.

Ms Linda Perham (Ilford, North)

As my hon. Friend knows, I represent a constituency where there are many licensed taxi drivers. Is she aware of how much members of the National Federation of Taxicab Associations appreciate the open, fair and constructive way in which the Government have consulted consumers and how much they appreciate the reassurances that have been given?

Mrs. Roche

I thank my hon. Friend very much for that important intervention. The Government are extremely grateful for the continuing contact that we have had with the federation and the contribution that it has made.

Mr. Lansley

Will the hon. Lady give way?

Mrs. Roche

No, I want to make some progress.

The House will no doubt agree that effective spectrum management and the promotion of innovation and competition are powerful forces acting on the consumer's behalf. Effective spectrum management enables more service providers to access the spectrum. That promotes competition and innovation, which increase consumer choice and drive prices down. It is no coincidence that competition and innovation are listed in clause 2(2) as matters to which my right hon. Friend the President of the Board of Trade is required to have particular regard. In addition, clause 2 requires the Secretary of State to have regard to economic benefit. That includes benefits for consumers. There can be no doubt, therefore, that clause 2 already provides for consumers' interest to be taken into account and will work to the benefit of consumers.

As part of the consultation process, my right hon. Friend the Secretary of State and I would welcome the views of the Director General of Telecommunications on any aspects of proposed licence fees. We regard that as very important. When we seek that consultation, it will include the effects on consumers and other users. We shall give them the most serious consideration.

It is appropriate to take this opportunity to pay tribute to the distinguished record of the present director general in promoting consumers' interests. Don Cruickshank has done an excellent job, and I am sure that all hon. Members wish to express their warm appreciation of his great contribution. That contribution is also recognised internationally—the director general is held in extremely high regard. However, there is no need to amend the Bill as proposed, as it already effectively requires that the director general's views be taken into account.

Because we place such weight on consumers' views, we consulted bodies representative of consumers at an earlier stage of the Bill. The National Consumer Council advised: we are not supporting or opposing any amendments to it". The Consumers Association said that it was not aware of anything contained therein that we would object to". We have also consulted, and listened to, other groups. There was mention in Committee of the views of the Joint Radio Company of the energy companies. I am pleased to say that the chairman of the JRC wrote to me afterwards, and said: I am writing to express our appreciation for the extent to which the Government expressed its commitment to issues of importance to the utilities during the Committee stage of the Wireless Telegraphy Bill… The debate showed a very full and comprehensive understanding of our concerns and we are grateful for the assurances given. The Telecommunications Advisory Council of the water industry also wrote confirming that it has been fully supportive of the spectrum pricing process". We are very grateful for those comments. I hope that I have provided the assurances on those points that Conservative Members were seeking.

Amendment No. 11 suffers from the serious defect that it would place an implicit duty on the director general to submit observations on the implications of all fee proposals for all consumers. If the director general decided, for whatever reason, not to express views, the Secretary of State would be prevented from making the regulations, even if they involved fee reductions. It is not acceptable that the Secretary of State should be subordinate to the director general in the way that amendment No. 11 would provide. I am sure that Opposition Members did not intend that to occur. It would place the director general in a very difficult position, and I do not believe that it is appropriate.

In summary, amendments Nos. 4 and 11 could distort the operation of spectrum pricing. As to new clause 14, I note the interest on the part of Opposition Members to put the spectrum management duties of the agency on a statutory basis. However, I cannot help but observe that the Conservative Government established the agency in 1990 under the next steps programme. The agency's aims and objectives are set out in its framework document, which is agreed by Ministers. It specifies that its mission is to facilitate access to radio spectrum of the appropriate quality, for the widest range of services, and so promote the creation of wealth, competition, quality and choice. Therefore, there is no need to have further statutory powers to define the agency's duties—and indeed to do so in the way that the new clause seeks would unnecessarily restrict the future range of operations.

I hope that I have answered the points raised by Opposition Members, and I invite them not to press the proposed new clauses and amendments.

Mr. Boswell

In the light of the Minister's assurances, and adding, solely as a point of substance, that we echo her warm praise for Don Cruickshank's record, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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