Oftel Competition Proposals (Hansard, 24 June 1996)

§ The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie)
My Lords, Oftel's proposed package covers new price cap arrangements and a significant deregulation of BT's licence. It includes a proposal for a new licence condition to prohibit the company from preventing, distorting or restricting competition including by abuse of a dominant position or the conclusion of 591 anti-competitive agreements. Oftel also proposes to insert this condition in due course into the licences of other operators.

§ Lord Marsh
My Lords, as the Minister must be aware, the dispute between Oftel and British Telecom has been going on for over a year, with very dangerous implications both for BT's plans for investment and for technological innovation. Is the Minister further aware—he must be—that the DTI has advanced proposals that have the unique distinction of being acceptable to all three parties—BT, the regulator and the consumer organisations? Does the Minister recognise that he now has an opportunity of solving the problem to everybody's satisfaction? Should Ministers not therefore seek to avoid their normal objection to popularity?

§ Lord Fraser of Carmyllie
My Lords, we have no objection at all to that; indeed, we very much welcome it. As I indicated, the situation at the moment is that Oftel has put forward a package and it is now for BT to accept or reject it. If it rejects the package, there is scope for reference to the MMC should agreement not be reached. My understanding is that in a number of material particulars there is consensus. But there remains the issue as to whether or not there should be a statutory restriction on the misuse or abuse of a dominant position in the market. It is on that matter that BT has still to reach a view. I understand that that is likely next month.

§ Lord Hooson
My Lords, does the Minister agree that within the Oftel package is a proposal by the director-general that he should assume a quasi-judicial function in respect of certain matters? If that is so, does he agree that, as the rights and properties of licensees are likely to be involved, there should at the very least be a proper right of appeal?

§ Lord Fraser of Carmyllie
My Lords, I am aware that that is the suggestion that BT has made; namely, that if such a position is to be taken up, there should be an accompanying right of appeal. I further understand BT's argument to be that that should not simply be a condition of its licence but that it should enjoy a specific statutory context within telecoms legislation. We are not convinced that a compelling case has been made for prohibition on abuse of market power generally. The telecommunications sector has its own distinct regulatory regime. As matters stand at present, as I indicated, it is for BT to accept or reject the condition suggested by Oftel. If it rejects it, there is the opportunity to go to the MMC.

§ Lord Tebbit
My Lords, may I remind both the House and my noble and learned friend of my interest in this matter as a director of British Telecom plc? Is the Minister aware that it is highly likely that only a modest legislative step by Her Majesty's Government would be needed to avoid a clash possibly requiring a reference to the MMC? In my view—the House may or may not agree—such a reference would be damaging to BT plc and almost certainly damaging to the industry as a whole. It would delay the tighter and tougher 592 regulatory regime upon which both the regulator and the "regulee are" agreed. Will the Government not reconsider the matter?

§ Lord Fraser of Carmyllie
My Lords, as I sought to indicate, we are considering that matter, but it is for BT to give an indication of whether it accepts or rejects the proposal by the regulator. My noble friend says that a small statutory amendment would be required. I am not absolutely sure just how small it would be. Certainly I accept that that is one way in which the matter could be resolved. Another is to see whether there is the opportunity to include some appeal provision out of existing law. That too is an avenue that is being explored. However, I cannot indicate that any definite conclusion has been arrived at on that issue.

§ Lord Peston
My Lords, I too declare an interest in that I am a customer of BT who, I might add—I hope that the noble Lord, Lord Tebbit, is listening—is not 100 per cent. satisfied with one minor aspect of the service he is receiving. I use this opportunity to put that observation into the public domain. Is the noble and learned Lord aware of the puzzling status of Oftel, which is acting essentially in the Government's role in dealing with a competition policy matter? Clearly, we all favour competition and are against the use of a dominant position in the market. This is not a matter for Oftel per se and the last thing we want is for the issue to go to the MMC. Following the questioning of the noble Lord, Lord Marsh, is there no way that the Government can use their good offices to bring a modicum of good sense into the matter without going to an extreme position? Particularly puzzling is the notion of Oftel proposing that it is a take it or leave it matter within the next month. That seems to me rather extreme. However, as an outsider, perhaps I have misunderstood the situation. We want BT to be subject to fair competition. We do not want a great bureaucratic framework to ensure that.

§ Lord Fraser of Carmyllie
My Lords, I understand that BT's position—doubtless I shall be corrected if I am wrong—is not that it does not accept that such a provision should be included; it is just a matter of how it should be achieved. Should it be a condition of the licence or a free-standing statutory provision? Whichever route is pursued, one thing is clear. There should be a right of appeal against any decision taken by the regulator. It is that matter which is being considered at the moment. It would not be desirable at this time to discover from BT exactly its position over the new terms set by the regulator. My understanding is that it intends to come to a conclusion on that in the course of the next month.

§ Lord Ezra
My Lords, the noble Lord, Lord Marsh, referred to a remarkable proposition from the DTI which apparently commanded universal support and would avoid a costly and lengthy reference to the MMC if there were disagreement between the two parties. Can the noble and learned Lord tell the House about that proposition and why it is not being proceeded with?

§ Lord Fraser of Carmyllie
My Lords, the noble Lord, Lord Marsh, referred to the proposal coming from the director-general of Oftel rather than any specific proposal from the DTI. In these matters the regulator stands independent of the DTI. There is a suggestion and attaching to it is the concern that there should be a right of appeal. We have not yet taken up a position on that matter.

§ Lord Marsh
My Lords, will the Minister accept that many people will be surprised at his reply? It is precisely because there has been a dispute between the OFT and British Telecom for over a year that the regulator has demanded a reply by the end of July, under threat of intervening in other areas. Whether or not the noble and learned Lord is aware of the situation, my understanding is that both sides are perfectly clear that there is a DTI proposition. One understands the problems but there are many different mechanisms by which they might be approached. Are the Government prepared at least to allow the DTI, either at ministerial or official level, to seek to broker a settlement to this long-standing, potentially damaging and expensive dispute, in order to find a solution?

§ Lord Fraser of Carmyllie
My Lords, I thought I had made clear where we stood. The problem is whether or not there should be a right of appeal attached. The question is whether that should be within a statutory framework or whether there is an opportunity to arrive at a satisfactory appeal procedure within the framework of existing legislation. That is being looked at at the present time.

§ Lord Marsh
My Lords, I apologise to the Minister. I must not have made my question clear. I asked a simple question. Will he not allow the two parties—if I am right in believing that they would so wish it—to have a meeting, under the auspices of himself and the DTI, to reach a solution?

§ Lord Fraser of Carmyllie
My Lords, the noble Lord will appreciate that both BT and Mr. Cruickshank are regularly in contact with the DTI over this and other matters. If they wish to have a further meeting, of course that is an opportunity available to them.