Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010

Lord De Mauley Excerpts

Thursday 16th December 2010 Lords Chamber

Moved By

[Lord De Mauley]

That the draft order laid before the House on 27 July be approved.

Relevant documents: 7th Report from the Joint Committee on Statutory Instruments and 7th Report from the Merits Committee

[Lord De Mauley]

My Lords, the Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010 will direct Ofcom to take certain action in respect of radio spectrum management. It is an important step in achieving the Government’s objectives on broadband and the contribution that it can make to a balanced economy.

Wireless communications are now an integral part of everyday life in the United Kingdom. There are now more active mobile connections than people: 3 million access broadband using wireless modems, or dongles, and the arrival of smartphones is changing the way in which people communicate and interact. These devices all require radio spectrum. Without sufficient spectrum being available, mobile services cannot continue to function nor can new and innovative services be brought to market.

The explosion of data traffic across networks is putting the networks under strain. Technical advances can play a part in mitigating the impact of this increased demand but ultimately what is needed is access to additional spectrum. However, spectrum is finite and therefore a scarce resource. Spectrum suitable to deliver mobile broadband services is even scarcer. Where spectrum is available, we need to bring it into use at the earliest possible opportunity. The Government’s proposals will achieve that and accelerate the deployment of high-speed mobile broadband services that can deliver benefit to consumers, citizens and business. It is that desire to secure the release of spectrum suitable for mobile broadband services that is behind this statutory instrument.

I will not detain the House with the detail of the long and tortuous route that has been travelled to bring us to this point, although some of your Lordships will recall it in vivid detail. Some of the issues involved, such as the liberalisation of the 900-megahertz and 1,800-megahertz spectrum, have been the subject of discussion and consultation stretching back several years. This issue has made the progress towards the release of suitable spectrum particularly difficult. That this matter is not particularly politically contentious is demonstrated by the fact that the previous Administration laid a statutory instrument in March, with measures that they considered would address some of the most difficult areas of concern. However, there was insufficient parliamentary time prior to the general election to debate it. There was therefore a need for the new Government to make a decision on how to proceed.

The Government have made it clear that one of their key priorities is to rebalance the economy, in terms both of supporting growth in a broader range of economic sectors and of seeing a more even distribution of economic opportunities across regions and industries. For that balanced economy to develop and thrive, a critical requirement is the right telecommunications infrastructure, specifically the provision of superfast broadband connectivity. The Government have already set out their agenda for accelerating the deployment of higher speed broadband connectivity, and we recognise that the widespread deployment of superfast mobile broadband services will contribute to that objective, delivering significant benefits to businesses and consumers.

In the light of these objectives, careful consideration has been given as to how best to proceed. We have taken into account responses to the initial consultation and have held further discussions with Ofcom and operators to inform our decision. As I have already mentioned, the principal objective is the earliest possible release of this spectrum and to give certainty to the market, so that new mobile broadband services are deployed as quickly as possible. We are already seeing 4G services deployed across the world, including Europe. Further delay would result in the UK falling behind in the availability of these services, and I am sure that noble Lords agree that we simply cannot afford that. We are justly proud of our position as a leading mobile market and we stand to lose that position; indeed, some argue that we already have.

We concluded that intervention by the Government, in the form of this direction to Ofcom, is desirable to achieve an early release of this spectrum, but we are also of the view that the previous set of proposals would have had a disproportionate impact on the functioning of the market. The United Kingdom has enjoyed a competitive mobile market that has resulted in widespread availability of services, and it remains our view that competition will drive the deployment of new mobile broadband services.

For that reason, the Government have decided on a simplified direction. We have been able to remove much of the detail in the draft laid by the previous Administration which we now consider unnecessary. That decision has been further informed by additional analysis by Ofcom on the competitive distortions that might occur through the liberalisation of the 900-megahertz and 1800-megahertz spectrum. Ofcom concluded that the risk of distortion was less than it had previously thought, primarily because of the establishment of Everything Everywhere, the joint venture in the UK between Orange and T-Mobile. It was Ofcom’s view that the joint venture is in a better position to respond to changes in the use of the spectrum than was the case when Orange and T-Mobile were independent of each other.

I recognise that there may be concerns about the removal of the coverage obligations that were included in the original draft order. The Government are committed to achieving the best superfast broadband infrastructure in Europe, and we have recently published our strategy to achieve that goal. Rural and remote areas of the country should benefit from that infrastructure upgrade at the same time as more populated areas.

We also remain committed to ensuring that by 2015 virtually all homes will have access to a minimum level of service of 2 megabits per second. I recognise that there may be concerns about the removal of the coverage obligations that were included in the original draft order. The Government are committing £530 million over the lifetime of this Parliament to supporting the rollout of these services to less well served areas. We will be working with local authorities and communities to ensure that local needs are met. Four superfast broadband pilots have already been announced, which will provide valuable insight into possible technical solutions that can be further exploited. We can expect wireless, whether fixed or mobile, to play its part in achieving these goals.

Alongside that government investment, we expect the market to deliver most of the necessary connectivity. That is why we are directing Ofcom to carry out a competition assessment in advance of the auction, to ensure a strongly competitive market that will help to drive the deployment of services. Ofcom is currently looking at the issue of areas of the country where there is no mobile coverage—either 2G or 3G—known as mobile “not-spots” and how they might be addressed. We also expect Ofcom to consider, as part of the competitive assessment, whether other conditions, such as coverage obligations, are necessary to enable it to deliver its primary duty of ensuring a wide range of electronic services throughout the United Kingdom to consumers, citizens and business. We expect that approach to address the issue of rural connectivity, but we will of course continue to monitor, with Ofcom, the extent to which these services are being delivered to rural and less urban areas.

The statutory instrument will fulfil a number of objectives. First, it will allow the United Kingdom to meet its obligations to implement the European Union’s revised GSM directive, which came into effect on 9 May 2010. That will liberalise the use of 900 megahertz spectrum for new technologies in the hands of the incumbents, and will also implement the accompanying Commission decision harmonising the use of 1,800 megahertz spectrum with 900 megahertz. Those licences will be made indefinite, subject to revocation on spectrum management grounds, and tradable. They will be subject to revised annual fees to be determined by Ofcom.

Ofcom is also being directed to amend licences for the use of spectrum at 2.1 gigahertz, so that they are made indefinite. Those licences will be subject to an annual licence fee once their initial term has expired in 2021. The licence holders will also be required to meet additional coverage conditions, and the licences will also be made tradable. We consider the extension of these licences to be necessary to encourage further investment in 3G services. This technology will continue to be an important part of the wireless broadband landscape for a number of years before 4G services can be fully rolled out. Without the change to the licences, further investment in those networks will be uncertain, to the detriment of users.

We are also directing Ofcom to begin immediately with preparations for the 800 megahertz and 2.6 gigahertz auction. As I have already mentioned, we are requiring Ofcom to carry out an urgent competition assessment in regard to further developments of 3G and future 4G networks, including the potential for new entrants, to inform the design of the auction rules for this spectrum. Maintaining a healthy competitive environment post-auction is a clearly desirable outcome.

That direction to Ofcom will permit the earliest possible release of this important spectrum, benefiting business, the consumer and the telecommunications industry alike, and I look forward to hearing the views of noble Lords.

--- Later in debate ---

[Lord Young of Norwood Green]

My apologies. I meant the noble Lord, Lord Clement-Jones. I hope that he does not take legal action.

I share the noble Lord’s view on the timetable. It would be good for Ofcom to be challenged on the length of the timetable, given the importance of the introduction of 4G.

There is an ambivalent attitude in this country, in that everybody wants a mobile phone and universal coverage, but people do not want a mast anywhere near them. That pushes to one side those who believe, in my view mistakenly, that they will suffer some deadly effect from the rays from mobile masts. It is usually the aesthetics that concern most people. Will the Minister give any steer to Ofcom to ensure that we maximise mast sharing, so that we do not have the countryside or towns littered with more mobile phone masts than we need? I also welcome the commitment to the previous Government’s policy of ensuring universal 2 megabit per second coverage by 2015 and to the superfast broadband trials.

I conclude by sharing the view expressed by the Minister on the role that mobile broadband can play in delivering universal broadband coverage. Does he agree that the best way of extending coverage is through a market where all operators can compete equally? I share the concern of my noble friends Lord Faulkner and Lord Berkeley about the possible impact on rail signalling systems. I would have thought that that would have been drawn to the attention of Ofcom a while ago. No doubt it is something that the Minister will comment on.

[Lord De Mauley]

My Lords, I am very grateful to noble Lords for their comments. We have covered a number of key areas, and a number of interesting and important points have been raised. The Government note the concerns that your Lordships raised during the debate. The noble Lords, Lord Berkeley and Lord Faulkner, raised the important issue of the conflict with the GSM-R rail operators’ frequency. I thank them for that. The Government are fully aware of the potential safety issues involving the use of spectrum, specifically of the 900-megahertz band for mobile broadband services, and of the adjacent spectrum planned for the rail safety network system. Noble Lords are absolutely right that safety is a key priority for the Government, and we will not allow it to be compromised. The level and severity of any possible interference is still being investigated, but discussions are taking place between Network Rail, the mobile operators, Ofcom, BIS and the Department for Transport to address the matter. Further technical work is under way to determine the likelihood of any potential interference and the available technical solutions.

As the noble Lord, Lord Berkeley, said, this is not just a UK issue. The use of these bands is harmonised across Europe, so we are discussing this with the Commission, too. I thank the noble Lords, Lord Berkeley and Lord Faulkner, for their helpful suggestions. I will definitely take them back to the department.

[Lord Faulkner of Worcester]

Will the Minister say something about who might have to pay for modifications?

[Lord De Mauley]

I thank him for that. That issue needs to be part of the discussions to which I have just referred.

My noble friend Lord Clement-Jones asked about the reasons for the delay. That is a very justifiable question. The new Government had to consider the options that are open to them and what they wanted to do against a backdrop of a changing market. The process was completed before Parliament rose in July for the Summer Recess. It was not considered immediately after Parliament returned because of the threatened judicial review by Everything Everywhere, and the need to address that threat.

My noble friend asked about a timetable. Ofcom intends to consult on its assessment in February. The 900-megahertz licences will be liberalised before the 800-megahertz licences become available, but Ofcom’s latest analysis is that the competitive distortion is not so great as to require action in the 900-megahertz spectrum. I confirm broadly that my noble friend's outline timetable is what is anticipated, although if there is anything I can add, I will write to him after the debate. I certainly agree with him that speed is of the essence. However, it is a very complex area and it would be equally dangerous to rush things through.

My noble friend also asked about the emergency services. The Government fully recognise the importance of spectrum in allowing the emergency services to operate effectively. The safety and security of the United Kingdom's citizens is of paramount importance, and the Government have consistently stated that spectrum management should pay due regard to this. However, as I said, spectrum is a scarce resource for which there is increasing demand. In these circumstances, the allocation of spectrum should be as efficient as possible. For that reason, the Government's agreed approach is that, in the first instance, such requirements should be sourced through the market. I hope that my noble friend will be somewhat reassured to hear that where this is not possible, a case will need to be made for an administrative allocation to be considered. Any requirement for additional spectrum by the emergency services will be considered within that framework.

[Lord Clement-Jones]

I am sorry, my Lords, but the timing of that is rather important. Once the spectrum is subject to auction, the emergency services will not have access to it. The spectrum below 1 gigahertz is of extraordinary importance because it means that the masts do not have to be so close together. It means that you have fewer masts, less cost to the emergency services and so on. What worries me in all this is the question of whether the emergency services should be subject to a market test. It is rather like the NHS—we do not subject that to a market test.

[Lord De Mauley]

I agree with the noble Lord about the seriousness of the matter. It is, as I said earlier, a complex area. It might be helpful if I wrote to him further about that matter.

The noble Lord, Lord Young, expressed a number of concerns about the auction, competition and coverage. The important thing is that we have asked Ofcom to conduct a competitive assessment of the future development of the 3G and 4G markets in the United Kingdom to inform the design of the auction. Ofcom may well decide that some form of capping is appropriate; the noble Lord referred to that. I agree with him about the importance of competition.

The noble Lord also asked about the benefits for consumers. Again, I broadly agree with him. Widespread next-generation mobile broadband services, which are capable of delivering data at speeds that are considerably in excess of today’s offerings, will be of huge value both to consumers and indeed to business. For the consumer and citizen, access to real-time information while on the move will be invaluable as well as offering a considerable market opportunity to creative industries wishing to develop content.

The noble Lord asked about the perceived blight of masts across the country. One has to say that if people want additional coverage of mobile broadband services, some increase of masts is likely. Given the capital expenditure involved, though, no operator will want to deploy more masts than are necessary to deliver an acceptable level of service.

[Lord Young of Norwood Green]

I agree with the Minister that they will not, but I made the point about encouraging mast-sharing. While I am on my feet—I do not want to do this any more than I have to—there is also the question of universal coverage and how concerned the Government are to ensure that the mobile service is less effective in some parts of the country than in others. How much premium do we put on that?

[Lord De Mauley]

I broadly agree with the noble Lord about mast-sharing. We have it already and I have no intelligence that it is not going to continue. It seems to be in the economic interests of all parties.

The noble Lord’s other question is about coverage. Again, I agree with him about its importance. The Government believe that our approach, particularly given the need to crack on with it, is the way to achieve that, and that the competitive pressures and the number of participants will assist it. A number of technical advances will also assist that.

[Lord Berkeley]

On the European network for the GSM-R, my understanding is that Network Rail responded to Ofcom on this some time ago, as well as to BIS. I am concerned about the reported reaction of BIS to these comments, which was, “We understand where you’re coming from, but basically you should have incorporated something into your design in the first place to ensure that the receivers and all the other equipment on the railway were robust”.

The legislation from the commission has been around for a number of years, and I am pretty persuaded that Network Rail and the Department for Transport have got it right, because they take it all very seriously. It seems a trifle arrogant for anyone now to say, “Sorry, mate, something new is coming up and you’d better go and change all your systems—and, by the way, possibly pay for it”. I hope that I have got this wrong. Maybe the Minister could look into that as well.

[Lord De Mauley]

I am grateful to the noble Lord for his comments. If there is some interdepartmental fencing, that is extremely concerning. I will go back to my department and shake some cages. Having said that, I hope that I have addressed as many of your Lordships’ questions as possible and if I have not I will, as I say, write to noble Lords. This is—

[Lord Clement-Jones]

My Lords, I am sorry to interrupt but, when the Minister says that, I hope specifically that he will include the radio mikes PMSE issue as well.

[Lord De Mauley]

I certainly intend to include that.

This area is, as I say, immensely complicated, as I am sure has become abundantly clear in the course of the debate. There are those who assert that the Government’s approach is flawed or lacks ambition, but it is clear that years of debate and consultation have shown that any proposals—whether they come from the Government, the regulator, or indeed the European Commission—are unlikely to receive universal acclaim. Experience shows that any proposal will receive differing levels of opposition and support. The point is that a consensus on what should be done is, frankly, unlikely.

That lack of consensus has been the case over a number of years. Ofcom’s attempts to find proportionate measures to deal with the issues raised by the refarming of 2G spectrum have faced challenges which, in turn, have led to delay. Any further delay cannot be to the benefit of consumers or business users, nor, I suggest, to the operators themselves. Regulatory uncertainty is seldom helpful to industry. The longer we delay, the further the UK will fall behind other countries that are already deploying new high-speed broadband services.

The issues involved have, as I say, already been the subject of considerable discussion, debate and consultation involving industry, the regulator and the Government. In our view, this direction to Ofcom represents the most appropriate way forward to allow the earliest deployment of next-generation mobile broadband services, to make a valuable contribution to the broadband infrastructure of the United Kingdom and to ensure that this country remains competitive in a digital world. I commend the order to the House.

Motion agreed.