Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010

Lord Young of Norwood Green Excerpts

Thursday 16th December 2010 Lords Chamber

Spectrum allocation may not make the front pages of newspapers, but it is a fast-changing area with fast-changing requirements. The last fundamental review of the UK’s spectrum strategy was the 2005 Cave review. The previous Government did not update it more recently, so it seems that all current decisions are based on a policy which we know to be out of date and where the balance between auction and other means of allocation has gone. Some would say that what we are doing is all a bit ad hoc. Are we really confident that we are proceeding in the right way today? I hope that my noble friend can reassure me and I look forward to his reply.

[Lord Young of Norwood Green]

My Lords, this debate is definitely one for the techies. As a football commentator said, it certainly feels like déjà vu all over again.

I was grateful to the noble Lord, Lord De Mauley, for being one of the few Ministers who has not said that he is doing this because of the terrible deficit left by the previous Government. It was a great relief. I hope that that is not a career-limiting observation.

The last spectrum auction took place 10 years ago under a Labour Government and is widely considered to have been a success in injecting much needed competition into the mobile market. The 3G auction specifically reserved a licence for a non-2G licence holder so as to kick-start competition. The result today, with each of the four mobile networks holding roughly the same amount of 3G spectrum, is a highly competitive market where the operators compete to expand and increase their mobile broadband networks.

While we on this side of the House support this statutory instrument, the proposals to liberalise the existing 2G spectrum ahead of agreeing the rules for the auction of the 2.6 gigahertz and 800 megahertz spectrum run the risk of significantly upsetting that competition. I note that Ofcom has concluded that liberalisation does not distort competition, but that is because its competition assessment examined the effect of liberalisation only on the basis of 80 per cent population coverage. Its assessment completely ignored the advantage that holders of the existing 900 megahertz spectrum gain from being able to use that spectrum for rolling out mobile broadband in more rural areas.

Your Lordships will be aware that sub-1 gigahertz spectrum enables network operators to cover significantly larger geographic areas. Indeed, it was estimated that holders of low-frequency spectrum are able to roll out their networks five times more cheaply than operators who hold high-frequency spectrum. It is this low-frequency spectrum that is critical to ensuring that mobile broadband supports the Government’s own broadband strategy and delivers universal broadband coverage to rural areas. However, there is much less likelihood of this being achieved if competition is significantly weakened. It would be ironic if the outcome of this spectrum auction, under the watch of Conservative/coalition Ministers, undermined the competition delivered by a Labour Government. I noted that there were a couple of attempts to cover that area. Although these are indefinite licences, there was the question of revocation and an annual assessment. I welcome those aspects.

What assurances will the Minister give the House that Ministers will give a clear steer to Ofcom that the auction of the 800 megahertz spectrum must be done in such a way as to ensure that the advantage gained by the current holders of low-frequency spectrum is corrected either through a spectrum cap or, as in 2000, through reserving a licence for a non-2G spectrum holder? In another place, the Minister Ed Vaizey said that Ofcom,

“must draw up auction rules to ensure fair access and competition on spectrum”.—[Official Report, Commons, Fourth Delegated Legislation Committee, 1/12/10; col. 11.]

Would the Government consider an auction that resulted in the concentration of low-frequency spectrum in the hands of the two networks that already hold low-frequency spectrum to be a failure? If so, what discussions have the Government had with Ofcom to ensure that the auction is structured so as to avoid this? I welcome the commitment to competition assessment prior to any decisions. I was interested in the point made about the hope that there would be universal coverage. We talk about the importance of rural connectivity, but the fact that it is not stipulated gives some cause for concern.

Given the importance of the digital economy to the UK’s wider economy, do the Government agree that it is essential that Ofcom actively protects competition in the mobile broadband market? While I share the Government’s view that release of spectrum to the market as quickly as possible is critical, does the Minister agree that the long-term interests of consumers depend on ensuring that the release of new spectrum is achieved through an auction that preserves a level playing field in spectrum holdings? Can the Minister give the House an assurance that Ofcom will have the Government’s full support in taking steps to preserve competition in the mobile broadband market, particularly if that is opposed by companies whose actions have delayed the release of spectrum to the detriment of consumers? I share the concerns of the noble Lord, Lord McNally, about the timetable.

[A noble Lord]

Lord Clement-Jones!

[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.

--- Later in debate ---

[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.