Future Mobile Competition

Andrew Bingham Excerpts

Wednesday 14th March 2012 Westminster Hall

[The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)]

It is a pleasure, Mr Gray, to serve under your chairmanship this morning. I congratulate my hon. Friend the Member for Vale of Glamorgan (Alun Cairns) on securing this important debate. I think that it is the first since we announced the mobile infrastructure project, so it gives me the opportunity to update the House on what is happening. My hon. Friend is fast gaining a reputation as something of an expert in the sector. In the Back-Bench debate, he led the calls to increase the coverage obligations for the 4G auction, and those calls were listened to, as he acknowledged in his speech. He has given a highly accomplished résumé of some of the key issues surrounding mobile competition, which only he and a select few others in the House probably understood. That is a measure of his expertise.

It was apparent to me when I took up my post as Minister with responsibility for communications that this matter is incredibly important and that we must get it right. I sometimes joke—perhaps I should not—that I never thought that I would be quite so excited by spectrum policy management as I am, and the reason is that it is fundamentally important to the future of the UK economy. We know that the internet has already contributed something like one quarter of the value of growth in gross domestic product in the UK in recent years, and without a vibrant communications sector that growth would be stunted. In the past year, almost two thirds of mobile handsets sold were smartphones. There is a huge hunger for data, and more and more people will access the internet and data on portable devices, whether smartphones or tablets.

To increase his already considerable expertise, I urge my hon. Friend to read the recent speech by Ed Richards, the highly effective chief executive of Ofcom, on dynamic spectrum management, which will be the next challenge to ensure that white space spectrum—the spectrum that sits between the spectrum that we allocate in more conventional ways—can be used. There is real hunger for spectrum as more and more people acquire devices. Spectrum is necessary not just for capacity, but for fast speeds. No one wants a smartphone that takes ages to download a website.

Spectrum and broadband access are becoming increasingly like utilities such as water, gas and electricity in that they are a fundamental tool with which to engage with modern life, because they allow people to access a wide range of services, such as handling their bank accounts, paying bills, doing homework, or accessing Government services. Equally important, they allow many small and medium-sized enterprises to increase their footfall and access to different marketplaces. All that needs to be sorted out.

When I was appointed, it was clear that unblocking the release of 4G spectrum to the market was essential. My hon. Friend alluded to the fact that the debate has been going on for a number of years. We were at one minute to midnight, so we ordered Ofcom to conduct a combined auction of 800 MHz and 2.6 GHz spectrum as soon as possible. Ofcom has consulted extensively on that, not once, but twice. The 4G auction is not just about faster broadband; as I said, it will help improve coverage. Having listened to my hon. Friend and others, the auction design now includes demanding coverage obligations of up to 98%.

We must not forget the important role of competition in the UK’s mobile communications market. When we directed Ofcom to design the auction rules, we made it absolutely clear that we want to maintain a four-operator marketplace. We want a competitive marketplace, not just because it drives down prices for consumers, but because it encourages innovation. We believe that it is important to retain that level of competition, so in the run-up to the auction, we directed Ofcom to assess both current and future competition in the UK market, and to take that into account in the design of the auction.

A major point that my hon. Friend made was his concern about the parcels of 800 MHz spectrum that are to be auctioned. He suggested that those parcels should be 5 MHz rather than 10 MHz, and pointed out that that was proposed in the original consultation document to enable all four operators to have access to the 800 MHz spectrum. Ofcom conducted genuine consultation. It is often said that consultation is a sham and that minds have already been made up, but Ofcom listened to the industry, and its overwhelming view was that parcels of 5 MHz were simply not big enough to have appropriate capacity, so Ofcom has proposed parcels of 10 MHz. The consultation has now closed, and we await the final auction rules and the mobile operators’ reaction.

As my hon. Friend well knows, the circle is difficult to square, because sub-1 GHz—that is, the 800 and 900 MHz to which he alluded—is seen by some as the best sort of spectrum because it travels further and penetrates further, as opposed to spectrum above 1 gig, which has greater capacity. In conducting its analysis of future competition, Ofcom took the view that that gap was narrow, and my hon. Friend will have seen that Ofcom announced proposals yesterday to liberalise 1,800 MHz for 4G services.

We now find ourselves in an unusual position. Operators above 1 gig have been arguing for a long time that they must have guaranteed access to sub-1 GHz, otherwise they cannot compete, and those operators with sub-1 GHz spectrum are jumping up and down and saying that those with spectrum above 1 gig now have a huge competitive advantage. Interestingly, whichever operator someone works for, it always appears in their world view that other operators have an extraordinary competitive advantage. However, I will adopt the tone taken by my hon. Friend and say to all operators that the time for arguing about such matters in the courts has long passed, and that for this country to maintain its economic edge and dynamic communications market, we must proceed with the auction and with spectrum liberalisation, which in any case we are required to do by the European directives.

I am immensely pleased that we have secured Treasury funding for the mobile infrastructure project that my hon. Friend mentioned. In the autumn statement, the Chancellor announced that £150 million would be set aside to fund that project which, where possible, is intended to cover mobile not-spots. As I said earlier, that money was secured because of the increasing recognition that mobile broadband coverage is becoming as important as fixed broadband coverage—if not more important—particularly in rural areas.

Since that announcement, my Department has worked closely with Ofcom to define the scale of the problem and identify the so-called not-spots. As my hon. Friend will know, a great deal of commercial sensitivity surrounds the precise location of those not-spots, and mobile network operators understandably guard such information closely. Subject to agreement with data holders, however, we intend to publish an indicative map that will give hon. Members a sense of where the project will focus. Additionally, we must communicate with the European Commission to ensure that the project meets the requirements of state aid regulations.

As I said earlier, the mobile infrastructure project is intended to cover areas where there is no coverage from any mobile operator—complete not-spots. In other areas, an individual might think that there is no coverage, but they may be with an operator that does not have coverage in that area—a partial not-spot. Ofcom is working closely with the industry to see whether that can be addressed. Of course, such matters are commercially sensitive because any operator that has invested in a network in one area would look askance at a second operator that was able to work in the same area with financial assistance from the Government. We must work with the operators to try and ensure that they all begin to provide coverage in areas that are not currently covered.

The definitional phase of the mobile infrastructure project is nearing completion and I am aware, not least from debates such as this, of the strong and increasing interest in it. My fellow MPs can rest assured that we will engage closely with the devolved Administrations and with those local authorities that will be most affected by the project—or, to put it another way, those that are destined to benefit most. Such engagement will ensure that people’s voices are heard when designing the overall solution, and that where choices need to be made, the project meets local needs. It will continue throughout the lifecycle of the project and allow local considerations to be taken into account.

A lot of work is being done to improve mobile coverage, and we must ensure that our planning complements that. We are also seeking to achieve synergies with the rural broadband programme, for which £530 million has been set aside, and that may include, for example, sharing backhaul—the fibre connections that are required for fibre in the ground and mobile connectivity to work.

Getting the industry on board is an essential part of delivering the project. We issued the first step in the procurement process, a prior information notice, before Christmas, and responses to that and to a further industry consultation document issued in January have given us a clear picture of what the industry is expecting to see throughout the process. We followed up that consultation with a series of meetings and workshops to ensure that what we are doing is fit for purpose, and that the capital infrastructure will be used to best effect.

Following detailed discussions with mobile operators about the best solutions to the problems of overall coverage, we are moving swiftly. We intend to begin a procurement process this spring with a view to signing a contractor to provide the necessary infrastructure by the end of the year. Ideally, benefits will begin to be felt this time next year, and the whole project will be delivered within a highly stretching three-year timetable.

My hon. Friend’s third point was about data roaming, and speaking as a layman rather than a Minister, I have an enormous amount of sympathy with that. On a recent trip to the United States, I experienced my own version of bill shock because of the sheer cost of data when abroad. That is also a huge issue in the European Union, and the point has been made time and again, not least by the effective commissioner for digital services, Neelie Kroes, that too many UK citizens who travel to Europe—as increasingly people do not only for leisure but for business—have to get into the habit of turning off their phones. That essential business tool and gateway to the things on which we increasingly depend has to be turned off when going abroad, even just across the channel to France, because of concerns about the price of data.

As someone who in principle is reluctant to intervene in the market, I looked slightly askance at the Commission’s efforts to reduce the prices first of voice roaming and now of data roaming. However, its efforts to reduce the cost of voice roaming have been effective, and in principle the UK is supportive of the directive on data roaming. There are probably a few details that need to be ironed out, but we have urged progress on that directive because we recognise that it presents opportunities that will allow consumers to conduct their business more cheaply and effectively.

The issue is more problematic outside the European Union because we would have to negotiate via the European Union, perhaps as part of the World Telecommunications congress, to provide a solution for global data roaming. That is not something on which the UK can take a unilateral decision for its customers and operators; it would have to be an EU-wide agreement on a global basis. I understand the concern, however, and progress on the data roaming directive this year should begin to make a significant difference to customers.

[Andrew Bingham (High Peak) (Con)]

I will be brief due to the time. Is the Minister aware that, on the fringes of the EU, if someone returns from a Greek island, for example, one minute they might be on a Greek mobile network but the next minute, because of its proximity, they move on to the Turkish network? That happened to me. When they get home and get their mobile phone bill, they find that some calls were quite cheap while others were extortionately expensive. People are perhaps not aware of that issue when they go to the fringes of the EU.