Release of Spectrum Band

Calum Kerr Excerpts

Tuesday 15th November 2016 Westminster Hall

[Calum Kerr (Berwickshire, Roxburgh and Selkirk) (SNP)]

I beg to move,

That this House has considered release of the 700 MHz spectrum band for mobile data in 2020.

It is a pleasure to serve under your chairmanship, Mr Flello. I vote that we also give you control over air conditioning. I hope that this afternoon we can provide a beacon of hope for people with poor connectivity in rural areas, but that beacon might be my face after standing here talking for more than 10 minutes.

[Robert Flello (in the Chair)]

Order. The hon. Gentleman reminds me to say that if right hon. and hon. Members wish to remove their jackets, they may do so.

[Calum Kerr]

Definitely my favourite Chair.

There can be little doubt that mobile connectivity is changing every aspect of our lives. Even in Westminster, this new way of doing things has had an impact—we need only look around this Chamber to see that. Someone somewhere in the country might be live streaming this very debate on a mobile device—I would not want to bet on that, but the appearance of the former Minister, the right hon. Member for Wantage (Mr Vaizey), may enhance the chances of it.

We can all agree on the basic truth that mobile connectivity, which was once a luxury, has become a fundamental part of the way we now live. I am sure I am not alone in being able to remember having to drive around looking for a phone box when my pager went off—I was just out of school at the time—but we now constantly carry around devices that far exceed the functionality and processing power of the desktop computers that not so long ago seemed to represent the cutting edge of what digital technology could offer.

I want to use this debate to underline the ever growing importance of mobile connectivity and to consider the specific potential of the release of the 700 MHz spectrum band, which if correctly managed could make a major contribution to a society that is more connected than ever before. Using 700 MHz mobile data could provide coverage over a wider geographical area, and the signal could effectively penetrate buildings, so it could play a pivotal role in bridging the gap between where the UK is now and the next wave of connectivity-driven innovation with the emergence of 5G. As we move towards the 5G world, we will require a mix of short-range high-frequency spectrum bands, backed up by long-range low-frequency bands such as 700 MHz.

I want the debate to demonstrate that the type of digital infrastructure that we choose to create involves fundamentally political decisions. Although this place may not be renowned for moving with the times, it must be recognised that we need frequent, better-quality debates in Parliament about connectivity. With that in mind, I want us to consider how other European countries are tackling the connectivity challenge, and how different political choices have been made on spectrum and different outcomes achieved, but let us first consider the reality today.

We already know that a major shift in consumer behaviour means that many people are switching to mobile devices for access to the internet. In 2016, 66% of adults used their mobile phones to go online, up from 61% in 2015. Some 86% of UK mobile customers currently use a smartphone. Perhaps most significantly, 92% of under-35s now view their smartphone as their primary device for accessing the internet. We can also point to a growing trend of favouring mobile data over public wi-fi. Research has found that 72% of people prefer to use their device’s 3G or 4G connection to access the internet even when they are in a public space. That demonstrates that behaviour is already straining at the leash when it comes to—

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[Robert Flello (in the Chair)]

The debate may now continue until 6.15 pm.

[Calum Kerr]

I return to the theme of the importance of mobile connectivity. I was about to mention the transformative potential of what is generally known as the internet of things, which we see on the horizon. It is becoming more of a reality day by day, and will involve a tremendous number of devices being hooked up and the aggregate power of the internet really bearing fruit. With that, the demand for mobile connectivity is only going to increase.

Mobile data will underpin the use of new technologies such as precision farming, driverless cars, remote healthcare and smart energy grids. We are already seeing the cutting edge of the process coming into play with the increasing use of immersive augmented reality apps such as Pokémon Go, which is the reason why my phone is currently broken—thanks to my two sons, it went for an 8 km walk to hatch an egg, but that is a different story. At the same time, media companies are increasingly adapting their content for mobile users, and technology is constantly pushing the parameters of what mobile devices are capable of.

It is clear that we know why we want to transform mobile data connectivity, but I want to focus on how we can make that change happen. We know that the Government agree that connectivity represents a fourth utility, but they need to match the rhetoric with unambiguous action. I put it to them that we have moved far beyond the stage at which spectrum licensing could be seen as a cash cow for the Treasury. Previously, the 3G spectrum auction raised about £22 billion, while the 4G licence auction raised £2.34 billion. In contrast, other countries sought to raise much less, in return for operators delivering greater coverage.

Spectrum should be considered in terms of the wider economic and social benefits it can provide, particularly when considering the ongoing challenge of rural connectivity. The UK’s approach to the mobile sector has left more than a quarter of Scotland’s landmass without any voice coverage, and nearly half of it without any data coverage. Across the mobile networks, indoor coverage drops to 31% in rural areas, compared with 91% in urban areas. Those are exactly the kind of disparities that 700 MHz could be pivotal in redressing.

The problems currently facing rural mobile customers are well documented, and will be particularly familiar to rural MPs. Unless the Government tackle the problems at the outset, when they are setting the terms for spectrum licences, they will end up having to apply retrospective sticking-plaster solutions to problems ultimately of their own making. We saw that with measures such as the mobile infrastructure project, which delivered only one tenth of the 600 potential mast sites identified in its original plan.

Although we can recognise the pragmatism behind such projects and the current positive direction of travel on getting more from existing licences, the UK should be moving much further, much faster on rural connectivity. As new licences for spectrum become available, let us get things right from the outset. There is an historic opportunity to redress centuries of rural isolation and exclusion by making mobile a truly universal service, which means access to the internet on any device, any time, anywhere.

That is why we need a better picture of the Government’s thinking on spectrum policy at this crucial moment. One solution that was proposed recently—it has received a great deal of coverage, but in my view that coverage was unwarranted—is so-called national roaming. That may be attractive on the surface but it is fundamentally flawed, because on its own it will not encourage mobile network operators to improve coverage. In fact, it could end up acting as a disincentive to the improvement of coverage.

What the proposal for “national roaming” demonstrates is the basic difficulty we face when it comes to making the mobile marketplace work. Currently, mobile network operators lack the significant profit motive to roll out infrastructure and improve rural coverage. A network operator’s revenue comes from subscriptions and the consumption of content. So from a purely market-driven perspective, those companies have little incentive to invest in comprehensive rural infrastructure.

To get the best outcome from 700 MHz, we can learn a lot by looking at licensing models that are already in use throughout Europe. In Germany, coverage obligations for 700 MHz state that providers must get broadband coverage to at least 98% of households nationwide and at least 97% of households in each federal state. Indeed, across Europe we see far more comprehensive 4G coverage on offer than is the case here. If Swedish network operators can offer 99% population coverage for 4G, in a country that has a larger landmass and a lower population density than the UK, why are we lagging so far behind?

How competition works in practice is also key. The UK has gone from having an equitable distribution of spectrum holdings to having the worst spectrum imbalance in the G20 countries. With half of UK operators now constrained by small spectrum holdings, the competitive pressure that kept prices in the mobile market low is lessening. Will the Government consider a cap on spectrum allocation to redress that imbalance, and will they consider having a fundamental review, which will be needed anyway when 5G comes?

We also need to consider additional mechanisms that target market failure in areas of low population density. As with broadband, getting mobile connectivity to households that are very hard to reach will be a challenge, but not an insurmountable one. In Germany, the 800 MHz licence involved an “outside to in” approach across four stages, requiring operators to provide 90% coverage in smaller towns before moving on to the next stage. Will the Government consider using such a model?

One nation—one small nation—that has made strong progress is the Faroe Islands. With challenging topography and a population density of 91 per square mile, it now has 100% population coverage and 98% geographic coverage for 2G and 3G, including 100% coverage on roads, even in tunnels, and in a radius of about 100 kilometres in the seas around the islands. The Faroese are currently in the process of rolling out 4G, which is expected to achieve a similar level of coverage to 2G and 3G. Faroese Telecom has shown that that is the way forward, and it is keen to offer solutions for rural Scotland and engage with the challenges we face, which are similar to those it has already faced. I believe that the Minister or his officials may already have a meeting coming up with its representatives.

Such willingness only underlines the case, which I know Ofcom recognises, for a “use it or share it” solution in rural areas. Such a policy is a sensible and workable alternative to a step such as national roaming. As groups such as Faroese Telecom show, there are organisations willing to step forward to fill any gap. I look forward to hearing the Minister’s views on such a policy, which has already been put in place in other countries, including the US.

If digital connectivity is now considered a utility, a radical shift towards comprehensive mobile data coverage is required. Will the Government commit to looking at the examples I have cited as they consider the criteria for new licensees? Will the Minister also consider setting new targets of 95% landmass coverage and 99% population coverage indoors, not only for voice but for data?

I want the debate around spectrum policy to acknowledge that where there is market failure, it is incumbent on Ofcom to intervene to address the situation. Spectrum is a public asset and we must do all we can to make sure that it gets used in the public interest where possible.

There is a compelling case for fresh thinking and a longer term view of mobile connectivity from the Government. They ought to accelerate the move away from the traditional revenue-focused approach and instead consider this asset in a holistic manner factoring in all the social and economic benefits that comprehensive mobile connectivity can provide.

Before I finish, I will explain the need for universal connectivity in terms that are closer to home. I want visitors to my constituency to enjoy a rail service with world-class connectivity when they travel from Edinburgh down the Borders railway, which was recently recognised as the best tourism project in the UK. I want visitors who opt instead to take in the stunning coastal scenery along the Berwickshire coast to get constant access to mobile data throughout their visit. On arrival in my constituency, I want all visitors to have constant access to online information about local businesses and landmarks. I want them to visit hotels and restaurants that can receive electronic payments. When they take to the hills around Liddesdale, I want them to be connected when they visit remote but remarkable sites such as the imposing Hermitage castle, so that they can make use of an immersive app to enhance their experience. I want people in every corner of these islands to have the option to experience the benefits that connectivity brings, and I want them to be able to do so on any device, any time, anywhere.

[Nigel Huddleston (Mid Worcestershire) (Con)]

I, congratulate the hon. Member for Berwickshire, Roxburgh and Selkirk (Calum Kerr) on securing this important debate.

As the hon. Gentleman has already mentioned, there are obviously many benefits to releasing the 700 MHz band, but we should not lose sight of the fact that there are some current users of the spectrum who will be negatively affected. Chief among them are the UK’s programme making and special events, or PMSE, sector. It is the backbone of our creative industries, using wireless radio equipment such as microphones and in-ear monitors to stage concerts, festivals, west end musicals, sporting events and a whole host of other key cultural events in the United Kingdom.

I recently met the British Entertainment Industry Radio Group, or BEIRG, the industry body that represents the sector. It is profoundly concerned that unless adequate mitigating steps are taken, the industry faces severe problems as a result of the 700 MHz release. Most notably, without the allocation of adequate replacement spectrum for the sector’s use, standards of production will fall, as more wireless devices are forced to operate in a much smaller amount of spectrum, increasing the risk of interference.

Ofcom has allocated the 960-1164 MHz band, for which the sector is grateful, but no other Administration or regulator in the world has shown any intention of following Ofcom’s lead and allocating this band for PMSE use. That means that the market for new equipment to operate in the new spectrum will be UK-only, which means it is too small for any serious manufacturer of wireless equipment to make the business case for, or to commit to making new products for. PMSE users therefore face being forced to vacate the 700 MHz band in quarter 2 of 2020, without being able to use the new spectrum because no equipment exists that can operate within it. With lead times on equipment of around three years for most manufacturers, the UK faces a situation whereby spectrum-intensive events, such as TV broadcasts, festivals and west end theatre, will be unable to continue offering the world-leading production values that consumers have come to expect.

[Calum Kerr]

The hon. Gentleman is making an important contribution. I could not possibly have got every aspect of the matter into my own speech without talking for far too long, so I welcome what he is highlighting. Does he agree that there needs to be—there already is an element of this—a fundamental review of all parts of spectrum and a strategy for not just tomorrow but further into the future, to address those kinds of concerns, as well as looking at existing allocation across all media areas?

[Nigel Huddleston]

The hon. Gentleman makes a very good point. We need to be careful about the unintended consequences of some of these changes. Some of those consequences can, with careful consideration, be anticipated; others will probably come in time, but that needs to be carefully reviewed and monitored.

The PMSE sector comprises many small operators, which are not all in the robust financial circumstances we would like them to be. Without assistance, they face some difficult times in the future. The Government and Ofcom’s recent announcement that a compensation scheme will be introduced is hugely welcome, and I thank the Minister for that. Although the importance of increasing mobile phone and broadband coverage is clear for all to see, we must ensure that unintended consequences do not have a negative impact on our hugely successful creative sector and that PMSE operators are able to continue their world-class work. I would be grateful, therefore, to hear from the Minister whether the Government have any further plans to assist the PMSE sector with the transition.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Flello. I congratulate my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (Calum Kerr) on securing this important debate. I am sure that the tens of millions of people who have heard about it will be streaming it right now on their mobile phones, to get Members’ words of wisdom.

An important set of points have been made. On the point made by the hon. Member for Mid Worcestershire (Nigel Huddleston), there is a clear need for further debate and scrutiny, and for far more attention than is given to the subject at the moment. That was laid bare in the comments of my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk, who highlighted a number of issues that are important—nay, essential—to ensuring a fair distribution of the opportunities provided by the technology in the future. He mentioned the need for rural coverage to take priority—for an outside-in approach to be applied. For far too long, people in rural or less commercial areas have found themselves stuck at the back of a queue, unable ever to get to the front because they are always overtaken by a commercial imperative. The situation in the Borders is, I think, similar to that in my own area, where some 432 miles of road are not covered by 2G, let alone 3G or 4G signals. Those issues must seriously be addressed.

I commend my hon. Friend for his suggestion about the approach taken by Germany. He pointed out that not only is there a requirement there to get to 90% coverage in smaller towns before widening access, but they managed to raise €5 billion through the licensing process, so that approach can be taken and at the same time a return made for the public purse.

[Calum Kerr]

Does my hon. Friend agree that it is also noteworthy that in Germany they have mandated minimum data speeds, with a minimum average of 10 megabits? Coincidentally, our own measly universal service obligation for fixed wired broadband stands at that same speed.

[Drew Hendry]

My hon. Friend shows just how on top of his brief he is by pointing out that anomaly and the lack of ambition we often see when it comes to broadband and wireless access.

That brings me on to the need to accelerate the process. Although it is important that there is further debate and that the considerations for manufacturers and those using the facility at the moment need to be carefully taken into account—I think we would all support that—we should not allow that to hold up the development of something that should be giving us not only a commercial edge, but a social edge for people across the whole UK.

There is rural-proofing and the need to accelerate, and I also completely agree with the “use it or share it” approach. There needs to be an acceptance that we must access all the technology as productively as possible. When we consider ambition, it is important to remember that in the United States they freed up the spectrum in 2008. That is how far behind we are. The UK already lags behind countries such as Finland, Estonia, Latvia, Lithuania and Sweden, which have all committed to accelerate the programme. There are important debates to be held, but there is also a need to pick up the pace—I hope the Minister will indicate how that will be achieved—to ensure that we can take advantage of the benefits.

My hon. Friend the Member for Berwickshire, Roxburgh and Selkirk also mentioned the need to be ready for the internet of things. That is not something we need to be ready for; it is being deployed here and now, and nowhere is it more important to rural areas than in mobile healthcare. There is an opportunity to give people the chance to improve and restore their health and get the kind of social benefit from the technology that at the moment they cannot access. Until the spectrum issues are solved, people will not, however, be able to do that.

I conclude by repeating one of my hon. Friend’s lines that we should all take away: everyone—the people in every corner of these islands—should be getting the best and fastest possible access and the best possible advantage from new technology.

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[Louise Haigh]

Absolutely. I could not agree more. The issues that have been raised today need to be seen alongside that point. The income for the Treasury should not be the first and only priority.

In our view, while Ofcom does a fantastic job of regulating and auctioning the frequencies, such decisions are in reality political. Where and how coverage targets are met matters greatly, and we in this place should be setting tough conditions for the auction. We would like the Government and Ofcom to be much more ambitious, and we would like to see clear licensing commitments to reflect that ambition. Geographical coverage is still poor, as we have heard. The targets set by the Government—to reach 90% of geographical coverage for voice and text by 2020—simply do not go far enough to meet the challenges of a data-driven world. In fact, as the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) mentioned, we are lagging behind many of our international competitors, who have significantly improved coverage through different and imaginative approaches to licence obligations. For example, Denmark has focused on specified postcodes, France has covered an incredible 99.6% of its population, the Netherlands has covered all main roads, waterways and airports, and Cyprus has specified rural areas and high schools as priorities.

With that in mind, I will conclude by asking the Minister a number of questions, in addition to those asked by the hon. Member for Berwickshire, Roxburgh and Selkirk.

[Calum Kerr]

Just before the hon. Lady asks her important questions—I can see the Minister is desperate to hear them—does she agree that there is a false economy here? By seeking money up front for the sale of licences, we inhibit the speeds that exist out there in the country. That holds back productivity, where we have an enormous challenge. If we show a bit more vision and foresight and plan for the longer term, we will get faster speeds and the overall benefit to the country and the public purse will be far greater.

[Louise Haigh]

That is absolutely right. The hon. Gentleman will know that we discussed that point at length in the Digital Economy Public Bill Committee. In fact, we have brought the band back together again—it is nice to be in the Chamber with all the team. He is also right that the Minister is desperate to hear my questions—he always is—so we will crack on.

Does the Minister still expect mobile data on the spectrum to be available by quarter 2 in 2020? Working with Ofcom, what conditions does he specifically expect to set to achieve much improved geographical coverage and coverage along major transport routes? In particular, what consideration has he given to outside-in licensing, as was mentioned earlier? Will he ensure that the prime focus of the auction of an enormously valuable public sector asset is on ensuring public benefit through increased and expanded coverage, rather than on raising revenue or maximising benefits for the mobile network operators? As the hon. Gentleman just mentioned, that will bring incredible benefits to productivity and our economy.

Finally, as regards the European Union, the Ofcom strategy document, which was written before Britain’s decision to leave the European Union, makes explicit reference to the importance of the EU to the 700 MHz clearance programme, in terms of consultation and technical considerations. The European Parliament and the European Council are leading the joint decision on the timing and release of the frequency. The Minister will be aware that the European Commission recently published a draft decision that includes proposals that would require member states to allow the use of the 700 MHz band for electronic communications services under harmonised technical conditions by 30 June 2020, yet the timetable laid out by the Prime Minister indicates that we will have left the European Union right in the middle of that deadline. I would be grateful if the Minister confirmed the steps he and Ofcom are taking to ensure that Brexit does not adversely impact achieving data usage on the spectrum. Finally, what contingency plans are in place?

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[Matt Hancock]

We expect to auction mobile licences for the 700 MHz band in late 2018 or 2019. It will be for Ofcom to conduct those auctions. The hon. Gentleman can see that the Government’s existing policy is to insist on licence conditions on mobile coverage. We are clear about the need for broad mobile coverage and the need to hold the mobile network operators’ feet to the fire on their licence conditions. Some licence conditions go further than 90% geographic coverage—not least those of EE, because it has the emergency services licence—and also include road coverage, to make sure that we get not simply geographical coverage but coverage of the geography where people use phones, which, along with premises, is on the roads.

The hon. Member for Berwickshire, Roxburgh and Selkirk mentioned the Faroes. I am meeting Jan Ziskasen from the Faroe Islands Government tomorrow to understand more about what they have done. Areas of sparsity with similar geographies to some parts of Scotland can always give us a greater understanding of what can be used to deliver connectivity in those geographies. I am enormously looking forward to that meeting and to hearing what more we can do.

The hon. Member for Sheffield, Heeley asked a number of specific questions. First, she asked whether we expect availability by 2020. The answer is broadly yes, we do. As I said, the auctions will take place beforehand, but we want to get on with this as soon as we make the switchover. I have answered her question on coverage being included in licence conditions; that is existing Government policy.

The hon. Lady asked a question about maximising revenue. She said that we should not maximise revenue first and foremost, but should instead look to the benefits of productivity. If only that had been the approach of the last Labour Government, perhaps the list of countries that we are behind would not be so long.

Finally, the hon. Lady asked whether we will work with EU partners. Yes, of course we will. I will be travelling to the Telecoms Council myself next month to make sure that while we are a member of the European Union, we continue to work with our European partners to get the very best connectivity for the whole country.

[Calum Kerr]

This is a happy, consensual debate, is it not? The Minister almost gave my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) a positive commitment—he managed to row back as fast as possible, but the direction was still positive. Does he support the concept of “use it or share it”, and will he consider it as another potential solution in rural areas, where existing spectrum licence holders are clearly not providing a service?

[Matt Hancock]

That is a matter for Ofcom to consider in setting the details of how the spectrum is auctioned. It will of course consult on exactly how that auction takes place, and I am sure it will have noted the hon. Gentleman’s comments.

I hope that I have answered all the questions asked today. This is a very important issue, if a rather technical one. I am grateful for the interest in it—

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[Calum Kerr]

I will just say a few words to wind up the debate. I thank hon. Members for coming and taking part in the debate.

I am concerned that because of the backgrounds of people in this place, there is not enough knowledge on this subject. The moment my colleagues saw “700 MHz” in the debate title, I got umpteen taps on the shoulder and people saying, “What is that? Is it broadband?” and I went, “Well, actually, it is mobile, but mobile broadband.” I am concerned that there is a lack of knowledge in this place. As I often say, we cannot move for tripping over a lawyer, but try finding somebody who understands technology and it is a challenge. Because of that, the danger is that we shy away from the issue, pass the buck to Ofcom and do not debate it. I say well done to the hon. Members who are here for taking part—we all have a responsibility to keep talking about this.

[Matt Warman (Boston and Skegness) (Con)]

rose—

[Robert Flello (in the Chair)]

Order. It is not usual to have interventions in the winding-up speech.

[Calum Kerr]

That is a shame. I am sure it was going to be a very good point; the hon. Gentleman is very well respected in the technology space.

We should be more conscious about what we do in that space, because there is a political dimension to policy setting on spectrum. We have talked today about the level of coverage. That is a political decision, and it is not fair to pass the buck to Ofcom. I am not saying that we are doing that fully, but we must debate and decide and be conscious of the direction of travel. The Minister has made some positive noises, but I would like to see more details firmed up. I would like to see 99% indoors coverage, 95% geographical coverage and an out-to-in approach. A fundamental review of spectrum policy is needed if we are to get the infrastructure that will deliver the access that I am sure the Minister and all of us want.

Question put and agreed to.

Resolved,

That this House has considered release of the 700 MHz spectrum band for mobile data in 2020.