Electronic Communications and Wireless Telegraphy (Amendment etc.) (EU Exit) Regulations 2019

Debate between Lord Foster of Bath and Lord Adonis

Wednesday 23rd January 2019 Grand Committee

[Lord Foster of Bath (LD)]

My Lords, following that interesting exchange, I pick up where the noble Lord, Lord Adonis, began, by pointing to what he described as the Minster’s “carefully woven” speech. I confess that I do not quite agree with that definition, as the speech appeared to be a cut-and-paste version of the speech that was given by the Minister in the other place, Margot James, on 7 January. Having gone through that speech, I noticed that odd words were missed out in the noble Lord’s version. In the other place, the Minister thought that there may well be a case for Ofcom remaining involved in BEREC—the word “well” was missing in the noble Lord’s version.

More important, we should recognise that over the last 30 years the industry that we are dealing with, including within it the telecoms industry, has developed from a monopoly situation to a highly competitive market, with annual revenues now in excess of £40 billion. It therefore forms an important part of our economy. Because of the way in which the industry is intrinsically linked to the European Union, there is no doubt in my mind that Brexit will have a significant impact on it, not least because a number of UK providers operate in other member states but have headquarters in the UK. I also believe that Brexit will have a significant impact on the regulatory regime under which those providers operate.

The Minister said, as indeed did Margot James in the other place, that the draft regulations will provide “clarity and certainty” both for the operators and for the regulator. I am somewhat inclined to disagree with that view. Indeed, the technical notice to which the Minister referred, which was issued way back on 13 September last year, explained that, irrespective of the outcome of the negotiations between the UK and the EU, the regulations would not have a significant impact on how businesses operate under the telecoms regulatory framework or on how consumers of telecoms services are protected within the UK. That claim is highly questionable.

Before I turn to those impacts, I want to seek clarification on consultation, the issue that has occupied a few minutes between the noble Lord, Lord Adonis, and the Minister. In the other place, the Minister for Digital and the Creative Industries, Margot James, said:

“All the changes that the draft regulations will make have been considered on a case-by-case basis and discussed with the regulator and stakeholders where possible”.—[Official Report, Commons, First Delegated Legislation Committee, 7/1/19; cols. 3-4.]


One has to assume that she believes that, as the noble Lord said only a few minutes ago, extensive consultation has taken place. The noble Lord told us about consultation with the Broadband Stakeholder Group and listed its membership. Interestingly, he did not mention the other part of the equation, which relates to the telecoms industry. There is a major body—the UK Competitive Telecommunications Association, or UKCTA—which represents very many of the key stakeholders in that field: Virgin Media, Vodafone, AT&T, the Post Office, Sky, TalkTalk; I could go on. If extensive consultation has taken place, one would assume that that key body, UKCTA, has been involved in the discussions. Yet I have received a note from UKCTA—I would be grateful if the Minister could explain whether this is correct—which says:

“UKCTA has not had any advance notice of, or discussions about, the SI despite regular meetings with DCMS, the most recent being on Monday 14th January”.


Can the Minister explain whether what I am told is incorrect, and if it is correct, can he explain why, despite the Government having claimed that there has been extensive consultation, this important body in the industry and the sector has not been consulted? On the impacts of these draft regulations, which the Government say they do not expect to be significantly—

[Lord Adonis]

The noble Lord has just raised an extremely important point about consultation. As he knows, in the discussions which the Grand Committee has been having on these no-deal regulations, the issue of inadequate consultation has been a running theme. As we probe beneath the regulations, significant issues of substance come to the fore when the Government tell us that the changes that are being made are technical. In fact, the actual change brought about by this regulation is substantial, because it entirely removes the European Commission from the whole process of deciding on competition issues.

The noble Lord is much closer to this sector than I am, and he has clearly had contact with the UK Competitive Telecommunications Association—I have to confess that I was not even aware of the existence of that body until he mentioned it, which is a huge lacuna in my understanding of public affairs. The noble Lord told us that it had not been consulted but that he has been speaking to it. Can he tell the Grand Committee what its view is of these regulations? Clearly, that is a material point, but it will also be a material point when the House itself comes to consider these regulations, also in the light of the further consultation responses which the Minister has kindly agreed to publish after the meeting of the Grand Committee.

[Lord Foster of Bath]

I am grateful to the noble Lord for his intervention. I assure him that I am more than happy to help to resolve the lacuna he has, and I will go even further and share with him a few thoughts that that association has about the draft regulations before us. I will take one particular one, which is its reaction, and the reactions of many other people, to the Government’s claim that the changes envisaged in these draft regulations will not significantly change the protections that are currently enjoyed by consumers of UK telecoms services. That claim is disputed, and I am keen to hear the Minister’s reaction to that, particularly in relation to the fundamental question of who will now supervise the regulator.

The UK regulator is Ofcom, which is probably the most highly regarded regulator throughout the whole of the European Union. It is a regulator in which most of us have great confidence, but from time to time it can make questionable decisions. Within the EU arrangements there are processes which provide for oversight of decisions of all national regulatory authorities, including Ofcom. These processes are covered under Regulation 7, particularly 7(1). As the Minister knows, they ensure oversight of a regulator’s decision by the Commission, and peer review by other EU regulators—in this case by members of BEREC, which the Minister has already referred to: the Body of European Regulators for Electronic Communications.

Post Brexit, the EU checks and balances against bad regulatory decisions will clearly fall away, yet safeguards to ensure regulatory certainty, and safeguards against bad regulatory decisions, are critical to ensuring that businesses in this sector can have the confidence to make major investments. Can the Minister provide a clear explanation of how, under these draft regulations, Ofcom will be held to account post Brexit? Can he confirm that, for instance, the Digital Economy Act, which went through your Lordships’ House some while ago, has weakened the telecoms appeal regime and that all that appears to be left for those who believe that an Ofcom decision is wrong is the judicial review process? As the Minister said, in certain cases there might also be the opportunity to go to the Competition Appeal Tribunal, but in the majority of cases it would appear that we are left with only judicial review, which, as noble Lords know, has undergone some quite significant and worrying changes in recent times. Therefore, does the Minister agree that this is a significant diminution of the protections against bad decisions by the regulator, however infrequently they are likely to occur?

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[Lord Adonis]

My Lords, the noble Lord is making a very powerful argument about the weakness of consultation and the problems that will be caused by these regulations. Is he suggesting that Ofcom itself said to him that it was not content with these regulations in their current form and that it is worried about the regime that will apply after a no-deal Brexit? That would be a very serious state of affairs if that were the case.

[Lord Foster of Bath]

That would be taking the interpretation of the conversations and correspondence I have had with Ofcom a step too far. I do not think that Ofcom feels that it is its place to comment on the rightness or otherwise of the regulations. However, it is pointing out very clearly that when these regulations come into force, its ability to do the work to the level that it wishes will undoubtedly be diminished because of its inability to influence future EU legislation which will have a significant bearing on companies that operate in this country. Equally—I shall come on to this in a second—its ability to engage in discussion and debate with fellow regulators in this field across the 27 EU countries will depend on what happens now.

I hope that the Minister will agree to extend his remit just a little in this discussion. It would be enormously helpful to hear from him what he understands the situation will be not only in relation to a no-deal Brexit but, if the Prime Minister is successful in achieving her deal, what it will be during the implementation period and then after it. So there are three possible scenarios in which it would be helpful to learn from the Minister how he thinks the arrangements will operate.

It might help him if I shared with him my own understanding of what the situation is likely to be and possibly made his response much briefer, because he could then say that I have got it right. In the debate on 7 January in the other place, Margot James acknowledged that,

“the Government recognise that Ofcom would benefit from the continued exchange of best practice with other regulators, and from the exchange of information about telecoms matters more generally”.

She went on to say:

“Ofcom intends to seek observer status after the UK has exited the EU”.—[Official Report, Commons, Delegated Legislation Committee, 7/1/19; col. 6.]


Can the Minister confirm that this is a huge oversimplification of the process that now applies in the event of a no-deal Brexit? In the past, it would have been a relatively simple matter for Ofcom to seek observer status. Under the rules that applied until December 2018, just a month ago, BEREC could simply have invited Ofcom to have observer status and that would have been fine, but the BEREC regulations have changed and are now very different. I am sure that the Minister will confirm that, under those regulations, the only possibility of Ofcom having even observer status on BEREC is if the European Union has agreed to it. That would require the UK Government specifically to negotiate such an arrangement with the EU. I would be grateful if the Minister could confirm that that is the case, because it is very different from saying that Ofcom will seek observer status. The Government will have to engage positively in negotiations with the European Union to bring that about.

Can the Minister also confirm his understanding of the position of Switzerland? It is a very good example, because its regulator was an observer member of BEREC. With the change in rules in December 2018, it no longer has observer status and the Swiss Government are currently in extensive negotiations with the European Union to see whether agreement can be reached for that to happen—there is no certainty that it will, any more than there will be certainty, for reasons that I shall come on to in a few minutes, about an agreement on this matter being reached between the UK Government and the European Union.

I accept that the Minister is slightly stretching the issue, but I hope that he will confirm that under transitional arrangements of the withdrawal agreement—if the Prime Minister is successful in getting her deal through—the key provision is Article 128 along, in part, with Article 8, which states clearly the UK has no right to participate in decision-making or governance of any EU bodies and no right to attend meetings. During the transition period, there will no opportunity for Ofcom to be involved—with, however, one caveat.

The caveat comes in two parts. It says that there are exceptions: Ofcom may be allowed to pop along for the odd meeting and to participate in discussions but not have a vote, but only in the very limited case where BEREC is discussing a specific case that relates to the United Kingdom or if, by having Ofcom present, it would be beneficial to the EU as a whole. That is a decision for it to make. I would be grateful if the Minister could clarify the point. My understanding is that if the Prime Minister is successful in getting a deal, during the transition phase, the position of Ofcom will be even worse than it would be if it had observer status. That, I believe, would be significantly detrimental to the UK. Post Brexit, if the Prime Minister is successful with her deal, clearly the situation will be somewhat uncertain because it will depend on the interpretation of and success of the negotiations. However, the draft political declaration covers the issue in paragraphs 33 to 35 and 40 to 42. It would be helpful to hear the Minister’s views on how he thinks that this will work out.

My final point is simply this. All of this is dependent on an agreement. Whether we are in the situation of a no-deal Brexit as regards the regulations before us or even if the Prime Minister achieves her deal and we have a transition period with an exit being subject to whatever arrangements have been made, it will all depend on whether the UK has achieved a data adequacy agreement with the European Union. Nothing can happen unless we have one because it is absolutely crucial. I could read out to noble Lords many learned articles about whether it would be possible for the UK to get a data adequacy agreement easily or even to get one at all. For instance, criticisms are already raging about the impact of the investigatory powers legislation, the GDPR regulations, the e-commerce and e-privacy regulations and so on. Whether those will enable us to get a data adequacy regulation or prevent us doing so is very unclear indeed.

I have raised some important points and I look forward to the Minister’s response. Above all, however, he must give us a clear understanding of the Government’s view about the likelihood of us getting a data adequacy agreement. The Minister in the other place made it absolutely clear that if the Prime Minister gets her deal and we have a transition period of almost two years, it will take the whole of those two years to get agreement on data adequacy. She went on to say that if we have a no-deal Brexit, the chances are that getting such an agreement will take even longer. Does that not mean that all of the claims that there will be no significant impact as regards these regulations on people in the UK, both service providers and the regulator, really do not stack up?

[Lord Adonis]

The noble Lord has referred to the data adequacy agreement, which is clearly an important issue. What is his understanding of what the impact would be on the United Kingdom if we did not secure such an agreement in the event of a no-deal Brexit? Presumably it will be quite a tall order to get such an agreement in the next eight weeks.

[Lord Foster of Bath]

Let me give the noble Lord one example. I said earlier that for Ofcom to become a member of BEREC, it is no longer a case of it going to BEREC and saying, “Please can we have observer status?” It will require a negotiated agreement between the UK and the EU. In my view and those I have spoken to about this, the agreement will not be reached unless we have an adequacy agreement. If the adequacy agreement is going to take at least two years and may not be achieved anyway, then during the whole of that period there is no way of Ofcom performing any role whatever within BEREC, for example.

[Lord Adonis]

Does the Minister want to respond to the noble Lord, Lord Foster, before I and my noble friend speak?