Digital Economy Bill

Lord Fox Excerpts

1st reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords
Tuesday 31st January 2017 Lords Chamber

These amendments are realistic and practical but provide a sense of ambition. They are to probe why we are not looking at these things in a more ambitious way, but they are all mechanisms which we can use. I beg to move.

[Lord Fox (LD)]

I will speak to Amendment 2 and make some comments on Amendment 1. Like the noble Lord, Lord Mendelsohn, I welcome the principle of a USO and we are having a healthy debate now. I will probe the Minister in detail about how the Government will respond to the Ofcom report. I was frankly surprised by the report’s language when it came out—it was a mere twinkle in our eye when the House last debated this. It referred throughout to “decent” broadband as a starting point, rather than “world-class” or “leading” or any of those things. As the noble Lord, Lord Mendelsohn, outlined, the work that has gone into modelling the need for broadband is, in one way, completely pointless. Most noble Lords are old enough to remember a time before the internet, or the industries which now use that medium, even existed. You could not have modelled how much bandwidth you would need today 10, 15 or 20 years ago. The industry that will use this network has not been invented so we cannot know what is necessary. Decent is fine but frankly we should be looking for the best possible. In Amendment 1 the noble Lord has set a very high bar.

In Amendment 2 we have taken as our text—as I am sure noble Lords can recognise—scenario 3 from the Ofcom report. It is really to test two things. One is the universal part of the USO. We are of the persuasion that universal means universal rather than 99-point-whatever-it-is per cent. I would be grateful to hear from the Minister what he believes universal means. On timing, we have heard various claims that by 2020 at the flick of a finger we could all have 10 megabits. There are many people where I come from in the countryside and from all over the country who would be very surprised if they could get 10 megabits. They are still struggling with ones and twos and upload speeds of practically nothing. The fact that apparently this is so easy and frictionless yet so far away for so many people seems slightly at odds. The point of Amendment 2 is very much to set what I think the previous speaker would call a less ambitious target, but one that we believe should be eminently achievable. I misspoke because it is not a target; the USO is a minimum. The noble Lord who spoke previously used the word “target”. One of the dangers is that this becomes the limit to our ambitions and it should not be. In many senses Amendment 2 is entirely compatible with Amendment 1. We have to get to Amendment 2 as a minimum but Amendment 1 and all the ambition enshrined within it can still be part of this formula.

Looking forward, we will be talking later about how we can assess the progress of this. At the moment we want an amendment that is designed to give the Minister enough pressure on Ofcom and Ofcom enough pressure on the service providers to deliver a minimum standard. It is inconceivable and unacceptable that we should be so down the pecking order at the moment. We will talk about other structural issues through the course of Committee but as a very minimum we believe Amendment 2 sets a standard.

[Baroness Byford (Con)]

My Lords, I have Amendments 3 and 7 in this group. I reiterate the expressions of support for this Bill given by earlier speakers. There are many aims in this Bill that I support but some specifics are worth raising at greater length. I perhaps should remind the Committee of our family interests in farming although, as far as this Bill is concerned, we are without any form of modern communication in any of our buildings. That might change in the future but clearly we are not an interested player in that part. I am a member of the CLA.

Amendment 3 is quite detailed—so I will not read it out—and tries again to tie things down more specifically than they are in the Bill. It seeks to guarantee clarity over what the consumer can expect from a universal service obligation on broadband. It will ensure that the USO delivers a minimum speed of 10 megabits—perhaps we might have further conversations about that—and that this is reviewed to reflect technological advances and increased demand. Once enforced the USO must also allow those who are not provided with access to broadband at the set minimum speeds a simple means of seeking financial redress if that is not resolved, which they can then use to find an alternative means of getting connected.

The CLA believes that this redress should mirror the reasonable cost threshold, which should sit just above the current landline threshold, at £4,000 per property. Small, rural communities should be able to pool this money to invest in alternative technologies and connection schemes that provide them with faster and more reliable—and potentially cheaper—connections compared to its being done individually. For these most remote premises, making use of a wide range of technologies, including wi-fi networks, satellite and mobile data to help provide universal coverage, will help to ensure that the introduction of the USO is a success and should be encouraged.

On my Amendment 7, which is about “may” and “must”, I need not argue the toss of the wording between the two words but feel strongly that “may” is a facilitator and “must” is a direction. I am sure that other noble Lords are probably heartily sick of receiving complaints from friends, neighbours, colleagues and family about the broadband service which they either have or are still unable to achieve at all. I have often spoken in this House of the areas that are not covered at all; of the services that advertise speeds “up to” but which achieve only a fraction of the implied promise; and of the difficulty of obtaining a helpful response from service providers when things go wrong.

The speed of change on the digital technology front is such that the Government must keep up with both the challenges and changes facing them and with their implications for society. No one can doubt that Ministers are very busy people, who are subject to a variety and quantity of pressures. I feel strongly that Parliament should assist them by indicating those priorities that are paramount. Most of us can have no idea of future provisions that will affect the universal service obligation. We ought to insist that whenever that obligation is affected, the Minister has to look closely at it more closely.

I wholeheartedly support the amendment in the name of the noble Lord, Lord Mendelsohn. I merely suggest that it be made clear that most farms—we spoke about rural areas—GP practices and businesses are small and medium-sized enterprises but are often not regarded in that way. My concern may be unnecessary, but I have read a great deal about the difficulties experienced by these enterprises, which are located in rural areas and which may not be recognised as belonging in that category of small or medium-sized businesses. Only last year, those who wanted to put forward their claims for the single farm payment were totally unable to do so in some areas because there was no broadband available, and in fact the department had to revert to accepting written paper applications, which people had been using for years.

My amendments are probing amendments, but it is important that our broadband is strengthened and is available to all. As was quoted, the NFU has suggested a speed of 30 megabits per second. Reliability is absolutely key to success in any area. As the noble Lord who spoke just before me quite rightly pointed out, many of the new businesses that have been formed would never have been started had they not had broadband access. If you look at rural areas and the growth in small and medium-sized businesses, many of them are based in those areas and give an option for employment for people in areas where it would not have been at all possible in the past. Therefore, delivery, accountability, setting challenges and holding to account are hugely important. I know that the Government are aiming at 100%, but it is often said that the aim is 95% or 99%. Often I wonder whether that refers to numbers of people or the areas covered. If it is on numbers of people, obviously it is easier in urban areas than in very rural areas.

I have tabled one or two amendments to the Bill that we will come to later. I support and welcome it, but there are areas which we need to strengthen, and I am glad to have spoken to my two amendments along with the other amendments that have been moved and spoken to already.

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[Lord Fox]

I am grateful that the Minister has brought up the matter of smaller and more populous transmissions for 5G, because one of the issues that he could consider when implementing this is to limit the amount of new ducting and work that needs to be done on our streets and in our towns. To enforce, or expect, the sharing of ducting across our towns—which is not necessarily forthcoming—would help us with that. Perhaps the Minister will consider that.

[Lord Ashton of Hyde]

An amendment on that issue may be considered later today. That, however, will be a little taster for later. I have, therefore, come to the end of my explanations and I hope that, with those reassuring words, the noble Lord will withdraw the amendment for the moment.

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Moved by

[Lord Fox]

8: Clause 1, page 2, line 23, at end insert—
“72B Universal service order: annual report(1) OFCOM must publish an annual report on the implementation of the universal service order for all areas pursuant to the provisions of this Act.(2) The annual report must include information on—(a) the number of premises that have been supplied with the minimum download speed as specified by the universal service order;(b) the number of premises that have been required to cover some of the cost of connection;(c) of the premises under subsection (2)(b), the average cost of connection per premises covered by residents, disaggregated by local authority area;(d) the number of premises that have chosen not to be connected via the universal service order after being provided with an estimate;(e) the amount of time on average it takes to provide an estimate and connect a premise, disaggregated by local authority area; (f) the percentage of premises nationally connected via fibre to the premises (FTTP);(g) the take-up of superfast broadband as a proportion of connected premises;(h) the measures taken by OFCOM, Government and others to increase take-up of superfast broadband;(i) the average time taken by named service providers to reconnect broken connections;(j) the number of community schemes set up in that year and the level of subsidy delivered to achieve this; and(k) the extent to which the rights of consumers are explained to them.”

[Lord Fox]

It transpires that since I last spoke in Committee—literally since I last spoke in Committee—I must now declare an interest: I have just received an email telling me that my broadband service conditions will change. The price has increased. I am virtually certain that the bandwidth has not.

Whether the Minister’s world-class targets, or the gigabit economy of the noble Lord, Lord Mendelsohn, is in play, the purpose of Amendment 8 is to address the issue raised very eruditely by the noble Lord, Lord Mitchell, which is that BT will miss its targets. The aim of this amendment is to introduce a way of monitoring performance regularly. There is a lot of talk about driverless cars but we do not want this to be without some serious driving. It is the central mechanism by which we on this side believe that the Minister and Parliament can drive performance on a regular basis. We talked, in Amendment 2, about an annual review of the USO, and we believe that this would be the precursor to that process. It is designed to create a sense of urgency and—to be honest—pressure, on both Ofcom and the service provider. Noble Lords will be aware that it is based on a suggestion, or proposal, of the LGA, but it has additional key measures designed to monitor progress.

It is perhaps simplistic to say so, but we should see ourselves—the Minister and Parliament—as the client in this relationship, Ofcom as the project manager and Openreach, or KCOM, as a contractor, and we need to be able to measure progress regularly. It is therefore not unreasonable to suggest some measures. Without going into huge detail, the measures address a number of issues. They address performance: paragraphs (a) and (f) look at minimum download speeds and the amount of fibre being installed on the premises. The economic aspects of (b) and (c) look at the cost of connection borne by citizens and the mean cost of connection. In (d), (e) and (i) we look at service levels, premises choosing not to connect, the time to get your estimate for connection and the time for repair—which many noble Lords will have experienced and should also be measured.

We then look at take-up and public acceptance, and my noble friend Lord Foster will pick up on some aspects of driving take-up. We need to look at the percentage of people opting to take this up and find ways of pushing it. We should have a way of measuring community schemes: in some senses the ease with which they can be established, and, frankly, the amount of resistance from the service provider that stops them happening. We also need to know that consumer rights— what they are receiving—are fully explained and understood, as I think the Minister has already said.

The reason for having an annual report is that we cannot rely on the Openreach mission to deliver this and we need to be able to put regular pressure, through Ofcom, on that delivery. Amendments coming up talk about the delivery model—the connection between Openreach and BT—but while we are in that situation, and even after, this amendment is a strong way of driving performance.

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[Lord Ashton of Hyde]

My Lords, Amendment 8 also relates to reviewing the delivery of broadband policy. We have spent some time discussing broadband policy and I do not wish to repeat myself by setting out the Government’s digital agenda again. We do not disagree with the urgency, and the noble Lord is right to mention it.

The amendment would require Ofcom to produce an annual report on progress in implementing the universal service obligation. We should remind ourselves that that is the point of this part. The amendment lists a number of areas that the report should cover, not all of which relate to the broadband USO. As noted previously, I agree that it will be crucial to monitor progress of this important consumer measure, but I think that it is reasonable that the reporting requirements should be decided once the design of the USO has been finalised, not before. This will be done following the consultation on the detailed design of the USO.

Some of the areas listed are already reported on by Ofcom. For example Ofcom’s Connected Nations report, which is published annually, already provides details of superfast broadband coverage and take-up, including the percentage of premises nationally connected via fibre. The length of time taken to repair lines is also monitored and reported on by Ofcom under its market review process. Ofcom also conducts mystery shopping exercises to check compliance with the broadband speed code of practice. Under Ofcom’s voluntary code of practice on broadband speeds, broadband providers agree to give clear information on broadband speeds to consumers when they consider or buy a home broadband service and provide redress when speed performance is low. Earlier, I mentioned the Advertising Standards Authority’s review.

The noble Lord, Lord Foster, mentioned take-up, as he did on Second Reading. We agree that that is an important issue. It is interesting that Ofcom’s report assumes an 80% take-up, which we will have to think about. We agree that it is important for the per-unit cost to reduce as it is rolled out. This will be one thing we can take into consideration in the consultation. He also mentioned the broadband voucher scheme. As I said earlier, the full fibre rollout consultation included the option of a further full fibre business voucher scheme alongside other options. We will publish the findings of the consultation and the next steps alongside the findings of the business broadband review.

Therefore, although we sympathise with the spirit of the amendment, we do not think it is the correct thing to do at the moment, before the decisions have been made, and I hope that the noble Lord will feel able to withdraw it.

[Lord Fox]

I must confess to being disappointed. The idea that because the service provider publishes some information to consumers, the point of the amendment is addressed, misses the point. Whatever else we have in our broadband service provision, it is not a free and fair market. It does not work as a market. The whole point that we are debating is that, if we were going to build this from scratch, we would not start from where we are now. I think it was the noble Lord, Lord Mendelsohn, who mentioned market correction. This is designed to enable us to maintain market correction of something that is not a market. We have deliberately created something that is completely agnostic as to what the universal service obligation should end up being, and it would be strengthened by the suggestions of the noble Lord, Lord Mendelsohn. I ask the Minister, in quiet reflection afterwards, to think again, but in the meantime, I beg leave to withdraw the amendment.

Amendment 8 withdrawn.

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[Lord Maxton]

My Lords, I too support these amendments, which are on the right lines. My only reservation is that if BT is already the owner of the line into a property—it could be a commercial one—who is responsible if a repair needs to be done: Openreach or BT?

[Lord Fox]

My Lords, we associate ourselves with Amendment 20. I was under the impression that Ofcom was already looking at the process of legal separation, and if this is designed to strengthen its arm and make sure that it happens, then we approve. At Second Reading, I talked about the desirability of full structural separation. We know that the pension deficit has been used as a reason. When that calculation was made, was the full effect of the EE acquisition factored into the pension equation? Now that there have been substantial changes in the make-up of the corporate parent, can a different argument be made on pensions?

In the recesses of my mind I recall something being attempted in York along the lines of Amendment 21. It foundered because there was no separation in the BT/Openreach model and the route to market proved very difficult. Perhaps to be successful Amendment 21 needs Amendment 20, if not full structural separation.

[Lord Mitchell]

My Lords, I will address Amendment 20. The separation of Openreach from BT is fundamental to the success of Britain being a leader in the digital economy in the 21st century. It is unanswerable that BT has been given a monopoly in fixed broadband connectivity. It displays classic monopoly behaviour: it controls the distribution, sets the prices and dictates the terms to its competitors. It has no incentive to improve the quality of its service—just the minimum. I would not be so vehement on this issue if BT was supplying a brilliant service, or even if it gave us believable market facts. Its broadband coverage is awful and it successfully lobbies to persuade Ministers and others that it is meeting its targets; it is not. It is undeserving of any government support, particularly in its ownership of Openreach. Why should it be granted this monopolistic licence to print money? Alternative owners will have a real incentive to improve the service.

Fixed and mobile connectivity are converging. The route may be different, but they are joining up: data are data. BT is rapidly taking on all the attributes of the overall monopoly supplier: all internet connectivity. If you aggregate its stranglehold in broadband, add its ownership of EE in mobile and then factor in its future 42% ownership of the 5G spectrum, it is overwhelming. We have a massive monopoly in the making. Separating Openreach will certainly clip BT’s wings and improve broadband connectivity.

Digital Economy Bill

Lord Fox Excerpts

2nd reading (Hansard): House of Lords
Tuesday 13th December 2016 Lords Chamber

[Lord Fox (LD)]

My Lords, one of the most pleasing aspects of this Green Paper is the alacrity with which everyone in your Lordships’ House accepts the importance of access to fast and reliable digital connectivity, whether it is delivered through broadband or wireless telephony. This wide-ranging Bill rightly identifies how important this is in setting up jobs and in the growth of the creative and fintech industries. Yet the Bill seems unambitious—a word already used by many noble Lords—and fails to embrace what world-class really means. It also studiously ignores one of the key elements that drives wireless performance and service levels, namely the wireless spectrum allocation which is coming up.

The Government’s proposed creation of a broadband universal service obligation is a very positive development. We are obviously waiting to see what Ofcom’s response to this will be, not just on download speeds but on upload, latency, consistency and stability. In that regard, I support my noble friend Lord Foster, who described 10 megabits per second as insufficient. The overall effect of broadband reach was very elegantly illustrated by the noble Earl, Lord Lytton. Although it might, on the one hand, have a 10 megabit label on it, what is actually received in the sitting room or office is often very much less than that. Even if 10 megabits became the accepted minimum, for many people in far-off areas it would also be the maximum. A target of 24 megabits per second has to be our first objective. Parliament should require Ofcom to develop a USO to deliver this as soon as possible; and delivered to the front room, rather than to a box in a road or, indeed, to one of the noble Earl’s hedges somewhere out there. Therefore, we do not think it unreasonable for all of the UK to have access to superfast broadband, and this should include more consistent upload speeds. My fear is that Ofcom and, indeed, the Government are limited in their ambition, and at the heart of this timidity is the fact that they both know that the broadband ownership model is not fit for purpose. This is not directly addressed by this legislation but, in terms of the digital network, it is an elephant in the room.

I apologise for making my next point, which I have made elsewhere, but if you think about what BT is being asked to deliver through Openreach, you will see that the current ownership model of Openreach is the equivalent of asking a consortium comprising Network Rail, Eddie Stobart and Tesco to build our roads. We would not do it, but that is what we have. Until the digital highway is a proper utility, and one that is independent from a company which is a digital service provider and, indeed, a telephony provider, Ofcom will struggle to deliver these requirements. Therefore, we welcome recent announcements about the partition or segregation of Openreach, but we believe this has to be a step towards full partition of Openreach from BT. In the meantime, it is for the Government through this Bill and, obviously, through their relationship with Ofcom, to make sure that the highest possible standards are delivered in the shortest possible time.

Ownership is also an issue when we come to the wireless spectrum. Recent competition decisions have very clearly indicated that the regulator wants four players in this market, yet currently the market is not balanced, with two large players plus two much smaller players, which, we should remind ourselves, were recently prevented from merging. That means that, from what had been a rather balanced distribution of spectrum, we now have a very unbalanced spectrum—by some accounts, the least balanced spectrum distribution in western Europe. BT/EE has the largest proportion of the available spectrum currently allocated at around 39%, Vodafone has 27%, with Three and O2 having just 14% and 13% respectively. Currently, the situation is asymmetric, but with the potential to become more asymmetric as the next round of spectrum sales comes up.

Ofcom will decide the terms of its next spectrum auction, which will be the 2.3 and 3.4 gigahertz sale sometime around the end of next month. We believe that it plans to restrict BT bidding on the 2.3 gigahertz but, as I am sure your Lordships know, that is a small part of the overall band width that is for sale, and BT will still have access to the larger part of that 3.4 part of the spectrum. Therefore, even with more complete restrictions on BT, there is then also an opportunity for Vodafone to clean up on this. So, far from there being four competitors, there is a lot of work to do to enable there to be more than just two large competitors and two very weak ones. Therefore, we believe that this Bill should concern itself with the equitable distribution of spectrum as well as just ensuring the smooth management of spectrum that has currently been allocated.

In summary, we welcome the introduction of the USO but absolutely challenge the very unambitious 10 megabit per second target. A higher target of 24 megabits per second with good upload, latency, consistency and stability targets is very important. We need to make sure that this is available at the point of use in the farthest-flung parts of this country.

On wireless, we believe that the path to adequate competition lies with equitable distribution of spectrum. The Minister should interest himself vigorously in how to ensure that this equitable distribution can be achieved when the next spectrum round comes up. I would be grateful if he would let us know how he plans to do that.

Digital Economy Bill

Lord Fox Excerpts

Committee: 1st sitting (Hansard - continued): House of Lords
Tuesday 31st January 2017 Lords Chamber

[Lord Stevenson of Balmacara]

My Lords, this is an interesting issue which has been drawn to our attention, and we thought it would be worth putting a probing amendment down. I am grateful that grouped with it is a more substantial amendment in many ways tabled by our colleagues from the Liberal Democrat Benches. Both bear on much the same thing.

It is quite common in commercial arrangements to find that there are limits set on ownership and control in proportions which are often around 30%, to reflect the ways in which people might control a market. Yet the way in which the Governments of the day have set up regulations to control the spectrum has not introduced any official cap. Amendment 54 suggests that it might be time now, given the intensity of concern about how much the spectrum is valued and how it is used, to have some form of competition cap, of about 30%. This probing amendment is there to invite the Government to comment on that.

Having said that, I am sure the Minister will want to cover another point, which I think will be the subject of other amendments later. We will come back to this, but I want to flag up now that the spectrum is not a single thing—I cannot think of the right word—and its value depends on which part of the spectrum we are talking about. Lower frequencies and higher frequencies are different, so to impose a 30% limit on the spectrum that any company can own would be slightly perverse, but the issue is important enough to raise the point. Future amendments may deal with the dispersion of the higher-value spectrum among operators, particularly in mobile telephony, where there is concern—I am sure that the Minister expects us to raise this at the appropriate point in the Bill—over the current way in which spectrum has been allocated among the existing players in this field, so that the larger ones tend to have more of the higher-value spectrum. This is an issue we will need to come back to, but it is not the subject of this amendment, which deals with a general concern about the possibility of a monopoly operating within this area, which might be dealt with perfectly properly by a regulator, but where it might also help if there was a specific cap. I beg to move.

[Lord Fox (LD)]

As the noble Lord, Lord Stevenson, intimated, Amendment 54A comes out of the same concern, but takes a slightly different view of the problem, placing the onus on the Secretary of State rather than Ofcom. The noble Lord, Lord Mitchell, spoke about fixed and mobile convergence, and at the heart of the concern here is that we are not talking about two separate markets when we talk about broadband and wireless; with the approval of BT’s acquisition of EE, one player not only has a dominant position in fixed line but already has the lion’s share of the spectrum already allocated, at 42%. As the noble Lord, Lord Stevenson, has said, this may come up in a different place, but it is at the heart of concerns expressed here.

Clearly the two weaker players were not allowed to join together, so we have an asymmetry in the wireless market, with two strong players and two weaker operators, which adds to the imbalance of spectrum allocation. We should be aware that spectrum allocation imbalance can clearly affect prices. It could affect access and also the speed with which technologies are rolled out: a land bank, or the equivalent, could be created.

It seems that Ofcom has already recognised this issue and is seeking to limit access to one of the bandwidths—the 2.3 gigahertz—but has not covered bands in the 3.4 gigahertz range so the principle appears to have been acknowledged by Ofcom but the measure has not been fully thought through. In a sense, we are debating how much of a problem this is, given that Ofcom has acknowledged that it is a problem.

This is, therefore, also a probing amendment, and it would place a requirement on the Government, rather than Ofcom, to assess the situation and come back with a thorough review of whether this really is an issue. Clearly there is a perception, but we need to measure that perception and publish some sort of assessment of whether 30% is the right limit and, indeed, whether there is a problem at all. I therefore ask your Lordships to consider this as a way of teasing out issues that, if they are not dealt with now, will come back to haunt us much later.

[Lord Ashton of Hyde]

My Lords, these two amendments concern the allocation of spectrum for mobile telephone networks. There are two main issues: the percentage amount of the cap; and the role of Ofcom as opposed to the Secretary of State, as dealt with in the amendment of the noble Lord, Lord Fox.

First, on the amendment of the noble Lord, Lord Stevenson, the Government have released a considerable amount of spectrum for mobile broadband. Ofcom has just concluded a final consultation on rules for allocating it through an auction. The intention of the amendment—to ensure that Ofcom can enforce competition in the mobile market—is a worthy one. Ofcom already has the power to set appropriate rules for its spectrum licensing, taking due account of competition implications. Ofcom must award licences by processes that are open, objective, transparent and proportionate in what they are intended to achieve, without unduly discriminating against particular persons or a particular description of persons.

In principle, Ofcom could make a similar rule for its forthcoming auction to that proposed in the new clause. Indeed, it considered a number of possible spectrum caps in its consultation. The provision allows Ofcom to reject some possible results of the auction on competition grounds. Ofcom already has competition powers which would bear in such a situation. It also strikes us as unlikely that Ofcom, having determined appropriate rules for an auction, would immediately nullify the results.

Amendment 54A, from the noble Lord, Lord Fox, proposes that the Government commission an evaluation of the current usage and allocation of mobile spectrum. Ofcom already has a responsibility, when carrying out its functions, to consider competition issues and whether radio spectrum is being used efficiently. Ofcom considered many of these issues in its recent consultation on the forthcoming auction. In future, it may well wish to review the state of competition in the mobile market—perhaps on similar terms and to a similar timescale to those proposed by the noble Lord—but in our view, that is for Ofcom to decide.

Given those issues, it seems to me that the proposed new clauses do not help Ofcom to carry out its duties, and I hope that noble Lords will therefore agree not to press them.

Digital Economy Bill

Lord Fox Excerpts

Report: 1st sitting: House of Lords
Wednesday 22nd February 2017 Lords Chamber

[Lord Fox (LD)]

My Lords, I associate myself with, and support, Amendment 1. The noble Lord, Lord Mendelsohn, covered it comprehensively and I do not want to go over the same territory.

In his opening speech in Committee, the Minister correctly hung his hat on delivering world-class digital connectivity. We can all subscribe to that. There was no doubting the mood of noble Lords in Committee, and certainly no doubting the mood of the country given that we are some distance from being world class in that regard. The objective of this amendment is to help move us along that road. At the time, the Minister associated the Government with the gigabit objective of the noble Lord, Lord Mendelsohn, while firmly ruling it out as a USO objective. The Minister has the notion that we should rely on Ofcom to set the target, that we should rely on a public consultation, and that, eventually, a USO will emerge. In the Minister’s view, this House is not expected to advise Ofcom on where that USO should be set. We disagree with that, because, once the USO is established, it will be trimmed, edited and manipulated. Then, no doubt, the debates will begin among the service deliverers about what exactly the USO means.

We have already seen the length and byzantine nature of the debate that can unfold when Openreach and BT start to discuss matters. We have only to look at the protracted ownership debate that continues unabated. That lengthy discourse will lead only one way; it will trim and pull back from whatever USO Ofcom establishes. For this reason we believe that Ofcom’s hand needs to be firmed up. It needs support and we must strengthen its hand in dealing with what is essentially a monopoly and very experienced public sector supplier. Therefore, this amendment is designed to support Ofcom to take the steps needed on the way to delivering the world-class digital network to which we aspire. That is why we think it should be accepted.

Proposed new subsection (2B) in the amendment contains a medium-term objective which the Minister has endorsed. We need to move towards gigabit connectivity. That will drive increased fibre-to-the-premises connection. Proposed new subsection (2BA) sets a difficult yet achievable goal for 2020 which Ofcom itself has modelled, as the noble Lord, Lord Mendelsohn, set out. It is important to have both those objectives because one can be the enemy of the other unless they are both included in the Bill. We cannot second-guess the country’s future need but we can be certain that it will be more than 10 megabits. We must be in a position to assist Ofcom in establishing a USO that can begin to deliver the needs of this country. It is for that reason that we support Amendment 1.

[Lord Wigley (PC)]

My Lords, I declare an interest immediately, because in both my household and my neighbour’s household we have had immense problems in securing adequate speeds. I referred at earlier stages to some of these difficulties.

I very much support both Amendments. Amendment 1 states that,

“by 2020, the following will be available in every household”,

and the list includes,

“download speeds of 30 megabits per second”.

This is absolutely necessary, because under the present provision, the providers just are not willing to do that. They are willing to rest their case on the fact that it is too expensive to run the necessary connection to a household, not just in far-flung rural areas but in conurbations and villages. I am within half a mile of the main exchange and within 200 metres of a box. However, because of the way they have laid out the connectivity sequence, we cannot get decent speeds. It is irritating that the excuse can be used that it is too expensive to provide a connection.

I assume that if there was a legislative requirement along the lines laid out in the proposed new subsections in Amendments 1 and 2, that would be overcome. If the Government are not willing to accept these amendments, I would be interested to know what response they would give to people who are facing this difficulty. It is not a technical impossibility, just too expensive. I was on the committee which dealt with the privatisation of telephones, with the late John Golding and others—it took a considerable amount of time to go through—and assurances were then given that of course, the responsibilities that had been on public bodies would be continued. I accept that, to a large extent, BT has done that. However, safeguards are needed, particularly in rural areas, and I would be grateful if the Minister said how he will cover that if he cannot accept these amendments.

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[Baroness Janke (LD)]

My Lords, on this side of the House we are concerned about the whole issue of affordability. With the universal service obligation, we need to recognise that many people who would very much benefit from having access to broadband will not be able to afford it. I am speaking about low-income communities and communities with interests, such as people on pensions, or those who have a need to use broadband more so than others, such as the disabled. It is important that some form of social tariff is introduced. In Committee, the noble Baroness gave a very encouraging response to this amendment. I think she referred then to a report from Ofcom that recommended the introduction of a social tariff. In moving the amendment again, I would like some assurance that this is a concrete proposal rather than an aspiration. I hope the noble Baroness will be able to assure me of that and I beg to move.

[Lord Fox]

I shall speak to Amendment 4. When an amendment along similar lines was debated in Committee, the Minister rightly noted that we were in danger of mixing our drinks with some USO and some non-USO measures clustered together. That is why I accepted the Minister’s advice and have separated the USO and left it in the Ofcom section of the Bill. This amendment covers the non-Ofcom measures. I am sure that as I have taken the Minister’s advice to frame the amendment in this way, he will be persuaded that there is something to be gained from the transparency that these measures will give and will back up his relatively supportive comments about the importance of driving public acceptance and helping people to understand what they can get from broadband by measuring those efforts and reporting them to Parliament. On that basis, I am sure the Minister will be only too willing to include this amendment in the Bill.

--- Later in debate ---

[Lord Maxton]

My Lords, I shall be brief. I have in my pocket a mobile phone owned by Virgin Media. Virgin Media uses the EE spectrum. As far as I know, there is no financial connection between Virgin Media and EE, but Virgin uses the EE network. Could the Minister explain that to me?

[Lord Fox]

My Lords, I am fortunate to follow the noble Lord, Lord Stevenson, whose comprehensive support of his amendment means that I need say very little, but I will make a couple of points.

We have talked in various debates on the digital economy about how wireless and broadband are converging, but there is one area where we do not want them to converge. The paroxysms that we are putting ourselves through around the broadband issue are because of how broken that market is, and there is a firm danger that we may be sending the wireless market down the same route. As the noble Lord, Lord Stevenson, pointed out, we had an equitable spectrum distribution, but there is a clear and present danger that we will move even further from that equity, with two dominant players and two very small players. The purpose of this amendment is to work in advance of that, so that we will not subsequently be debating the brokenness of the wireless market as we have been, from time immemorial, in respect of the broadband market.

When this amendment was debated in Committee, the Minister’s response was very much about leaving Ofcom to choose. He hazarded that, from the Government’s point of view,

“it also strikes us as unlikely that Ofcom, having determined appropriate rules …, would immediately nullify the results”.—[Official Report, 31/1/16; col. 1196]

In other words, it is up to Ofcom to decide, and it is not going to decide on this issue. That actually makes this amendment more important, not less. Ofcom has clearly recognised that there is a potential issue here, and it has gone tentatively down the route of limiting access to the 2.3 gigahertz spectrum while completely ignoring the 3.4 gigahertz spectrum. I think that the case has been made by the noble Lord, Lord Stevenson, for us to take account of that in the Bill and, for that reason, I support the amendment.

[Lord Ashton of Hyde]

My Lords, I thank all noble Lords who have spoken on this technical but important subject. The intention behind the amendment is that Ofcom is able to ensure competition in the mobile market. It also proposes that the Government commission and evaluate the current usage and allocation of mobile spectrum.

As has been said, Ofcom already has the power to set appropriate rules for its spectrum licensing, taking due account of competition implications. Ofcom must award licences by processes that are open, objective, transparent and proportionate to what they are intended to achieve and not unduly discriminating against particular persons or a particular description of persons. It is important to remind ourselves that Ofcom has been given the position of regulator of the telecommunications market in the United Kingdom. It already has a duty, when carrying out its radio spectrum functions, to have regard to the desirability of promoting both competition in the provision of electromagnetic communications services and the efficient management of radio spectrum for wireless telegraphy.

Reviewing the state of competition in the mobile market falls clearly within Ofcom’s remit. It considered many of the issues outlined in the proposed new clause in its recent consultation on the forthcoming spectrum auction. This included a proposal to apply a cap of 255 megahertz on the amount of immediately useable spectrum that any one operator can buy. Ofcom believes that the UK mobile market is currently working well for consumers and businesses, with strong competition between mobile network operators. It considers it unlikely that any of the four mobile network operators would cease to be credible as a national supplier of mobile services in the next few years, even if they did not obtain any spectrum in the forthcoming auction. Additionally, more useable mobile spectrum, such as the 700 megahertz band, will be available in the future. The reality is that Ofcom has considered the competition issues in some detail. Not everyone agrees with its conclusions, and Ofcom will take that into account as part of its consideration of the consultation responses. However, it is for Ofcom as the regulator to take a view on these issues, and it has already done so.

The noble Lord, Lord Stevenson, asked whether the current divisions are optimum. Ofcom is obviously more expert than I am, and we think it is for Ofcom to opine on that. As I said, Ofcom proposes to set a cap of 255 megahertz on the immediately useable spectrum. It has explained that, as a result of this proposed cap, BT/EE would not be able to bid for spectrum in the 2.3 gigahertz band. The cap will prevent a worsening of the current extent of asymmetry in immediately useable spectrum. I think that that indicates its views and I am not going to contradict it.

In addition, if the Government felt that it was necessary to direct Ofcom to undertake a competition assessment, they could do so under Section 5 of the Wireless Telegraphy Act, and they did so in 2010 ahead of the 4G auction.

The noble Lord, Lord Maxton, asked how Virgin supply a mobile network through EE. I am informed that the answer is that Virgin sublet part of EE’s spectrum access.

Given that Ofcom is already able to, and does, take into account competition issues, I hope that the noble Lord will agree to withdraw this amendment.

Digital Economy Bill

Lord Fox Excerpts

Report: 3rd sitting (Hansard): House of Lords
Wednesday 29th March 2017 Lords Chamber

[Lord Ashton of Hyde]

My Lords, during the passage of this Bill there has been debate on the state of the UK’s fibre networks, the ability to switch communication provider, the quality of business connectivity and other matters vital to our economic future such as the new broadband universal service obligation. These issues rely on the Government’s ability to formulate and implement policies effectively.

Amendment 33ZJ creates a new power for the Secretary of State to set a strategy and policy statement relating to telecommunications, the management of radio spectrum and postal services to which Ofcom, as the regulator, will have regard when carrying out its statutory duties. Ofcom’s media and broadcasting functions are not included in this power, which recognises the importance of media independence from government. This measure will allow the Government to establish a clear policy direction to ensure greater coherence in an increasingly complex and interlinked environment. These changes also strengthen the already strong existing partnership between Ofcom and the Government. Introducing a strategy and policy statement for Ofcom’s sectors brings it in line with the other regulators, Ofwat and Ofgem, and fulfils the Government’s commitments to better establish the policy framework for regulators, as laid out in the Principles for Economic Regulation 2011.

This new clause also provides for Ofcom to disclose information to the Secretary of State at least 24 hours in advance of publication where appropriate, and improves Ofcom’s general information-sharing powers. The new clause provides restrictions on disclosure to other persons, and representations cannot be made to Ofcom specifying changes to be made to any information provided.

The Government’s ability to create and deliver effective policies is supported by Ofcom’s expertise and research. In the past, even when it would have been beneficial for Ofcom to provide information, and it wanted to, it has been restricted by its existing statutory framework. This new clause supports the partnership between government and regulator by enabling early access to certain publications where that would be appropriate, and improving Ofcom’s ability to share information where it deems it to be supportive of policy development.

This amendment therefore improves the policy-making process while also introducing greater transparency in the working relationship between government and Ofcom by giving clarity to the respective roles and responsibilities. This will ensure that policy decisions are taken by government—accountable to Parliament—and Ofcom, independently of government, undertakes the detailed application of regulation.

Should this amendment be agreed, existing Clause 9, which provides for a statement of strategic priorities relating exclusively to the management of spectrum, will no longer be necessary and the Government will table an amendment at Third Reading to remove it. I beg to move.

[Lord Fox (LD)]

My Lords, as someone who has proposed amendments that go some way in this direction, I welcome this move, which in some part meets what we propose elsewhere. I have one question around the wording:

“OFCOM must have regard to the statement when carrying out”,


its related functions. What exactly does that mean? Is that language replicated exactly for Ofwat and Ofgem? How should that regard be manifested by Ofcom?

[Lord Stevenson of Balmacara (Lab)]

My Lords, rather like the last speaker, I welcome this measure but am a bit nervous about it. The idea that the Government of the day should be able to set out their forward thinking in a way which is helpful to the regulatory functions is a good one. However, as other external viewers have sought to point out, it raises worries about whether the regulator is truly independent of government in that mode, and whether the Government might be accused of setting an agenda which would then be imposed through a well-respected regulator which everyone thinks is doing a good job in a way that might not have been the case had the process of primary legislation followed by regulations been the approach taken. I hope that when the Minister responds he will confirm that there is no intention for this measure to circumvent the clearly established arm’s-length relationships between the regulator and government. It would be helpful if he could do so.

In another Bill—I sometimes get confused, so I hope that I am discussing the right one—we talked about how the Secretary of State for Education has responsibilities in relation to the new body that is to be set up in higher education, the Office for Students. However, we think that it should be called the Office for Higher Education. In that Bill, the words “have regard to” the instructions given by the Minister are very much part of the way in which that system operates. However, that situation is different in the sense that the measure replaces an existing arrangement for a body which was not a regulator—HEFCE—and for which the only mechanism whereby higher education policy could be created was by letters of instruction. That usually takes the form of an annual letter to HEFCE which sets out the Government’s wishes for the future year, sometimes for several years ahead. I make that point simply because it would be helpful if the Minister could make it very clear that the model here is one of improving an arrangement which will be for the benefit of the exercise of the powers that already exist, and does not add new layers of bureaucracy or new powers, and that the intention is not to set an agenda or to curtail the independence of Ofcom, as I think the system would not work without it. Otherwise, I welcome what is proposed.

Digital Economy Bill

Lord Fox Excerpts

Ping Pong (Hansard): House of Lords
Thursday 27th April 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord Ashton of Hyde) (Con)]

My Lords, this Motion covers two areas where the other place has offered amendments in lieu of your Lordships’ amendments. Lords Amendment 1 on the universal service obligation challenged the Government to be more ambitious on universal digital connectivity. A broadband USO, set initially at 10 megabits per second, forms part of our plans to make sure nobody is digitally excluded. Lords Amendment 1 would have disrupted those plans. In our view, it would make the USO unworkable and, because of the risk of legal challenge, would lead to delays in implementation.

The USO can work only if it is legally robust and enforceable. EU law requires it to take into account technologies used by the majority of subscribers. Today, 30 megabits per second is enjoyed by fewer than 30%. Two gigabits per second is enjoyed by fewer than 1%. While we may have a majority taking up 30 megabits per second in a few years’ time, the Government want to implement the USO now and the Lords amendment would make this difficult to achieve.

I know that a key concern for many is that the whole country should be able to access superfast speeds of 30 megabits per second. We share that ambition. We have therefore proposed an amendment in lieu that a superfast USO will be reconsidered by Ofcom once 75% of premises across the UK subscribe to superfast broadband.

On Lords Amendment 2, the other place agreed with your Lordships’ concerns in relation to bill capping and proposed Amendment 2A in lieu. As with the Lords amendment, we provide that mobile phone service customers must have the opportunity to place a limit on their bill. Any limit set cannot be exceeded unless the customer agrees to this. Ofcom is given enforcement powers. The requirement placed on providers to ensure that customers can contact the emergency services will be unaffected.

The Government also reflected on the switching and roaming elements of Lords Amendment 2, but were not convinced of their merits. While it appears to be attractive, we do not believe that roaming is the right solution. I set out our reasons at Third Reading. With regards to switching, the Bill already goes further than the proposed amendment. The provision in the Bill, confirming Ofcom’s power to set a condition about switching, relates to operators of all telecom services, including fixed line, broadband and pay TV, not just mobile phones. I beg to move.

[Lord Fox (LD)]

My Lords, as someone who has renovated a Victorian house, I know one thing to be true. It is all very well stripping off the anaglypta and the woodchip, slapping on some Farrow & Ball, improving the coving and putting up a dado rail, but if you do not tackle the fundamentals you are pretty soon raising the floorboards again. It is the roof, the electricals and the plumbing that call you out. I had hoped that the Bill would tackle the fundamentals of the nation’s digital plumbing. I hoped that it would put in train a really revolutionary revolution for our digital network and enable the whole country to participate in the digital economy I believe the Bill sets out to achieve. I still hope that is true, but I have my doubts.

Without a requirement for a fast digital delivery and a date for the arrival of that fast digital network, we will struggle. The notion of having a 75% threshold of subscription is a tricky way of going about this. We will have to use the reporting requirements that Ofcom is now obliged to follow—that is a move forward—to get it to report on how it is driving broadband usage. We are using the commercial arms of the same companies being asked to deliver broadband to promote the use of broadband itself. We have a closed loop that does not necessarily have an incentive to drive up to the 75% threshold. I would be more confident in the progress of this country in delivering this network if there was not a dominant player that sits on a Victorian asset of copper wire which it wants to sweat, and quite understandably. It has to be up to the Government and Ofcom to drive their desire to really move forward. We are closing the door on a fresh, shiny new Bill which still smells of new paint, but, just as with my house, I cannot help thinking that we will be raising the floorboards on this issue time and again in Parliaments to come.

[Lord Stevenson of Balmacara (Lab)]

My Lords, we welcome the amendments in lieu in the Motion moved by the Minister. Having said that, I think we are at liberty also to regret that they do not go further.

The issue that we are dealing with here, which I think has been well picked up by the noble Lord who has just spoken, is that 59% of rural Britain has no proper access to the internet and large parts of the country have not-spots. It is a cause for major concern. The root of the problem is that, while a USO sounds good and is an effective way of getting across the argument that the service should be for everyone, the reality is that, unless there are sanctions to make sure that it happens and an incentive in terms of investment to make sure that the funding is available for it to take place at an appropriate time, it will never happen. It is therefore only part of the story.

The narrative that we are unfortunately locked into appears to be one where the Government were initially unwilling even to have anything in statute which provided a floor for the activity here—we now have that with this amendment, although it is a very low floor—but they do not yet have the aspiration, embodied in amendments that this House agreed, to get the speeds up and widen the coverage as quickly as they can. We are stuck in a situation where the spirit may be willing but the flesh is certainly very weak. We are not in a position where we can say that we will be able to look forward to this in an immediate future.

The root of the problem has another source, which is the reliance on the European Commission’s requirements in this area. The Government have made great play of this, but the only legislative framework under which Europe is operating here, which will fall away in 2019 if the new Government get their way, is that there should be non-binding guidance on what constitutes a universal service, yet the Government have chosen to interpret that as a limit on what they do rather than an opportunity to go further. While we welcome what is here, we do not think that the mechanics chosen will do the trick, particularly when Ofcom has recommended a faster basic speed and a cheaper way of doing it, which would be at 30 megabits per second. As we have just heard, we may be back looking at this in very short order.

On mobile bill capping, which will help consumers who get themselves in trouble with their bills, we are delighted that the Government have accepted the amendment made by the Lords at an earlier stage.