Digital Economy Bill

Lord Mitchell Excerpts

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

[Lord Gordon of Strathblane (Lab)]

My Lords, I support Amendment 1, and indeed the other amendments in this group, without in any way taking away from the credit due to the Government for introducing the USO. I think we are universally in approval of what the Government have done, and they deserve great credit for it. However, as I mentioned at Second Reading, this is a rather unambitious target. That of itself is not worrying—after all, it can be left to Ofcom to increase the target—except that it will alter the way that we go about things. We need a step change in how we go about things. Ten megabits can be achieved by wringing more miracles out of copper wire, and we would change nothing. This is not even in tune with the Government’s own thinking. Again, the Government deserve great credit for what they announced in the Financial Statement about new funding to look at what we can do with 5G. 5G could revolutionise our industries and the Government have put money behind that. The department would find itself pushing at an open door if it asked the Treasury for more funding at this point.

My last point in this brief intervention is simply to say that, having looked at the broadband advice to the Government and the three scenarios, I was, frankly, pleasantly surprised by how little option 3 costs. If that is all it costs, why not go for it and get the Treasury to cough up?

[Lord Mitchell (Non-Afl)]

My Lords, I support all three amendments on the USO. In my view, anything is better than what we have at present and what the Government are aiming for. In particular, I support Amendment 1 in the names of the noble Lords, Lord Mendelsohn and Lord Stevenson of Balmacara. Theirs is the most ambitious amendment, and ambition is what we desperately need. I do not think that it is pie in the sky; it really is what we have to go for.

In my Second Reading speech, I said that gigabits are the future of connectivity—they are the king—and that megabits are simply history. I stick by that. We cannot have pathetically low connection speeds. As we know, sadly, from its past performance, you can set a target for connectivity as low as you like, and the one thing you can be absolutely certain of is that BT will fail to meet it.

It is very clear that worldwide the goal is gigabit connectivity. South Korea, China, the Baltics and Scandinavia are all racing to the top to ensure that their societies are right at the forefront, and so must we. If the Prime Minister wants an industrial strategy that results in a global Britain leading the world, then she and her Government have to set high targets for 21st-century Britain, and nowhere more so than in connectivity. What the Government propose is like having a man with a flag walking in front of a car to ensure that it does not exceed 4 miles per hour. That is why I support Amendment 1—it flies the flag for digital Britain.

I plead with the Minister: do not settle for a third-rate target lobbied for by BT. It has its own agenda, which is to milk its obsolete copper infrastructure. Its interest is not in the national interest. Will this Government be bold and will they set their sights on promoting a gigabit economy?

[Lord Arbuthnot of Edrom (Con)]

My Lords, one issue that has not been raised in this debate so far is the effect on small businesses in rural areas of the poverty of mobile telephone networks. That, combined with slow or poor, and sometimes non-existent, broadband speeds, puts rural businesses at a disadvantage. So I have a great deal of sympathy with the amendments that have been spoken to, and I hope that the Minister will show similar sympathy.

--- Later in debate ---

[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.

[Baroness Byford]

My Lords, at Second Reading I spoke against the continuation of BT and Openreach as one unit. Many of us have experienced disappointing results when we have asked BT and Openreach to do things: the two of them seem to pass the buck to each other. Separation is a very good suggestion and I support Amendment 20 in principle. If this is not possible —like others, I have followed the current pension debacle, which is adding to the difficulty—who holds BT to account? If it is Ofcom, is it doing its job; if not, should somebody else be doing it? One does not often hear praise of BT, and its provision is unsatisfactory. If the Government say that the amendment is not necessary, the Minister should tell the Committee what he is going to do about the current position, which is far from satisfactory.

Digital Economy Bill

Lord Mitchell Excerpts

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

[Lord Mitchell (Non-Afl)]

My Lords, the Digital Economy Bill does very little for the digital economy. Of course, it addresses subsidiary issues that certainly need to be changed, but in its key objective to launch the UK into the next phase of the tech and digital economic revolution, it fails. We are entering a new, post-Brexit era in which we are told we will be taking on the world in the exciting challenges that face us. Digital has to be part of that, but what are we offered? A Bill so limp and so pedestrian, so uncoordinated and so patchy and, as many noble Lords have said, so lacking in ambition that it proves the old adage that it you set the bar low enough, you might even achieve it.

The digital world is growing fast, very fast; certainly faster than most politicians understand. If we are going to lead in a world of driverless cars, the internet of things, digital health and a host of other data-dependent technologies that require massive connectivity speeds, we need a digital infrastructure that matches our ambitions. I hear Ministers making proud statements that we will achieve 100% coverage in 10 megabit per second speeds by 2020. Do they realise just how embarrassing this is? I hear them talking about a megabit economy, but in the world around us megabits are becoming obsolete. In tomorrow’s brave new digital world, gigabits will be king. That is one thousand times faster. Without a Government commitment to a gigabit infrastructure, we have not got a prayer of meeting our digital objectives. So, my first question to the Minister is: will the Government make such a commitment to encourage the building of a gigabit infrastructure? After all, that is what South Korea, Japan and Finland are doing. We have to think big.

Nearly 50 years ago, I joined what was then called the data processing industry. I have seen an industry grow to become the world leader. If nothing else, it has given me a perspective on this industry and what it is set to offer in the future. Five of the biggest companies by value in the world today barely existed 20 years ago. Indeed, three of them—Google, Amazon and Facebook—did not exist at all. Microsoft has been around a little longer, and Apple, in 1996, was close to bankruptcy—now look at it. This is an industry which continues to experience phenomenal growth, and to many people’s surprise we in the UK have done really well. There are some powerful statistics provided by Tech City. The UK digital tech industry is worth £161 billion, of which London contributes £62 billion. Over a four-year period from 2011 to 2015, the digital industry grew 32% faster than the rest of the economy. UK Digital tech employs 1.56 million people, of which London employs 328,000. Jobs are created nearly three times faster here than in the rest of the economy. In London, one in four new jobs are in tech. There are 58,000 digital tech businesses in the UK. Finally, it is worth remembering that 41% of all digital tech jobs are in non-digital industries; it is not all apps and data management.

In usage, we are the world’s leader in online shopping, with a spend of £1 billion a week, and 35 million of us log on every day. Dare I say that 5 million of us use online dating agencies, although I point out that that does not include me? Who books travel except online? We are a tech savvy country and this is a huge success story. London has become a digital exemplar to the world. Today, it sits there right at the top, behind Silicon Valley, it is true, but certainly on a par with New York. Nowhere in Europe comes close. Why has it occurred? I would say it is because of convergence. Two of the world’s top 10 universities—Imperial and UCL—are based here. Only one other city, Boston, can match that. Then, throw in the close proximity of Oxford, Cambridge and King’s College, and it can be seen that London is a scientific and intellectual powerhouse.

Then, look at where London is also a world leader—music, fashion, media, sport, theatre and, of course, banking, insurance and financial services. These are the ingredients in the cocktail that makes London such a digital leader. This bringing together of science and the financial and creative industries is critical to London’s growth, particularly in the world of smartphone apps. Medicine is a good example. We have the universities, but we also have the Wellcome Foundation and the newly opened Crick Institute. MedCity has been created to commercially exploit the exploding world of digital health. It is a rosy position and, as I say, no country in Europe comes close, but we have to stay ahead of a very fast-moving game. That is my plea for today. The usage of internet connectivity is not a gradual process; it is exponential. Billions are being invested in new technologies, which are going to require huge data capabilities. Driverless cars will happen. When Google, Amazon, Apple, BMW and the Japanese car companies are investing tens of billions of pounds in this area, it cannot fail. A grid of driverless cars and lorries will require undreamt of levels of mobile data connectivity. So too will the internet of things, which is just in its infancy but about to become ubiquitous. Without ultrafast connectivity it does not work.

However, there is one company which on its own is restricting our digital growth and holding us back, and that is BT. The way things are going, BT will soon control a very high percentage of the access to things digital in our country, both broadband and mobile. Broadband provided on its ancient, dilapidated copper cables seems to be its solution to our short-term problems. “Sweat the assets” is its mantra, then delay and obfuscate. In the mobile sector, it has purchased EE. In the 5G spectrum, it will end up with over 40% of this key mobile technology. When you group broadband and mobile together, you see the giant that BT is becoming. To give it a historical slant, it owns the roads and it owns the railway lines. It is demolishing the competition. Its level of investment is low and that is why our connectivity is equally low. It could have diverted much more funding into digital, but it chose instead to set up BT Sport.

Speak to friends about BT’s services. Speak to MPs and hear what they say their constituents and small businesses say. It is awful. BT is holding us by the throat. Its performance is dismal. That has profound consequences for us all. It displays all the attributes of a predatory monopoly. My question to the Minister is: will the Government encourage the Competition and Markets Authority to pursue BT for anti-trust and monopolistic behaviour? Secondly, will the Government and Ofcom force BT to sell Openreach so that it can make its own way without BT holding it back? I am sure the Minister will divert my questions, but will he at least concede that BT in its digital activities is displaying monopolistic behaviour—a monopoly acting against the public interest? We are poised for spectacular growth. We are not starting from the beginning. We have done very well in digital. However, our success could slip in the proverbial nanosecond if the gigabit infrastructure is not in place. We cannot allow that to happen.

Digital Economy Bill

Lord Mitchell Excerpts

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

[Lord Maxton (Lab)]

My Lords, I fully support these amendments, although they use the term “United Kingdom”. I would like the Minister to say what powers the Scottish Parliament in particular and the other devolved Parliaments have in this matter. BT has a monopoly on laying the cables, but it often has to do it down roads and across private land, particularly if no telephone line already exists. Some 90% of the islands that are a part of the United Kingdom are off Scotland’s shores, and BT has to lay cables right the way across the sea—and at the moment, they are telephone cables, not high-fibre cables. What is the responsibility of the Scottish Parliament and the other devolved Parliaments in all this?

[Lord Mitchell (Non-Afl)]

My Lords, I too support these amendments. At each stage of the Bill in your Lordships’ House, I felt terribly frustrated by the Government’s lack of ambition. I said in Committee and on Second Reading that the gigabyte should be king. According to something I read a couple of days ago, in 10 years’ time 50 billion devices will be connected to the internet worldwide. This country will account for some 8% to 10% of that—4 billion or 5 billion devices. We have to have the gigabyte capability in this country to deal with such massive growth. The Government’s response to something so crucial to our nation’s development is meagre, and I hope they and the Minister will reconsider.

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

My Lords, I thank the noble Lord, Lord Mendelsohn, for his attention and for meeting us. I also thank noble Lords from the Lib Dem Benches. We have had interesting discussions and I think that they have been beneficial on both sides. I will apply that to the rest of the day’s proceedings so that we do not waste time being nice to each other for the rest of the day.

Amendments 1 and 2 seek to include a series of additional specifications on the broadband universal service obligation, all of which were discussed in Committee. Noble Lords, during the course of the Bill and already today, have commented on the Government’s lack of ambition. Let me say straightaway that the Government share the ambition for widespread availability of fibre-to-the-premises connections. More extensive fibre connectivity is crucial to the UK’s future digital economic growth—we agree on that. But the UK’s fibre market is still at an early stage of development. The Government want to encourage the market to do more to deliver fibre as widely as possible and we are already taking steps to drive FTTP deployment. In the Autumn Statement we announced more than £1 billion to support digital infrastructure, targeted at supporting the rollout of full-fibre connections and future 5G communications. Where we differ crucially is that we believe that it would not be appropriate for the universal service order to include a target for FTTP connections. Let me be absolutely clear why this would be a mistake.

I remind noble Lords that the regulatory regime for electronic communications is shaped by four European directives, adopted in 2002 and implemented in this country through the Communications Act 2003. Amendments 1 and 2, if they are to achieve what the noble Lord, Lord Mendelsohn, and others are seeking, must be consistent with this legal framework: in particular, the universal service directive. I struggle to see how a target for a 2 gigabits per second USO could possibly be compliant with EU law. First, the purpose of universal service requirements in the EU directive is not to force the development of a nascent market, such as the UK’s fibre market, but to ensure that a baseline of services is made available to all users where market forces do not deliver this. The USO is a safety net to prevent social and economic exclusion, not a statement of ambition: we are setting the minimum, not the maximum. This amendment is upside down, placing a ceiling on ambition rather than acting as a safeguard for those less well served by communications providers.

Secondly, the EU directive requires us to consider cost. Universal fibre to everyone’s door will be expensive as FTTP coverage is currently low. According to Ofcom’s latest Connected Nations report, only approximately 1.7% of UK premises have access to FTTP services. So clearly it would be very expensive to address this in the short term.

The recitals to the universal service directive indicate that any change in the scope of universal service,

“should be subject to the twin test of services that become available to a substantial majority of the population, with a consequent risk of social exclusion for those that cannot afford them”.

I have already explained that fibre to the premises is available to less than 2% of UK premises. This is far from a technology available to a “substantial majority” of the population. Furthermore, under the directive, connections provided under a broadband USO should be capable of supporting,

“data communications, at data rates that are sufficient to permit functional Internet access, taking into account prevailing technologies used by the majority of subscribers and technological feasibility”.

It may perhaps be argued that a sensible level of universal service for today should nevertheless be delivered using only fibre to the premises so as to be future- proof. But again, this suggestion would not be compliant with EU law. The directive requires that universal service be implemented using,

“the most efficient and appropriate approach”,

which is also proportionate and minimises market distortions. To require fibre-to-the-premises connections capable of 2 gigabits per second would clearly not be the most efficient way of delivering for today’s needs and would in fact cost many billions of pounds.