Digital Economy Bill (First sitting)

Nigel Huddleston Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 11th October 2016 Public Bill Committees

[Christian Matheson]

Not exactly.

[Nigel Huddleston (Mid Worcestershire) (Con)]

Q Far fewer people switch broadband and phone providers than gas or electricity, for example. Do you support the Government’s published principles of switching, which will make it easier for consumers to switch?

Baroness Harding: Yes, completely. I think it is extremely confusing for consumers, because how you switch depends on which network you are with today, and which one you are going to. It is not a level playing field among competitors, so, for example, someone leaving TalkTalk who takes mobile phone, broadband and TV—a proper quadplay customer—does not have to speak to TalkTalk at all, as they should not. They head off to whomever they want to go to, and the switching process will work its way through. On the other hand, someone leaving Virgin and going to BT, or leaving Sky TV and coming to TalkTalk, has to speak to Virgin or Sky respectively. We and, I think, Three as well have been campaigning for simpler switching for eight years. Finally we have a Bill that is very much on the consumer side, that will make switching easier and competition stronger. I think it is a great thing.

Sean Williams: And BT completely supports the position.

David Dyson: Three has campaigned for more than a decade on this issue. It is a complete joke that it has taken so long, and it fundamentally goes back to the point that Ofcom needs more powers to make decisions that are in the consumer interest. We are the bottom of the class from a global perspective, in terms of switching. I think Papua New Guinea ranks alongside us as the only country that still has donor-led porting. It is a joke. Ofcom tried to legislate on that five years ago, and Vodafone litigated on a technicality and won. Since then it has been kicked into the long grass. It is a major issue, but the more fundamental issue is that Ofcom does not have the power, right now, to make decisions that are fully in the interests of consumers and competition.

[Nigel Huddleston]

Q Baroness Harding, you mentioned that this is a consumer-friendly Bill in various degrees. Mr Dyson and Mr Williams, are there any other elements of the Bill that you see as consumer friendly that would benefit my constituents, for example?

David Dyson: Absolutely. The electronic communications code reform is critical in being able to roll out more coverage, more capacity and better quality from a mobile perspective. That is a really important step. We hear a lot about coverage, capacity and quality. Ofcom recognises that there is a major issue in consistency of access not just for operators across the country, but for different technologies. That will certainly help, but for me the most important element of the Bill is effectively to give Ofcom the powers to create competition in this market.

Fundamentally for us, the most important decision that Ofcom needs to take in mobile in the next five years is going to happen before the Bill comes through in that spectrum. The UK is bottom of the class not only in mobile number portability, but in spectrum distribution in this market. It is the most fundamental input in terms of a level competitive playing field and Ofcom is about to take that decision in the context that it is always worried about being litigated. The facts speak for themselves. We have a terrible position in the UK right now and I am worried that it will not get any better unless Ofcom has more powers.

[Christian Matheson]

Q I am hearing mixed messages about this industry and its ability to achieve a USO. On one hand, we hear that market forces will achieve it and, on the other hand, we hear that Ofcom does not have enough power and that there is a fear of litigation. Should this Bill be giving greater powers to Ofcom? For example, in areas such as Devizes, which Claire Perry talked about, where there are broadband not spots, should Ofcom deem a provider to provide for that area?

Baroness Harding: The key thing in the Bill is to reform the appeals regime. As David Dyson has just alluded to, between 2008 and 2013, which are the most up to date stats I could get last night, Ofcom accounted for just under 50% of all cases in the Competition Appeal Tribunal. Our industry is important, but it is not that important compared with the whole of the rest of competition issues because the standard of appeal is much lower in telecoms than in any other regulated sector. That means there is a very cautious regulator.

BT has managed to raise $45 million from private equity funds to fund its litigation pot. Ofcom spent £10 million in the last two years on litigation. That is awful use of taxpayers’ money. It means you have an industry that is used to appealing every single decision the regulator takes, so the regulator is too cautious. That is why we are saying, “Give them the powers and competition will do the job for you.”

Sean Williams: I am sorry, but I completely disagree with that point. First, it is not true to say that everything gets appealed. BT did not appeal a charge control this very year that took a billion pounds of profitability out of BT—in fact out of Openreach—over a three-year period. We did not appeal the previous charge control, which did a similar thing and we did not appeal the one before either.

Ofcom is an extremely powerful regulator that is accountable to nobody but the Competition Appeal Tribunal. No one in the Government can tell it what to do. It has extremely wide discretion. You will not get better decisions out of Ofcom if you reduce the standard of appeal to judicial appeal standard. Is it reasonable, is it fair, is it just that Ofcom can take £3 billion of shareholders’ equity value away from them on a judicial review standard? It is not. It is thoroughly unjust.

To keep Ofcom accountable, to keep its decisions high quality and to comply with the regulatory scheme, it is of the utmost importance to require an appeal on its merits. It is required across the communications sector across the whole of the European Union. It is not by any means unique. Ofcom makes many very impactful decisions and that is why it gets many of its decisions appealed to the Competition Appeal Tribunal, very often by the small players in the industry. The organisation that is appealing Ofcom’s most recent charge control is CityFibre Holdings, which thinks that Ofcom’s decision to drive down Openreach prices will kill off its business plan, not just Openreach’s. It is not BT that is appealing that decision. It is very important that the one piece of this that really needs to come out is the change to the appeal regime.

It is also true to say that the Supreme Court of the United Kingdom, only about two years ago, was absolutely clear that the scheme provides for an appeal on the merits.

David Dyson: There are two important points on this. First, Three is 100% supportive of the changes in the Bill in this regard. Secondly, it is really important to note that all the Bill proposes to do is raise the standard of appeal that Ofcom has to the same level as regulators in other industries, which does not feel excessive to me.

Sean Williams: Except that Ofcom has many more powers than any other regulator, including a dispute resolution power that is not available to any other sectoral regulator. That is the cause of many of the disputes and appeals that happen.

--- Later in debate ---

[Matt Hancock]

I think the explanations coming from the witnesses are excellent. I did not have any other questions.

[Nigel Huddleston]

Q Are the switching proposals in the Bill, which make it easier for customers to switch and give them more power and information, a step in the right direction?

David Wheeldon: They clarify Ofcom’s existing powers, so to that extent they are a welcome clarification. We have some concerns about the direction of travel that Ofcom is going in, not least because we see and operate in a market where there is already extensive switching and all the customer satisfaction surveys suggest that the vast majority of customers are happy with it.

What we are worried about is that Ofcom might go down a direction that tries to mandate a certain type of switching between networks that do not have any obvious need or reason to engage with each other. It is one thing in telecoms where you have to exchange customer information and data, but in TV, where you do not have any need to speak to a different TV network or operator, the idea of putting in place a new system where we are required to talk to each other could end up being quite burdensome and bureaucratic.

I hope that, as we engage with Ofcom, we avoid doing that. In the end we want to make this as easy as possible for customers, because that is in all our interests. We compete pretty ferociously with each other on a day-to-day basis, so a system that works for customers is in all our interests. The provisions in the Bill that clarify Ofcom’s role are fine.

[Matt Hancock]

Q Could you remind me what proportion of the market Sky has?

David Wheeldon: In the overall broadband market we are below 40%, I believe. In TV, it is 60%—I am not sure quite what the breakdown between us and other pay TV providers is. We compete not just with Virgin and BT and others but increasingly with Netflix and free-to-air. Many of our customers will go to take a free-to-air package from us. So the market is pretty dynamic and I think that at the moment it seems to be working pretty well for customers.

--- Later in debate ---

[Rishi Sunak (Richmond (Yorks)) (Con)]

Q Mr Moorey, to elaborate on what you said about the provisions in the Bill to reform the appeals process, I think you described the current set-up as having a chilling effect on competition and pro-consumer impacts. It would be great if you would elaborate on what the Bill will do to improve that situation.

Pete Moorey: I think it has. I think the reason why we do not have things like a gain in provider-led switching and automatic compensation in the sector is in part due to the fact that the regulator has not felt able to move ahead with those things without appeal. Indeed, the speed at which the regulator acts is also a result of the appeals mechanism. We see proposals coming from Ofcom, particularly around things like switching, where it seems to go through a process of repeated consultation really out of a fear of being appealed by the companies. So I think it has had a chilling impact, and those are a couple of examples.

As other panel members have said, moving to a system that every other economic regulator in the country uses, which means that you are able to challenge on the process rather than the merits, would therefore be a significant change. I simply do not see the case for the telecoms sector being any different from energy or any other economically regulated sector.

[Nigel Huddleston]

Q A great frustration in rural areas in particular is being promised mobile coverage or broadband speed that is not delivered. What in the Bill can ensure that those speeds are delivered and that coverage is acceptable?

Pete Moorey: The automatic compensation element is an important part of that. If you are not receiving the speed or signal required, there could be a case for compensation. Clearly, a big issue that we want to see addressed that is not in the Bill is around the Advertising Standards Authority code and the fact that companies can advertise that you will get a certain speed when actually only 10% of their customers get that. I know that the ASA and its committees are looking at that, but I think that needs to move forward much quicker. That is clearly not something for the Bill, but it is something we would support.

[Nigel Huddleston]

Q What about terminating contracts?

Pete Moorey: Ofcom has taken a lot of steps in recent years to allow people to terminate contracts when they are not getting the speed they want. I think that is an area that needs to be looked at with regard to mobiles as well. Vodafone has introduced a new rule that means that you can get out of a contract within 30 days if you are not getting the signal you expected. Again, I do not think that is necessarily something for the Bill, but it is certainly something the regulator should be looking at.

--- Later in debate ---

[Claire Perry]

Q I appreciate that point, but does either of you agree that there is a real asymmetry of concern between data which an individual may share with a public body and data which individuals share with a corporate body? One thing I am fascinated by, and it relates to so many provisions in the Bill, is that we knowingly or unknowingly give away rights to all kinds of information with every keystroke we make on the internet. We give huge chunks of personal information to corporate bodies which do not have the definition, as per clause 31, of improving the welfare of the individual, but are simply in it for profit. How would either of you help us to address that? Perhaps the Government—rightly, as an elected organisation—are being scrutinised about this, but my constituents are willy-nilly giving away vast chunks of their data, and in some cases giving away private data to very insecure storage facilities, almost without knowing it. It is frustrating for a Government who are trying to do the right thing to make digital government far more effective—as you did, Mike, during your time—to constantly be facing concerns and criticisms that ought properly to be applied to corporate bodies, but never are.

Mike Bracken: I completely understand your point about asymmetry and I agree with that. I would suggest that in corporate, public and private life it is a fair assumption that many people in the country are waking up to how their data have been used, how they have released that data and, increasingly, the repercussions of that, whether on social media, transactional data with a private company or, indeed, the public sector. There is a general awareness of and unease about some of the practices in all three of those sectors.

Having said that, the Government are held to a different account. Our members—we are a member-based organisation—hold the Co-op to a different account. We are the custodian of their data, and we are owned by our members. Many of the services we provide or help to provide to our members, such as wills, probate and funeral care, are deeply emotive at a certain time of life. These services often depend on Government data being in very good shape about place, location and identity. It is a fair correlation to draw that there should be a symmetry between how an organisation like us should be governed and managed, and the rules that should apply to public sector data. That is not to say that all the data regulations which apply to all corporations and trading organisations need to be exactly the same as those for the Government. That would be a political issue far beyond my position to comment on. The Co-op would look to see that the Government uphold the highest possible standards, so that our members can get the best possible use of that public data.

Jeni Tennison: Perhaps I can add a couple of things. Mike has made the point well that the Government need to act as a model for how to do data sharing well, and how to be open and transparent about handling people’s personal data. The Government are in a position of authority there. However, the other thing to bring up is that we have a mixed economy for the delivery of public services, including the private sector, charities and social enterprises. There should be some scrutiny over the way in which those organisations are handling personal data in the context of delivering those public services.

[Nigel Huddleston]

Q Do you believe that there is a lot of work to do in terms of clarity, in order to allay some of the fears about which data are being used here? I have had emails from constituents, and there is a perception that Excel spreadsheets will be floating around universities with personal financial data and personal health records. It is nothing like that, is it? It is aggregated and anonymised. What can we do, what can Government do and what can you do to help clarify the opportunity, move the debate on to those opportunities and allay some of those fears about data protection?

Jeni Tennison: I completely agree that there needs to be greater clarity about which data are being shared with whom, and why and how. You say that we are talking here about the transfer of aggregate and anonymised data, but that is not necessarily the case for some of the pieces of data sharing that are in the Bill. Some of it is the sharing of individual-level data, but it is not clear whether those are bulk Excel spreadsheets or through APIs. Those are the kinds of details that actually make a difference to how anybody might think about this trade-off between privacy and the public good.

Mike Bracken: Perhaps another way of thinking about that would be to question whether there needs to be sharing at all. As Jeni said, the sharing of data in Government has many different forms. Hopefully, many of those are secure and anonymised. I have doubts about our overall data-sharing operations, simply because Government is so distributed and there are so much data. Adding more sharing, without a clear landscape under which that is happening, seems to add more risk of privacy violation and more risk to security. Perhaps a way to think about it is access rather than sharing. Many Government Departments, and many organisations, are able to provide individual data points at point of request to people who they trust. You can query a dataset using an application programming interface rather than sharing an entire dataset with Departments. I suspect it is that willingness to share very large sets of data in different ways for the convenience of Government Departments and agencies that is the root cause of the unease around the data sharing part of the Bill.

[Nigel Huddleston]

Q Forgive me, but is that not the point? I said let us focus on the opportunities but already we have gone on to the negatives and the concerns. It is often commented that by sharing health records we could cure cancer in 10 years. If I asked my constituents if they would share their health information with a university, 99 out of 100 people would say yes. We have to be more ambitious on the communication of the opportunities as well, have we not?

Mike Bracken: The opportunities are great and we are very supportive of that, but I suspect you did not ask each individual constituent if we should share everybody’s health data. That is the point. When we ask for data sharing it is down to an individual’s point of view. The Government use bulk data too often when what is actually required is only a small amount of data by another Government Department. There are different mechanisms that can do that more safely.

[Chris Skidmore]

Q The research power for data sharing, as presented, has been welcomed by many academics and civil society groups as a means of unlocking data for research for public benefit. Looking particularly at that data sharing with non-public bodies, do you recognise the benefits of that power? In terms of your point about communicating the value of the Bill, we have the research power and other things. Looking at vulnerable groups, such as troubled families, we have other powers that are there for public benefit. How do you feel we should express that public benefit?

Jeni Tennison: The benefits of each of the individual pieces of the Bill are different kinds of benefits to different kinds of people. I think they need to be separated out in some ways and not be muddled up together. That is one of the challenges with the Bill.