Digital Economy Bill

Explanatory Notes

Policy background

Access to digital services

3 The Conservative Party Manifesto committed to roll out universal broadband to ensure everyone is part of the digital economy. Improved connectivity is essential for any ambitious nation, driving economic growth, quality of life, education, and engagement with public services. The January 2014 UK Broadband Impact Study further sets out the benefits of fast broadband.

4 "Superfast" broadband is a term used to describe broadband capable of delivering download speeds of at least 24 Mbps, which cannot be delivered through previous generation broadband technology. A range of technologies can deliver superfast broadband. The United Kingdom’s superfast broadband networks are largely provided through Virgin Media’s cable network and through BT Openreach’s "Fibre to the Cabinet" ("FTTC") solutions. FTTC is currently the main technology being used to extend superfast broadband coverage through publicly-funded projects but other technologies including "Fibre to the Premises" ("FTTP"), wireless, and satellite also have roles to play. In 2013 the government set an ambition that, by the end of 2017, 95 per cent of premises would be able to connect to superfast broadband. To ensure that coverage extends to areas where it would not be commercially viable for the private sector, the government, Local Authorities and devolved administrations are investing nearly £1.7 billion in improving broadband. There are also a number of projects trialling technologies to extend coverage to the final five per cent and in May 2016 it was announced that BT had confirmed more than £200 million would be available for reinvestment, because its contracts with government require it to return money to local authorities once certain take-up thresholds have been reached.

5 As the world goes increasingly online, those left behind risk social and economic exclusion. The government is therefore concerned to ensure that, where superfast broadband remains unavailable, a good quality broadband service is nonetheless available. In December 2015 the government launched a scheme offering a subsidised satellite broadband connection (including the option of superfast speeds) to homes and businesses unable to obtain an affordable broadband service of at least 2 Mbps. This scheme formed part of the government’s commitment to make sure every home and business in the United Kingdom could access speeds of at least 2 Mbps by the end of 2015. This commitment is termed the "Universal Service Commitment" and currently acts as a non-statutory safety net.

6 In November 2015 the Prime Minister announced that government was planning to create a broadband Universal Service Obligation ("USO") with the ambition to give people the legal right to request a broadband connection with speeds of 10 Mbps by the end of the Parliament. Unlike the non-statutory Universal Service Commitment, a broadband USO would be a legal right to request a connection, similar to the way the existing USO operates to request a telephone line or equivalent arrangements for utilities. On 23 March 2016 the government published A new broadband Universal Service Obligation, consulting on the proposal. On 17 May 2016 the government published its response to the consultation confirming plans to legislate.

7 The government expects the broadband USO to work in a similar way to the telephony USO that is enabled by section 65 of the Communications Act 2003 ("the 2003 Act") and implemented through the Electronic Communications (Universal Service) Order 2003 (SI 2003/1904). A provider or providers are designated to provide the service. In the case of BT, who is a designated provider under the telephony USO, a telephone connection is provided on request unless the cost of installing the connection exceeds £3,400 in which case the customer has the option of paying any additional costs. The government has commissioned Ofcom to provide technical analysis and recommendations on the design of the broadband USO and on 7 April 2016 Ofcom published Designing the broadband universal service obligation, inviting views from industry and others on how the detailed operation of the broadband USO will work. Ofcom will complete its report by the end of 2016. The broadband USO will be implemented under the power in section 65 of the 2003 Act and the Bill amends section 65 to provide adequate vires. The government will consult on a draft order once Ofcom completes its analysis.

8 In addition to ensuring the availability of broadband connectivity, the government believes that consumers need to be well informed about services available to them, be able to easily switch provider and be compensated if things go wrong. Ofcom also shares this belief and set out a similar position in their recent strategic review of digital communications, Making communications work for everyone, published on 25 February 2016.

9 The government believes that consumers should be able to more easily switch communications provider. In 2014 just 6 per cent of consumers switched their broadband or fixed line telephone provider, half the rate of switching of gas or electricity providers. For pay-TV the switching rate was just 2%. Since June 2015 Ofcom has successfully implemented gaining provider-led switching across the Openreach network. This means that customers wishing to change their fixed voice and/or broadband service provider only need to contact their new provider. No longer do customers also have to contact their existing provider to obtain an authorisation code that they must then give their new provider. The government supports this model and on 25 May 2016 published Switching Principles Action Plan setting out how the government wishes to ensure switching continues to be made simpler.

10 Ofcom has powers to require communications providers to adopt rules on switching under section 51 of the 2003 Act. The government is keen to see an extension of the 2015 switching reforms to the Openreach network extended to other electronic communication services, especially as many consumers now buy services in a bundle including mobile services and pay-TV. To ensure that Ofcom is able to achieve these reforms in a timely manner, the Bill will clarify that section 51 may be used to require communication providers to comply with switching conditions.

11 Electronic communications, and in particular broadband, are increasingly essential services like utilities, without which it is difficult to operate. Delays in connection and re-connection can be inconvenient and unless the consumer actively complains there is little incentive for the provider to improve quality of service. Consumers who suffer a power cut are protected by Ofgem’s Quality of Service Guaranteed Standards, which are service levels that should be met by each distribution company. If they fail to meet the level of service required, then customers may be entitled to a payment. The government wishes to see a similar scheme set up for those who have their communication services disrupted. The Bill will make clear that Ofcom is equipped with powers to achieve this.

Digital infrastructure

12 The electronic communications code ("the code") enables electronic communication network providers to install and maintain electronic communication networks by giving network operators certain rights. Under the code, operators are permitted to construct infrastructure on public land and have rights to install equipment on private land. With regards to private land, the code requires that operators contact the land owner before installing equipment but also provides that when permission is not given by the land owner an operator can apply to the County Court or Sheriff Court in Scotland to allow them to undertake the work. The code is found in the Telecommunications Act 1984, pre-dating the introduction of mobile networks in the United Kingdom and is widely considered to be out of date and in need of reform.

13 The government asked the Law Commission to review the code in 2012. The Law Commission published a detailed report on 28 February 2013, including detailed recommendations for reform of the code, but also advised government to carry out further consultation and research in some areas before proceeding. In early 2015, the previous government introduced amendments to the Infrastructure Bill, which would have reformed the code along the lines of the Law Commission’s recommendations. However, the measure was subsequently removed from the Bill, to allow further consultation and research to take place.

14 Following formal consultation in February 2015 and further analysis work, on 17 May 2016 the government published A New Electronic Communications Code, setting out plans to legislate. The Bill will reform the underpinning rights that communications providers have to acquire land - moving to a "no scheme" regime that ensures property owners will be fairly compensated for use of their land, but restricts their ability to profit from the public need for communications infrastructure. In this respect, it will put the telecommunications sector on a similar footing to utilities like electricity and water, and significantly reduce the cost of providing infrastructure.

15 The revised code will also provide new rights to upgrade and share infrastructure. The government intends infrastructure sharing to assist future deployment of technology such as 5G. Administrative changes to court processes are intended to allow for faster dispute resolution, making sure that disputes do not delay construction and maintenance of communications infrastructure.

16 The Bill will also enable an existing temporary relaxation of the rules for installing communications apparatus to be made permanent in order to further facilitate broadband infrastructure rollout. Communications network providers with rights under the electronic communications code ("code operators") are permitted to construct infrastructure on public land and take rights over private land. In addition to these rights, code operators are subject to conditions and restrictions relating to the installation, retention and use of electronic communications apparatus as set out in the Electronic Communications Code (Conditions and Restrictions) Regulations 2003 (SI 2003/2553) made under section 109 of the 2003 Act. Section 109 was amended by the Growth and Infrastructure Act 2013 that enabled changes to be made to these regulations relating to the installation of broadband cabinets and poles, relaxing the notification requirements placed on code operators, as well as the general requirement placed on them to bury new overhead lines underground. Complementary changes were made to planning legislation that enabled the installation of the infrastructure. In 2018 this easing of 2003 regulations will be reversed because the Growth and Infrastructure Act 2013 contains a sunset provision. The Bill will remove the sunset provision.

17 In 2013 the government consulted on the proposed planning changes. In response to concerns expressed in the consultation that the removal of prior approval requirements might lead to the insensitive siting of cabinets and poles, it was agreed that communications providers and planning authorities would develop and commit to a code of practice on the siting and appearance of apparatus to safeguard against this. On 5 March 2015 the Minister for the Digital Economy made a written statement announcing the outcome of a review of the operation of the code of practice. The review was conducted by a working group comprising representatives from a range of industry and sector organisations including the Planning Officers Society, English Heritage, the National Parks Authorities, Openreach, Virgin Media and the UK Competitive Trade Association (UKCTA). The working group jointly agreed that overall the code appeared to be working well. The government believes that the planning changes have been proven to work well and that the sunset provision should be removed to allow continued rollout of superfast broadband and future technologies.

18 The Bill also contains a number of measures relating to spectrum. Spectrum is the term generally given to the electromagnetic frequency range from 3kHz to 300GHz, considered the part of the electromagnetic spectrum that can be used for wireless communication. The government considers that making better use of spectrum is essential to facilitate the development of the United Kingdom’s digital communications infrastructure. Spectrum is national asset owned by the government, which is then licensed by Ofcom to a wide range of civil uses. In addition and separate from its role as the independent telecommunications regulator, Parliament has tasked Ofcom with managing and granting rights of use in relation to spectrum through duties and obligations under the 2003 Act and the Wireless Telegraphy Act 2006 ("the 2006 Act"). The Bill implements a number of measures that were first announced in the 2013 strategy paper, Connectivity, content and consumers: Britain's digital platform for growth.

19 White spaces are unused parts of allocated spectrum. These frequencies are not always used at a specific time or in a specific location. They are a technical consequence of the way spectrum bands are allocated, but they are also wasted space. The government is keen that better use is made of white space, and new technologies known as white space devices will share spectrum bands with existing users. This process is known as dynamic spectrum access and it enables white space devices, operating in frequency bands authorised by Ofcom, to connect to geolocation databases which identify when and where spectrum may be available for use. These databases are not regulated under existing legislation. The Bill will allow Ofcom to register and then regulate such database providers so that it is better placed to undertake its spectrum management duties and prevent interference and to help facilitate dynamic spectrum access.

20 In most regulated sectors it is normal to require the regulator to have regard to government priorities. For example, Part 5 of the Energy Act 2013 provides for the Secretary of State to set out the strategic priorities, and other main considerations, of the government in formulating its energy policy for Great Britain, and the particular outcomes to be achieved as a result of the implementation of that policy. Ofgem must have regard to the strategic priorities when carrying out regulatory functions; further, the Secretary of State and Ofgem must carry out their respective regulatory functions in the manner each consider is best calculated to further the delivery of the policy outcome. Section 2A of the Water Industry Act 1991 (as amended by section 24 of the Water Act 2014) allows the Secretary of State to publish a statement setting out strategic priorities and objectives for Ofwat in carrying out relevant functions relating wholly or mainly to England (section 2B makes equivalent provision for Wales). Ofwat must carry out those functions in accordance with any such statement. Radio spectrum is a limited resource that needs careful management with increasing demands from technologies dependent on mobile connectivity and it is the government’s view that a strategic approach is needed. The Bill makes provision for Ofcom to have regard, when carrying out its radio spectrum functions, to a statement setting out the strategic priorities of the government relating to the management of the radio spectrum.

21 Currently, where there is a contravention of a provision, term or limitation of a spectrum licence, Ofcom can revoke (or vary) the licence or prosecute. In limited circumstances, Ofcom may impose a financial penalty. The government’s view is that the current enforcement powers available to Ofcom in relation to such a contravention are not necessarily proportionate or sufficiently flexible in all cases. For example, spectrum licences granted to mobile network operators contain requirements to achieve certain rates of coverage, such as the term in the 900 MHz and 1800 MHz licences requiring 90% coverage of the United Kingdom’s landmass by the end of 2017. If these requirements are not met Ofcom’s only available sanction is to revoke the licence. The Bill will provide Ofcom with powers to issue financial penalties if matters such as coverage requirements are not satisfied.

Online pornography

22 The Conservative Party Manifesto committed the government to measures to restrict access to harmful sexualised content online, by requiring age verification for access to all sites containing pornographic material. In February 2016 the government published Child Safety Online: Age Verification for Pornography, consulting on how to implement the commitment. The government believes that commercial providers of pornography (material designed primarily to cause sexual arousal and stimulation), should have age verification controls in place where it is accessed online in the United Kingdom. The Bill provides for a legal requirement backed by regulation underpinned by civil sanctions. The regulator will be able to maintain a list of non-compliant sites and to provide that list to organisations through whom pornographers may receive payment including payment providers such as credit card companies to enable them to consider whether to withdraw services. Similarly the list can be provided to internet service providers.

23 The Bill does not provide for the blocking of non-compliant websites by internet service providers ("ISPs") on the basis that this would not be consistent with the treatment of other harmful or illegal content such as online terrorist material. Rather this approach will sit alongside the existing regimes. Firstly, the systems in place in relation to harmful content on line, for example the multi-stakeholder, voluntary approach underpinned by the Internet Watch Foundation, which provides a ‘notice and takedown’ service to advise ISPs, in partnership with the police, to remove this criminal content relating to children. Secondly, the major ISPs, covering 90% of the market, provide optional family friendly filters that are free to customers, and filter out a variety of potentially harmful or unsuitable content. Account holders (who must be over 18) are able to customise the settings of these filters, or indeed turn them off.

Intellectual property

24 The Conservative Party Manifesto committed to protect intellectual property and to make Britain the best place in Europe
to innovate, patent new ideas and set up and expand a business. The Bill contains a number of intellectual property measures to support creative industries.

25 The main ‘physical’ criminal copyright offences in the Copyright, Designs and Patents Act 1988 ("the 1988 Act") carry a ten-year maximum custodial sentence but the provisions governing online infringement, introduced using secondary legislation in 2003 in the course of implementing the Information Society Directive 2001/29/EC , provide for a maximum two-year sentence . In March 2015 the government published Penalty Fair, a study of criminal sanctions for copyright infringement available under the 1988 Act. This recommended that the offence for online copyrights infringement was increased to achieve parity with physical copyright infringement. In July 2015 the government published a consultation on changes to the penalties for online copyright infringement. On 21 April 2016 the government published a response to the consultation announcing its intention to legislate to increase the maximum sentence for online copyright infringement to ten years, achieving parity with the physical offence, and also to re-draft the offence to address wider concerns about the offence provisions themselves. The Bill will implement the necessary changes.

26 Currently, registered design owners can stamp or label their products with the word ‘registered’ and the relevant registered design numbers in order to ensure that anyone who infringes the design cannot later claim they were unaware of the registration, and so be excused from paying damages to the owner. The optional marking of a product in this way to make others aware of the intellectual property protection afforded to the product is sometimes called providing "constructive notice". Multiple rights may subsist in a single product, which may lapse or be revoked at different points in time. It is an offence to represent falsely that a design in any product is a registered design. Re-marking products when the details change in one right is very costly, both in terms of time and money. In July 2015 the government published a Call for Evidence on a proposal to introduce an option for design owners to mark their products with a relevant website address as a way of providing public notice of their intellectual property rights. The Bill will amend the Registered Designs Act 1949 to provide design owners with the option of marking a product with the address of a website which links the product with the relevant registered design numbers as an alternative way of providing constructive notice.

27 Section 73 of the 1988 Act exempts cable platforms, such as Virgin Media, from paying copyright licence fees to retransmit the core public service broadcaster channels, such as ITV1. The provision exists to support the specific policy objective of supporting the development of cable television infrastructure in the 1980s and 1990s. In March 2015 the government published: The balance of payments between television platforms and public service broadcasters: Options for deregulation, consulting on, amongst other things, repealing section 73. It was proposed that the measure was no longer relevant with the development of multi-channel and digital TV on satellite, terrestrial and increasingly internet based platforms. The Bill repeals section 73. In the government’s view, with over 4.5 million cable subscribers across the country, many of whom use the service for far more than just television, the objective of developing cable infrastructure is now met through other legislative measures such as reform of the electronic communications code – as above. Additionally under section 272 of the 2003 Act public service broadcasters must offer channels without charge so the legislation is no longer necessary. The repeal also removes a loophole that is relied upon by internet based live-streaming services who profit by retransmitting public service broadcaster content over the internet, substituting their own advertisements. See ITV Broadcasting Limited and others v TV Catchup Limited and others [2015] EWCA Civ 204, which has now been referred to the Court of Justice of the European Union for a second time.

Digital Government

28 In November 2012 the previous government published the Government Digital Strategy setting out the objective of delivering government services as "digital by default". The government’s view was that the public increasingly expects to access services quickly and conveniently, at times and in ways that suit them, often online. The strategy identified that up to that point, government had been hindered in delivering better services because of a reliance on digitised versions of pre-digital business processes, layered on top of legacy IT systems, some of which are over 30 years old. It was stated that out-dated back-end systems prevented effective data sharing.

29 In 2013 government started on a two year programme of open policy making to find a way of overcoming the legal barriers to the better delivery of public services, better research and better statistics (www.datasharing.org.uk). In February 2016 this process culminated in the government’s publication of Better Use of Data in Government, consulting on proposed reforms. The Bill provides the necessary legal framework to enable data sharing for a public benefit and will be a key enabler for the government transformation plan, that sets out in more detail how the government intends to deliver transformed public services over the lifetime of this Parliament.

Public Service Delivery

30 For a public authority to access information held in another part of the public sector it requires appropriate legal powers, which are often provided by express legal gateways to disclose information. The government believes that the current legal landscape of data sharing for public service delivery is unduly complex and inconsistent across public services and organisations. This may hinder the ability of public authorities to offer citizens timely and appropriate interventions and to respond quickly to a changing social and policy environment. 

31 The Bill provides a single gateway to enable public authorities, specified by regulation, to share personal information for tightly constrained reasons agreed by Parliament, where its purpose is to improve the welfare of the individual in question. To use the gateway, the proposed sharing of information must be for the purpose of one of the specified objectives, which will be set out in regulations.

32 The government is publishing draft regulations to demonstrate examples of the type of information sharing objectives that are envisaged and these are summarised in Annex B of these notes. The Annex also lists the public authorities who are likely to be specified in regulations, permitting them to use the power.

Civil registration

33 The Bill also provides a data gateway for civil registration information in England and Wales. Most transactions to prove eligibility for public services still rely on individuals providing paper birth, marriage, civil partnership and death certificates as evidence. The Bill will allow for electronic verification between public authorities and the General Registry Office, removing reliance on paper certificates. The government’s view is that this will also reduce the risk of fraud in relation to forged or altered certificates. Further, the Bill will enable access to civil registration data like births, deaths and marriages so that public authorities do not send letters to people who are deceased.

Debt and Fraud

34 The government is seeking to help individuals manage their debt to the public sector more effectively. The Bill will allow public authorities to pilot projects enabling information to be shared between specified persons to help improve efficiency, and create a more informed view of a customer's individual circumstances, and their ability to pay.

35 Government agencies work to detect and prevent losses to the public sector from fraudulent activity. The Bill will provide the ability for public authorities to pilot arrangements to enable the sharing of information between specified persons to spot conflicting information across different public services that could suggest patterns of fraud for further investigation by officials.

Research and Statistics

36 Official statistics produced by the Office for National Statistics ("ONS") are intended to support the development of economic and public policy and inform public and commercial decision-makers. The Bill provides ONS with access to administrative data from across government and businesses. The government’s view is that this will provide more accurate, frequent and timely statistics, instead of relying on surveys.

37 The Bill will also provide for the use of de-identified (de-personalised) data to support accredited researchers to access and link data in secure facilities to carry out research for public benefit.

Data Protection

38 The digital government measures in the Bill are aligned to the "Data Protection Principles" set out in Schedule 1 to the Data Protection Act 1998, in particular that the sharing or linking of data should be proportionate, (i.e. that the minimum amount and type of data necessary is used), and purposive - that the powers are constrained so that there are specific purposes for which data can be disclosed. The Bill provides that information cannot be disclosed under the powers if it contravenes the Data Protection Act or is prohibited by Part 1 of the Regulation of Investigatory Powers Act 2000. The Bill provides a new criminal offence for unlawful disclosure, and to further protect HMRC tax data once it has left the department, HMRC has continuing controls over their data shared under these powers.

39 Powers to create new information sharing objectives for public service delivery are limited by the Bill in that they must demonstrate that information is needed to improve a public service provided to individuals, or facilitate provision of a benefit to an individual. The objective must have as its purpose the improvement of the well-being of citizens. There is also a statutory duty to consult with the Information Commissioner, HMRC and others.

Ofcom and other regulation

Ofcom reports and information

40 Ofcom already has several powers to require communication providers to provide information for various purposes, in particular the power in section 135 of the 2003 Act that allows it to collect information for the purpose of fulfilling its regulatory function in respect of electronic communication services. The powers are limited and in particular Ofcom can only require communications providers to make data publicly available themselves for specific purposes such as consumer protection, but not to promote competition. Ofcom can publish information on its own website but it is limited in its ability to release information directly to third parties, such as price comparison websites. Further, a provider is not obliged to give Ofcom information that it does not presently have, either because it has not collected the information, or having collected it, has not retained it. The Bill will provide Ofcom with a broader information collection power that the government envisages could be used to obtain address-level data on broadband line speeds, in formats suitable for third party intermediaries to use to present comparisons; and for Ofcom to use for monitoring speed prediction accuracy. This could address one of the key problems consumers face: that providers only advertise estimated broadband speeds within wide ranges, often only at postcode level and the speed can vary significantly where premises are further down the road from the nearest curbside cabinet

41 In addition to this new information gathering power, the Bill will also amend some of Ofcom’s existing powers to collect information. Ofcom’s general information gathering power in section 135 of the 2003 Act will be widened to enable them to access customer experience data held by communications providers to ensure visibility of metrics such as the number of complaints received and the time taken to be resolved. Ofcom’s power to publish reports on the state of the country’s communications infrastructure every three years under section 134A, as inserted by the Digital Economy Act 2010, will be added to so that Ofcom can report more frequently where necessary in fast developing areas such as 4G coverage where the government has a target of achieving 90% coverage by the end of 2017. The Bill will also give Ofcom the power to publish comparative data that it already collected under section 136, and which the government believes could aid the consumer is determining which provider is offering a higher quality product.

Ofcom appeals

42 Sections 192 to 196 of the 2003 Act set out the rights of appeal against the majority of Ofcom’s decisions regarding the regulation of electronic communications networks, services and spectrum. These provisions also apply to appeals against Ofcom’s decisions in respect of radio and television regulation that are made under powers in the Broadcasting Act 1990, the Broadcasting Act 1996 and Part 3 of the 2003 Act for a competition purpose. These appeals are heard by the Competition Appeal Tribunal ("the CAT"), which the 2003 Act requires to carry out a review of Ofcom’s decisions "on the merits". In the case of appeals against price control decisions, the CAT must refer the case to the Competition and Markets Authority ("the CMA") and then decide the matter in accordance with the determination of the CMA.

43 The government believes that the existing "on the merits" standard of review is overly burdensome. A 2013 analysis by the Department for Business, Innovation & Skills found that the average length of an appeal to the CAT reviewed "on the merits" was 11 months. The high costs of continuing litigation and subsequent delays in the regulatory regime can hinder effective regulation that must be able to keep pace with technological advances in the sector. The CAT itself has stressed "an appeal before the Tribunal is not a de novo hearing" (BT v Ofcom [2015] CAT 6). The government therefore wishes to ensure that this is clearer in legislation. A judicial review standard will ensure that appellants can still challenge Ofcom’s decisions, but litigants will no longer be able to seek complete reappraisals of Ofcom’s fair decision making.

44 Regulation of the telecommunications sector in the United Kingdom must comply with the Framework Directive (2002/21/EC) for electronic communications. Article 4 of the Framework Directive requires Member States to provide a right of appeal for any user or network or service provider that is affected by a decision of the national regulatory authority to an appeal body. Member States must ensure that "the merits of the case are duly taken into account and that there is an effective appeal mechanism". The government’s view is that the requirement for the CAT to decide appeals "on the merits" goes further than is required by Article 4, and that a judicial review standard of appeal would be more appropriate. The intensity of judicial review is flexible, dependent on the circumstances, and can therefore duly take into account the merits of the case as required by the Framework Directive.

45 There is precedent for regulatory appeals to be decided on a judicial review standard. Section 120 of the Enterprise Act 2002 provides a right of review to the CAT of certain decisions of Ofcom, the Secretary of State or the Competition and Markets Authority in relation to mergers. The CAT is required to determine the application by applying the same principles as would be applied by a court on an application for judicial review. Similarly section 57 of the Postal Services Act 2011 provides for an appeal against Ofcom decisions on a judicial review standard.

46 There have been three consultations on this issue since 2010. Most recently, in June 2013 the Department for Business, Innovation & Skills published a consultation entitled Streamlining Regulatory and Competition Appeals, consulting on a range of reforms to the regulatory system, including the option of changing the basis of appeals under the 2003 Act to a judicial review standard. The Bill will now implement this reform.

Regulation and functions of the BBC

47 On 12 May 2016 the government published the white paper: A BBC for the future: a broadcaster of distinction, in which it was announced that Ofcom would be appointed as the external independent regulator of the BBC, as recommended by the independent review by Sir David Clementi. Section 198 of the 2003 Act provides that it will be a function of Ofcom, to the extent set out in the BBC’s Royal Charter and Framework Agreement between the BBC and the Secretary of State, to regulate the BBC’s services. The ‘BBC’s services’, as set out by the Act, do not cover all of the activities of the BBC, in particular, the BBC’s commercial services, online activities and the World Service. The Bill amends section 198 so that Ofcom can regulate all of the BBC’s activities. This is an enabling measure and the detail of what functions Ofcom will be required to carry out will be set out in the Charter and Framework Agreement.

48 As part the summer 2015 agreement between the government and the BBC, the BBC agreed to cover the full costs of the so-called ‘over-75s TV licence concession’ and to take on responsibility for the concession from 2020. The concession provides for free television licences (currently funded by the government) for those who have reached a qualifying age, currently set at 75 years. Section 365 of the 2003 Act enables the Secretary of State to make provision for concessions in relation to the payment of the licence fee, which may take the form of exemptions from payment or of reduced rate payments. The Secretary of State exercises the function of conferring concessions by making regulations. The Bill transfers to the BBC the function of making provision for a concession by reference to age (for persons who are aged 65 or over) to the BBC. The Secretary of State will retain the power to make provision for all other concessions as set out in the 2003 Act.

Direct marketing code

49 The Bill contains measures that the government believes will contribute to reducing the number of unwanted direct marketing telephone calls. The Information Commissioner’s direct marketing guidance sets out best practice to ensure that the law is complied with. The Bill will put this guidance on a statutory footing by requiring the Information Commissioner to issue a statutory code of practice on direct marketing. It is the government’s view that this will make it easier for the Information Commissioner to take enforcement action against those organisations in breach of the direct marketing rules under the Data Protection Act 1998 and the Privacy and Electronic Communications Regulations 2003 (SI 2003/2426) ("PECR").

50 Direct marketing without consent from targeted consumers is an offence under PECR. Consent for direct marketing does not last indefinitely and in PECR consent is referred to as only being given ‘for the time being’. The Information Commissioner’s direct marketing guidance is that if an organisation is making contact by telephone, text or email for the first time it should not, in most circumstances, rely on any indirect (third party) consent given more than six months ago, even if the consent did clearly cover that organisation. The Commissioner frequently sees situations where third party consent is taken to last indefinitely and to apply to any number of different companies and products. Fines imposed may be challenged and where the quality of consent is a core issue, enforcement has proven difficult to sustain. The Bill will aid enforcement of the regulations.

Ofcom miscellaneous

51 The government believes that economic regulators should be independent from government and funded by industry. Ofcom is largely funded through fees from industry for regulating broadcasting, postal services and communications networks. Additionally Ofcom is funded by government to perform statutory duties that do not permit the raising of fees or charges from industry, such as its duty to tackle silent and abandoned calls. Ofcom is prohibited from charging fees to cover these costs. As referred to above, Ofcom is also tasked with managing and granting rights of use in relation to spectrum and levies fees and charges on those who use the radio spectrum under the 2006 Act. In 2014/15 there were 79,910 2006 Act licences in issue, covering a wide range of frequencies, technologies and methods of use. Ofcom collects the money raised from these licences and pays it to into the Consolidated Fund. The government returns approximately £50m of these receipts as grant in aid to Ofcom to fund its spectrum management and other activities. The Bill will allow Ofcom to cover all its non-fee raising activities from spectrum management receipts and then only return the net proceeds to government. This will not increase costs or fees (other than for satellite filings – see below) but will create an accounting mechanism that allows Ofcom to be fully independent

52 The Bill will enable Ofcom to recover fees from satellite operators for the satellite filings made to the International Telecommunications Union, the United Nations agency for information and communication technologies. Satellite filings facilitate equitable access to and rational use of the natural resources of the radio-frequency spectrum and the geostationary-satellite orbit. The International Telecommunications Union manage this through the maintenance of a Master International Frequency Register so that frequency assignments and any associated orbits obtain international recognition and there is less chance of interference. Ofcom’s existing powers to charge fees do not currently cover satellite filings so they provide this service free of charge, with the cost of filings being covered by public money. The Bill will correct this anomaly, allowing Ofcom to charge, as is already the case for regulators in many other countries who charge for providing this type of service.

53 The Scotland Act 2016 implemented the Smith Commission Agreement, which was published in November 2014 having gained all‐party agreement in Scotland. The Smith Commission Agreement provided that Scottish Ministers should have the power to appoint a member to the Ofcom Board, Ofcom should lay its annual report and accounts before the Scottish Parliament and Ofcom to submit reports to, and appear before, committees of the Scottish Parliament. Sections 65 and 66 of the Scotland Act 2016 have implemented this. The government has agreed with the Welsh Government and the Northern Ireland Executive to make equivalent provision for those jurisdictions. This Bill makes provision for Northern Ireland. Clause 50 of the Wales Bill as introduced to the House of Commons on 7 June 2016 makes equivalent for provision for Wales.

 

Prepared 4th July 2016