` House of Commons Standing Committee B (pt 1)
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Session 1999-2000
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Standing Committee Debates
Electronic Communications Bill

Electronic Communications Bill

Standing Committee B

Thursday 16 December 1999

[Mr. John Maxton in the Chair]

Electronic Communications Bill

Clause 8

Clause 10

Modification of licences by the Director

2.30 pm

The Minister for Small Business and E-Commerce (Ms Patricia Hewitt): I beg to move amendment No. 36, in page 10, line 39, leave out from `so' to end of line 42.

The Chairman: With this it will be convenient to take Government amendments Nos. 37 to 45.

Ms Hewitt: I start by apologising to you, Mr. Maxton, and to the Committee for the fact I shall be leaving our proceedings early this afternoon, although my hon. Friend, the Minister for Competitiveness, will be here to take over. In case the Committee finishes its deliberations before I return, I thank you, Mr. Maxton, for your exemplary Chairmanship, as I do my hon. Friends for their superb support. I also thank Opposition Members for their close scrutiny of the Bill, which has been a model of how Committee proceedings should operate. I propose to write to members of the Committee to clarify the scope of clauses 7 and 8, which we debated in a previous sitting, and make particular reference to Government contracts, the position of which is even more arcane and complex than I suggested then.

The amendments deal with modifications to telecommunications licences. Everyone accepts that the existing system for modifying telecommunications licences has become unworkable. The procedure was designed at the time of privatisation to deal with a couple of operators, but it is now swamped because there are hundreds of operators. The problem is that the existing system requires the Director-General to gain the written consent of all relevant licensees before he can proceed with any licence modification, even if it is a minor and technical modification. It would be almost impossible to make the necessary modifications.

Clause 10 puts in place a more flexible and efficient procedure, whereby silence on the part of the licensees allows a modification to proceed and the Director-General may make fast-track deregulatory modifications in cases where stringent tests are met. However, the telecommunications industry was worried about the further mechanism that was originally included in clause 10, which would have allowed the Director-General to proceed directly with the licence modification without referring it to the Competition Commission, if it seemed to him that objections to the modification did not represent a ``significant minority'' of licensees. The industry was concerned about that and about the possible scope for excessive discretion being given to the Director-General in deciding whether a minority was significant.

We recognise the scope of those concern, so we are removing by way of the amendments the ``significant minority'' mechanism from the revised licence modification procedure. That will leave in the place the simpler procedure that I have outlined. There is a real benefit to be gained, in that the mechanism will be deregulatory and simplifying. I hope that it will be welcomed by hon. Members on both sides of the Committee. There may be a need for more flexible procedures in future, but those can be dealt with during the broader process of reviewing and reforming telecommunications regulation generally, which we will develop next year.

Mr. Alan Duncan (Rutland and Melton): The Opposition are broadly in agreement with all that the Minister has said. Our approach to this part of the Bill has been to ensure that existing licence holders are in no way disadvantaged by any retrospective action that might take place. We welcomed the Minister saying on Second Reading that she would table amendments in Committee—we always think that it is good to remove certain aspects of a Bill and slim it down.

The pace of this Committee's deliberations has been quite swift. The Opposition has not received any representations on the amendments, but I am slightly worried that something may yet be said. From our conversations with Oftel and one or two telecommunications companies, it seems that the industry agrees with the amendments. Apart from that one caveat, we are content with what is proposed.

Amendment agreed to.

Amendments made: Government amendments Nos. 37, in page 12, leave out lines 1 to 18.

38, in page 12, line 34, leave out `, (3)'.

39, in page 12, line 41, leave out from `objected' to end of line 48.

40, in page 13, line 1, leave out `or (3)(b)'.

41, in page 13, line 14, leave out from beginning to `and' in line 19.

42, in page 13, line 24, leave out `or (3)'.

43, in page 13, line 26, leave out `or who has already objected to it'.

44, in page 13, line 28, leave out from beginning to end of line 8 on page 14.

45, in page 14, line 28, leave out subsection (6).—[Ms Hewitt.]

Clause 10, as amended, ordered to stand part of the Bill.

Clause 11

Appeals against modifications without the licensee's consent

Question proposed, That the clause stand part of the Bill.

The Chairman: With this it will be convenient to debate Government new clause 1—Appeals against modifications of licence conditions.

Ms Hewitt: In asking the Committee to agree to Government new clause 1, I am of course inviting the Committee to disagree to clause 11. The new clause allows us to tidy up a legislative loose end. Yet again, we are simplifying the statute book, and I am therefore confident that we shall have the support of the Opposition.

Clause 11 provides an appeals procedure that is specific to telecommunication licence modifications. We needed to include it to ensure compliance with the European convention on human rights. However, last month I laid a statutory instrument before the House that introduces a general appeals procedure into the Telecommunications Act 1984 for a range of telecommunications regulatory decisions. That statutory instrument will come into force on 20 December 1999.

The specific procedure in the Bill and the new general procedure are, to all intents and purposes, identical. The amendment therefore simply takes the logical step of removing the specific appeals mechanism from the Bill and expanding the general appeals system to include licence modification. The result will be one uniform procedure for appeals against all telecommunication regulatory decisions. I therefore ask the Committee to agree that clause 11 should not stand part of the Bill and that it should be replaced with Government new clause 1.

Question put and negatived.

Clause 11 disagreed to.

Clause 12

Ministerial expenditure etc

Question proposed, That clause 12 stand part of the Bill.

Mr. Nick St. Aubyn (Guildford): As we are generously allowing the Secretary of State to spend money, could she give us an idea of how much money she thinks will be required to fulfil her functions under the Bill?

Ms Hewitt: The clause is a standard provision. If we were to activate part I and put in place a statutory scheme, our initial estimate is that the costs would be about £500,000 in its first year. There will not be any costs to other parts of the Bill; indeed, part II will enable Departments to save money by substituting electronic procedures for paper and written ones.

Mr. St. Aubyn: Could the Minister clarify her estimate of £500,000 a year? If she were to bring in a regulatory regime, what assumptions is she making about how much money she will charge the industry for regulating it so that her own expenditure is limited to £500,000?

Ms Hewitt: I cannot provide great detail on that point, although I readily undertake to write to the hon. Gentleman on it. As he may recall from the discussions on part I and from his reading of the regulatory impact assessment, we have looked into the administrative costs of running a scheme and the possible costs to an approved provider of obtaining approval under the scheme, including the costs of obtaining approval by, for instance, complying with other standards and paying the fees in association with those standards. So the £500,000 that we anticipate as the cost of running a part I scheme, were it to be activated, would indeed be funded by fees. It would not be an additional net public expenditure.

Mr. Duncan: We appear to have hit some curious mathematics. If the costs will be only £500,000—the Minister has already told the Committee that the fee charged for a licence might be anything between £30,000 and £50,000—does she envisage only 10 people being charged such a fee or does she intend to make a profit from it?

Ms Hewitt: We discussed that during our debate on part I. It would be much more sensible to consider those issues in appropriate detail if we were to decide to activate part I. In the first year—to which the figures relate—our working assumption is that 10 providers will seek approval.

Mr. St. Aubyn: That is a very unsatisfactory reply. We have said from the beginning—and we shall say it again when we reach the next group of amendments, that part I is unnecessary. We are now being asked to write a blank cheque for the cost of part I. Although the Minister has admitted that she has done no research or deep thinking on what it might cost in the long run, we are nevertheless being asked to approve part I and write her a blank cheque for not only the effects of implementing part I but the costs of doing so.

Clause 12 ordered to stand part of the Bill.

Clause 13

Prohibition on key escrow requirements

Mr. Duncan: I beg to move amendment No. 59, in page 15, line 43, leave out from beginning to end of line 5 on page 16 and insert—

    `(a) treating an electronic communication as not having been made if the intended recipient is not in possession of a key for electronic data comprised in that communication and so notifies the sender within a reasonable time; or

    (b) imposing on a person who is under a duty to store and make available any data, and who stores it in any electronic form such that a key is required to gain access to the data or to make it intelligible, a duty to secure that the key is available when the data is required to be made available.'.

This is a small but crucial amendment, about which we feel quite strongly. I fully accept the Minister's good faith in saying that on no account did she want key escrow to be part of the Bill. Indeed, the purpose of clause 13 is to prohibit the requirement for key escrow. We all know the history of the debate. We openly admit that in the early stages it seemed to be a solution to the problem. However, we now accept—indeed, my hon. Friend the Member for Esher and Walton (Mr. Ian Taylor), the former Minister, has openly admitted it—that key escrow is not the solution to some of the problems that have been envisaged.

We are glad to see that, at least superficially, the purpose of clause 13 is to prohibit key escrow. However, the Bill is in some respects self-contradictory. Indeed, even though the clause is meant to ensure that it does not happen, subsection (2) allows such an open-ended exclusion that key escrow could come in through back door. I shall explain what our amendment would to.

Clause 13(2)(a) enables an unnecessary key deposit requirement to be imposed when all that is necessary is for an unintelligible communication to be treated as if it had not been made, provided that the recipient notifies the sender promptly that it is unintelligible. The amendment would substitute that more limited provision.

Clause 13(2)(b) is unnecessarily wide and would enable a general requirement for the introduction of key escrow or key recovery facilities. The amendment would limit the requirement to make a key available to only the relevant case—which is almost certainly already implied by law—and that is where the holder of the data is under a duty to hold the record and make it available.

So my fear is that the Bill may unwittingly allow arbitrary and—I accept—accidental key escrow requirements. It is the objective of both sides of the Committee to make sure that that possibility does not creep into the Bill. Everything that the Minister said on Second Reading corroborates that objective. I hope that, in that spirit, she will accept that our only purpose is to clarify the language to ensure that what she says she wants, which we also want, properly appears in the Bill, and that there is no curious and needless opportunity for key escrow to pop back into the legislation when there is no other need for it. I therefore hope that the Minister will be able to accept the amendment.

2.45 pm


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