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Session 1999-2000
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European Standing Committee C Debates

Telecommunications Legislation and Radio Spectrum Policy

European Standing Committee C

Wednesday 16 February 2000

[Mr. John Butterfill in the Chair]

Telecommunications Legislation and Radio Spectrum Policy

[Relevant Documents: European Union Documents Nos. 14320/98, 12838/99, 12839/99 and 12840/99.]

10.30 am

The Minister for Small Business and E-Commerce (Ms Patricia Hewitt): I welcome the opportunity to debate the future regulation of Europe's communications infrastructure and services. I remind the Committee how extraordinarily fast that whole area is moving. The markets already create about 15 per cent. of European Union gross domestic product and they are generating one in every four new jobs. The communications market and the information society will therefore have to drive Europe's single market and to reduce regional and social economic differences. It is thus essential that we get the framework right to deliver cheap and fast telecommunications.

The telecommunications markets in Europe, with the exception of Portugal and Greece, were liberalised from 1 January 1998. The purpose of the package of measures that has been proposed by the Commission is to simplify, strengthen and update the regulation of the sector so as to ensure, first, that liberalisation is effectively implemented and secondly, that regulation is effective, consistent and light handed.

The Commission has reviewed the package of measures to liberalise the market and offered its blueprint for a new regulatory framework. The two-month period for public consultation closed yesterday, but our Government have arranged that the formal United Kingdom response will not be delivered to the Commission until the Committee has had the opportunity to discuss the issues.

The new regulatory framework has to take account of competition and other changes since the markets were liberalised in 1998. That is why the review communication of last November drew on and was accompanied by several other documents, and why we have such a full pack for the debate this morning. We have the Fifth annual report on the Implementation of the the Telecommunications liberalisation package, the results of the consultation held on next steps in radio spectrum policy, the results of the consultation held on the convergence Green Paper and a report on the development of the market for digital television in the European Union.

I will start with the fifth implementation report. Besides the review documentation itself, the Committee has particularly identified that report for debate. It looks at how member states have transposed the liberalisation directives into national law and how the rules have been applied in practice. The result is a comprehensive assessment of a number of important regulatory themes: the structure and function of the national regulatory authorities--NRAs--licensing and interconnection, universal service, tariffs, numbering, radio frequency administration, rights of way and the state of competition in local access, which are all matters about which hon. Members are concerned.

The report finds that since full liberalisation at the start of 1998, competition in national telecommunications markets has been more vigorous than many had expected. The evidence is to be seen in significant price reductions across a wide range of services, an increasingly large choice of new services and a number of new market entrants. To give a little flavour of the impact of that competition, a 10-minute local call costs on average 13 per cent. less than it did in 1997 and long distance calls have fallen on average by 30 per cent. Therefore, we see real benefits to consumers as a result of liberalisation.

The Commission also identifies weaknesses that can be barriers, particularly for small businesses within the single market, and which need to be addressed in future regulatory framework. In particular, there is a low level of harmonisation between the licensing and interconnection regimes in different member states, divergence in how EC rules are implemented at national level, differences between the powers, resources and practices of the NRAs, poor enforcement of cost accounting rules, which can frustrate competition via interconnection and leased lines, lack of competition in local access, not only in the United Kingdom but right across member states--we are addressing that ourselves--and customers lack the leverage to complain effectively because tariff information is unclear.

That is the background and rationale for the Commission's regulatory framework review document, which is the next item on the agenda. The current regime has evolved over many years. It now contains more than 25 separate legal measures. It simply does not fit a new world in which markets are moving fast and broadcasting and telecommunications are converging.

The Commission advances five principles for the new regulatory framework. In future, regulations should be kept to a minimum; be based on clearly-defined policy objectives; strike the right balance between flexibility and legal certainty; evolve towards technological neutrality; and, whether they are agreed globally, regionally or nationally, they should be enforced as closely as possible in line with the activities that are being regulated.

Following those principles, the Commission proposes a structure that will include some sector-specific directives, non-binding measures through guidelines and self-regulatory codes that would be consistent with the directives but allow a much faster response to market changes, and gradually greater reliance upon the general competition rules of the treaty.

As far as the sector-specific legislation is concerned, the Commission proposes that five instruments will replace 20 current ones: the framework directive identifying specific policy objectives and four specific directives eliminating provisions that are no longer necessary and setting limits for NRAs' discretion. The new framework would cover licensing, access to infrastructure--in other words, the local loop--and interconnection, universal service and privacy and data protection.

Accompanying that would be the new "soft law" measures--the guidelines and codes of practice. That makes very good sense. In such a fast-moving market we need co-regulation wherever possible, with Governments working in close partnership with business and consumers. Indeed, I have just come from launching Trust UK, which is an example of such a co-regulatory approach.

The next item to which we need to turn our attention deals with radio spectrum matters. It may help if I explain that the proposal for a European Parliament and Council decision on spectrum policy, which would form the basis for further harmonisation at Community level, is potentially wide-ranging. We fully share the objectives of rapid and effective action at EU level to secure spectrum harmonisation where major Community interests are at stake. However, we have told the Commission that we will examine carefully the specific proposals that it is likely to produce in the next few months. We welcome the fact that it has acknowledged the importance of the role of the CEPT--European Council for Post and Telecommunications)--, which is the 42 European-nation body, in international spectrum management and its desire to build upon rather than duplicate existing mechanisms. However, we want to ensure that any delegated authority for this purpose given to the Comission under the comitology procedures does not bypass the machinery of the European Parliament and Council of Ministers in areas that should properly be subject to political control.

At the Telecoms Council on 30 November 1999 I gave this regulatory blueprint a warm welcome, as did all my colleagues from other member states. We endorsed the five principles to which I have referred. The Telecoms Council will meet next on 2 May. At that point, we shall not have any new legislative instruments before us, but we shall need to react quickly to the report that the Commission will release in mid-April on its consultations about the future regime. This debate therefore provides a valuable and timely opportunity to sharpen the UK contribution to that process. We have exercised a leading and influential role in the development of EU thinking on convergent markets and it is essential that we keep up that work.

The Chairman: We now have until 11.30 am at the latest for questions to the Minister. I remind hon. Members that questions should be brief and asked one at a time, please. There should be ample opportunity for all members of the Committee who wish to do so to ask more than one question.

Mr. Alan Duncan (Rutland and Melton): I thank the Minister for her opening remarks. By and large, we Opposition Members agree with the tenor of her comments--the wish to see continuing liberalisation and increased competitiveness. The scale and significance of the communications changes are massive and we all appreciate that we are in the midst of an enormous revolution.

The Minister briefly mentioned local loops, which are crucial to the speed of change and the access that more and more internet users will enjoy. What measures does she propose specifically to require local loop unbundling, not only in Britain but throughout the European Union?

Ms Hewitt: To start with the position in the United Kingdom, our regulator, Oftel, has reached an agreement with BT under which the local loop will be unbundled no later than July of next year. That is an extremely important measure providing the framework for the roll-out of asymmetric digital subscriber lines-- ADSL--the new technology in the local loop that will increase its transmission capacity and is on track for the first 400 exchanges by next month.

Oftel has made it clear that the reason for that timetable of July next year is that we have to go through a process whereby BT and the competing operators trial the process of co-location within the local district exchanges. That is not a trivial problem and it is important that we deal with the practicalities so that when local loop unbundling happens there are robust processes in place to ensure that competing operators can have their own engineers operating from within a single exchange and that roll-out happens smoothly. Oftel has also made it clear that if as a result of the pilots that are taking place this year it becomes possible to bring forward the July 2001 deadline, that will be done.

In relation to the rest of the European Union, the European Commission is itself proposing in a directive that local loop unbundling should be mandated across all member states. It has already been agreed in several member states and implemented in others and is the subject of consultation in many. We are all proceeding apace on the issue of local loop unbundling.

Mr. Duncan: Is not the Minister rather concerned that, despite the Chancellor's bragging this morning to the newspapers about his agreement with Oftel, BT has now said that it knows nothing about it. It seems a curious way of proceeding that the main company involved should be unaware, when the Chancellor tells the public what he claims to have achieved. Exactly what are the Government doing at EU level to promote lower access prices to the internet? What is happening with the link between the EU and the United States of America in terms of the backbone that will be used for internet access across the Atlantic? Are there any mergers at the moment that give the Minister any concerns about undue monopoly control of that access?

 
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Prepared 16 February 2000