Memorandum submitted by the National Consumer
Council
SUMMARY
How the communications sector is regulated and
what it delivers are of crucial importance to consumers. The existing
regulatory arrangements are confusing and inadequate in dealing
with this rapidly converging sector. A more cohesive structure—in
the form of an Office of Communications (OFCOM)—is long
overdue.
The delay in publishing draft communications
legislation was disappointing. So it is vital that the Government
publishes the draft Bill soon and consults widely on its provisions,
including pre-legislative scrutiny. It is illogical to exclude
the BBC from OFCOM's remit as it should be independently regulated.
The paving bill should be amended to require the BBC Board of
Governors and OFCOM to prepare for planned transfer of responsibilities
to OFCOM. Interim measures should be introduced to make the current
system of BBC regulation more transparent and accountable.
The relationship between OFCOM's objectives
should be made clear and we consider that protection of consumers'
interests should be the over-arching objective. Regulation needs
to be proportionate and appropriate and must be retained where
necessary to protect consumers' interests and foster effective
competition.
The proposal to set up a Communications Consumer
Panel is strongly welcomed. To do its job properly, the Panel
must be independent and adequately resourced, with a remit to
cover both economic and content issues where there is a consumer
interest. It must cover all key players including the BBC.
Universal access to public service broadcasting
(PSB) was a key plank of the communications white paper. Government
needs to set out its vision for the future of PSB in a digital
era, and initiate a full public debate about the future delivery
and funding of PSB. More clarity is also needed on how analogue
switch-off will be achieved. The Government's tests of affordability
and availability must not be diluted.
Given the risks of misleading information for
consumers about digital equipment and services, Government should
take the lead in ensuring consumers have access to comprehensible
and accurate information on these matters. We think that OFCOM
should have a general duty to ensure provision of clear information
to consumers about the communications sector.
Greater flexibility in positive content regulation
must not lead to consumer detriment or result in a public relations
exercise. OFCOM will need to draw up good practice guidelines
on issues such as the criteria for assessing performance, and
will require a range of powers and sanctions if performance is
unsatisfactory. The BBC should be required to adhere to these
guidelines as well. All broadcasters should be obliged to take
account of OFCOM's observations on key cross-industry PSB issues.
The Government's strategies and initiatives
on digital, internet, broadband and e-government need to be streamlined
and clarified. What is meant by the goal of universal internet
access should be made clear, together with how this can be achieved
through the various technological means. We consider that more
emphasis is required on the consumer interest, including the interests
of consumers on low incomes and in rural areas.
1. INTRODUCTION
The National Consumer Council's purpose is to
make all consumers matter by putting forward the consumer interest,
particularly that of disadvantaged groups. We research, campaign
and work with those who can make a difference to achieve beneficial
changes for consumers. One of our key objectives is to ensure
that markets and public services work for everyone. We have been
lobbying for some years for fundamental changes in the regulatory
structure for communications, including the establishment of a
single regulatory body—OFCOM.
We pay particular attention to strengthening
consumer representation. To this end we have been campaigning
for some time for improvements in consumer representation arrangements
in communications. We look forward to the setting up of the proposed
Communications Consumer Panel and hope that it will be given the
tools to represent consumers' interests effectively in this fast-moving
and complex sector.
The National Consumer Council strongly welcomed
the overall themes of the communications white paper (A New
Future for Communications), the precursor of forthcoming legislation
which is expected to introduce far-reaching changes in regulation
and consumer representation. But a number of key issues remain
to be resolved which we discuss below.
The consumer interest in communications is about
ensuring universal, affordable access to a wide range of good
quality services, choice and diversity in those services, fair
treatment of consumers in pricing and service conditions, and
ensuring minority interests are met.
We welcome the opportunity to make a submission
to the inquiry, and the Committee's continuing interest in issues
relating to the anticipated Communications Bill and related matters.
Our submission follows the order of the topics listed in the Committee's
call for evidence, and concentrates on those areas where we have
carried out work. Our recommendations are listed at the end of
the report.
2. COMMUNICATIONS
REGULATION
We believe an Office of Communications (OFCOM)
makes sense for consumers and industry alike. We have called for
more streamlined and coherent regulation for a converging sector
for a number of years. Current arrangements risk duplication,
or issues falling through gaps, so we strongly support a single
communications regulatory authority.
Given these potential benefits, the delay in
the publication of the draft Communications Bill, and expected
legislation during the current parliamentary session, was disappointing.
This is particularly acute in the case of telecommunications,
given that more consumer-focused regulatory reforms and proposals
to improve inadequate consumer representation arrangements were
dropped from the Utilities Bill in March 2000. The delay has also
affected the setting up of the proposed Communications Consumer
Panel, a body which is urgently needed to represent consumers'
interests in this fast-changing and complex sector.
So we are anxious that the Government should
publish the draft Communications Bill soon, as an indication of
continued commitment to these reforms. This interim period should
be used to consult widely before introducing the Bill in the Queen's
Speech at the end of the year. The delay notwithstanding, we regard
the paving bill, which will establish OFCOM, as a welcome step,
facilitating the significant preparatory work that needs to be
done.
To assist in the preparation and passage of
the legislation, it would be helpful if it was subject to pre-legislative
scrutiny. Legislation establishing other regulatory bodies was
scrutinised in this way. The Food Standards Bill establishing
the Food Standards Agency, for example, was scrutinised by a committee
made up of members of the Health and Agriculture Select Committees.
While we broadly welcome the paving bill, the
BBC's Board of Governors is a notable omission from the list of
bodies required to prepare for transfer of their regulatory functions
into OFCOM. If it is necessary for other regulators and OFCOM
to do so, then logically this should also be the case for the
BBC Governors. Even if the transfer of their responsibilities
to OFCOM does not actually take place until further down the line
because of the timing of the BBC Charter renewal process, the
Board of Governors should be included in order to establish a
foundation for a more cohesive regulatory structure (we discuss
the BBC's regulation in more detail below).
3. POLICY DEVELOPMENTS
Government objectives
A critical task for Government is to define
OFCOM's objectives to ensure that it delivers on the communications
white paper welcome objectives relating to access to high quality
and diverse services, and safeguarding the interests of consumers
and citizens.
The Towers Perrin report (OFCOM Scoping Project,
October 2001) stated that OFCOM's regulatory objectives are now
seen as falling under five headings:
a. furthering the interests of consumers;
b. encouraging dynamic and competitive
markets;
c. securing the continuing availability
of high quality broadcasting content;
d. protecting the interests of citizens;
and
e. encouraging efficiency and innovation
in the management of radio spectrum.
We recognise that OFCOM will have to balance
a number of objectives, and it should have a duty to explain how
it has done so when making decisions. However, we consider it
would assist in clarifying OFCOM's core mission if there were
to be fewer objectives and the relationship between them made
clearer. In particular, promotion of competition should be seen
as a means to an end, rather than an end in itself. Competition
is often beneficial to consumers, delivering new services and
additional choice. But other regulatory actions are often necessary
to protect consumers' interests. In our view, OFCOM's objectives
should be framed within a hierarchy so that the protection of
consumers' interests is the over-arching objective.
Tough regulatory action is often required to
ensure that markets become and remain effectively competitive,
and to protect consumers' interests where there is market failure.
Many consumer benefits have come from regulated competition, rather
than unfettered competition, for example, from regulatory controls
on energy, and on telecommunications prices. There is a continuing
need in the telecommunications market for the regulator to pursue
initiatives to foster effective competition, and to ensure universal
service. Regulation will need to be retained where necessary to
protect consumers' interests, to promote effective competition,
and to meet public policy goals, for instance, on public service
broadcasting.
We strongly support the proposal to bring together
economic and content regulation. There are overlaps between economic
and content issues, and this rightly lies behind the logic of
a unified regulatory authority. It is vital however to get the
balance right. Neither should be dominated by the other, and this
should be reflected in the objectives of OFCOM and the choice
of board members. Arrangements to help the OFCOM Board deal with
content matters should be located within OFCOM, through its sub-committee
structures - that is, under the Board's responsibility rather
than alongside it. It will also be vital to ensure that the Board
includes members with expertise in looking at issues from a consumer
perspective.
OFCOM's objectives and duties should reflect
the welcome emphasis in the white paper upon ensuring universal
access for consumers to a good choice of high quality services.
But what new services should this involve? And how should they
be made available?
OFCOM should have a particular duty to take
account of the interests of disadvantaged groups of consumers,
in line with other regulators, such as OFCOM and Postcomm. In
this sector, it is important that communications technologies
help to combat—rather than exacerbate - social exclusion.
This is particularly relevant to those consumers on low incomes
and those living in rural areas, and for access to the networks—for
example, digital broadcasting and mobile phones.
The Communications Consumer Panel
Consumers need a stronger voice in the communications
sector to ensure their interests are effectively represented to
decision-makers and industry. We therefore welcomed the government's
white paper commitment to establish a Communications Consumer
Panel. We now look forward to further detail to ensure it can
effectively and independently represent the consumer interest.
The key terms of reference of the Panel should
be set out in statute in the draft Communications Bill. The Panel
will need to be adequately resourced, and capable of engaging
with, and influencing, the full range of stakeholders. The Panel's
independence from OFCOM should be made clear. The Panel must be
a partisan advocate, setting its own agenda and promoting its
views on behalf of the consumer interest.
Access is important, but the question is: access
to what? The consumer interest covers the choice and quality of
services, as well as how they are delivered. The government should
clarify that content issues will come within the Panel's remit
where there is a consumer interest. Moreover, if the Panel is
to do its job of articulating consumers' concerns effectively
across the communications sector, it must cover all the key players—including
the BBC as the major public service broadcaster.
The Communications Bill should specify the role
and functions of the Communications Consumer Panel and ensure
that it will have the remit, legal standing, duties and resources
to represent consumers' interests effectively.
Public service broadcasting
The expansion of spectrum through digital technologies
offers the chance to expand public service broadcasting provision.
The consumer need for public service broadcasting remains constant
but the market alone cannot be relied on to offer affordable and
universal access to diverse and high quality broadcasting. The
National Consumer Council commended the communications white paper's
emphasis on universal access to public service broadcasting (PSB).
So we now have expectations that the forthcoming Communications
Bill will deliver on this vision.
We note the previous recommendations of three
general principles by the Culture, Media and Sport Committee (A
new Future for Communications, Second Report, Volume 1, Report
and proceedings of the Committee, March 2001) to guide the future
provision of public service broadcasting that were not fully reflected
in the white paper, paraphrased here:
— While the BBC, ITV, Channel 4 and
Channel 5 will continue to produce considerable public service
content for the foreseeable future, it does not follow that their
output can be equated with public service broadcasting.
— The current position of "privileged
broadcasters" (PSB broadcasters) brings with it very considerable
costs, and these costs should be transparently identified and
continuously assessed.
— The focus in future should be on
ensuring the provision of public service content from whatever
source is most appropriate rather than on protecting the privileges
of certain broadcasters for their own sake.
We welcome the Committee's recognition of the
need for fuller exploration of the principles which should underpin
the PSB framework, and we agree with the Committee's comment in
the same report that "public service broadcasting is a constantly
changing phenomenon." However, we consider that more clarity
is required about what content (in broad terms) should be universally
available in the new context. An overall picture of the evolving
PSB sector needs to be developed, setting out what should be universally
available to consumers on a free-to-air basis across the different
PSB channels.
We are not recommending a list of detailed types
of content to be provided by each PSB broadcaster. What is needed,
however, is a clearer vision from which a framework can be developed
for PSB in the digital era so that it is possible to see in broad
terms where the various broadcasters fit within the jigsaw. This
should set out the obligations of the different broadcasters,
the funding they are allocated to fulfil them, and ensure they
are properly accountable for their performance. The framework
should be flexible, leaving room for new entrants in the provision
of PSB, in the context of the increased capacity made possible
by digital technology.
The Government should set out a vision for the
future of PSB, so leading a debate about how it should be delivered
and funded in the digital era, with particular emphasis on the
role of the BBC.
The BBC
As the key public service broadcaster, it is
illogical and runs counter to the consumer interest to exclude
positive content regulation of the BBC from the remit of the new
communications regulator. The white paper put forward a convincing
case for a single regulatory authority for communications. Yet
the Government's current proposals retain more than one regulator:
OFCOM and the BBC's Board of Governors. Two largely unconnected
streams of regulation are not in the consumer interest and against
the logic of streamlining the regulatory structure.
It is generally accepted that independence is
a prerequisite for effective regulation. But the BBC is largely
self-regulated by a part-time Board of Governors—serviced
by BBC-appointed staff—that also sets the BBC's overall
strategy and appoints its senior management. According to the
Standing Orders of the Board:
The Governors' role is in certain respects
analogous to that of the Board of a public company, since they
oversee the discharge of executive functions by the Director General
and his staff. In other respects their role is analogous to that
of a regulator; ensuring that the BBC acts in accordance with
the obligations placed on it by the Charter, by the Agreement
and by Statute
(The Board's Standing Orders, BBC web site,
June 2000).
A public company would be hard pressed to persuade
the outside world that it was acceptable for its own board of
directors to have the dual functions of regulating the company
and setting its strategy. As a publicly funded body, the BBC should
be independently accountable for its performance within the wider
framework of public service broadcasting.
External regulation of the BBC should not endanger
its independence:
OFCOM would not interfere in detailed scheduling
or editorial decisions. Also, not all broadcasters would need
to be regulated identically. OFCOM would regulate the BBC, like
all broadcasters, according to their particular role and remit.
Its decisions will need to be justifiable in the light of its
objectives, centring on the interests of consumers.
We note the Culture, Media and Sport Committee's
previous comment:
We find it absurd to suggest that Parliament's
role in reviewing the BBC's status would somehow be diminished
if the BBC were subject to equal treatment with other broadcasters
in legislation that will doubtless be subject to extended and
detailed consideration by both Houses of Parliament. We recommend
that the House of Commons be given a full opportunity early in
the next Parliament to consider the future regulation and governance
of the BBC as part of the process leading to enactment of the
new regulatory regime.
(A new Future for Communications, para.
129, Second Report, Volume 1, Report and proceedings of the Committee,
March 2001)
We agree. We strongly recommend that the draft
Communications Bill incorporates the BBC fully within OFCOM's
remit.
In the regrettable absence of the BBC being
brought within OFCOM in the Commmunications Bill, there are other
measures which could result in a more coherent framework for PSB
than we have at present. We were encouraged by Baroness Blackstone's
statement in the House of Lords (Hansard, Column 1271,
29 October 2001,) that:
The aim is to treat all broadcasters in a
similar manner . . . Broadly speaking, the BBC will be subject
to the same degree of standard-setting and monitoring as all the
other public service broadcasters for each of the three tiers
regulated by OFCOM . . . (the BBC's) position will be brought
much closer than it has been to that of other broadcasters.
Interim measures should be introduced to make
the current system more transparent and accountable. There needs
to be more detailed scrutiny of the way the Governors fulfil their
regulatory role but, in order for that to take place, clear information
is needed on how they carry out and separate their regulatory
and management functions.
The Governors should be required by the Secretary
of State to differentiate clearly between regulatory and non-executive
management activities, and report on them. The Department for
Culture, Media and Sport should devise a set of criteria and audit
procedure for assessing the effectiveness of the Governors' regulatory
performance, building on good practice elsewhere and with open
consultation. The government should set out ways in which regulation
of the BBC can be aligned more closely with that of other broadcasters
in the run-up to the Charter Review.
Content regulation
Commercial public service broadcasters are to
be given more freedom to regulate themselves on their qualitative
public service remits but it is crucial that the companies' statements
of programme policy are meaningful. Without setting down a rigid
set of rules, it will be necessary to foster high standards and
consistency across PSB broadcasters—including the BBC—in
areas such as criteria for assessing performance, and the process
for drawing up the statements including consumer consultation.
OFCOM should draw up good practice guidelines covering these statements
to ensure their overall coherence to help formulate an overall
picture of PSB. They should therefore include the timetable for
publication and overall presentation.
The recent move away from "box-ticking"
and "clock-watching" regulation of PSB is sensible.
However, the proposed three-tier regulatory structure should be
based on robust co-regulatory arrangements. Greater regulatory
flexibility should not lead to less effective regulation or to
consumer detriment. Broadcasters" obligations must be clear,
measurable and lend themselves to outside scrutiny, and OFCOM
will need a range of powers and sanctions at its disposal.
It would also be useful for the broadcasters
to discuss jointly their approaches to drawing up the programme
statements and performance assessments from time to time, and
there will need to be room for independent consumer commentary
on the adequacy of the processes. They will, of course, be in
close and regular touch with OFCOM. But it might also be helpful
to require the industry to meet annually to discuss these matters
with each other and with OFCOM and consumer representative organisations.
If performance against obligations is unsatisfactory,
OFCOM will need a range of sanctions, beyond the rather extreme
option of licence revocation, which should be laid down in statute
and available to OFCOM as reserve powers. To ensure transparent
and accountable regulation, OFCOM should set out its criteria
to determine when its backstop powers might need to be enforced.
OFCOM will be expected to report periodically
on key cross industry PSB issues. All licensed broadcasters—including
the BBC—should be formally required to take account of these
observations in drawing up their annual statements, and report
on how they have done so. OFCOM should also advise the Secretary
of State on how the Governors are carrying out their duty to regulate
the BBC effectively. The advice should be published.
Analogue TV switch-off
The Government's recently published Digital
TV Action Plan (Department for Culture, Media and Sport and
the Department of Trade and Industry, December 2001), while a
welcome first step, was a long way short of a coherent and comprehensive
strategy for achieving digital switchover. Fundamental questions
still need to be addressed about government's public policy goals,
universal access, the future of digital terrestrial television
(DTT), and fostering effective competition and key consumer protection
issues.
Switching off the analogue TV signal is of huge
significance to consumers. New and exciting choices could become
available in the digital era. But there is a risk that some consumers
could lose out in a complex and evolving marketplace.
The Government's current strategy relies heavily
on a market-led, voluntary conversion to digital. Commercial effort
and consumer uptake of digital has been concentrated on pay-TV.
Indeed, many consumers possibly equate digital television with
pay-TV.
But pay-TV is unlikely to drive digital switchover
in all UK households. Progress has been made, but most consumers
who have switched were existing subscribers to satellite or cable
analogue services. Many consumers indicate that they are unable
to afford, or are disinterested in, opting for digital TV (see,
for example, Turn on, tune in, switched off: consumer attitudes
to digital TV, Consumers' Association, March 2001, and Digital
decisions: viewer choice and digital television, report by
the Viewer's Panel, Department for Culture, Media and Sport, December
2001). It seems unlikely that the current digital offering will
attract sufficient consumers to allow switchover, so the government
needs to clarify how it intends to meet its goal.
The Prime Minister recently described the projected
date of switchover between 2006 and 2010 as "achievable"
(speech at the Confederation of British Industry's National Conference,
November 2001). We are uncertain how this will be achieved in
current circumstances. The Digital Action Plan restated that switchover
will take place "when—and only when—the two tests
of availability and affordability are met." Although the
tests could be more clearly defined, they are nevertheless very
welcome. Switchover should be test driven, not date driven. The
government should resist any pressure that may build to dilute
the tests in order to fulfil the target timetable.
Cost will be an absolute barrier for some consumers
and government may need to offer a range of financial incentives
or other mechanisms—such as free set-top boxes to ensure
access for all to PSB. Certainly, an affordable and attractive
free-to-air, non-subscription based option must be widely available.
It is unacceptable to switch-off analogue in the absence of this
choice.
It is argued that DTT adds to consumer choice,
is the least disruptive option, and could reach near-universal
coverage. The Government may regard the platform as key to developing
a compelling offering for the many consumers resisting digital,
and vital in ensuring consumers have access to free-to-air public
service channels. If so, there are some significant issues to
be addressed. The first of these relates to equipment. The integrated
digital television set is one means of accessing free-to-air content
without subscribing. But massive reductions in the price would
be necessary to make this a mass-market proposition. A cheap,
stand-alone set-top box, distinct from current commercial offerings,
may be a better option.
Measures to improve the reach and quality of
the signal are absolutely necessary. More significant initiatives
with public resource implications may be required. But is this
is good use of public finance? Alternatively, if DTT is not critical
to government strategy, the government will need to outline how
other platforms could deliver the public policy goals.
The majority of viewers continue to rely on
analogue services. The introduction of new services should not
adversely affect investment or scheduling for analogue services.
Nor should broadcasters be pressured to migrate content—particularly
PSB—to digital channels leaving only poor quality programming
for analogue viewers.
The pull of new content should encourage consumers
to switch to digital, not the push of reductions in the quality
of analogue content. Consumers must not feel compelled to switch
to digital because it is regarded as a technological advance—they
should conclude for themselves whether it is an attractive and
affordable proposition. The Digital TV Action Plan emphasises
the role of the BBC in promoting digital. We urge caution in altering
the BBC's function from one of content provider to promoter of
digital. Viewers, especially those who are poorly informed or
vulnerable to exploitation, may be rushed into switching if they
misunderstand the promotional messages.
We are disturbed that the government proposes
to investigate the transition to exclusive sales of integrated
digital TVs. A move to exclusive sales is unnecessary and contrary
to consumer interests because of the serious restriction in choice.
Consumers should have the option of purchasing an analogue television
set, which they may wish to supplement with a set-top box.
It remains to be seen to what extent the Government's
proposed Digital Television Project will ensure that consumers'
interests are seen as paramount in the delivery of the Digital
Action Plan. The National Consumer Council has been invited to
be represented on the Stakeholders' Group and the Market Preparation
Group, being set up by government, which we welcome. But we remain
concerned about the balance between industry and consumer interests.
Consumer information
Consumers are confronted by a fast changing
market in communications equipment and services. The digital era
offers extra choice to consumers, but it also brings added complexity.
Government, industry and regulators have roles in ensuring that
consumers are confident to make the right decisions: being armed
with the right facts, in the right format and from a credible
source.
Until recently there was one means of delivery
and a handful of channel choices. Now consumers choosing a new
television set, are faced with a multitude of decisions on platforms,
providers and programming packages. But there is evidence that
the quality of retailer advice is patchy at best. Last year (June
2001) the National Consumer Council commissioned a small mystery
shopping exercise to test the quality of information and advice
offered when buying digital television services.
We uncovered vast differences in the quality
of information and advice offered on digital television. There
were many examples of incomplete, misleading and inaccurate observations
made about a number of issues that are important to consumers
when making decisions on digital. In particular, shop assistants
conveyed inaccurate information about the scheduled date of analogue
switch-off. Incomplete and highly partisan advice was offered
about the digital platform choices available to consumers. In
addition, most assistants gave no indication of the possible need
for aerial upgrades or video problems. The research suggests that
consumers are having to make choices without the benefit of the
full facts. There is a clear risk of consumers being confused,
or even potentially misled into making the wrong decisions.
A long-term, public information strategy is
still missing from the Digital TV Action Plan. The Government
should take the lead in co-ordinating an information campaign
with the support of consumer organisations. But any information
campaign must have a clear aim to increase knowledge rather than
sales.
In addition, training for retail staff should
be a priority. The proposed review of national training plans
(Department for Culture, Media and Sport and the Department of
Trade and Industry, Digital TV Action Plan, December 2001)
could be helpful, but resources are necessary to make them effective.
Unless more is invested in training staff, misleading practices
may lead to investigations by trading standards officers or even
the Office of Fair Trading (OFT).
Looking ahead, the new OFCOM should have a role
in ensuring consumers are equipped to get the best out of a fast
evolving market. The anticipated Communications Bill should include
a duty on OFCOM to ensure provision of clear information to consumers.
The government should require OFCOM to pursue initiatives that
improve the financial and technical skills of consumers, aiding
their confidence when negotiating the digital environment. This
is similar to the Financial Services Authority's role in providing
information and skills for consumers in that complex, evolving
sector.
Implications for regulation
We also need to consider the future of economic
regulation in a post-switchover marketplace. Digital cable is
likely to continue to be unavailable in many parts of the country.
Latest figures (October 2001) show that the number of homes passed
by cable companies in the UK totalled just over 12.5 million,
only about half of the total number of households (Independent
Television Commission, ITC Cable Statistics, December 2001).
It is highly unlikely that there will be any further significant
roll-out of infrastructure. If there were no viable DTT alternative,
digital satellite could be the only option available to many consumers,
and therefore has implications for analogue switch-off. Will the
Government remain committed to switchover in such circumstances?
If so, measures to ensure easy and affordable
access to PSB on remaining platforms would be critical. But in
the absence of a fully competitive pay-TV market, proactive regulation
may also become necessary to protect consumers from potential
abuse of market power. In this context we await the outcome of
the OFT's inquiry into BSkyB with interest. Firm action will be
necessary on behalf of millions of consumers if the OFT confirms
its provisional decision that BSkyB has behaved anti-competitively.
4. UNIVERSAL
INTERNET ACCESS
To be effective, the Government's overall strategy
on electronic communications needs streamlining and clarification.
Various initiatives on digital, internet, broadband and e-government
do not appear to be clearly connected. For example, there are
mixed messages about whether digital television is intended to
play a major role in delivering universal internet access. Digital
television has a limited capacity to do this and, in any case,
it is unclear how many households will be willing or able to pay.
We also favour greater exploration of issues
relating to consumers' needs—such as cost,—and the
development of appropriate applications and skills. The Independent
Television Commission's Go Digital digital neighbourhood pilot
project (announced August 2001) may shed some light on these issues
but research into consumer needs and willingness to use and to
pay for advanced digital services will need to be ongoing.
Given the public policy benefits in providing
universal internet access, which will be essential to the effectiveness
of the e-government strategy, there is an argument for the government
to put more resources into developing a more effective infrastructure
for delivering reliable internet access. We discuss this below,
under broadband.
We believe universal internet access can provide
benefits to consumers. But there are problems relating to, for
example, online personal privacy and data protection, identification
and security, as well as payment methods. Consumers need to have
the means to go online if they wish but also, they need to feel
confident of adequate protection and confidentiality too.
We would urge the Government to clarify what
its goal of universal internet access by 2005 means (A new
Future for Communications). Is it access in every home or
in the local community? Should particular groups be prioritised,
such as those with mobility problems or those in rural areas?
If so, how should this be achieved?
5. BROADBAND
The Government needs to be clearer about what
it considers to be the role of broadband services in delivering
universal internet access and the potential benefits for domestic
consumers. The recent report from the Broadband Stakeholder Group
(Report and Strategic Recommendations, November 2001)
and the Government's subsequent response (Office of the e-envoy,
UK online broadband strategy, December 2001) to it contained
some helpful initiatives designed to boost public sector demand
and content development. But there is vagueness about whether
broadband is regarded as a mass consumer proposition and, if so,
how this is to be achieved.
Government decision-making on broadband, for
example on any need for fiscal or other incentives, would be aided
by more clarity about the overall public policy goals, especially
in relation to domestic consumers' interests. Public investment
may be justified, particularly to reach consumers on low incomes,
or in remote areas, who are otherwise unlikely to have affordable
broadband access. On the other hand, this may be unnecessary if
public policy objectives relating to internet access could be
achieved through targeting resources on narrowband initiatives.
A clearer focus is required on the demand side options.
The Government should make clear its views on
the respective roles of broadband and narrowband in achieving
its universal internet access target. High prices are an obvious
reason for the poor take-up that currently characterises the British
broadband market. Measures to spur competition are vital. As local
loop unbundling illustrates, this sometimes requires more proactive
and targeted regulation. The industry is clearly divided on the
history and implications of the local loop unbundling experience.
We believe an independent and authoritative investigation is needed—possibly
carried out by the National Audit Office—to identify the
regulatory lessons to be learned as the market develops further.
Proper independent evaluation should be carried
out and published into the experiences of those UK online centres,
and their role in aiding take-up by disadvantaged consumers.
Recommendations
— We urge the Government to include
the Communications Bill in the Queen's Speech this autumn. The
Government should publish a draft Bill this spring to allow time
for consultation, as well as pre-legislative scrutiny in Parliament.
Regulation
— OFCOM's objectives should be framed
within a hierarchy, with the protection of consumers' interests
as the overarching aim. It should have a duty to take account
of the interests of disadvantaged consumers. OFCOM's structures—for
example, appropriate sub-committees—should enable it to
deal effectively with content matters. The Board membership should
include individuals with expertise in consumer issues.
— To fulfil the objective of more streamlined
regulation in communications, OFCOM's remit should encompass the
regulation of the BBC. Ideally this should be included in the
forthcoming Communications Bill. The current OFCOM Bill should
require the BBC Board of Governors and OFCOM, alongside other
regulators, to prepare for the transfer of regulatory functions
to OFCOM. In the absence of the BBC being regulated by OFCOM,
the Government should require the BBC Board of Governors to differentiate
clearly between their regulatory and management functions. The
government should devise criteria for assessing its effectiveness.
Communications Consumer Panel
— The Communications Bill should specify
the Communications Consumer Panel's role and functions as an independent
advocate of the consumer interest, covering key players in the
communications sector, including the BBC.
Public service broadcasting
— The Government should lead a debate
on the vision for public service broadcasting (PSB) in the digital
era to see how different broadcasters fit into the overall picture.
A framework can then be established to include the obligations
of different broadcasters and their funding.
— To ensure overall coherence in PSB,
OFCOM should produce good practice guidelines for public service
broadcasters—including the BBC—on how to produce their
statements of programme policy and performance reports. Broadcasters
should discuss their PSB statements with interested parties annually,
including consumer organisations. OFCOM should have a range of
powers to enable it to act if broadcasters' performance is inadequate.
— All licensed broadcasters should
be required to take account of OFCOM's observations on key cross-industry
PSB issues. OFCOM should advise the Secretary of State on the
way the BBC Governors are carrying out their regulatory function.
Digital switchover
— We urge the Government to adhere
firmly to their current tests for digital switchover. However,
the Government should define them more clearly and give more detail
about how they should be achieved.
— The Government should take the lead
in co-ordinating a public information campaign to ensure consumers
are confident to make informed decisions about what digital equipment
and services they should buy to meet their needs. More could be
done to ensure that retail staff are adequately trained so that
consumers are provided with accurate information. In addition,
OFCOM should have a duty to promote consumer skills and information
in this sector.
Universal internet access
— The Government should clarify what
is meant by its goal of universal internet access by 2005, especially
in relation to domestic consumers and disadvantaged consumers.
The role of the different technologies should be clarified. Independent
evaluation of the experiences of UK online centres, and of related
pilot projects, should be carried out and published, including
use by disadvantaged consumers.
Other NCC publications
Boxed in on digital? The consumer interest
in digital switchover (PD92/01)
Plugging in the panel: representing consumers
in communications (policy briefing PD57/01 and policy discussion
paper PD59/01)
A new future for communications (white
paper response PD12K01 and summary of our response PD15K01)
Remotely in control: consumers and the communications
revolution (PD56/00)
15 January 2002
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