House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Fourth Report

COMMUNICATIONS

III BACKGROUND

8. The Telecommunications Acts of 1981 and 1984 provided for the separation of BT from the Post Office, the subsequent sale of 51 per cent of the former, the sale of telephones and services in competition with BT and the creation of the Office of Telecommunications (Oftel) for the regulation of the then nascent telecommunications market.

9. This market soon emerged. In 1983 Mercury launched its first services in the City of London with basic network services following in 1986. In 1992 cable operators were offered a licence modification allowing them to offer voice telephony in their own right. In the mobile telephone market a duopoly operated, following the licencing of Vodafone and BT Cellnet in 1983, until the entry of One2One in 1993 and Orange in 1994.[8] There are now about 43 million mobile phone subscribers in the UK. Only 1 per cent of UK households are without a telephone, but 6 per cent have only a mobile.[9] 85 per cent of medium sized businesses and 61 per cent of small businesses own at least one mobile phone. The Internet took off as a general consumer service in the latter half of the 1990s[10] and, as of June 2001, about a third of all UK households, 9.4 million homes, 94 per cent of medium sized businesses and 60 per cent of small businesses had Internet access.[11]

BROADCASTING

10. The legislation expected in draft form later this month is designed in part to replace the Broadcasting Acts of 1990 and 1996. The former established structures for a broadcasting ecology consisting of four terrestrial channels, all with public service obligations (and the potential for a fifth), a mix of satellite television services (soon to merge into BSkyB) and nascent cable television provision. There were 74 independent local radio stations. The technical possibility of digital broadcasting was known but the Government was not convinced of its potential as a major broadcast medium.

11. By 1996, this picture was very different. One in five homes had access to multichannel television through either cable or satellite. The number of satellite channels available was about 200. A franchise for the fifth analogue terrestrial channel had been awarded. It had become clear that fullscale digital television was technologically feasible and the foundations for a digital terrestrial television service were laid in the Broadcasting Act 1996.

OVERALL

12. The previous Committee originally identified 14 statutory and self-regulating bodies for media and communications in the UK.[12] Five of these are to be absorbed into the Office of Communications—OFCOM.

Telecommunications

The Office of Telecommunications (Oftel)

Created in August 1984 under the Telecommunications Act, Oftel is responsible for promoting the interests of consumers; maintaining and promoting effective competition; making sure that telecommunications services are provided in the UK to meet all reasonable demands, including: emergency services; public call boxes; directory information; and services in rural areas.

Radio frequency spectrum management

The Radiocommunications Agency (RA)

The RA, as an executive agency of the Department of Trade and Industry (established in April 1990), is in a slightly different position to the other regulators who are independent bodies under various statutory provisions. The RA is responsible for managing most nonmilitary radio spectrum in the UK (allocation, maintenance and supervision) and representing the UK in relevant international discussions.

Broadcasting

The Independent Television Commission (ITC)

Established by the Broadcasting Act 1990 the ITC regulates commercial television broadcasting: licensing commercial television companies to broadcast analogue and digital services; setting and monitoring standards for programme content, advertising, sponsorship and technical quality; seeking to ensure that viewers can receive television services on fair and competitive terms; and investigating ex post complaints from viewers.

The Broadcasting Standards Commission (BSC)

The BSC was established by the Broadcasting Act 1996 (which brought together the former Broadcasting Standards Council and the Broadcasting Complaints Commission). The BSC regulates all television and radio output in the UK. Three main tasks were set out in the 1996 Act: to produce codes of conduct relating to standards and fairness; to consider and adjudicate on complaints; to monitor, research and report on standards and fairness in broadcasting.

The Radio Authority (RA)

The Authority licenses, monitors and regulates all commercial radio services. These comprise national, local, cable, satellite and restricted services, on both analogue and digital platforms. Restricted services include all shortterm services (for example, 'special event' radio) and highly localised permanent services such as hospital and student radio. The Authority has three main tasks: to plan frequencies; to appoint licensees with a view to broadening listener choice; and to regulate programming and advertising. It is required, after consultation, to publish Codes to which licensees must adhere. These cover programmes, advertising and sponsorship and engineering. There are also rules on ownership.

13. In addition to these organisations there are the BBC Governors, Sianel Pedwar Cymru (S4C) and the Office of Fair Trading (OFT). The BBC is a Corporation established under successive Royal Charters which, inter alia, provide for its independent status, public obligations and the more detailed "Agreement" between BBC and Secretary of State for Culture, Media and Sport. This Agreement sets out the framework for the Corporation's regulation by the twelve Governors.[13] S4C is responsible for the regulation, as well as the provision of commercial Welsh language programming. The Office of Fair Trading has had specific duties relating to independent production targets and other matters under the Broadcasting Acts 1990 and 1996 and general powers to investigate possible anti-competitive behaviour in the media sector.[14]

Evolution of Government's proposals

A BIG BANG

14. In May 1998 the previous Committee published a report on The Multi-Media Revolution which included a recommendation for a single regulatory body for broadcasting, telecommunications and communications infrastructure.[15] The Government, in its reply to the Report and its Green Paper Regulating Communications (both published in July 1998) was lukewarm to the idea of a "big bang" approach to reform in this area. In December 2000, however, the Government's White Paper, A New Future for Communications, proposed—two and half years after the previous Committee's recommendation was made—a single regulatory body for the whole communications sector. As our predecessors highlighted in their Report on that White Paper, the Government had now accepted that "the communications revolution has arrived".[16]

15. A Bill to implement the communications White Paper was originally expected during this present Session of Parliament, 2001-02. However, either time was not found for the Bill or it was not ready. This delay in itself was claimed by NTL to have sent "the wrong signal to the investment community about the strength of the Government's commitment to the sector".[17] The Government did introduce paving legislation to establish a shell for OFCOM, without regulatory responsibilities, in order that some practical work could be undertaken in preparation for full functioning and absorption, in due course, of the responsibilities, assets and liabilities of the five existing regulators. The Bill allowed the Chairman and non-executive members to be appointed, and thereafter a Chief Executive. The practical work enabled includes planning on issues such as staff, premises, finance, information systems and transfers of functions. This Bill received Royal Assent on 19 March 2002.

NEXT STEPS

16. The current plans of Government are for a draft Bill on the substance of OFCOM's role and responsibilities (and related matters) to be published in early to mid May. This draft Bill will be the subject of pre-legislative scrutiny by a Joint Committee of both Houses. Over the same period there will be further consultation between the Government and industry on the detail of the Bill.

17. The Government wrote that: "Whilst the timing of the Bill's passage cannot be precisely predicted, it is reasonable to hope that, if it is introduced early in the Session, it might have completed all of its stages and have received Royal assent by the end of the 2002-2003 Session."[18] In oral evidence the Secretary of State for Culture, Media and Sport, Rt Hon Tessa Jowell MP, suggested that Second Reading of the substantive OFCOM Bill would take place in November 2002.[19] The Secretary of State for Trade and Industry, Rt Hon Patricia Hewett MP, said that the prospects were good for the Government meeting its commitment to OFCOM beginning work in 2003 as stated in A New Future for Communications.[20]

18. The UK's rules on media ownership will also be the subject of Government proposals. The White Paper set out the issues involved but made few firm proposals. There has been a major public consultation exercise since the white paper with the Government publishing summary responses in March 2002. Tessa Jowell told us that she planned for separate draft clauses on media ownership to be published as soon after the main Bill as possible so that equivalent scrutiny could take place. We discuss these issues below. We look forward to the publication of the draft of the substantive Communications Bill in line with the Government's revised timetable. It would be extremely damaging to the sector's interests for this timetable to slip any further. In similar vein, we look forward to the early publication of the promised draft clauses on media-ownership so that thorough pre-legislative scrutiny can take place of the Government's decisions on these important issues.

Developments in communications

19. The UK communications sector has developed and changed markedly over the last 10 years.[21]

From introduction of mobile telephony in 1983, use in the UK rose steadily to about 12 per cent in 1997 but has recently enjoyed a huge spurt in ownership from 27 to 73 per cent of UK adults between January 2000 and August 2001.

Narrowband home access to the Internet has also grown very fast recently from 4 per cent in 1996, 12 per cent in 1998, to 45 per cent by the end of 2001. A narrowband connection, over the fixed telephone line, is available to 93 per cent of the population. Broadband connections, available to about 65 per cent of the population, has been taken up by about 1 per cent of UK households.

From a standing start in 1998 digital televison (DTV) is now in 39% of homes (a huge rise from the figure of 4 per cent for 1998). By the end of 2001, of these homes:

65 per cent have satellite DTV (available to 99 per cent of the population)
21 per cent have cable DTV (available to about 65 per cent of the population)
14 per cent had terrestrial DTV (available to about 55 per cent of the population)

20. The difficulties and inevitable risks of predicting technological developments and their rate of progress to market are amply illustrated by the following extracts from reports of the Government's Foresight programme.[22]

1995

Advances in the compression of video images led to the prediction that "it now seems unlikely that there will be a volume demand for channel capacities greater than 2Mb/s hence reducing the requirements for a broadband network to a level that is only 30 times greater than the widespread public telephone network."[23] (By 1999 Foresight was predicting that capacities of 10Mb/s to the home would be common - see below).

1996

"Most forecasts of UK mobile telephony users by the year 2000 are in the range of 10-12 million". (The actual figure was nearly 32 million).[24]

1999

As late as March 1999 the developments set out below were seen as likely to become commercially available as indicated. The deadlines for the obsolescence of the fixed network telephone (2007) and high speed household Internet services (2004) have yet to pass. However, the remainder of these developments are not available widely, if at all.

Commercial application	earliest	most likely
Unified personal numbering for everything	1999	2000
Go-anywhere personal numbering	2001	2002
Office / home PCs have no wiring except a power cord	1999	2002
50% of telephone communications made via the Internet	-	2000
10 Mb/s to home common	2001	2004
Fixed network telephones are no longer sold	2005	2007
Fridge front e-mail based on cordless communications	-	2000
Movies can be stored in televisions	2000	2001