House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Fourth Report

COMMUNICATIONS

IV PROPOSED SHAPE OF OFCOM AND ITS TASKS

The Government's ambitions for the UK communications sector

21. The Government has a number of ambitions for the communications sector. Three objectives were set out in the 2000 white paper:

to make the UK home to the most dynamic and competitive communications and media market in the world;

to ensure universal access to a choice of diverse services of the highest quality; and

to ensure that citizens and consumers are safeguarded.

22. The Government has some further objectives, including:

to convert TV broadcasters and viewers to digital TV and switch off the analogue signal so as to free up spectrum for other uses (such as telecommunications);

to ensure universal Internet access across the UK by 2005; and

to create in the UK the most extensive and competitive broadband market in the G7 group of countries by 2005.

23. In addition the Government has a blanket target, set by the Prime Minister in spring 2000, that all public services which can be transacted electronically should be available on line for citizens and firms by 2005.[25]

The shape of regulation to come

BOARD STRUCTURE

24. OFCOM will be a corporate body governed by a Chairman, a Chief Executive and no more than five other executive and non-executive members. The previous Committee welcomed a collegiate approach in view of the significant powers and responsibilities to be wielded by the regulator of this extremely large sector. We reiterate this view. We note that, under the provisions of the Office of Telecommunications Act 2002, the Secretary of State has the freedom to increase the size of the OFCOM board to allow regional, national and sectoral representation. We believe it could be a mistake to do this. The experience of the US Federal Communications Commission, whose senior staff we met in Washington during the course of this inquiry, suggests that a small executive body functions most effectively.

25. The White Paper stopped well short of setting out the internal organisation of OFCOM. It stated that the board will "be collectively accountable and, between them, should have sufficient knowledge, expertise and authority to pursue the regulator's objectives". The FCC told us that effective regulation did not appear to be necessarily served by one Commissioner, or board member, representing each sectoral or sub-sectoral constituency (such as telecommunications, broadcasting and Internet; cable, satellite and terrestrial; or television and radio). The FCC seemed to feel that breaking out of the "smoke-stack" or "silo" mentality was a key to success. The Government claims to "see a clear case for ... an over-arching regulation as a whole" while recognising that OFCOM will need a range of different approaches and expertise.[26] We agree that OFCOM, as a matter of course, must be able to call upon appropriate expertise; but we believe that a convergent sector needs a regulator with a genuinely integrated decision-making body at its head.

CONSUMER REPRESENTATION

26. One area that does deserve special attention, however, is the consumer's voice. The National Consumer Council (NCC) welcomed the Government's commitment to a Communications Consumer Panel as did the previous Committee.[27] The NCC wrote that this Panel needs to have adequate resources, be independent of OFCOM, and have a remit drawn widely, to embrace content, choice and quality of services as well as how these are delivered. The NCC added that the Panel should cover all the "key players—including the BBC as the major public service broadcaster" and have the legal standing to represent the consumers' views to audiences and institutions beyond OFCOM.[28] The NCC said that the Panel's terms of reference, covering all these key points, should be set out in the OFCOM legislation.

27. We regard the proposed Communications Consumer Panel as an important "plug" which may need a designated "socket" on the OFCOM board in the form of one or more members with special responsibility to represent the interests of all consumers (including those with disabilities). In addition to particular representation on the OFCOM Board we agree with the National Consumer Council that the Office should have a dedicated consumer affairs unit to pursue the consumer agenda within the organisation.

TRANSPARENCY

28. The previous Committee recommended that the new regulator be under a specific duty to ensure that its governing body (and any subsidiary manifestations) met in public unless there was a compelling need not to do so on the grounds of commercial confidentiality.[29] We noted that, under legislation known as the "Sunshine Act", it is actually illegal for the FCC's five Commissioners to meet in groups of more than two (i.e. a majority meeting) unless it is a properly constituted meeting, notified and open to the public. We believe that a high degree of openness and transparency over agendas, meetings, votes, and especially the grounds for decisions taken, such as the award and removal of licences, is necessary. We recommend that the final Communications Bill sets out specific requirements with regard to the openness and transparency of the conduct of OFCOM, including that its board should meet in public unless issues of commercial confidentiality make this inappropriate.

LIGHT TOUCH / DEREGULATION

29. Telewest and other witnesses were concerned about the potential for action by OFCOM to distort the market.[30] Telewest called for the regulator to be under a duty to carry out impact assessments of any new measures (which should tackle both direct and indirect impacts). [31] In our meetings with the FCC, we had been impressed by the statutory requirement for the US Commission to conduct a biennial review of its regulations to assess market development and maturity and the potential to roll back regulation in favour of competition legislation. It was clear from evidence submitted to us, by BT and Telewest amongst others, that the communications sector in the UK could benefit from a similar obligation on OFCOM.[32] We recommend that OFCOM be under a statutory duty regularly to review its rules, regulations and its requirements for statistical returns from businesses, with a view to deregulation where possible.

CONTENT / ECONOMIC REGULATION

30. The National Consumer Council was strongly in favour of the bringing together of economic and content regulation as being the "logic" behind a unified regulator. However, other witnesses were concerned lest the traditional debate over content regulation predisposed OFCOM to apply a similarly self-regulatory "light touch" with respect to economic issues. NTL argued that, of the regulators identified by the Government for absorption into OFCOM, none had a tradition of focussing on economic regulation in the broadcasting sector. We regard the finding of the proper balance between content and economic regulation as one of the key challenges that OFCOM will face as a fledgling institution—no matter how experienced are the individuals at the helm.

ACCOUNTABILITY

31. The OFCOM Board must be accountable to Parliament. We recommend that the final Communications Bill contains a duty on the Chairman of the OFCOM Board to submit an annual report on OFCOM's activities, expenditure and achievements to Parliament. The Chairman and Chief Executive of OFCOM would then be subject to the same examination by this Committee, on the basis of that report, as has become the practice with the Chairman and Director-General of the BBC.

25 Progress against this target, and the process behind the initiative, was the subject of a recent report by the National Audit Office, Government on the Web II, Session 2001-02, HC 764. Back

26 Communications White Paper, paragraph 8.6.2 Back

27 Ev 160-162 Back

28 Ev 162 Back

29 HC 161, 2000-01, para 139 Back

30 Ev 118 Back

31 Ibid Back

32 Q 207, Ev 75 and 118 Back