Draft Electronic Communications (Network and Services) (Penalties) (Rules for Calculation of Turnover) Order 2003

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Mr. Mark Field (Cities of London and Westminster): Given the widespread public consultation, I appreciate that my speaking on the matter will create a 100 per cent. increase in the response that the Minister has had. It is a pleasure to speak on the matter today, and I should say at the outset that we have no objections in principle to much of what has been proposed. My hon. Friend the Member for Lichfield (Michael Fabricant), who served on the Standing Committee considering the Communications Bill, would normally have been in my place; unfortunately he is on an overseas trip today. He has passed a few notes on to me and tried to explain one or two of the aspects relating to the calculation of turnover.

It is fair to say that we entirely agree with what the Minister said. We desire, as he does, a dynamic communications sector in which consumer interests are protected. I must confess that I was a little concerned at the prospect of the availability of a broad-ranging, third-party action, but I was assured by the Minister's final comments, when he said that there would be a fairly limited opportunity for third parties to take actions under the provisions.

Will the Minister give us a brief explanation of the thinking behind the formula that has been put into place regarding the definition of turnover for the purposes of calculating the amount of penalty? I appreciate from what the Minister said that there is a maximum limit that would not exceed 10 per cent. and in a number of instances, particularly for technical breaches, the fine in mind would make up considerably less than 10 per cent. of turnover.

In view of the fact that a number of communications businesses are growing rapidly but have cash flow problems, there is surely some concern that the protection of consumer interests may be undermined if the result of a hefty fine for one of the up-and-coming businesses affected was a reduction in its capacity. I wonder whether consideration was given to putting a minimum in place, and why the 10 per cent. hurdle and bar has been adopted. Does that have any bearing on other competition procedures, and penalties for breaches in such processes?

We have no objections in principle to the order, and we would like to see how it operates in the post-28 December regime that will apply to the communications world. It is to be hoped that, if problems arose from the provision, the Government would be willing to return to the matter having taken further consultation within a year or two of the provisions coming into operation.

10.12 am

Brian Cotter (Weston-super-Mare): Like the hon. Member for Cities of London and Westminster (Mr. Field), I have been pitched into this debate, not having had the background of involvement with the Communications Bill.

I recollect that when the Communications Bill was in Committee some concerns were expressed about aspects of it dealing with small businesses—to get on

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to my usual hobby-horse. I hope that provisions in the order relate to small businesses—I presume that small businesses are involved, because those points were raised in Committee—that the situation with small businesses has been taken on board and that there are appeal procedures that will be easily usable for a small firm. Sometimes that is a problem.

The Minister also spoke about guidelines, and we all hope that any guidelines attached to the order will be able to be clearly understood by everyone. I was reassured by the Minister's comment at the beginning that there will be a degree of self-regulation under the order. That is always to be hoped for-in this place, as outside, we all look for less regulation. I hope that the guidelines will be clear, that small businesses will find them easy to deal with and that there is not too much regulation. Apart from that, the Liberal Democrats support the measure.

10.14 am

Mr. Timms: I am most grateful for what both hon. Members have said. We miss the hon. Member for Lichfield, who played a full part in Committee, but the hon. Member for Cities of London and Westminster was in the Committee. He made a point about striking the right balance on the risk of third party action, which is an important part of our aims. We want a fairer balance between communications providers' interests and the risk of third parties being adversely affected by contraventions of conditions. Subject to Ofcom's consent, third parties can bring civil proceedings as soon as such contraventions occur.

The hon. Member for Cities of London and Westminster raised an interesting and important point about the 10 per cent. figure, which is increasingly being used elsewhere in our legislation. For example, the turnover order under the Competition Act 1998, which applies to the electricity and gas sectors, uses that figure and provides for the imposition of penalties up to a maximum of 10 per cent. of turnover. He rightly pointed out that the figure is a maximum—the full 10 per cent. will not always be applied. There is a growing consensus that 10 per cent. strikes the right balance between being a sufficient disincentive to the behaviour in which people should not indulge and protecting customers' interests. The application of the penalties will be up to Ofcom. Ofcom must consider all relevant factors, and the penalty must be appropriate and proportionate. As I have said, Ofcom is consulting on that point.

It is also worth making the point that under the powers in the Communication Act 1998, the director general of telecommunications has been able to impose a fine of up to that amount since March 2000, when the 1998 Act came into force for breaches of the Competition Act 1998, which is another context in which the 10 per cent. figure is used.

I am grateful to both hon. Members for their expressions of support. The order is important to the regulator because until it is approved it will be impossible for Ofcom or Oftel to exercise their powers to impose such penalties under the networks and services legislation.

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I agree with the hon. Member for Weston-super-Mare (Brian Cotter) that self-regulation should be encouraged whenever it is applicable, and there are provisions to make that easier and more widespread. Equally, there will be times when it is necessary to impose penalties, which is something that the order makes possible.

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Question put and agreed to.


    That the Committee has considered the draft Electronic Communications (Network and Services) (Penalties) (Rules for Calculation of Turnover) Order 2003.

Committee rose at nineteen minutes past Ten o'clock.

The following Members attended the Committee:
Cran, Mr. James (Chairman)
Anderson, Janet
Atkins, Charlotte
Bottomley, Peter
Coleman, Mr.
Cotter, Brian
Cruddas, Jon
Cunningham, Jim
Field, Mr. Mark
Mole, Chris
Stewart, Ian
Timms, Mr.
Vis, Dr.

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