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Mr. Andrew Lansley (South Cambridgeshire): My hon. Friend the Member for Lichfield said America. I said Australia.
Dr. Howells: Perhaps I should have said, ''The example quoted by the Opposition, between them.''
Mr. Lansley: I hope that the Minister accepts that I intend no discourtesy to him or to the Committee, but I have to head out to lead a debate of my calling in Westminster Hall on the film industry. I hope that when I read the record, I will find that he recognised the value of self-regulation in the context of the localness code and bent towards amendment No. 603. Unhappily, rather than hear it, I shall have to wait to read it. I apologise to you, Mr. Atkinson, and to the Committee.
Dr. Howells: I wish the hon. Gentleman well in his debate on the film industry. I am sorry that I shall be
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unable to answer it—I understand that my right hon. Friend the Minister for Sport is to do so. I think he went to the pictures once, in the 1960s.
It is reasonable that Ofcom should be able to take a view on these matters. We expect it to take an interest in, for example, the degree of networking that is consistent with maintaining localness. It must be remembered that local radio broadcasters get valuable spectrum for free. In return, it is right that the regulator, acting on behalf of the Government, should be able to take a view on how the spectrum is used.
I am sorry that the hon. Member for South Cambridgeshire is not here to hear my response to amendment No. 603, which would require Ofcom to consider the extent to which the matters it is required to secure under the clause could be, or are already being, secured by self-regulation, and therefore whether it is necessary to draw up a code. I have some sympathy with the general thrust of the amendment, but I do not think that it is necessary. I hope that the industry will welcome the general thrust of the duty and take an active role in developing the code, which offers an excellent opportunity for the industry and the regulator to work together to develop a co-regulatory approach.
I welcome the comments made by the ubiquitous Mr. Ralph Bernard, the head of GWR, the largest radio group in the United Kingdom. He said:
''OFCOM and the industry work together to develop a sensible code, all agree on how the output of the codes will be judged a success or not, and then the industry gets on with operating the system without the need for much further input from the regulator. Trust us to regulate to pre-agreed rules and I am sure we will get a positive result with benefits for consumers, advertisers and the public as a whole''.
I could not have put it better myself. While I cannot pre-empt Ofcom's precise approach to that duty, I am sure that the Committee agrees that Mr. Bernard's approach is admirably positive, and equally sure that Ofcom will be encouraged by his words. The Radio Authority has stated:
''The new duty to be imposed on OFCOM, to safeguard the local character and content of local radio services, places the Radio Authority's existing approach into the context of modern regulation. We welcome the proposal which will in effect codify existing rules and requirements. We hope and expect that OFCOM will look to the station operators to give effect to these regulations largely on a co-regulatory basis, which will include a consultative approach to developing the required localness Code.''
I should add that clause 6 places Ofcom under a duty to review regulatory burdens. Subsection (2) states that Ofcom has to have regard to the extent to which its duties can be secured or furthered by effective self-regulation. I hope that the hon. Member for South Cambridgeshire will be reassured by those comments and agree that the amendment is unnecessary.
We are lucky to have such a good and successful local radio industry in the United Kingdom, and we want to keep it that way. Local radio stations have nothing to fear from a localness code. Localness is what they are good at, and the code will ensure that they continue to be good at it in a changing world.
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Mr. Whittingdale: I have to say that I am somewhat disappointed by the Minister's response. He seemed to recognise some of our arguments, stressing that it will be for Ofcom to decide what to include in the code as to what should be local. However, the fact that the Bill specifies in black and white various provisions to do with premises and employment seems to suggest that Ofcom will take it that those factors are important must be included.
The Minister quoted, with approbation, Ralph Bernard, but Mr. Bernard said, in the paragraph before the one that Minister read out, that the clause
''is akin to the regulator setting up a division to make sure that we remember to switch the microphone on when we want to broadcast an announcement.''
The clause seems far too prescriptive. I am disappointed that while the Minister accepted the thrust of the amendment, which sought co-regulation and the self-regulatory principle, he was unwilling to accept it. Although my hon. Friend the Member for South Cambridgeshire has had to leave us, the Opposition are keen to press the amendment.
Question put, That the amendment be made:—
The Committee divided: Ayes 4, Noes 14.
Division No. 13]
AYES
Fabricant, Michael
Greenway, Mr. John
Hoban, Mr. Mark
Whittingdale, Mr. John
NOES
Bryant, Mr. Chris
Coaker, Mr. Vernon
Harvey, Nick
Howells, Dr. Kim
Irranca-Davies, Huw
Joyce, Mr. Eric
MacDonald, Mr. Calum
McGuire, Mrs. Anne
Miller, Mr. Andrew
Murphy, Mr. Jim
Picking, Anne
Robertson, John
Watson, Mr. Tom
White, Brian
Question accordingly negatived.
Clause 302 ordered to stand part of the Bill.
The Chairman: Before we move on to clause 303, I was remiss in not telling Members not present at the Programming Sub-Committee that the effect of its decision is that instead of the Questions on clauses being put at 11.25 am, whether or not they have been debated, those Questions will now be put at 5 pm.
Clause 303 ordered to stand part of the Bill.
Clause 304
Conditions relating to competition matters
Mr. Whittingdale: I beg to move amendment No. 618, in
The Chairman: With this it will be convenient to discuss the following:
Amendment No. 619, in
clause 304, page 262, line 30, leave out subsection (2).
Amendment No. 645, in
clause 305, page 263, line 13, leave out subsection (2) and insert—
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Amendment No. 649, in
clause 305, page 263, line 17, leave out subsection (3).
Amendment No. 624, in
clause 305, page 263, line 34 after first 'a', insert 'Broadcasting Act'.
Amendment No. 625, in
Amendment No. 650, in
Amendment No. 629, in
Mr. Whittingdale: It was with a certain degree of depression that I discovered that my hon. Friend the Member for South Cambridgeshire had been successful in his application for a debate on the film industry that would coincide precisely with the debate on clause 304. It is a complicated clause concerned with Ofcom's exercise of competition-related powers. If ever my hon. Friend happens to find himself on ''Mastermind'', I suspect that his specialist subject may be the workings of competition law, in which he is extremely well versed. I, on the other hand, have had to take a crash course because of his absence and I hope that the Committee will forgive me if I rely rather more on my notes than I have in previous debates.
I shall begin with a few words of introduction on the clause and the amendments, the purpose of which is to draw attention to some serious concerns about the fact that the Bill does not provide adequate safeguards in relation to the economic regulation of broadcasting. We hope that the Minister will clarify the Government's thinking on that aspect of the Bill, and that, if he is unable to support the amendments, he will at least consider whether it is possible to introduce additional or alternative amendments that will address our concerns.
9.30 am
The clause provides Ofcom with sector-specific competition powers relating to the broadcasting sector. Those powers will allow Ofcom to include a general fair trading condition in Broadcasting Act licences. It will also be able to exercise concurrent competition powers under the Competition Act 1998. We think that the sector-specific power is superfluous because, unlike its predecessors, the Independent Television Commission and the Radio Authority, Ofcom is given concurrent competition powers. There is potential for misuse, in that Ofcom might
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attempt to use the sector-specific power instead of its concurrent competition powers, and thus manipulate markets in which no significant market power exists. The provision is unprecedented: to date, no other regulator has sought simultaneously to exercise both sectoral and general competition powers.
Clause 305 requires Ofcom to consider whether it would be more appropriate to act under its concurrent competition powers before exercising its powers under the Broadcasting Act 1996 when it is exercising the Broadcasting Act powers for a ''competition purpose''. That term is defined in clause 305(7), which reflects the wording of the general fair trading condition in clause 304. However, the Bill does not require or even encourage Ofcom to use its concurrent competition powers in preference to its sector-specific powers, despite the Government's stated position that concurrent competition powers should take precedence. That leads to considerable uncertainty about which approach Ofcom will take to competition issues in broadcasting.
Given that Ofcom will have concurrent competition powers, it is unclear why it requires competition powers under the Broadcasting Act, as well as an obligation under clause 3 to have regard to
''the desirability of promoting competition in relevant markets''
when that is considered to be relevant. If the Government included clause 304 because they believe that there are circumstances in which it would not be appropriate for Ofcom to use its concurrent competition powers when dealing with broadcasting matters, they have yet to explain what those circumstances are. It is extremely difficult to foresee a situation in which it would be legitimate for Ofcom to use its competition powers under the Broadcasting Act, but in which its concurrent competition powers were not available to it.
It would be inappropriate if clause 304 had been included merely because of the power that is available to the ITC and the Radio Authority. Although both are currently subject to a statutory duty to ensure fair and effective competition, they do not enjoy the concurrent competition powers that Ofcom will be given. Because of that, to discharge the duty to ensure fair and effective competition, the ITC and the Radio Authority need to be able to impose an obligation on the companies that they regulate via their licences. However, Ofcom will be able to apply and enforce the statutory competition regime and will not need to fall back on a general fair trading licence condition, as the ITC and the Radio Authority have done in the past.
We should recognise that to date no regulator in the communications sector has sought to rely simultaneously on a general fair trading condition and concurrent competition powers. When Oftel first introduced a fair trading condition into Telecommunications Act 1984 licences in the mid-1990s, it included in that condition a sunset provision that ensured that it ceased to apply when prohibition-based competition legislation came into force. That sunset provision was triggered on 1 March 2000 when the Competition Act 1998 came into force: from that date, the general fair trading condition in licences
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under the Telecommunications Act 1984 ceased to apply. Oftel took the further step of confirming, in a statement on 1 July 2002, that its approach when faced by behaviour that could contravene both the Competition Act and the sectoral regime would be to use its Competition Act powers and not to rely on the sectoral regime.
In the light of that, allowing Ofcom to rely simultaneously on competition powers in the Broadcasting Acts 1990 and 1996 and its concurrent competition powers is unprecedented, disproportionate and contrary to the principles of good regulation. It also creates inequities between the ways in which electronic communications networks and services on the one hand, and the broadcasting sector on the other, are treated. Amendments Nos. 645 and 549 require Ofcom to use its concurrent competition powers in priority over its sector specific powers. Ofcom should not have the discretion to choose which route to take when it makes decisions, which is what the Bill as it stands provides.
The Bill is silent on the general question of the economic regulation of broadcasters. Part 3 gives Ofcom overall power to regulate the broadcasting sector via broadcasting licences. Under clause 206(2)(b), Ofcom's function in relation to broadcasting is
''to regulate . . . in accordance with this Act, the 1990 Act and the 1996 Act . . . television licensable content services that are provided by persons under the jurisdiction of the United Kingdom for the purposes of the Television without Frontiers Directive''.
Those licences are to be issued pursuant to the Broadcasting Acts 1990 and 1996, which give Ofcom the power to impose licence conditions on licensees and issue directions pursuant to the fulfilment of Ofcom's duties.
Although part 3 describes the regulation of content in the television broadcasting sector in detail, it is silent on how Ofcom should undertake the economic regulation of broadcasting, other than under the extremely wide functions given to Ofcom to regulate and licence the broadcasting sector. Ofcom could seek to include whatever conditions it considers appropriate in broadcasting licences. It has considerable scope to regulate broadcasters in ways that are unrelated or only peripherally related to content regulation, which could be outside the scope of Ofcom's concurrent powers and its sectoral competition powers. For example, Ofcom could seek to impose conditions on broadcasting licensees in the nature of economic regulation that is not for a competition purpose, but is pursuant to one of Ofcom's other duties.
For example, clause 3(1)(a) imposes on Ofcom a duty to
''further the interests of consumers''.
In performing that duty, Ofcom must have regard to the interests of consumers
''in respect of choice, price, quality of service and value for money.''
Under clause 3(1)(a) and clause 3(4), Ofcom may seek to determine that packages of television channels should be comprised of particular channels or a particular number of channels all sold at a particular
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price in ''the interests of consumers''. Directions that Ofcom sought to impose on broadcasting licensees pursuant to the fulfilment of that duty would be in the nature of economic regulation, but would arguably not be pursuant to any of Ofcom's competition powers.
Similarly, Ofcom may seek to rely on its duty under clause 3(1)(c):
''to secure the availability throughout the United Kingdom of a wide range of television and radio services which (taken as a whole) are both of high quality and calculated to appeal to a variety of tastes and interests''.
Ofcom may seek to use that duty to impose on broadcasters licence conditions or directions regarding channel packaging and pricing, or other types of significant economic regulation that are unrelated, or only indirectly related, to the core matters of content regulation that part 3 of the Bill deals with.
I understand that in discussions with industry representatives, officials have advised that Ofcom would not use its licensing powers to undertake economic regulation of the broadcasting sector. The fact that the Bill leaves cable distributors of television services unregulated in these activities shows that they are not intended to be caught—otherwise, significant disparities between the regulation of competitors engaged in the same activities would arise.
Ofcom would have no jurisdiction over how cable operators package and price television channels, as the operators do not require part 3 licences to retail third-party channels. Their television activities are thus unregulated by the Bill. However, However, Ofcom could assume jurisdiction over the retail packages of satellite retailers that hold broadcasting licences. Ofcom could seek to regulate the prices of distributors of channels on satellite that happen to hold broadcasting licences, while satellite distributors that retail only the channels of third parties would remain outside the regulatory net as they would not need a part 3 television licensable content service licence for those activities; they could therefore price and package as they pleased.
In any event, the intention that Ofcom will not use its licensing powers to undertake economic regulation of that type is not reflected in the Bill, and there are no safeguards against Ofcom using its licensing powers in that way. Such concerns are not unfounded. Under the ITC regime, the regulator relied on its duties to ensure both the availability of a wide range of services and fair and effective competition in order to issue directions regarding the package of channels—the so-called minimum carriage requirement—and the EPG code.
Furthermore, the exercise by Ofcom of its powers in relation to the economic regulation of broadcasting under part 3 of the Bill—where matters do not fall to be dealt with under its concurrent competition powers—is not subject to sufficient procedural safeguards. The introduction of and any changes to codes, licence terms or general directions to the broadcasting sector are not governed by a set of tests and procedures for their introduction and modification that is similar to the set of tests and procedures in clauses 43 and 44, which apply to
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electronic communications networks and services. Similarly, the bill does not provide full rights of appeal to the Competition Appeal Tribunal against Ofcom decisions in such matters.
At the moment, the Bill provides full rights of appeal in three circumstances, subject to a number of exceptions—
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