Examination of Witnesses (Questions 1-19)
OFCOM
17 APRIL 2007
Mr Whittingdale: Good morning. May I
begin by apologising to our witnesses for the slight delay in
starting the proceedings. This is the second occasion on which
the Trade and Industry Committee and the Culture, Media and Sport
Committee have been together to take evidence from Ofcom. I would
like to welcome the Chairman of Ofcom Lord Currie and Ed Richards
the Chief Executive. As in the previous year we have tried to
divide the session in two, and I will take the chair for the first
half where we will be looking predominantly at broadcasting matters,
and then I will hand over to my college Peter Luff, who will predominantly
be examining telecoms matters. May I start by inviting Adrian
Sanders to begin.
Q1 Mr Sanders: Good morning. The Secretary
of State has the power to direct you in respect of spectrum allocation.
Is the Government pressing you to allocate digital dividend spectrum
to any particular technology or body?
Lord Currie of Marylebone: Just
to give the context for that, can I also echo the welcoming remarks
of the Chairman. We are very pleased to be here, and it is very
good to have the opportunity to speak to both committees across
the range of our Ofcom activities. On the Digital Dividend Review
which is underway, we are very much in consultation mode. We have
just received over 700 representations. No decisions have been
made by Ofcom, and we are very much in listening mode. You are
absolutely right to say that the Secretary of State has the power
to direct us on this set of issues if they so choose. We are working
on the assumption that this will be an Ofcom decision. In the
event that we are directed of course that will change the circumstances.
Q2 Mr Sanders: So you are saying
the Government is not in communication and pressing you
in any particular direction?
Lord Currie of Marylebone: We
are not being pressed in any particular direction. We are in consultation
with Government and with all other stakeholders. That is the position
we are in at this point in time. Clearly as we move towards a
decision we will be communicating that decision with Government.
Q3 Mr Sanders: Government is not
pressing you to auction the spectrum?
Lord Currie of Marylebone: No,
but that is an option we have set out as a way forward;
but we are not under pressure to go in any particular direction
on this. That may change, of course. The Government may make up
its mind in the light of the very considerable debate that we
have initiated on this question.
Mr Richards: I think the background
to this is the overall policy framework that we have got in place
which has its origins in the Cave Review that was done for the
Government, which the Government accepted as policy towards spectrum;
which is to deploy more market mechanisms for the management of
spectrum overall. What we set out in our spectrum management ever
since we started really was to move to more market-based mechanisms;
that, in relation to the release of spectrum, typically means
you start with the presumption that you will use a market release
mechanism which is usually an auction to release spectrum. That
is where we start with this. What we have said also though very,
very clearly at every stage is that if there is a compelling public
interest which means that you should grant an allocation of spectrum
we would be open-minded to that possibility. The process we are
going through at the moment is to explore the many, many different
claims that are being made for an overarching specific public
interest, which might lead you to make an allocation decision
as opposed to an auction process. The Government has not in any
way stated to us its preference; it has let us get on with the
consultation that we are in the middle of in the way David has
described.
Q4 Mr Sanders: Have you had any discussion
about voluntary charitable events that might require spectrum,
given that they would not come under that commercial remit?
Mr Richards: Yes, they are one
amongst a series of different organisations or entities who are
making a public interest case. It is important to say, in relation
to the Digital Dividend Review, that there are a whole range of
different organisations which are making cases both for purely
commercial use of the spectrum, dozens and dozens and dozens of
different organisations, and also a whole range who are making
public interest claims. Some are voluntary organisations; some
are Regional Development Agencies; we have had submissions from
people involved in community television; from broadcasters; from
people concerned with rural access to broadband and so on and
so on. There is really an enormous range of views on this. We
have had more submissions on this particular spectrum project
than any other so far. I think I am right in saying the only other
piece of work that we have done in our lifetime that has had more
submissions is food advertising for children, which was not something
which was in our original plan. I think it is over 750 separate
submissions on the digital dividend so far and the one thing which
characterises them is the divergence in opinion. Wherever you
define the spectrum of opinion to be, you have got every colour
in that spectrum—violently opposed in some cases, and coming
at the issues from very different perspectives in other cases.
One of the great challenges we have got in this particular remit
is to try and find a way through those very, very divergent opinions.
Q5 Mr Whittingdale: Are you comfortable
that Ofcom has been asked to judge whether there might be an overriding
public interest above the economically efficient mechanism for
allocating spectrum? Is that a policy question which should really
be for Government?
Lord Currie of Marylebone: I think
we are comfortable. If you look back at the work we have done
since we came into existence the view of public service broadcasting
looked very much at public interest questions and broadcasting.
Ofcom has been set up not just as an economic regulator, but as
a regulator that has a very strong indeed a statutory duty to
look after the interests of citizens, as well as the interests
of consumers. I think therefore we are well used to looking at
those broad public policies within the framework that Parliament
has given us and that is our job. I think we do feel that we are
able to undertake the rigorous research analysis that is required
to shed light on what is, as Ed has said, an extremely complex
decision, and a hugely important one. This is a very valuable
bit of prime spectrum and, therefore, the way it is used and ensuring
it is used efficiently is absolutely central to what we want to
achieve in this.
Mr Richards: May I add something
to that briefly. What David said is clearly absolutely right—a
lot of what we do on a daily basis is to try to make those judgments.
Equally, what we also try and do is make decisions wherever we
can using evidence that we can identify or research ourselves.
Clearly there are circumstances, there could be circumstances,
in which a final judgment had to be made which was essentially
a political judgment and that would not be for us to make. That
is precisely why, as I know you are aware, the Government has
a reserve power of direction over spectrum. Those circumstances
could easily exist. We will do everything we can to assemble the
evidence, marshal those arguments and make what we think is the
right decision in line with our duties. Clearly there is the possibility
that at the end of that there is a broader political judgment
to be made and we absolutely recognise that.
Mr Whittingdale: I think we would like
to look in some more detail at the options. May I ask Peter Luff
to begin.
Q6 Peter Luff: I want to register
my concern and I agree with John Whittingdale about this really
political judgment we are being asked to make in the Digital Dividend
Review. We have had a letter from Public Voice, a lot of organisations
like the RNIB, about the role of people who look after citizens
rather than consumers—they are two different words—and
you have some very political judgments to make. I am actually
nervous about delegating this to an independent regulator, but
let us move on to the technical side of what you are doing in
the DDR. Why did you get it so wrong on radio microphones?
Lord Currie of Marylebone: I am
sorry, we have not got anything wrong on radio microphones.
Q7 Peter Luff: I have got a quote
here from an interview given by Ed Richards to Ofcomwatch, in
which he says: "I am thinking for the example about the conversation
we have had with the PMSE people (the programme making and special
events sector)—from that we have already recognised it is
more complicated than we thought". Why was it more complicated
than you thought after all the work you had done?
Mr Richards: This is a year-long
exercise and when you start out in a process of this kind always
you put out an initial view, a range of options for consultation
before discussion, and that is exactly what has happened. Interestingly
enough with PMSE what has happened is that there has to be change
in PMSE. Actually we have been talking about that change for many,
many months. We have found it very difficult to catalyse a discussion
about that. Once we put the document out and said, "Here
is our initial proposal for the way we will proceed", we
succeeded in provoking a discussion. We did that in the full knowledge
that we would then listen with an open mind to what people said
about the way forward. In relation to PMSE I think the process
that we see unfolding now is exactly the one we hoped would happen.
We do not feel defensive at all about the original stance that
we proposed. It was a proposal for consultation as all of our
consultations are in that form. What we have now heard back from
the PMSE community is a much more coordinated, much clearer expression
of their concerns. We can now take those concerns on board; we
can reflect them in the next stage of our work; and we will proceed
on that basis. We are actually proposing to issue a new consultation
specifically on PMSE options for dealing with programme-making
and special effects in May and that will be the next phase of
the evolution of the work. I do not think we have got anything
wrong. I think this is the normal way in which policy of this
kind is developed by an independent regulator.
Q8 Peter Luff: Users of this spectrum
had to shout pretty loud to get you to listen—pretty loud.
Lord Currie of Marylebone: I am
sorry, we actually wanted these representations to be made to
us. Just to be clear, there are three key issues. Firstly, we
have to clear some of the current uses of PMSE into other perspectives
in order to be able to free up the spectrum that is to be released;
that is a process that has to be managed. The two other issues
that are concerning the community of users (who are very diverse
one should say and range from very small groups, charity groups,
through to very big commercial operators, one should bear that
diversity in mind), the two issues are: one, should they pay for
that spectrum (and many other players, including public sector
emergency and MoD do pay for their spectrum), should this principle
be extended into this area, that is one change? The other significant
question is whether this group, if they are to pay, are too diverse
to be well represented; whether they are getting their aggregate
voice together? That is something we are spending a considerable
amount of time thinking about, and thinking about ways of managing.
We are well aware of the issues and, as Ed has said, we are in
a process of consultation about it.
Q9 Peter Luff: I am very grateful
for the way Ofcom has responded to some of the representations
that people like me have been making on this. I am grateful for
the promise of a further consultation paper. What is the timetable
for that further consultation paper?
Mr Richards: We will be issuing
it in May.
Q10 Peter Luff: Issuing it in May,
and when do you expect that consultation to close?
Mr Richards: Our normal period
is a ten-week consultation period; but, because there has been
prior work in that area, we may shorten that slightly so it may
be somewhere between six and 10 weeks and then we would move on
from that. We are hoping to put something else out on the DDR
before the summer. At the moment it is impossible to say exactly
what because, as I have mentioned, 750 serious submissions on
a policy of this kind is a huge amount, and we have an awful lot
of assessing and evaluating to do. Some organisations have submitted
new evidence, new research, and we have to pick through all that
and make sure we know where we are. If I may add one other thing
on PMSE: one of the things you are seeing in the Digital Dividend
Review, as well as in every other area of spectrum, is a lot of
noise and some very vocal representations. We have seen that now
for some months right the way across the board in everything we
do to do with spectrum. It is important to understand why that
is. It is because there is a fundamental change taking place,
a strategic change in the way the country manages spectrum from
a bureaucratic, closed room allocation of spectrum use, highly
restricted, highly constrained, very specific to a much more liberal,
market-based trading environment, but also one which ensures that
there are price mechanisms and incentives for efficiency on as
many users of the spectrum as possible. What happens when you
go through a transition of that kind is that there is change for
a lot of people and a lot of organisations. When that happens,
as you know as well as I do, you will have a lot of vocal representation.
That is not the first and it certainly will not be the last of
this kind of situation.
Q11 Peter Luff: Your technical analysis,
I think, was quite flawed to begin with on the use of spectrum
by the radio microphone users. Live8 for example use virtually
30 of the 38-odd bands you are going to auction; and Live Earth
later this year will use currently about 25 or so, perhaps fewer,
bands so it is a huge use there. The point is, this is a grandfather
right. These people are the film-makers, the broadcasters, the
sports industry, the theatre industry and the music industry in
particular, all of them have grandfather rights which you have
to respect if we are not to lose this very, very important social
and cultural activity.
Mr Richards: We agree with that.
We have no intention of creating a situation in which theatres
or other important live events are not able to carry out their
work in the way they do which enriches our society. That is not
a possibility. They have to be moved; there has to be a change;
that is the reality of being able to release the spectrum for
other uses, for we have to work with them and others to find a
sensible way through it.
Lord Currie of Marylebone: We
have to work with them to make sure they are actually using the
spectrum in the most efficient way possible. One has to say the
old regime, which Ed described, was one that did not encourage
the efficient use of spectrum, and this is a hugely valuable national
resource which we have to make sure is well utilised in an economic
and efficient way.
Q12 Mr Hoyle: Can I take you on to
the great subject of the moment that we see in shops and retailers
around the country, "HD for All". What is your opinion?
Do you think we ought to be broadcasting ITV, BBC, Channel 4 and
Five; should people be expecting HD television?
Lord Currie of Marylebone: Firstly,
I think high definition is coming. The question of how much high
definition services should be provided is a question which is
right at the heart of one of the consultations that we are undertaking.
There are a number of options, and high definition can be done
with the spectrum that has already been pre-dealt to the broadcasters.
You will recall 70% of the spectrum that is being released is
already committed to broadcasters. There is a lot that can be
done with the allocation of spectrum. The question of whether
additional spectrum should be purchased or given to the broadcasters
for high definition is one of the questions we are consulting
on. We do not, at this point, have a view on it.
Q13 Mr Hoyle: Who do you consult
with?
Lord Currie of Marylebone: The
broadcasters and the wider community.
Q14 Mr Hoyle: What about the people
who buy the TVs in the stores who are expecting HD television
and would be bitterly disappointed if we are going to have two
tiers? You will get the Sky Freeview HD and yet the old channels
they expect to be in HD will not be. Are you worried that we are
going to have two tiers?
Mr Richards: It is not clear exactly
what people have been sold or what they are expecting at the moment.
Interestingly enough some of the research which I have seen in
this area demonstrates that 20% of the people who have bought
HD-ready television think they are already watching HD. One in
five people think they are getting HD when they clearly are not.
Q15 Mr Hoyle: That is acceptable,
is it?
Mr Richards: No, it is not acceptable,
but I do not think it is primarily an issue for us. That is primarily
an issue of the way selling is taking place in retailers. It is
something we are concerned about but I do not think it is necessarily
something which should dictate spectrum policy. The more general
issue that you are raising is whether the activities of retailers,
and whether they have been accurately selling televisions or not,
should dictate spectrum policy. If you think about the high definition
issue in general, firstly, it is already available by satellite;
secondly, it is available by cable; thirdly, as David has pointed
out, 70% of the available spectrum in this area has already been
pre-allocated for digital terrestrial—in other words, Freeview
broadcasters. It is entirely possible for them to put high definition
television on the multiplexes they already have. In our estimation
there could be between four and six high definition channels put
on digital terrestrial television to complement satellite and
cable without any additional spectrum being allocated at switchover.
There is an important line in the sand to be drawn. That is not
to say that high definition television is simply not available
or could not be made available on Freeview in the absence of new
spectrum being given. That said as I hope we have also made clear,
we are listening very carefully and are very open-minded to arguments
that are being made about whether there is a compelling public
interest for a specific allocation of some of the spectrum specifically
for high definition television in addition to the multiplexes
that have already been allocated.
Q16 Mr Hoyle: Let us cut through
all of that and let us cut to the chase; let us really look at
what we are after, because you do worry me. The public out there,
in your opinion, think they are getting the HD television so that
makes it alright because they do not really know what they are
getting, so let us not worry about it. I think the bottom line
is that the public out there, and it is the public that matter,
not the broadcasters, let us talk about the users, the people
that really matter our there, the Joneses of Chorley, she goes
out and has been to Currys (not the same one, I dare add, Lord
Currie) and bought her HD television, spent a lot of money thinking
she is getting HD television; because she has been cheated does
not mean to say it is alright. Surely the time has now come, and
all the statistics will tell you, that the public our there are
changing their televisions more often, more quickly, to get that
latest technology, so the least they should expect is the best
television coming through from the BBC, Channel Five, Channel
4 and ITV. That is the least they should be expecting. I want
to know what you are going to do to ensure we get it?
Lord Currie of Marylebone: We
are in the process of consultation. We have not made a decision
on this question and it will be some time before we do. Just to
emphasise the point there, the case you are making, that consumers
really want this, is a case that undoubtedly is embedded in the
cases that have been made to us by broadcasters for allocating
spectrum in the way that they are advocating. We will be looking
at that evidence. There are may other uses for this spectrum,
and there are other uses people may wish to see happen, for example,
local television, mobile TV, and a whole number of other applications
that people may wish to have. We have to recognise that this spectrum
is limited and there are certain choices to be made. You may well
be right, that may be the answer we come to but we need to look
hard at the evidence before we come to that decision.
Q17 Mr Hoyle: My final question:
how do you consult? How do you consult with the likes of Mrs Jones?
Mr Richards: We do a very substantial
amount of research. We do more research than any of the organisations
that we took over from by a factor of about three. In fact the
one thing we absolutely do not do is trust representations from
producers. What we do is go out and make sure we have got statistically
robust measures of what people think in general. We have done
that as a first phase in the Digital Dividend Review. Interestingly
enough, when we asked people what they thought about high definition
television they were remarkably cool about it. We asked them whether
they thought it had broader social value, rather than just a private
decision whether you wanted to take satellite or cable or not,
and they did not.
Q18 Mr Hoyle: I take it from that
Mrs Jones will not be consulted? I will leave it at that. I think
the answer is no.
Mr Richards: No, I think the answer
is: I think that could change.
Q19 Mr Hoyle: I will leave it because
the Chairman has got to move on. Do you actually put adverts in
local papers saying, "What are your views? Are you ready
for HD television? Do you want it?" The answer is no. I have
never seen your adverts in local newspapers. I think that is the
kind of consultation we need to see for the people we represent.
Mr Richards: That would be a very,
very skewed form of identifying what people think. You would get
a certain response back
Mr Whittingdale: Lindsay, I think we
have got your drift.
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