Examination of Witnesses (Questions 40-59)
LORD CURRIE
OF MARYLEBONE
AND MR
ED RICHARDS
22 APRIL 2008
Q40 Mr Hoyle: We will stick with
our own quango.
Mr Richards: We will stick with
our own independent regulator.
Q41 Mr Sanders: Moving on to mobile
phones and their use of aircraft, do you believe there is a demand
for passengers to use mobile phones on aircraft? What do you see
as the risks to passenger welfare were they able to do so?
Lord Currie of Marylebone: We
have to remember that mobiles can be used in different ways. I
would have thought there is probably quite a considerable demand
for people to be able to use their mobiles for data purposes,
e-mail and so on. I tend to be a little more sceptical personally
as to whether there is a demand for people to make voice calls.
However, we have got to a position where it is increasingly inappropriate
for a regulator to make those decisions when technically it is
possible. To make it illegal to use mobile phones on an aircraft
when it is perfectly feasible so to do seems to us to be a disproportionate
regulatory action so we have permitted it. I think it is very
interesting question as to how the airlines respond. I personally
would not travel on an airline which allowed voice calls from
any seat in the aircraft but they may find ways of managing the
process in a way which does not have a consumer detriment and
does allow those people who wish to use mobile phone for voice
mail to do so. I think it is for airlines to manage. They own
their customers; they know what their customers want and I think
they will respond to the market demand.
Q42 Mr Sanders: One of the other
issues that you presumably would be looking at is the charging
policy of the airlines because it would be effectively the airline
that would control the network provider and what they would charge
to ensure that passengers would not be ripped off.
Lord Currie of Marylebone: There
clearly needs to be transparency on pricing so that passengers
know what they will be paying if they make a call. Whether there
would be a case for going any further than that—in other
words to price cap such calls—I think is a more difficult
question that we would have to think about. Certainly transparency
is something we would look for.
Q43 Mr Hoyle: What power do you think
you would have to control an aircraft, mid-flight internationally?
What evidence have you taken about Emirates who have already introduced
using mobiles on aircraft? Have you done any in-depth study? Have
you had any reports on the effect that that has had? What pricing
structure have they used and where would you pay your bill to
under an international phone call?
Mr Richards: We have not done
the price analysis because the UK-based services do not exist
at the moment; we have only just permitted it. Bear in mind also
that the second big concern we have is clearly safety. Historically
people have associated the absence of using mobile phones with
safety issues. That is actually a matter for the CAA and the EASA
(European Air Safety Agency) and we have made it very clear that
those hurdles need to be cleared before any of this happens. I
think the core question for us was: do we have good reasons for
not allowing this, given that our duty is to permit and encourage
spectrum to be used wherever it can be? The conclusion that we
came to was that really we had no grounds for doing that. We were
clear that the CAA and EASA had responded on safety; we checked
that with them and made it clear that that hurdle would have to
be overcome before it happens. After that, as David says, it is
a matter for the airlines and I think consumers will exercise
choice on this. I am with David; personally I would be quite attracted
to the idea of being able to use e-mail but I would not want to
sit on a plane full of people making voice calls. I am sure some
there will be different services on offer from different airlines.
The pricing question is one we have not got to yet; we have not
thought about it in detail. We will no doubt have those questions
referred to us as soon as real services begin.
Q44 Mr Binley: Most consumers would
congratulate you on the role you played in international roaming
charges and you have brought some sanity to that pricing structure.
The Government was concerned about it actually in terms of recouping
what was said they lost in income by increasing domestic charges,
trying to recoup lost revenue from other areas of the domestic
market. What evidence have you found for that?
Mr Richards: We have not found
very much evidence of that so far. It is something we are monitoring.
It comes back to the market research point we were discussing
earlier. We look at the market and changes in pricing and cost
to consumers very, very carefully and we do that throughout the
year. We have not found any evidence of that yet but one of the
reasons why we felt slightly more relaxed about that issue than
I think some of our peers in other countries is entirely because
of the point we raised earlier, that there is a five player competitive
market in the UK as opposed to a two or three player market in
other countries. Therefore if there was an attempt to recoup prices
through other charges there was always the competitive discipline
of the other players to reduce that. It rather allows me to connect
back to the question that was asked earlier because it illustrates
how important it is that we keep that competitive structure and
why that debate about the liberalisation is so important.
Q45 Mr Binley: Just to follow on
from there, you have a three year programme of price reduction
in terms of roaming charges. There is still room within the market
place for reduction, is there not?
Mr Richards: On termination rates,
yes. Our termination rates are in the lowest quartile in Europe.
They are going to reduce in real terms every year for the next
three years to 2011. That will take us to a point after which
I think I agree with the premise of your question: will we, at
that point, want to look at either further reductions or indeed
a different approach to this question? I think we will. We have
never made any secret of the fact that we are not enthusiasts
for termination rate regulation. If there was a better way of
doing it we would like to find it. It is complex, it is cumbersome,
it is endlessly argued about; you can always take a different
view. We have tried to make the best judgment we can; we defend
that judgment. It is cost orientated to support consumers. It
is a complex set of regulation which if, in some years to come,
we could rid ourselves of collectively I think that would be a
terrific outcome.
Lord Currie of Marylebone: Litigation
is getting in the way of us having that debate about what the
future might be beyond 2011.
Q46 Mr Binley: So you need us to
act in this place.
Lord Currie of Marylebone: We
would like to have a debate on this issue and it would be a very
good issue for your Committee to take up.
Q47 Mr Binley: Can I move onto the
transfer of data because that is one of the areas where there
is great suspicion that cost is being recovered. Do you think
regulation will be necessary in this respect?
Mr Richards: It is possible that
it will. I have said very publicly that I felt the data roaming
charges were too high and that they should come down. I think
the market is catching up with consumers and I wanted to signal
to the mobile operators that they needed to do something on this
before regulation had to come in. People are using mobile broadband
now; they are downloading things when they travel and move around.
That is happening and therefore the market needs to respond. Prices
have come down. I think every single one of the mobile operators
have reduced those charges. The Commission, alongside us, will
look at those prices next year with a view to considering whether
regulation is necessary for 2010 on. That is the timetable and
I think the answer to your question is that it depends what the
operators have done between now and then and where we are.
Q48 Mr Binley: That seems a pretty
slow moving process and you seem to be able to be a pretty effective
administrator; the two do not really go together, do they? What
might you do if you feel that this thing is not moving as quickly
as it should or as effectively as it should, and when you might
do it?
Mr Richards: As with voice roaming
it requires a European intervention; we cannot do it as a national
regulator. We are prisoners of the Commission's process. They
have said they will review it in 2010 and make a decision on that.
I think in the meantime all we can credibly do—which we
are doing—is firstly make clear our sense of where we are,
which is what we did in my public statement on it that they were
too high. Secondly, we need to do everything we can with the European
Regulators Group to get the analysis right, understand the position
and prepare the ground for making good decisions. As a matter
of fact, we lead the European Regulators Group on this topic;
we lead the working group so we are heavily involved in that analysis
and will push it forward as fast and as far as we can.
Q49 Mr Binley: I think there is a
real need out there to do something in this area. Moving onto
mobile selling, the second highest number of complaints to Consumer
Direct behind second-hand cars. That is not a great compliment
to the industry, is it? What has been the industry's response
so far to your proposal to introduce formal regulatory measures
to protect consumers from mobile mis-selling?
Mr Richards: The short answer
to that is that the industry is not good enough. The response
was not good enough and that is why we are going to introduce
a mandatory code. The voluntary code was not effective enough;
the complaints have not come down sharply enough and therefore
we are going to move to a mandatory code and that will enable
us to introduce sanctions to prevent mis-selling.
Q50 Mr Binley: My concern about this
is how do you monitor it? This is about coal-face operations;
how does your organisation get to coal-face to monitor effectively
in order to know what is going on?
Mr Richards: We have a call centre;
we have the Ofcom Advisory Team; we take thousands of calls every
week from consumers. The reason we have a very good understanding
of this is because we have tracked this data ever since Ofcom
was created, we can see what is happening and mobile mis-selling
has gone from being no issue at all to being a very significant
issue. We have to tackle it and the mandatory code is what will
be necessary.
Q51 Mr Binley: I am slightly unhappy
about that. It is all very well to be reactive to complaint, but
I want to know what you are doing about going out there and actually
seeing what salesmen are doing when they sell the phones. That
is where the action is and very often the companies do not really
have control and knowledge in that respect.
Mr Richards: We get thousands
of calls about this and we will take cases, go to the operators
and say, "This is what people are telling us is happening.
This is not acceptable. You need to take responsibility for this."
The key point on this that the mandatory code will change is that
it will be the direct responsibility of the mobile operator. Part
of the problem here is this vast range of agencies and sellers
they have and some of those have been irresponsible. We must make
sure that the mobile phone operators have proper control of their
sales agents. The voluntary code has not worked to our satisfaction,
we have therefore introduced a mandatory code.
Chairman: We will move onto the broadcast
section now. Thank you very much for that; it has been very interesting.
It has been a bit of a rattle through a whole range of complex
issues but I think we are very happy with the answers.
(Mr John Whittingdale took the Chair)
Chairman: Can we start off by looking
at your recent publication of the public service broadcasting
review. I am going to ask Adrian Sanders to begin.
Q52 Mr Sanders: You are required
to carry out a review of public service television broadcasting
at least once every five years. You have published the findings
from the first phase of your second review. Would you agree that
nothing very surprising has emerged?
Mr Richards: I would not quite
agree with that. It is not surprising only in the sense that the
forecast and projections that we made in the first public service
broadcasting review have broadly proved to be right. It is worth
going back to that first PSB review where, when we published it,
a substantial number of people regarded us as making heretical
statements, predicting things that could not possibly happen,
anticipating things that were not right. Actually, by and large,
they have all pretty much happened.
Lord Currie of Marylebone: One
of the reasons for bringing the review forward is that the pressures
on commercial public service broadcasting have been more intense
perhaps than even we anticipated.
Q53 Mr Sanders: You are calling for
greater clarity up to 2011 from people to really make a decision
as to which side of the fence they fall. How important is it that
you actually have that divide between somebody declaring that
they are a public service broadcaster and that they are not a
public service broadcaster?
Lord Currie of Marylebone: Clearly
the BBC is the cornerstone of public service broadcasting and
that role must be absolutely preserved. It is also important that
we have effective alternatives, that there is plurality of provision
of public service broadcasting. The reason we need clarity on
that question is because we need to know who is playing in the
public service broadcasting space. If there are commercial companies
that are currently delivering but decide not to as part of their
strategy, we need to understand that.
Chairman: I think it is fair to say that
your conclusions were very similar to the ones which we drew in
the Select Committee Report so in the main we thought yours was
an excellent review. Can we focus, however, on one or two specific
areas of particular concern?
Q54 Rosemary McKenna: Moving to children's
programming you identified what we have also identified, the decline
in funding for children's programming. I do agree with your suggestions
on how that might be addressed in the future, particularly the
BBC's role in delivering programmes. I am also very happy that
Channel 4 has announced that they are going to be investing in
programmes for older children. However, you say that no commercial
digital channel has identified or established a business case
for significant investment in high quality UK programming for
older children and that this is unlikely to change. Why do you
think that is?
Mr Richards: The economics of
quality, original children's programming are very, very difficult.
The way the economics work is that you are making something which
sells into a global market and the way you can cover the costs
and make profit on it is to sell into a global market. That global
market is dominated by American and, to some extent, Japanese
programming. That is why, if you look at the dedicated children's
channels on cable and satellite, there is so much American programming.
I am not criticising it, I am just observing it. Some of it is
very, very good, but it is American programming; it is infused
by American culture and not British culture. To make commercial
children's original programming work the costs are relatively
high and you have to be able to sell it in global markets as well
as just your domestic market. Clearly if it is drama which is
about the United Kingdom—we all think about our favourites
in that area—it is less likely to sell well in international
markets. That is at the heart of it.
Q55 Rosemary McKenna: The BBC has
been incredibly successful with things like Teletubbies
and Balamory which goes on to have options, the packaging
they sell and all the toys and everything. They are based in UK
culture and I think it is really important that children should
have programming that reflects their culture. Do you not think
there are opportunities out there for the digital channels?
Mr Richards: It is much easier
for young children. Teletubbies is a very good example
of this. Teletubbies is something that, because it is not
using drama—compare it with Grange Hill or something
like that—it can be reversioned (it does not even use English,
it uses whatever you call Teletubby language) very easily
for resale in any market. It is much easier for very young children,
something that can be sold more generally. It becomes much harder
as the children become older; as the drama or factual programming
connects to British society it is much harder. Teletubbies
is a good example of what you can do at the younger age; it is
much, much harder as you go through the ages.
Q56 Rosemary McKenna: Yet parents
tell us that the BBC provision is absolutely vital to them, for
young children; they can watch television without adverts and
all the attendant issues that they might not be happy about. They
really value that. It just seems to me that somebody is missing
an opportunity.
Mr Richards: It may be and indeed
it is worth saying that the area of children's provision that
we were least worried about was the younger age group. Channel
5 does have part of their channel which is focussed at the younger
age group with Milkshake and that appears to work commercially.
It may be that parts of that can develop but there is very little
evidence now so far over many years that real substantial investment
will go into original UK focused programming.
Q57 Rosemary McKenna: Do you not
want any powers to enforce that?
Mr Richards: I think the days
of our being able to impose that on ITV or Channel 5 are declining
fast. That is why our argument in the PSB review is that we now
need to decide as a society what we value in public service broadcasting;
we need to decide as a society where we want plurality, where
we want providers other than just the BBC (that may not be everywhere,
it may be in other areas; it certainly is in news for example
and parents tell us that it certainly is in children's programming).
If that is the end that we will, we then need to agree what the
means are. The means that we have all grown up with are not there
any more so we need to find a new way of doing it. I think the
Channel 4 proposal to extend its remit to older children is something
that we have supported publicly; I think it is potentially a very
exciting initiative, but it takes you back to the question of
Channel 4's finances and is that a remit that they can economically
sustain for the next decade.
Q58 Philip Davies: We are seeing
this reduction in children's programming because it is expensive
and you need to find a world-wide market but that has always been
the case. The one thing that has changed is that you have introduced
this ludicrous nanny state restriction on advertising for children's
programming. That is what has changed in the last year. Given
that we have a Bill on Friday before Parliament asking us to go
further down this particular route, can you comment on what effect
your restrictions have had on children's programming?
Lord Currie of Marylebone: As
you well know the debate on this question is somewhat bifurcated
and although you may regard what we did as nanny state there are
many who think it was far too weak. The other key point to make
is that the decline in children's programming has been going on
for the last five years; it has been a steady decline and is not
something that has been created by the measures we have taken
on advertising.
Q59 Chairman: They are not going
to help.
Lord Currie of Marylebone: No,
and we have done a lot of work to balance the question of the
need for quality programming on the one hand with the intellectual
and cultural diet the children get and the physical, dietary needs
on the other. We made a very careful balance in our analysis.
We were very conscious that we were having to make a rather difficult
judgment in that process.
| 
