Session 2010-11
Publications on the internet
General Committee Debates
Delegated Legislation Committee Debates

Draft Wireless Telegraphy Act 2006 (Directions to Ofcom) Order 2010


The Committee consisted of the following Members:

Chair: John Robertson 

Bradley, Karen (Staffordshire Moorlands) (Con) 

Brown, Lyn (West Ham) (Lab) 

Burt, Lorely (Solihull) (LD) 

Dobson, Frank (Holborn and St Pancras) (Lab) 

Foster, Mr Don (Bath) (LD) 

Jones, Andrew (Harrogate and Knaresborough) (Con) 

Keen, Alan (Feltham and Heston) (Lab/Co-op) 

McCartney, Jason (Colne Valley) (Con) 

Mercer, Patrick (Newark) (Con) 

Metcalfe, Stephen (South Basildon and East Thurrock) (Con) 

Morris, Anne Marie (Newton Abbot) (Con) 

Murray, Ian (Edinburgh South) (Lab) 

Nash, Pamela (Airdrie and Shotts) (Lab) 

Onwurah, Chi (Newcastle upon Tyne Central) (Lab) 

Pearce, Teresa (Erith and Thamesmead) (Lab) 

Simpson, David (Upper Bann) (DUP) 

Vaizey, Mr Edward (Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport)  

Vara, Mr Shailesh (North West Cambridgeshire) (Con) 

Mark Oxborough, Committee Clerk

† attended the Committee

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Fourth Delegated Legislation Committee 

Wednesday 1 December 2010  

[John Robertson in the Chair] 

Draft Wireless Telegraphy Act 2006 (Directions to Ofcom) Order 2010 

2.30 pm 

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Vaizey):  I beg to move, 

That the Committee has considered the draft Wireless Telegraphy Act 2006 (Directions to Ofcom) Order 2010. 

It is a pleasure to serve under your chairmanship this afternoon, Mr Robertson; I think this is the first time that I have done so. 

My right hon. Friend the Secretary of State for Business, Innovation and Skills laid this statutory instrument before the House on 27 July. It directs Ofcom to carry out a number of actions that will implement the revised GSM directive in the UK and allow Ofcom to proceed to release additional spectrum into the UK market to support the roll-out of high-speed mobile broadband services. This is an important step in the provision of new higher speed mobile broadband services. 

Wireless communications are now an integral part of everyday life in the UK. There are now more active mobile connections than people. More than 3 million people access broadband using wireless modems, otherwise known as dongles, and the arrival of devices such as smart phones and tablets such as the iPad and the Samsung Galaxy are changing the way people communicate, access online material and interact. [ Interruption. ] The hon. Member for Bath, from a sedentary position, indicates his assent to the way in which I have outlined the different ways we are communicating. He is certainly at the cutting edge of that change. 

The devices all require one thing to make them function. I am not talking about the hon. Member for Bath, but the use of radio spectrum. If sufficient spectrum is not available, the services cannot continue to function effectively, nor can new and innovative services be brought to the market. 

Use of spectrum can often preclude the use of a particular frequency or frequencies by others. The laws of physics dictate the amount of spectrum available, so spectrum is a finite and scarce resource, for which there is increasing demand. Spectrum that is suitable to deliver mobile broadband services is even scarcer. It follows therefore that making spectrum available whenever and as early as possible is central to deriving the benefit that high-speed mobile broadband services can deliver to consumers, citizens and businesses. It is the Government’s desire to speed up the release of spectrum suitable for mobile broadband services, and that is what lies behind this afternoon’s important statutory instrument. 

A long and tortuous route has been travelled to bring us to this point. I will spare hon. Members the details, but some of the issues, such as the liberalisation of the 900 and 1800 MHz spectrum, have been the subject of discussion and consultation stretching back several years.

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Those issues have made progress towards the release of spectrum particularly difficult. The previous Administration had laid a statutory instrument back in March with measures they considered would address some of the most difficult areas of concern, but there was insufficient parliamentary time before the general election to get that passed. There was therefore a need for this Government to make a decision on how to proceed. 

The Government have made it clear that one of their key priorities is to rebalance the economy, both in terms of supporting growth in a broader range of economic sectors and in terms of seeing an even distribution of economic opportunities across regions and industries. A critical requirement for that balanced economy to develop and thrive is the right to telecommunications infrastructure, specifically the provision of superfast broadband connectivity. In light of that objective, we have considered carefully how best to proceed, and, in doing so, have taken into account responses to the consultation and held further discussions with Ofcom and mobile operators. 

The principal objective is the earliest possible release of the spectrum and the giving of certainty to the market, so that new mobile broadband services are deployed as quickly as possible for the benefit of consumers. We are already seeing 4G services deployed across the world and in Europe. We cannot afford further delay that will result in the UK falling behind in the availability of such services. We are justly proud of our position as a leading mobile marketplace and do not want to lose it. We have concluded that intervention by Government, in the form of the direction to Ofcom, is desirable to achieve an early release of the spectrum, but we are also of the view that the previous set of proposals would have had a disproportionate impact on the functioning of the market. 

We have therefore decided on a simplified direction. The decision was also informed by further analysis by Ofcom of the possible competitive distortions that might occur through the liberalisation of 900 MHz and 1800 MHz spectrum. Ofcom concluded that the risk of distortion was less than it had previously thought, primarily because of the creation of Everything Everywhere, the joint venture in the UK between Orange and T-Mobile. It was Ofcom’s view that the joint venture is in a better position to respond to changes in the use of the spectrum than was the case when Orange and T-Mobile were separate companies. 

The simplified direction will allow the UK to fulfil its obligations to implement the European Union’s revised GSM directive, which came into effect on 9 May 2010. The directive will liberalise the use of 900 MHz spectrum for 3G services in the hands of the incumbents, and will also implement the accompanying Commission decision harmonising the use of 1800 MHz spectrum with 900 MHz spectrum. The licences will be made indefinite, subject to revocation on spectrum management grounds, and they will also be made tradable. They will be subject to revised annual fees to be determined by Ofcom. 

Ofcom is also being directed to amend licences for the use of spectrum at 2.1 GHz so that they are also made indefinite. The licences will be subject to an annual licence fee once their initial term has expired in 2021. The licence holders will also be required to meet additional coverage conditions and the licences will be made tradable. 

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Mr Don Foster (Bath) (LD):  In relation to the 2.1 GHz, the order specifically states: 

“OFCOM must, provided the holder of a 2100MHz licence consents, vary the licence”. 

That includes the issue of geographical coverage. What would happen if the licence holder did not consent? 

Mr Vaizey:  I will write to the hon. Member on that specific point. We consider the extension of the licences to be necessary to encourage further investment in 3G services. That technology will continue to be an important part of the wireless broadband landscape for a number of years before 4G services can be fully rolled out. Without the change to the licences, further investment in those networks will be uncertain, to the detriment of consumers. 

We are also directing Ofcom to begin immediately with preparations for the 800 MHz and 2.6 GHz auction, but with a requirement to carry out an urgent competition assessment of the competitive position of operators in regard to further developments of 3G and future 4G networks, including the potential for new entrants, to inform the design of the auction rules for that spectrum. 

I believe that this direction to Ofcom will permit the earliest possible release of this important spectrum, benefiting business, the consumer and the telecommunications industry alike. 

2.38 pm 

Chi Onwurah (Newcastle upon Tyne Central) (Lab):  It is a pleasure to serve under your chairmanship, Mr Robertson. I should start by declaring an interest. I worked for Ofcom when the previous Government’s Digital Economy Bill was going through Parliament. Although I did not work directly on the provisions related to the statutory instrument under discussion, I provided support for other areas of the “Digital Britain” report, which led to the Bill. 

In that context I can say, with some justification, that the previous Government had a good understanding of the importance of the UK’s communications infrastructure. As the Minister has said, we need advanced, competitive communications platforms if we are to develop a digital economy at the leading edge of Europe with competitive communications markets, high-tech, high-growth companies, digitally literate consumers and world-leading creative industries. 

The Digital Economy Bill was the previous Government's way of implementing that vision. It followed the Caio report, the draft “Digital Britain” report, the final “Digital Britain” report, the Gower review and a series of reports from the Broadband Stakeholder Group, Ofcom and others. As the Minister said, it has been a long and tortuous path. Part of the objective of the Digital Economy Bill was to provide such help as Government can to the private sector in delivering the effective modern communications infrastructure we need, built on new digital technologies. Essential to that is the modernisation and release of mobile spectrum, which is the objective of this statutory instrument. It should not come as a surprise, therefore, that we support the objectives of this statutory instrument. We certainly wish to see a mobile sector enabled to play its part in Britain's economic

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recovery. We see the need to allow consumers to benefit from new mobile technologies by providing additional capacity for mobile broadband. 

We have concerns, however, on how this Government are trying to achieve this objective. We also have concerns on whether this Government truly understand and are committed to the importance of competition and consumer protection. I hope that the Minister can reassure me on the following points. The Minister alluded to the importance of releasing new spectrum, but does he recognise how important it is that the spectrum auction takes place quickly? It is estimated that during the period of this Government more people will access the internet from mobile devices than from fixed devices. Already, many consumers experience congestion when accessing the internet through a mobile network, especially in rural areas. I am sure hon. Members have experienced that congestion too. 

New mobile spectrum is essential. We had hoped to release this spectrum some years ago, but European harmonisation, technical issues and conflicting industry viewpoints meant that it was not until March last year that the previous Government were in a position to lay a statutory instrument before the House. That was eight months ago, however. At that time, the Conservatives prevented it making its way through the House in the wash-up. We could be eight months further advanced, had the Conservatives recognised the importance of pressing ahead with mobile liberalisation. That delay will cost our economy and our competitiveness. 

Even following the election, the Minister has made the industry wait six months before laying the statutory instrument. Will the Minister clarify what representations he has received during that time? We are fully aware of the importance of a speedy release, which is why I can say straight away that we will not oppose the motion, despite our concerns. 

The statutory instrument that we laid before the House was nine pages long. This one is three pages long. Hon. Members will be aware that length does not always reflect quality, or the extent of the evidence. When we made a detailed comparison of the two statutory instruments, important differences became clear. In our statutory instrument, we gave very clear directions to Ofcom on how the existing 2G spectrum should be modernised, on how the auctions for the new digital dividend spectrum should be organised and with what objective—whether competition or consumer choice—and on how mobile operators should have to open up their networks to enable competition through wholesale access in rural areas. 

The Minister’s statutory instrument does none of that, and the Minister has described it as a simplification. This is a very complex technical area and, for the benefit of hon. Members, I do not intend to go into the details. The previous Government found it necessary to appoint an Independent Spectrum Broker, who said that it would take at least nine months to build consensus on the best way to resolve all the competing interests. Indeed, it was a long and painful process, so I understand the Minister’s reluctance to go into detail. 

We, as the then Government, felt that we had a responsibility to give Ofcom direction. Most importantly, we were also aware that, without clear direction, there is a danger that the auction will be challenged in the courts, which would further delay the auction and the

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availability of new mobile services for British consumers. However, the Minister is giving Ofcom no guidance on the way in which the auction should be constructed. 

Spectrum is a valuable national asset, as the Minister said, and I am sure that the Treasury expects substantial revenues from the auctions. Can the Minister confirm that the primary objective of the spectrum auctions must be to ensure continuing competition, so that consumers can chose between different mobile operators? Can he confirm whether the Government agree that it is essential that Ofcom protects competition in the mobile broadband market by taking steps to prevent an over-concentration of mobile spectrum? Given the importance of competition, why has he removed all requirements to offer wholesale access? 

As I said, I understand the Minister’s reluctance to enter into the detail, but the Government like to talk of their determination to seize back policy from unelected quangos. While I was working for Ofcom, the then shadow Secretary of State for Culture, Media and Sport, the right hon. Member for South West Surrey (Mr Hunt), said that 

“with a Conservative Government, OFCOM as we know it will cease to exist. Its remit will be restricted to its narrow technical and enforcement roles. It will no longer play a role in making policy. And the policy-making functions it has today will be transferred back fully to the Department for Culture, Media and Sport.” 

So, who is making policy—Ofcom or the Government? Will the Minister not even set out whether the objective of the auction is competition or revenue-raising? The Prime Minister has said: 

“The days of quangos taking decisions in areas of contested public policy must stop—unless they are strictly told to do so.” 

Is that what is happening? Is Ofcom being told to take a difficult decision, so that at some future date the Government can duck out of their responsibilities? 

Finally, will the Minister assure the Committee that Ofcom will have the Government’s full support in taking steps to protect competition and consumer interests? The Government have delayed the universal broadband commitment, as well as the auction. Does the Minister recognise the role that mobile broadband can play in delivering universal broadband coverage, and does he agree that universal broadband coverage should be a priority? 

2.48 pm 

Mr Foster:  It is a great pleasure to serve under your chairmanship, Mr Robertson. I will seek to be brief. May I say to the Minister that I very much support the statutory instrument? Like the hon. Member for Newcastle upon Tyne Central, I believe it is important to get on as quickly as possible on this issue. I welcome the fact that, notwithstanding the concerns that she has reasonably raised, she will not be voting against the order. 

I would welcome the Minister’s response to three concerns. The first is a simple, technical concern about whether the statutory instrument will ensure that when Ofcom follows a direction to provide licences for an indefinite period it has the legal power to do so. Some concerns have been expressed as to whether the order cuts across the Wireless Telegraphy Act 2006 and the power in that Act to provide licences for finite periods. 

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My second concern is similar to the one raised by the hon. Lady. It relates to competition, particularly in terms of the lower frequencies. The Minister and the hon. Lady will be aware that the frequencies in the 800 MHz area have huge commercial benefit, not least because they pass through houses more easily and also because there is already a wider roll-out of the facilities to enable that to happen. If Vodafone and O2 are able to take up a fair amount of the 800 MHz band, that will put them in a very dominant position. As I understand it, the solution to that is provided in the statutory instrument, where there is a requirement for Ofcom to make a competition assessment before the auction goes ahead. But I would like an absolute assurance from the Minister, which I am pretty confident he will give me, that before the auction goes ahead, the matter of ensuring that there is not unfair competition will be a key criterion in Ofcom’s arrangements for the auction. 

My final issue concerns coverage. The Minister is aware—he said it in his earlier remarks—that although fixed broadband will clearly be important, and although we recognise that particularly in rural areas there will be a need to consider using not only fibre optics but satellite, fixed wi-fi and WiMAX to provide a fixed system, there will also be many users who will want access to a mobile broadband system; and the desire to have access to it will be just as real in rural and remote areas as it will be in conurbations. Therefore it is important to ensure that people in remote and rural areas are also given the opportunity to access broadband through a mobile system. 

At the moment, the statutory instrument contains no specific requirement in the auction process for the 2100 MHz or the 800 MHz to have a geographical coverage. However, it does make it very clear that Ofcom, in carrying out that auction, will have regard to section 14 of the Wireless Telegraphy Act 2006. Section 14(3)(h) specifically states that a requirement 

“to specify the other terms, provisions and limitations subject to which a licence to which the regulations apply is to be granted.” 

I would like the Minister to confirm that that will be used by Ofcom in its consideration of geographical coverage. Without such a requirement, there is a real worry that the highest price for the Government will be obtained by limiting the auction to densely populated areas, and rural areas will lose out. That would be wrong. 

In the same way, in the other area that I mentioned in an intervention earlier—not only the 800 MHz but the 2.6 GHz and also the 2100 MHz—it is clear in the proposed statutory instrument that Ofcom must 

“provided the holder of a 2100MHz licence consents, vary the licence to provide for all of the following”, 

which includes a geographical coverage requirement. Clearly, if I am concerned about ensuring that that geographical coverage will be a requirement, I still have a concern. The Minister said that he would write to me, but by now he might have more up-to-date information on what will happen in a situation where the current licence holder does not consent to such an agreement. 

Anne Marie Morris (Newton Abbot) (Con):  I want to support my hon. Friend’s representations on geographical spread. Certainly, in Devon, in the west country, we have a real issue with access to broadband. I support

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what he is saying. It should be an issue that is considered by the Minister when looking at not only the statutory instrument but the provision of broadband more broadly across the county. 

Mr Foster:  I am grateful to my hon. Friend for that intervention. One thing is absolutely clear: the directions that the Minister is giving today do not simply instruct Ofcom to see how it can maximise the amount of money that the Government receive. The directions do not say that, so no one could interpret the statutory instrument as it stands as instructing Ofcom to do that, because in those circumstances, rural areas would almost certainly lose out because no geographical requirement would be placed on any of the licences—I am not suggesting that the requirement should be on all licences. Quite clearly, where a geographical requirement is placed, it would reduce the value that the Government are likely to receive from the auction simply because the successful bidder would have to do more work to ensure that there is the wider geographical coverage that I am requesting. There is nothing in the instrument that would prevent the inclusion of a geographical coverage limitation. What I am looking to hear from the Minister is an assurance that Ofcom will take that consideration into account. 

I look forward to hearing what the Minister has to say on whether the statutory instrument will create a problem for Ofcom in relation to the Communications Act 2003, and in relation to the competition issues and the coverage issues. Regardless of the responses I get—I hope they are positive—the issue is one that we have to get on with very quickly, so I too do not want to delay the order’s implementation. 

2.56 pm 

Mr Vaizey:  I welcome the hon. Member for Newcastle upon Tyne Central to the Committee and thank her for her contribution on behalf of the Opposition. I did not get a chance to congratulate her on her contribution to a debate that we participated in on science because I talked too much and ran out of time. I have spoken to her privately—I can now put it on the record publicly—about my sheer terror at having to face her across the Dispatch Box, given her significant experience working for Ofcom. Let me elaborate on what I am saying when I talk about terror: the people who work for Ofcom are generally of the very highest standard. Although I have listened to the hon. Lady and confirmed that she is of the very highest standard, I did not need to listen to her; I simply need to look at her CV to know that having worked for Ofcom, she will be a formidable opponent and a formidable spokeswoman. My instinct is that this is the only decision that the Leader of the Opposition has got right since he was elected. 

That may answer the fifth point that the hon. Lady made—I have written down six points—which was about the future role of Ofcom. Let me put on record on behalf of the Government our admiration for Ofcom as a regulator, for its chief executive Ed Richards, who, in my opinion, runs Ofcom superbly and for its chairman Colette Bowe. 

The hon. Lady referred to remarks made by the Secretary of State for Culture, Olympics, Media and Sport. Far be it from me to second-guess the hon. Lady,

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but I think the remarks may have been made by the then Leader of the Opposition, now Prime Minister. The point that we were trying to get across in opposition about Ofcom was that we felt that the previous Administration had allowed a vacuum to appear in certain areas of policy, which, not unnaturally given the enormous talent that resides in Ofcom, had been filled by the organisation. An example would be the debate on the future of the television licence fee and whether that should be top-sliced to fund alternative public service broadcasters. It is therefore important that the Government give the lead on the policy that they want to see implemented, as the Secretary of State for Culture, Olympics, Media and Sport is doing in terms of local television, but reassured that Ofcom stands behind the Government as a regulator that is the envy of the world in its ability to implement Government policy. 

The hon. Lady’s first point was on the importance of an early auction. She pointed out—I agree with her on this—the congestion on the internet and the difficulty that we all have, particularly during very dull debates in the House, in being able to access the internet. I have noticed that coverage in the Chamber is not what it should be. She also pointed out that one of the difficulties we have encountered in getting to where we are today is the existence of “conflicting industry viewpoints.” That was probably the understatement of the century, considering that this is the most litigious and difficult environment. 

The hon. Lady asserts that had we adopted the statutory instrument that was put forward by the previous Administration, we would now be eight months further advanced. However, circumstances changed fairly significantly at the time when the previous Government laid their statutory instrument, in that two of the major operators—Orange and T-Mobile—merged as Everything Everywhere, which changed the competitive landscape. I hesitate to say this, but I am not sure that the statutory instrument would have survived those changed circumstances. 

Although I have approached my remarks in the spirit of harmony, I venture to suggest that the previous Government could, to a certain extent, be accused of dithering, over a number of years, about grasping this issue. The SI came to us very late in the day, at a point when the mobile telecoms landscape was changing. 

We laid the order towards the end of July and even then it was not plain sailing, given the concerns that were expressed by some of the mobile operators, and it has been a process of delicate negotiation to get where we are today. I am delighted, however, that we have done so, and that the mobile operators were able to take a step back and see the bigger prize for all of them in terms of liberalising spectrum and proceeding with the auction. 

The hon. Lady asks what representations I have received. I have engaged with all five—or four, depending on whether Everything Everywhere is regarded as a merged entity—mobile operators on the issue, so they have had plenty of opportunities, which they have taken, to make their points. 

I was not clear what the hon. Lady meant about clear directions to Ofcom on the liberalisation of 2G spectrum, regarding the difference between the previous statutory instrument and this one. The essential difference between them lies in the directions on the auction of spectrum.

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We have, effectively, transferred the auction process to Ofcom, because of the changed mobile telecoms landscape, and, to a certain extent, Ofcom now starts with a blank sheet of paper. That said, Ofcom will take account of maintaining competition in the mobile marketplace, which is why it will undertake a competition assessment as it draws up the auction rules. It will also—eliding my remarks with addressing the remarks by the hon. Member for Bath—take into account issues such as rural coverage, as is allowed under European Union law. 

The final point raised by the hon. Lady concerned our alleged delay on the universal broadband commitment. I would assert that, far from being a delay, it is an enhancement. We discovered early on in coming into office that the previous Government’s commitment to a universal broadband at 2 megabits a second was woefully inadequate, and there was absolutely no point in putting in place broadband that would, effectively, be out of date the minute it was laid. The four pilots that we have announced will, therefore, be for superfast broadband. My right hon. Friend the Secretary of State will outline our broadband strategy on Monday, which will contain some very exciting developments. Those will show that we will be proceeding apace—at almost a superfast pace—to implement superfast broadband in this country and to maintain our position as world leaders in information technology. 

The hon. Member for Bath rightly examined whether the SI has the power to create indefinite licences. My understanding is that the relevant sections in the Act have simply been transposed from the Wireless Telegraphy Act 1949, which has allowed the creation of indefinite licences, and there is no reason to doubt that that is legal. 

The hon. Gentleman also mentioned the importance of maintaining competition. As I said, that is why it is vital for Ofcom to undertake a competition assessment. Coverage conditions will be an important consideration for Ofcom when it draws up the auction rules. I should make it clear that, as I understand it, Ofcom is not in a position to draw up auction rules in order to maximise revenue for the Treasury; it must draw up auction rules to ensure fair access and competition on spectrum. 

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We have reached a good position after many months of discussion and examination of the issues. In getting the draft SI before Parliament by the end of July, we moved relatively swiftly—getting to that position in about two and a half months. Obviously, procedures slowed the SI down once it reached Parliament, but we are in a good position, because we can benefit the British consumer by liberalising existing spectrum, extending licences to give the mobile operators the certainty that they need to invest and being able to proceed apace with the auction rules. 

I hope that the hon. Lady, who had a distinguished career in the field, will do all she can when she meets the operators to impress on them the need for them to see the big picture and not to delay Ofcom unduly in the process of drawing up the auction rules. Ofcom will draw up those auction rules in full consultation with the industry, taking into account all relevant factors, and I look forward to seeing what emerges from what I described earlier as our world-class regulator. 

3.6 pm 

Chi Onwurah:  I thank the Minister for his kind remarks in welcoming me and for addressing some of the concerns that I expressed. 

The interventions have highlighted the shared concern about the ability of this statutory instrument to ensure competition in mobile services across our country, in rural areas as well as in cities. I do not feel that the Minister fully addressed that concern. My comments on 800 MHz and 900 MHz with regard to wholesale access were themselves a reflection of the measures taken in the previous SI to ensure competition. 

Nevertheless, we share the desire to ensure that the auction proceeds as quickly as possible. Labour Members will be doing all that we can to support that, although I expect to return to the issue in the future, in the hope that our concerns have been addressed. We will not oppose the motion. 

Question put and agreed to.  

Resolved, 

That the Committee has considered the draft Wireless Telegraphy Act 2006 (Directions to Ofcom) Order 2010. 

3.8 pm 

Committee rose.