Joint Committee on the Draft Communications Bill Minutes of Evidence

Examination of Witness (Questions 100-116)


MONDAY 27 MAY 2002

  100. Are there any deficiencies on the face of this Bill that you would like this Committee and Parliament to remedy?
  (Mr Edmonds) I have to say, my team and I have been working very closely with both departments in the preparation of the Bill. We have had the opportunity to make points to them throughout the preparation of the Bill and we have. As far as I am concerned the set of powers which are given to OFCOM here are as adequate a set as any regulator could hope for.

  Mr Lansley: That is a no.

Baroness Cohen of Pimlico

  101. I would like to come in on the question of duty. You said yourself, Mr Edmonds, that it had taken longer to force BT to engage in interaction with the private sector and indeed interaction with the consumer on broadband than anybody would have hoped.
  (Mr Edmonds) Indeed.

  102. The length of time these things take matters very much because of where it puts us, ie in arrears with an awful lot of people in Europe. What I think we are all prodding for is, is there something you could have done differently because everybody is extremely critical and probably still is of the inability of a regulator to push BT into a position which it wanted. Is there something you could have done differently if you had had a few more powers (just to ask the question again) and is there still the possibility, I suppose, of the dominant market player holding up further progress and, if so, what do we do?
  (Mr Edmonds) I think this is an interesting question because I think it goes right to the heart of the role of the regulator. We are dealing with private sector companies. Private sector companies have rights, duties, responsibilities to their shareholders. They have their own rights and privileges under the law. The whole of my organisation is directed towards redressing market failure but only in situations where we have fully analysed, where we have evidence and we have good reason and we follow due process in driving something through. The specific example you give, I think we could have encapsulated and shortened the process. I suspect there is very little different that we could and indeed should have done in terms of going through, analysing what was happening, finding out why it was not happening and then saying "This is the action that we would expect you to take". You say we are in arrears with a lot of people in Europe. I think we are in arrears in perhaps four or five countries in Europe. I think we are catching up dramatically quickly. What I think we must not do, and what sometimes we are at risk of doing, is forgetting that in the UK we have 55 per cent of the country able to take cable, we have virtually 100 per cent of the country linked to BT, there is real competition both in narrow band and in broadband, most of our European counterparts do not have that. We have some of the lowest prices in the world let alone Europe in terms of unmetered access to narrow band. We have very low prices now for broadband connectivity. I do not accept the UK is a failure in terms of broadband, still less the telecommunications sector as a whole. I think in many areas we are in advance of most of Europe and much of the world.

Brian White

  103. Just a quick question on that which is that there is a dearth of capital at the moment for the sector. If you were OFCOM now what would you be doing to address that issue?
  (Mr Edmonds) I do not think it is the job of the regulator to sort out the capital markets. I do not think it is possible for the regulator to sort out the capital markets. What we are seeing in the UK, indeed in Europe and in America, is a reaction to the events of the last two years and bankers, investors and others saying "We have been burned by a series of actions, we are very, very cautious now about where we are putting our capital". What the regulator can do is maximise the extent to which market barriers are pulled down or reduced to maximise the extent to which other people can get access into the network. Those are the kinds of actions that I am taking and continue to take but certainly I am not, and I do not think OFCOM should go out and say "It is my job to organise capital", I do not think any regulator is capable of doing that.

Mr Lansley

  104. Can I just ask about the concurrence powers that you enjoy with OFT and OFCOM will have OFT. Clearly the Competition Act set up a system of concurrency which you have been operating since then. This will be widened with OFCOM and the OFT in the future. There are many in the industry who feel that this might lead to a sense of double jeopardy, that the Bill on the face of it suggests that it cannot be passed between the agencies, one begins and then another, that agency having begun, if you begin as OFCOM then you carry that through.
  (Mr Edmonds) Sure.

  105. Also there is a feeling that the industry does not know under what circumstances the OFT might become involved. Do you think there is a degree of transparency that is still lacking here as to how the working group might interpret the concurrency in practice and it would be better to be a little more specific. What are the circumstances where the OFT would lead?
  (Mr Edmonds) I think I would answer your question by reference to the past and those in the industry to whom you have been talking, who have suggested there might have been double jeopardy, and asking- when? We have worked very closely with the OFT on all occasions that there has been any possibility of either of us taking a case forward and deciding Oftel will take the case forward. There are very clear guidelines that the concurrency working party has published. I think it is transparent. I think if people do have problems it is perhaps through a failure to have looked at what the rules are, what the guidelines are, how they are carried out. No company has suffered from both an OFT inquiry and an Oftel inquiry because that is not the way it works. We sort it out before we get to that point, and I think OFCOM would. I think you are talking to John Vickers later, his workload has not prompted him so far to ask me if he can take off some of the cases we have been dealing with and I suspect that will be true in the future.

  106. The guidance that OFT has issued, and the way the working group works, and indeed the policy as expressed with the Bill, nonetheless leaves open the possibility that it will normally be OFCOM but it could be the Office of Fair Trading where it is better placed to do so. "Where it is better placed to do so" has not been validated by any particular set of circumstances since the Competition Act came in.
  (Mr Edmonds) Indeed.

  107. Would it be simpler to say "Well it will be OFCOM and it will not be OFT" or OFCOM arrives at a point where it says "We are not going now to try and regulate this market ourselves because we think it is a fully competitive market and we do not need to set conditions. We do not need to be the regulator, it can be done by OFT using all the normal rules which apply in other sectors".
  (Mr Edmonds) I think either of those options clearly is on the table. From my own experience and the knowledge of having a regulatory agency that has a deep knowledge of the industry, a deep knowledge of the business with which it is dealing, having that knowledge I think is likely to be more effective particularly when its staff are fully trained in the Competition Act methodology. I would prefer the power to rest with the sectoral regulator providing, as I say, that training and that knowledge is instilled in the organisation. If you were pressing me on an either/or I would be comfortable with the Bill suggesting that OFCOM should be the competition authority in the communications area. As I say, in real life, in experience it has not been a problem sharing the function with the OFT to this point.

Anne Picking

  108. My question is about fair play to the consumer and about the nations, regions, localities, communities and interest groups. Will OFCOM be better placed than Oftel has been to ensure that remote areas are properly served?
  (Mr Edmonds) I think the answer to that is it will not be worse. The remote areas of the UK under the Universal Service Obligation for telecommunications get a service, they get a basic service which is to do with narrow band telephony. They can have internet access over narrow band, they can have fax. It is established that there will be adequate phone call box facilities. It is established that people in those remote areas do not pay more for their calls than they do at the moment. The whole question of geographic averaging does give people in remote areas the same price even though the costs are much higher. All of that will flow through into the new world of OFCOM. Whether or not the interests of that group of people will be enhanced, I think the honest answer to that is no, not in terms of the Bill, because the service obligation will be there and that will not change. Will it be enhanced by the consumer panel and the representation of the more effective way of arguing the case, again I do not know. I have a very strong consumer interest inside Oftel. I have a consumer group for England, Northern Ireland, Scotland, Wales, the disabled, the elderly, small business and they provide me with very strong advice about the problems that you have alluded to. As far as we can, we reflect that in the decision that we take. The new consumer panel I think is very important, indeed a critically important part of the new framework. How that is constructed, how that is built up, how the consumer voice is represented through that clearly is still to be determined but I see no reason at all why it should be injurious, indeed it should be beneficial and in the interests of the consumers.

Lord Pilkington of Oxenford

  109. Broadband will never get to remote areas, the dream will never be realised?
  (Mr Edmonds) No, I do not agree with that. I think broadband in remote areas will come. I think broadband will come in the first place through the aggregation of demand. I think some of the initiatives that the Department of Trade and Industry and the Office of E.Envoy are taking off so that local authorities, regional development areas, local business, local chambers of commerce come together. It has happened in Cornwall with ten exchanges which have been enabled in Cornwall which otherwise would not have been enabled because of the local partnership. It is happening in Wales. It is going to happen in Scotland. I think broadband will come but I do not think it will be a response by the providers of broadband to the demand that is diffused at the moment, I think it will come through the aggregation of demand. That is the first answer to your question. The second answer to your question is I am always very chary about forecasting what is going to happen in technology. Satellite technology is being developed by BT in terms of rural areas. I think it is too early to say that there is going to be a market failure which will not be resolved by the market itself but it will be putting demand together in a quite different way.

Anne Picking

  110. I think you gave an answer to my question in a frank and realistic view of the situation but can I ask David Edmonds if he thinks that is satisfactory?
  (Mr Edmonds) In the narrow sense of your question I think, again if I may, I will go back to the answer I gave earlier. The regulator will carry forward what Parliament determines the regulator should carry forward. I can give you an answer in terms of what is happening in the world with the obligations that I have currently and the obligation that I drive forward. It is for you, Parliament, within the constraints of European law to determine what you think the basic service obligation should be and if that is different from the one we have at the moment. The regulator would clearly drive it forward. From my own perspective what happens at the moment is clearly providing a pretty good service in most parts of the United Kingdom.

Lord McNally

  111. I would just like to really go back to my first question. If we put your evidence today next to the evidence that we heard from Patricia Hodgson last Thursday it is almost unbelievable to that we are talking about the same organisation. These clever people who are going to devise the structure, you think the only thing they can come up with is that animal from Dr Doolittle which had a head at both ends. I ask you again: do you really think this body that is being created is going to be able to give the attention to detail on the technical side that you have addressed very frankly to us today and also the broader cultural aspects, for which we get very very heavily lobbied and I suspect so will OFCOM?
  (Mr Edmonds) Lord McNally, yes I do. We are not a group of very clever people.

  112. I hope you are!
  (Mr Edmonds) For the last 12 months the regulators have worked together and we created at the end of the first stage an organisational framework, and it was a first option, and we have been very, very careful not to try and do the work for the board. We are not the new board. We all disappear. The new board will take the decisions. If you look at the output of phase one, we designed there, if you like, a central option, that did integrate horizontally across the organisation the work of the existing regulators. We put in the same part of the organisation a responsibility for network and services. We put then a responsibility for compliance actually driving that across the piece, a strategic core and then—to use your phrase from earlier—some technical functions the RA carries out. I have been very close to this now for 12 months. It is a dream I have had for three years, the creation of OFCOM. Yes, I do believe that the cultural diversity—you have not asked me about it, I guess it is not my patch—the whole of the cultural side, the public service broadcasting obligation side, all of that I do genuinely believe can be integrated into an intelligent and sensible framework. I think the content board is absolutely key and I think the content board will have a separate existence. I think again putting together the BSC, the ITC, parts of the Radio Authority in that content board again produces, one hopes, a synergy in terms of work on content. Integrating that across into the main board, yes there will be some difficulties, there will be some problems but I believe if a board is created that has got the skill set that is needed firstly to design this organisation and then to run this organisation, and if we are very clear about its duties and responsibilities, yes I do profoundly believe that we can create what I perceive we have a chance of doing which is a world leading regulatory agency. We have got a fantastic opportunity to create something that is better than exists anywhere else in the world and it is an opportunity that I think we ought to seize.

Baroness Cohen of Pimlico

  113. On that note, we are asking everybody whether they think the draft Bill is "future-proof" and whether they think it is going to do what the Government intended to do, which is provide a framework for at least 10 years? Are there any hold-ups in your view?
  (Mr Edmonds) On the telecommunications side, which is clearly the area I have worked most closely on, it is basically about transposing European law into UK law. That is as future-proof as it can be in the sense that until there are more European Directives—and it has taken rather a long time to drive these through so I do not expect it to come back to that for some years—it is pretty solid. Television broadcasting is a different game. There has been a Broadcasting Act every five years or so for as long as I can remember. I suspect some of the clauses between 180 and 230, about content and the way content is handled, will be amended because, again, Parliament has a rather more fundamental interest in that side of the work than it does in basic communications. The Act under which I operate Bryan Carsberg had operated under since 1984 and it has not been amended substantively since then. Whether this will last until 2020 I have my doubts.

Paul Farrelly

  114. Mr Edmonds, one thing that is slightly curious to me is that I have not picked up from all your evidence that you see any deficiencies whatsoever either now or in the foreseeable future in this Bill. You must have the happiest of working relations with the Government. You had a dream and the dream is now draft. Is there absolutely nothing extra that you would like to see in this Bill or, indeed, taken out of this Bill?
  (Mr Edmonds) In August 1999 I said "to ensure consistent economic regulation goes across all communications markets, there should be a single regulatory framework applying the same rules." This Bill to a very large extent fulfills that expression. From my context as a simple economic regulator I see that the Bill has got a huge amount of material on content. My approach to content is rather more self co-regulation. I think perhaps if I were working inside OFCOM I would find the great detail in those clauses to be a bit oppressive, if I may use that word, but insofar as fulfilling what the White Paper originally set out to do, and fulfilling the document I first set out three years ago, I think it is a very good piece of legislation. I have a good relationship with Ministers. I have a very independent relationship with Ministers. My team have been involved in the drafting and I am are very proud of the way in which the teams have worked with their departmental counterparts to produce something as good as it is. I am sure you will find lots of ways of improving it, but as a starting point this is as good as I could wish for.


  115. Was the consumer panel part of your 1999 vision?
  (Mr Edmonds) No, I was talking much more about the basic regulatory framework. I have been an advocate for the consumer panel throughout the preparation of the Bill. The consumer panel ought to fulfil a role for the OFCOM board. Analogous to that would be the chairs of the existing six groups that advise me. Having that direct contact with consumers and floating ideas with consumer groups through consumer panels and consumer committees is an absolutely essential part of the way in which we work. Every single proposal Oftel brings forward is taken through the consumer groups that we have as well as being publicly consultable, and the consumer panel for me since the White Paper has been something I very much hoped would be created. It sets out the framework here. I think it could be improved and how it is created in terms of the sub-committees and how it is created in terms of national groupings, all of that is still to play for, but in terms of its basic concept I think it is very beneficial.

  116. You do not think it is vulnerable to NGO pressure?
  (Mr Edmonds) No, I think there is a very interesting issue of ensuring that a consumer panel is adequately briefed and has access to information. If you were to take evidence from any of the six chairs of consumer panels that advise me, you would see they have access to information. Equally, I think they will tell you that they are perfectly unconstrained in the advice that they give you and the criticisms they make. They have argued powerfully, for example, for the Content Board and for the consumer panels to have national representation and special interest representation. I see no evidence of the possibility in real life—a phrase I have used before—I have never felt that the people who are advising me have in any sense felt obligated by the fact that they were given a sandwich lunch, no.

  Chairman: Does the Bill team have any question of clarification? Mr Edmonds, thank you very much indeed.

previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2002
Prepared 20 June 2002