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
(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.
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
(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.
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.
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.
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.
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 thento
use your phrase from earliersome 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 diversityyou have not
asked me about it, I guess it is not my patchthe 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 Directivesand
it has taken rather a long time to drive these through so I do
not expect it to come back to that for some yearsit 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.
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
(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
(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 lifea phrase
I have used beforeI 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.