Memorandum submitted by the National Consumer
How the communications sector is regulated and
the way in which consumers' interests are represented are matters
of crucial importance to consumers. The National Consumer Council
(NCC) strongly supports new legislation to introduce a more cohesive
regulatory structure and a stronger consumer voice in this sector.
However, there are some serious flaws in the
draft Bill. The legislation should recognise the broad range of
the consumer interest in this sector and use the term consumers,
instead of other more restrictive terms such as customers. We
welcome the provisions to set up the Communications Consumer Panel
but disagree with the provision which would only allow it to comment
on issues other than service delivery if asked to do so by OFCOM.
To enhance the Panel's independence, its members should be appointed
by the Secretary of State, not by OFCOM. Sensible arrangements
should be put in place to ensure that the Panel and the Content
Board co-operate on overlapping issues, and share forward plans
for consumer research. Similarly, the Panel and OFCOM will need
to co-operate while retaining their distinctive roles. A memorandum
of understanding should be drawn up between OFCOM and the Panel
with public consultation.
OFCOM's duties should be amended to refer to
consumers rather than customers, and the furtherance of the interests
of consumers should be the over-arching duty. We recommend that
access, equity, redress and information should be added to the
list of matters to which OFCOM will need to have regard in the
interests of consumers.
We support the concerns expressed by the Independent
Television Commission about the inadequacies of the Bill with
regard to third tier content regulation. The Bill should be amended
so that OFCOM is able to review public service broadcasting annually,
rather than every three years.
We welcome the amendments to the draft Agreement
for the BBC, including provision to bring the BBC within the first
and second tiers of OFCOM's content regulation. While we welcome
the limited expansion of external regulation of the BBC under
third tier regulation, the BBC should be independently regulated
under OFCOM. We have welcomed the proposals from the BBC Board
of Governors to improve their accountability and openness as an
important watershed. These moves would be enhanced by amending
the Agreement to ensure greater accountability on aspects such
as reporting arrangements, and publication of criteria by the
Department for Culture, Media and Sport to assess the Governors'
regulatory performance. We support the proposals to commit the
BBC to comply with non-financial sanctions that may be applied
by OFCOM but urge caution in terms of giving OFCOM the power to
impose financial sanctions. Further work is needed to develop
a more appropriate form of sanction for a publicly funded body
that would not penalise licence-fee payers, together with further
We welcome the opportunity to make a submission
to the Joint Scrutiny Committee on the Communications Bill. The
NCC's purpose is to make all consumers matter by putting forward
the consumer interest, particularly that of disadvantaged groups.
We research, campaign and work with those who can make a difference
to achieve beneficial changes for consumers.
One of our key objectives is to ensure that
markets and public services work for everyone. The consumer interest
in communications is wide-ranging and substantial: it is about
ensuring universal, affordable access to a broad range of good
quality services, choice and diversity in those services, fair
treatment of consumers in pricing and service conditions, and
ensuring minority interests are met. We have been lobbying for
some years for fundamental changes in the regulatory structure
for communications, including the establishment of a single regulatory
How the communications sector is regulated is
a major concern for consumers. We have been lobbying for some
years for fundamental changes in the regulatory structure for
communications, including the establishment of a single regulatory
Strengthening consumer representation is another
key objective for the NCC. To this end we have been campaigning
for some time for improvements in consumer representation arrangements
in communications. We look forward to the setting up of the proposed
Communications Consumer Panel and hope that it will be given the
remit and tools to represent consumers' interests effectively
in this fast-changing and complex sector.
The NCC fully supports the introduction of new
legislation for the communications sector. It is vital that key
measures are implemented, notably the establishment of an integrated
regulatory bodyOFCOMand a strong voice for the consumer
interest through the proposed Communications Consumer Panel. However,
we have some fundamental concerns about the draft Bill, in particular,
the way that the consumer interest is interpreted, the remit for
the Consumer Panel, OFCOM's objectives and duties, and content
regulation. Given the short deadline for submissions on the draft
Communications Bill to the Joint Scrutiny Committee, we concentrate
on these key issues of concern to consumers.
2. THE CONSUMER
INTERESTGetting the terms right
The government has stated that ``Consumer interests
are a major focus of the entire draft Bill.'' (The draft Communications
BillThe policy, DTI/DCMS, 2002). This is very welcome.
However, the Bill itself barely refers to consumers except in
the title for the proposed Consumer Panel. Even here the Bill
refers to ``the domestic and small business customer'' rather
than ``consumers'' (clause 96).
The consumer interest in communications is not
confined to service delivery and other market-related issues.
It is about access to networks and services but it is also about
equity, choice and quality. Consequently the content that is delivered
through those networks is as important for consumers as how it
is delivered. This means that the existence of a strong and sustainable
public broadcasting sector is very much a consumer concern.
The term ``consumers'' more accurately conveys
the broad span of the consumer interest in electronic communications
and we recommend that this replaces other terms such as users
or customers in the legislation.
A broad remit
Consumers need a stronger voice in the communications
sector to ensure their interests are effectively represented and
taken into account by decision-makers and industry. We welcome
the inclusion of a Communications Consumer Panel in the draft
Bill, and the intention that it should be independent and operationally
separate from OFCOM.
However, we disagree with the current wording
of the Bill. As it stands, the Consumer Panel would only be able
to comment on content issues at the instigation of OFCOM (clause
96(2)(g)). It will be vital for the Panel to have the independence
to comment on consumer issues related to content for the following
The breadth of the consumer interest
in communicationsthis includes basic content issues such
as choice, quality and diversity.
The integrity of the projectif
the intent is to create an integrated regulatory body because
of converging technologies and markets, it is totally illogical
to have a Consumer Panel which is restricted to one aspect.
The integrity of the Consumer Panelthe
Panel's independence will be undermined if it cannot comment on
all issues of concern to consumers without OFCOM's permission.
The global nature of communications
regulationUK regulation of content is not solely a matter
for OFCOM. The EU and other international institutions also play
a key role in regulating this sector, including content issues
(for example, the European Directive on Television Without Frontiers).
The unique role of the Consumer Panelit
will be external to OFCOM, whereas the Content Board will be within
the regulatory structure. If the Panel is not allowed to comment
on content issues without being asked to do so by OFCOM, there
will be no independent voice on content issues. The Panel will
be independent, whereas the Content Board will be part of OFCOM.
We recommend that clause 96 (2)(g) is deleted
as it would artificially limit the Panel's remit and restrict
its independence from OFCOM. It should be replaced by a provision
which would allow the Panel to advise on any other matter relating
to the consumer interest in electronic communications networks
The Panel needs to be independent from OFCOM
and to be perceived as such by consumers and other parties. We
do not agree with the provision in the draft Bill (clause 97)
that the members of the Consumer Panel should be appointed by
OFCOM, with the approval of the Secretary of State. Consumer confidence
in the Panel will be undermined it its members are subject to
appointment by OFCOM. We recommend that the Bill is amended so
that the Panel members are appointed by the Secretary of State,
following consultation with OFCOM.
The Panel will require a broad span of expertise
and experience in the communications sector and on relevant issues.
Panel members should, therefore, be appointed according to Nolan
principles through open recruitment.
Relationship with the Content Board
The draft Bill requires OFCOM to set up a Content
Board to ensure the public interest in the nature and quality
of television and radio programmes is sufficiently represented
within OFCOM. Even though the draft Bill states that the majority
of members of the Content Board will be from outside OFCOM, it
will nevertheless be part of OFCOM and have decision-making functions
delegated to it by OFCOM.
The Content Board will have a fundamentally
different role to that of the Consumer Panel as it will be part
of the regulatory arrangements under OFCOM. However, there will
be inevitable overlaps between the Panel's work and that of the
Content Board, for instance on issues such as public service broadcasting
and media literacy. We suggest that the Content Board and the
Consumer Panel should be required to share forward plans for consumer
research and consult on forward work programmes. The relationship
between the Panel and the Content Board should be included in
a memorandum of understanding between OFCOM and the Panelsee
Relationship with OFCOM
The nature of the relationship between OFCOM
and the Communications Consumer Panel will be of pivotal importance
in ensuring that consumers' interests are fully protected and
effectively represented. It will be essential to have as much
clarity as possible about their respective roles and the relationship
The Panel will need to work closely with OFCOMat
Board and staff levelsto advise OFCOM on its work, and
to exchange information on future work programmes and matters
of concern to consumers. Co-operation will be vital to avoid unnecessary
duplication of workfor instance, by sharing plans for consumer
research on specific issues, and sometimes undertaking joint research.
However, it will be necessary to draw a line between OFCOM and
the Panel to ensure that such co-operation does not inhibit the
Panel's independence. To get that line in the right place, we
recommend that OFCOM's Board and the Panel draw up a formal memorandum
of understanding to ensure co-operation, guard against unnecessary
duplication, and also to enshrine their respective independence.
A draft memorandum should be published before arrangements are
finalised so that it is subject to public consultation.
We strongly support bringing together economic,
network and content regulation within OFCOM. The Bill lists seven
general duties for OFCOM (Clause 3(1)). We recognise that OFCOM
will have to balance a number of objectives as encapsulated in
these duties. However, it would assist in clarifying OFCOM's core
mission if the relationship between the duties were to be made
clearer. In our view, the first duty``to further the interests
of the persons who are customers'' should be over-arching. The
word customers should be replaced by consumers, as we state above.
We welcome the provision in the draft Bill for
OFCOM to have regard to the interests of consumers (as we said,
this should replace customers) in respect of choice, price, quality
of service and value for money. However, we recommend that access,
equity, redress and information should be included as well as
these are matters of equal importance for consumers.
As it stands, the Bill will require OFCOM to
review its functions to avoid the imposition of unnecessary burdens,
or the maintenance of existing ones. We agree that regulation
should not be retained unnecessarily but are concerned to ensure
that the pendulum does not swing too much in the opposite direction
to the detriment of consumers. Tough regulatory action is often
required to protect consumers' interests, and to ensure that markets
become and remain effectively competitive.
Regarding content regulation, the move away
from detailed box-ticking and clockwatching is sensible. However,
regulation of public service broadcasting should be based on robust
co-regulatory arrangements. Greater flexibility should not lead
to less effective regulation or to consumer detriment.
We support the concerns expressed by the ITC
about some aspects regarding third tier regulation (Memorandum
to the Joint Scrutiny Committee on the Communications Bill, 23
May 2002, ITC). In particular, consumers need to be able to identify
the role of each PSB broadcaster to see how each fits into the
whole of the PSB ecology, and what consumers are then entitled
to expect. The current draft Bill would mean that the remits for
PSB broadcasters would be far too general.
The draft Bill requires PSB broadcasters to
publish annual statements of programme policy. While OFCOM would
be expected to review the performance of broadcasters annually,
it only allows OFCOM to review and report on public service broadcasting
every three years. We agree with the ITC that:
OFCOM'S powers to conduct triennial analysis
of the overall delivery of public service only permit it to reach
conclusions about services taken "altogether over the period
as a whole"; so it is hard to see on what basis OFCOM can
inform the annual statements of individual licensees.
It will be vital from the consumer standpoint
that OFCOM is able to conduct annual analyses of the overall state
of PSB. The programme policy statements of the individual broadcasters
should be developed within the context of the whole PSB framework.
If these are to be drawn up annually, then so should the overall
Regulation of the BBC
The government has recently issued proposed
amendments to the BBC Agreement with the Secretary of State, and
is consulting on these proposals as part of its consultation on
the draft Communications Bill (Draft Communications Bill: Proposed
Amendments to the BBC Agreement, DTI and DCMS, 2002). We welcome
the intention that the BBC will be subject to the first and second
tiers of OFCOM regulation. However, the BBC will only come within
the third tier of regulation to a limited extent. It will be required
to consider any guidance issued from OFCOM on programme policy
statements, and OFCOM's reports on public service broadcasting,
to the extent that these raise issues relevant to the BBC. While
we welcome these provisions, it is illogical and runs counter
to the consumer interest to exclude positive content regulation
of the BBC from OFCOM's remit.
The Communications white paper put forward a
convincing case for a single regulatory authority for communications.
Yet the draft Bill would retain more than one regulator: OFCOM
and the BBC's Board of Governors. This is not in the consumer
interest and runs against the logic of streamlining the regulatory
structure. We consider that backstop powers for the BBC should
rest with OFCOM rather than the Secretary of State.
External regulation of the BBC should not endanger
its independence: OFCOM would not interfere in detailed scheduling
or editorial decisions. Also, not all broadcasters would need
to be regulated identically. OFCOM would regulate the BBC, like
all broadcasters, according to their particular role and remit.
Its decisions will need to be justifiable in the light of its
objectives, centring on the interests of consumers.
Earlier this year, the BBC Governors announced
proposals to reform the BBC's system of governance which we strongly
welcomed. It represented an important watershed in the way the
BBC is regulated. Nevertheless, the BBC needs to spell out in
more detail how the new arrangements will work in practice. For
instance, how will the Governors set and monitor objectives for
the Corporation? What criteria will the Governors use to judge
whether the BBC has succeededor failedin meeting
those objectives? If there were a serious failure, what action
would the Governors take?
We are aware that the BBC Board of Governors
is making strong efforts to become more open and to encourage
greater external input into the governance arrangements, and we
welcome these moves. However, in order to ensure greater accountability,
we consider that the Agreement should be amended so that the Governors
are required by the Secretary of State to differentiate clearly
between regulatory and non-executive management activities, and
report on them. The Department for Culture, Media and Sport should
devise a set of criteria and audit procedures for assessing the
effectiveness of the Governors' regulatory performance, building
on good practice elsewhere and with open consultation. The government
should set out ways in which regulation of the BBC can be aligned
more closely with that of other broadcasters in the run-up to
the Charter Review.
In terms of OFCOM's enforcement powers for tiers
1 and 2 of content regulation, the BBC's position should as far
as possible be analogous to that of other broadcasters, as the
draft Agreement states. We agree that the Agreement should commit
the BBC to comply with any non-financial sanctions that may be
applied by OFCOM. The consultation on the draft Agreement also
welcomes views on how the BBC should be treated with regard to
the provision in the draft Bill for OFCOM to be able to impose
financial penalties on broadcasters. As the draft Agreement states,
the principle of a common approach for broadcasters might point
to OFCOM having power to impose financial penalties on the BBC.
However, as the proposals also state, it is ultimately the licence-fee
payer who would be disadvantaged as the penalties would be paid
out of licence fee revenue. As a result, we consider it would
be preferable to find a more appropriate measure for a publicly-funded
body that will not penalise licence-fee payers. This will need
to be equivalent to the potential impact of financial sanctions
on commercial broadcasters. We recommend that further work is
carried out on this matter in order to identify an appropriate
form of sanction, accompanied by further public consultation.