Examination of Witnesses (Questions 213-219)
MR STEPHEN
CARTER, MR
MALCOLM TAYLOR,
MR HOWARD
WATSON AND
MR DAVID
DOHERTY
MONDAY 10 JUNE 2002
Chairman: We are sorry to have kept you waiting.
It was well worth the wait, from our point of view. We shall start
with Lord McNally.
Lord McNally
213. Clause 3(3) of the Bill says that the main
interests of consumers are choice, price, service and value. Are
you content with the way the Bill is set out, as far as telecoms
is concerned, that it will achieve those objectives?
(Mr Carter) Perhaps I can kick off, and
David may wish to contribute. I think our view—and I hope
we have laid this out in our submission—is that inherent
in the way the Bill is drafted, and I think inherent in the interests
that are being regulated or proposed to be regulated by OFCOM,
is the question about the balance between the content and competition
issues. Our view would be that history would suggest that we are
more confident as a nation of broadcast regulators than we are
as a nation of competition regulators, and that the proposal contained
within the Bill to create a Content Board, notwithstanding the
legitimate issues over taste and decency, etcetera, etcetera,
raise a question about whether the economic issues are going to
be given due prominence and due consideration, number one; and
number two, whether or not it might create a kind of first-class
and second-class citizenship within the regulator, whereby first-class
regulators in content will be attracted to perhaps the same objective
that seems to apply in economic regulation. That is part of the
reason why we suggested that consideration might be given to a
balancing function, which is the Economic Regulation Board that
we propose.
214. Do you think that is why the Bill sets
out as an objective to secure a wide range of TV and radio services,
but is slightly more limited in its objective as far as telecoms
is concerned? You have said we are more secure as television and
radio regulators than as telecoms regulators. I am interested
in what you said about the balance of the Bill and the balance
of OFCOM. In some respects I think the reason why the Content
Board has emerged is for precisely the opposite reason to yours:
that it will create an organisation which knows the price of everything
and the value of nothing, and that that is why the Content Board
is there. The fact that you bring in a counter-balancing Economic
Board is not something, I think, that was shared by the regulators
themselves when they gave evidence to us. What do you think this
board would do that is not already there in the powers of OFCOM?
This also, may I remind you, is supposed to be a light touch regulator.
It does seem to me that you are leading us into a path, or leading
yourselves quite surprisingly into a path, of over-regulation.
Do you know where you are going?
(Mr Carter) Is that general or a specific question?
215. I have to tell you, a couple of your colleagues
along the line are looking rather worried at you there.
(Mr Doherty) No, it is just a headache!
(Mr Carter) That is David's natural resting face!
I think the challenge is to create balance, and knowing the value
of things, particularly in the content area you are in, is crystal.
Equally, the duties and the objectives outlined in the Bill lay
claim to making the country a dynamic and competitive environment
for modern communication industries. We sit here today 20 years
after the first deregulation of British Telecom, and British Telecom
still accounts for 75 per cent of residential call revenues, which
is a pretty significant market position by anybody's definition.
So I think our view, which we have tried to crystallise in the
proposals—it may well be that we are taking it down a route
which is overstating the case—is that in looking to preserve
the things where there is a necessary need for balance and control
over, if you like, the softer areas, that might overbalance the
converged regulatory environment, to the detriment of the competition
and economic areas, in industries which look likely to change
more dynamically and more dramatically than perhaps the traditional
broadcasters.
216. So basically you believe that oftel failed
in the last 20 years. Do you have fears that, the way the Bill
is constructed, those failures will be built into this Bill as
well? If so, how do we avoid it?
(Mr Carter) I think the best way to try to avoid it
is to forcibly remind Parliament, that this Bill will become law
at the end of 2003, will become reality in 2004 and will significantly
affect business planning cycles in 2005 and beyond. That is five
years from when the first consultation process started. Over that
period of time, certainly the emerging communication industries
are changing beyond recognition. So having a "beady eye"
on what the future industry and industrial shape is, is where
we would encourage the Committee to focus its judgement as to
whether the Bill is appropriate or not.
217. Would you give OFCOM a specific role in
innovation, to encourage innovation?
(Mr Taylor) Most definitely. Coming back to that particular
point, I think one of the things we actually have to try to watch
for is the unintended consequences of regulation, and perhaps
the suggestion for an Economic Advisory Board is really not necessarily
something that has to exist for ever and a day going into the
future. When OFCOM is first established there are a lot of potential
knock-on effects of regulating one part of the supply chain that
could have a detrimental effect on others. Anything we can do
to stop the unintended consequences of regulation would be good
and to second-guess those if we can. If it can be done outside
of OFCOM, the impact would still be the same. The objective is
to have a dynamic and competitive communications market and the
regulatory environment should encourage this as best we can, and
I think that is one of the reasons to have a strong economic regulatory
thrust.
218. This slightly puzzles me, because I thought
you chaps just wanted to get at the market. The problem about
economic advisory boards is that you can start planning their
21st or 25th anniversary party right now. Getting rid of them
is the difficulty. I think what we want to hear is that this Bill,
particularly in your sector, is genuinely a deregulatory Bill,
is genuinely light touch, and that you cannot wait to get into
this new regime to start competing like mad with each other. But
no, you want to regulate another body to look after you.
(Mr Carter) No, I think we would not put that interpretation
on it—the latter, I mean, not the former. Hopefully we have
made clear that we are broadly in support of the Bill, we think
it is a step forward in the right direction. We welcome converged
regulation. We are a classic example of two organisations who
are right in the thick of the alphabet soup of regulation with,
I think, seven or eight regulatory relationships. In terms of
simple time management alone, it would be more sensible to move
to one rather than seven. Our point about the economic regulation,
just to reiterate it, is that what would be a failure in our view
is if the economic and competition issues ended up being subsumed
in endless debates about the content, decency and taste issues,
at which point the modern communication industries, of which we
feel we are at least part, if not a leading part, would end up
being disadvantaged rather than advantaged.
Mr Grogan
219. I have one question directly following
on from Lord McNally. We hear a lot about light touch being the
essential ambition for this Bill. Is that an ambition that you
share? If so, how would you make the Bill more light touch? Or
would you agree with Cable & Wireless, who are later before
us, that they really are saying, "Drop light touch, just
go for appropriate and proportionate regulation"? Is not
that what you are saying? Which would you side with?
(Mr Carter) I am not sure I understand the difference
between light touch and appropriate and proportionate. My judgement
of light touch would be appropriate and proportionate. I think
our specific addition to the debate around the nature of regulation
would be speed. Again, we have made that point in our submission.
Whether it is light touch or heavy touch, whether it is appropriate
proportionate or disproportionate and inappropriate, if it is
done slowly and languorously over time, in an industry that is
changing apace, it is of no value to anyone. We have current examples
of where that has happened to the disadvantage of the emerging
players.
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