Joint Committee on the Draft Communications Bill Minutes of Evidence

Memorandum submitted by Nortel Networks

  Nortel Networks congratulates the Department of Trade and Industry, and the Department for Culture, Media and Sport on its joint publication of the Government's draft Communications Bill, which aims to make the UK the most dynamic and competitive communications market in the world. Nortel Networks applauds the Government's dedication to simplifying the regulatory framework for the sector through the creation of a single unified regulatory body.

  We are honoured to have the opportunity to present evidence to the Joint Scrutiny Committee. In advance of the opportunity for a more detailed discussion on the draft Bill as a whole, the following outlines areas of particular interest to Nortel Networks and our customers. In summary, the following commentary focuses on the power of the new regulator, the importance of public consultation, competition powers and broadband.


  Although the policy document accompanying the draft Communications Bill expresses the opinion that the creation of OFCOM "will lead to a higher quality of decision-making that is consistent across the sector", Nortel Networks is concerned that the powers conferred to OFCOM are very far reaching and may make this goal unobtainable. As a result of its range of power, the regulator may not have the capacity to take into account the wide range of views within the communications industry and may not subsequently adopt adequate flexibility when making new regulations.

  Without a sufficient level of flexibility, regulations adopted by OFCOM have the potential to not only be difficult to implement but can also become overly burdensome. As such, it is essential that OFCOM work in close cooperation with industry to create an environment that nurtures rather than hinders the pace of technological development. At the same time, however, it is important that OFCOM be mindful of the importance of an expeditious decision-making process. OFCOM must therefore strike a balance between industry's need for a quicker decision-making and the general demand for a fair and transparent public consultation process.

  On a more specific note, Nortel Networks believes that the duties of OFCOM should include a requirement to enable efficient investment in infrastructure and promote innovation. Although this requirement is included in Article 8 of the European Parliament and Council Framework Directive, it should be specifically included in the general duties listed in the Communications Bill (Part 1, Section 3), just as the customer oriented duties have been. Strong infrastructure investment and a high quality of innovation will support the Government's goal of attracting, maintaining and retaining existing and new investment. Indeed, by creating an enabling regulatory environment and attracting greater investment, OFCOM will play an instrumental role in increasing the global competitiveness of the United Kingdom and increasing its attractiveness as a centre for technological innovation.


  An additional duty placed upon OFCOM is the requirement for a regular review of its functions with a view to ensuring that regulation involves neither the imposition of unnecessary burdens nor the maintenance of burdens that have become unnecessary. Essentially, the Government has touted "light touch" regulation as OFCOM's guiding principle and Nortel Networks strongly encourages the Government to remain committed to this philosophy.

  In conjunction with light touch regulation and in order to be effective, the current procedures that call for and require public consultation in advance of creating new regulation(s) must be expanded. As a concept, the importance of public consultation is acknowledged throughout the Bill but there is no obvious mention of the need for a public discussion of views on changing existing laws or implementing new regulations.

  While the new live web-casting initiative within Parliament is commendable, OFCOM must go further to maintain a healthy two-way public dialogue that maintains transparency throughout the regulation-making process. A case in point is the statement, "it is important that OFCOM is respected and trusted by those it regulates", made within the policy narrative. Without a review of current public consultation guidelines, it will be difficult for OFCOM to reach this policy goal. Just as OFCOM must be accountable to Parliament and Government Ministers, it must also be accountable to the consumers and industry it serves.

  In addition to consulting industry and consumer groups, Nortel Networks recommends that OFCOM conduct impact assessments on all decisions considered since each has the potential to alter the regulatory and/or competitive landscape for the UK communications industry.


  According to the draft Bill, OFCOM has the power to carry out the functions of Part 1 of the Competition Act of 1998, alongside the Director General of Fair Trading. While Nortel Networks acknowledges the importance of instilling OFCOM with this power, we are concerned that OFCOM's competition powers have the potential to place companies in "double jeopardy". Specifically, if OFCOM and the Office of Fair Trading have similar but somewhat conflicting views on competition, a company could face two completely separate rulings by the two agencies.

  There is a need for greater clarity with regard to not only the relationship between OFCOM and the OFT but also on the way in which they will act regarding competition issues.


  We welcome the Government's statement that it does not intend "for the draft Bill to extend regulation into the Internet". While this approach, if correctly applied, should allow those involved in the Internet industry to continue to provide and develop valuable content and services for UK consumers and businesses alike, Nortel Networks is concerned that the bill allows too much room for interpretation in this area and makes the Internet vulnerable to regulatory creep.

  We recommend that the Government work closely with the broadcasting and Internet communities to clarify the way in which it defines items such as what is and what is not a "television licensable content service" (Sections 154 and 155) as well as what is meant by "available for reception by members of the general public" (Section 238). Nortel Networks believes that the Internet should be regulated only to protect consumer interests (as is done in the offline world) but as these and other related definitions stand at present, the Government has not instilled confidence in the notion that Internet regulation will go no further than that.


  As the policy narrative indicates, the draft Communications Bill is reflective of much but not all of the work the Government is doing to promote advancements in the UK communications market. Nortel Networks is troubled with the fact that despite the Government's publicly stated view that broadband is a tool for stimulating the UK economy, increasing the UK's global competitiveness and addressing social disparities, broadband is not discussed in the body of draft bill.

  While the Government's policy document responds to this omission by pointing to the Office of the e-Envoy as leading the Government's broadband strategy, Nortel Networks encourages the Government to compliment the e-Envoy's work by expanding OFCOM's remit to include a clear focus on the promotion of broadband.

  As was advocated above, OFCOM should be required to enable adequate investment in communications infrastructure, including broadband and wireless infrastructure. A strong infrastructure base will support the Government's short (lower prices) and long-term (universal access and diversity in service offerings) goals while simultaneously reinvigorating the economy and supporting the Government's efforts to be the most dynamic broadband market in the G-7 by 2005.


  Nortel Networks respectfully submits the above comments to the Joint Scrutiny Committee and asks that they be considered in any recommendations made by the Committee. Nortel Networks strongly supports the creation of the Office of Communications and welcomes the opportunity to work with the Government as it crafts OFCOM's structure and remit.

May 2002

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