Joint Committee on the Draft Communications Bill Minutes of Evidence

Examination of Witnesses (Questions 380-387)



  380. Can I suggest that in fact what you have a problem with, I do not say you have a problem but the problem lies with trying to have licensed content as distinct from having regulated content. As far as I can understand, let us take a particular very specific example of child protection in relation to video-on-demand and indeed on the Internet generally, it is regulated, of course it is regulated. It is regulated by the Competition Authority. It is regulated under the law and there may be some specific regulation particular to the Internet to do with issues relating to child protection, etc.. The concept of regulation is not one that you are wholly opposed to. The difficulty is trying to arrive at a subset of Internet content which ought to be licensed. If we do not do that, if we do not try to license it, but actually just follow, as it were, the very specific instances where the content in itself has characteristics which require it to be regulated, then that would be a better way of approaching it.
  (Mr Abbott) If I could comment, as the company which provides content and manufacturing, today on manufacturing. What I would suggest is this is obviously a very, very complex issue. The way the manufacturers have got to contribute is they have to provide the hardware, they have got to provide the keys and the mechanisms to allow special parental control. It is up to the Government to decide how far they want to go in terms of interfering in that area. I think the second area that we need to tackle to make this job a lot easier is the content provider now is going to go offshore, in the past the content provider was told to be onshore and therefore could be regulated. The one area that I think it is absolutely vital we keep a close watch on is the open nature of the technology that is being used. If the technology platforms are kept open then I think regulators will have a far easier chance of deciding just where they need to act and where they do not need to act. Where I am going with that is in terms of, for instance, digital free-to-air transmissions. If encryption came into that area and if we saw an expansion of multiple different types of encryption coding, then you would find it very, very difficult to get inside there. The problem of how you legislate for the international sum, how do you legislate what we want to do from North America I think is a difficult question, I cannot answer it. What I can say is I can make the job a lot easier as a manufacturer if OFCOM make it very, very clear that they are supporting an open platform.

Nick Harvey

  381. We have already knocked this issue around quite a lot but Government ministers have said repeatedly that they wish to exclude the Internet from content regulation. Mr Parrish says that even in the light of experience if a future government arrives at a different view on that, they can legislate anew. Well, a lot of us who have aspirations to see all sorts of things legislated for know that it is not just quite as easy as that. If we pass the Bill in its current form, would it not be perverse of OFCOM at least at the outset to seek to regulate Internet content even if Parliament had built in the ability at a later point, should it want to, to slightly broaden the scope?
  (Mr Parrish) Obviously the difficulty is we are in a transition from where we are with most people now watching four or five television programmes plus some of Mr Murdoch's channels and doing e-mail and a little bit of Internet to a situation where we are going to have hundreds of channels and do a lot on the Internet. I think we need to take the powers now which are going to last us a few years but not forever and if the world changes in some very dramatic ways, which it might, it is possible to put through primary legislation in three months. We did it with the Terrorism Bill, and it can be done again. I would not recommend that we give the Secretary of State statutory powers in this area because I think it is a question of primary legislation to change the intent of this legislation.
  (Mr Hochhauser) Mr Harvey, may I make the point with regard to licensing content on the Internet. The current Broadcasting Act requires anybody who, in Mr Lansley's terms, streams a video to have an LDO licence. There is a requirement to be licensed under the Act, not just for licensable programme service licences but actually to have what used to be known as a cable licence. Strictly speaking any Internet company today that is streaming video to two or more homes simultaneously is in breach of the law. The fact is nobody has gone after them. There has been no attempt by the ITC to go in and wade in and say "Look, you are trading illegally" because it is impractical to do so. The same would apply in future trying to legislate on the Internet increasingly if the Internet becomes converted on broad band and we see more and more of the Internet being the delivery mechanism of choice. The question is why are we talking about licensing programmes? Well, we have all the laws which deal with decency and taste, it is to do with the proportion of programming that is made available from local content. We are talking about issues such as advertising and the way advertising is done on children's programmes. In an era of choice, which is where the Internet and video-on-demand now apply, that becomes irrelevant anyway so the era of licensing and programmes as we move more and more towards broad band and Internet becomes less and less relevant as long as we have mechanisms by which we can, for example, protect children from gaining access where parents want them to have it. This is a stepping stone. If you want this legislation to be future proof then you have to take away all forms of licensing. If you do not, we could still license those programmes where they continue to be gatekeepers. The gatekeepers will become far and few between over the next ten years.

Mr Lansley

  382. In your evidence to us you raise, as others have done, what you describe as the risk of double jeopardy because of the concurrent powers between OFCOM and the OFT. Of course when the OFT in particular came to see us they said "Well, there is not a risk of double jeopardy because we have a working group and a set of regulators get together with OFT and it is all set out transparently there". They said "Give us the examples", so if I can play that back to you, give us the example?
  (Mr Parrish) We have rehearsed this quite a lot before in terms of the Competition Act, an aborted attempt of this Bill which did not happen, and various other cases. The assumption appears to be that it is the regulator who will choose a particular case between his regulatory powers and his Competition Act powers, but that he will be the one who exercises the Competition Act powers in respect of this sector rather than the Office of Fair Trading Competition Commission. Are we not in a danger of ending up with a bunch of sectoral competition regulators ten years down the track? I think the presumption should be that, where possible, the Office of Fair Trading Competition Commission exercise the competition powers where they are needed in this area, otherwise we are going to end up with sectoral competition regulators, which is inappropriate because sectoral boundaries change. It is an awful lot easier to add sectoral technical skills and market knowledge to a department which has skills in competition than the other way round. Technicians in our sector are two a penny. There are lots of them around here. Those skilled in competition law are not and Oftel struggled because it did not have enough people that understood competition law. I think it should always be for the OFT to exercise that power with support from the regulator rather than the other way round.

  383. Within the Bill one of the solutions that would be consistent with your argument would be that, in effect, OFCOM would be able to determine that a fully competitive market had been established in some sub-set of its responsibilities, and from that point on the presumption would be that it would go to OFT rather than OFCOM, but there is not technically a mechanism for that to happen in the Bill. You would like to construct that sort of thing? That is the sort of thing you are looking for?
  (Mr Parrish) I would like to go slightly further than that. The reason we have a regulator is because we are moving from two situations. We had two monopoly providers, BT and the Post Office on the telecommunications side, and the BBC and one or two other friends of government providing broadcasting services, and we were trying to move away from a situation where we had the sorts of monopolies which you need to control (being the nature of the thing) and we also have some choke points in the delivery mechanisms, such as there is a limited amount of spectrum. Those are the reasons why we have regulation at all. Supposing we have some new business which opens up where there is no existing monopoly. 3G services to take an example—why not give that to the Competition Authority straightaway? There are going to be five competitors, they are going to compete very hard. You do not need a regulator. They can be dealt with directly by the competition law. If it is a new business you do not need a regulator. Put the responsibility with the Competition Authority.

  384. The argument is not about double jeopardy, the argument is about the relative competencies and the signals to the industry of regulation via OFCOM on the one hand as distinct from OFT on the other. While OFCOM continues to have a responsibility, the temptation is for OFCOM to use sector specific regulatory powers rather than competition powers. There is a degree of lack of transparency about how its objectives are to be achieved by this route or that route. You are concerned about OFCOM's ability to undertake the economic and competition analysis necessary for this. Is that a reasonable summary?
  (Mr Parrish) That is reasonable.

Lord Crickhowell

  385. To raise an entirely different subject, you have joined the growing list of witnesses who express hopes and fears about possible things related to the Bill but do not tell us whether the Bill is adequate or what changes you require. I refer to your very challenging comments on digital switch over where you join an increasing number of people who express confidence that it will all be done by 2010. As a former Secretary of State for Wales and a former Chairman of the TV licence holder covering that part of the country, I must say I am rather more sceptical. You say that the achievement of digital switch over represents a major spectrum management challenge for OFCOM. I am not quite clear what you are asking us to consider. Okay, there is a management challenge but there are other things that are going to happen in a fairly big way if we are going to do it. Is your industry going to provide the money to do it or what is it going to require to provide the coverage? I am not clear what you are saying here. You thought it worth telling us this and making this confident statement but you do not tell us whether the Bill is adequate. What are you saying?
  (Mr Abbott) I am about to join the growing list of people who say, "We will come back to you"! The answer to your specific question about whether the industry fund the switch over is yes, absolutely. It is a commercial issue. What we are looking for from the Bill is to make sure, as I touched on earlier when I was talking about the technologies, that it really stress what currently exists so there is already that leadership and it already exists. I do not think I am asking the Bill to change anything. I just want to reinforce that. I would want to see the content of the Bill reinforcing what already exists within the DVB platform. If you allow any manufacturer to produce any product through an open system so that any customer can buy it, then we are going to get closer to 100 per cent penetration. If OFCOM ever did allow a situation where closed loops started to come in then the problem of small country areas will become a much, much bigger problem. The success of the current analogue television which I think we would all accept is pretty much 100 per cent—

  386. You had better come to my valley. There are large parts of Wales where that simply is not true.
  (Mr Abbott) I live very close to your valley. Our factories are in South Wales so I am very, very familiar with the problems of reception within narrow valleys, and there are solutions to that and they can be provided, and cable obviously is one. However, it does not exist at the moment. Where I am going with that issue is not to challenge whether it is 97 per cent or 100 per cent but to say it is successful to a degree—maybe not as much as you would wish—because you can receive any programme on any television. OFCOM legislation should be reinforcing the DVB issues and reinforcing the fact that a broadcaster should have modules if he wants to go into pay per view.

  Lord Crickhowell: Seeing a couple of the expressions on the faces of the Bill team next to you as to what you are saying, I look forward to receiving your recommendation in due course as to what changes in the Bill are required.

Lord McNally

  387. But it is not a matter for legislation. It is a matter for industry initiative. Manufacturers are making seven million analogue sets a year with a life expectancy of ten years. That is hardly going to empty the bucket. The record of the broadcasters in promoting digital, particularly free-to-air digital, has been, quite frankly, pathetic. Digital switch over is not going to be achieved by government legislation but by entrepreneurial zeal a lot of which is lacking at the moment in the industry.
  (Mr Abbott) It is lacking in the industry because spectrum allocation is not completely clear. Chairman: Could I ask you quite seriously to come back to us on this because it is quite a big issue. It does not affect the Bill but it does affect our deliberations. Thank you, gentlemen.

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