Examination of Witnesses (Questions 421
MONDAY 17 JUNE 2002
Chairman: Good evening. Lady Cohen will start
Baroness Cohen of Pimlico
421. Before I ask anybody about spectrum management
or otherwise, I ought to disclose I am a non-executive director
of the Defence Logistics Organisation, and somewhere in there
I have defence communications systems which use a lot of spectrum.
OFCOM has been given by the Bill a general duty "to encourage,
in the interests of all persons, the optimal use for wireless
telegraphy of the electro-magnetic spectrum". Do you think
this is the right formulation? How often will it conflict with
OFCOM's other objectives? Is OFCOM better placed than the Radiocommunications
Agency to resolve conflicts?
(Mr Forrest) My Lord Chairman, our view
on the duty of OFCOM is that we think it is absolutely right that
there should be this duty for optimal use of spectrum. However,
the difficulty I think is in defining what is optimal. We have
already heard in the previous presentation some of the complexity
of the various issues associated with technology, for example.
One of the things we think that is very important here in order
to be able to understand the meaning of optimal and for OFCOM
to carry out such a duty is that it should have for example very
strong technical expertise. We have noted the FCC, for example,
in the United States recently have very strongly increased the
strength of their technical branch because of the difficulty of
handling many of the issues associated with the new technologies
which come forward. We would certainly see as part of this duty
of OFCOM that it needs to have the very strong back-up in certainly
the technical areas but also in the areas of understanding the
way different services develop, because we think there will be
conflicts here, for example, with universal services and local
TV, which will need to be resolved. With your permission, my Lord
Chairman, perhaps Philip Langsdale might like to comment on that.
(Mr Langsdale) The issue is one which has already
been referred to the Committee, which is one of balancing the
universal coverage of spectrum against the optimum use. Clearly
given the need to deliver signals strongly into rural areas and
for universal coverage, it is more inefficient in its use of spectrum
and therefore there is a challenge for OFCOM in balancing how
much spectrum to give to broadcast TV versus the need for universal
422. Your evidence has a very powerful gypsy's
warning. It says that you feel ". . . strongly that there
is a need for clarity in the respective roles of Ministers, OFCOM
and various Advisory Committees." The dangers of Whitehall
turf wars are legendary. I wonder whether you feel the Bill has
got it right in terms of the balance of power between OFCOM and
the Secretary of State?
(Mr Forrest) Our understanding is from what is said
in the Bill that ministers would retain policy aspects associated
with spectrum management and that OFCOM would handle what I would
call the managerial issues, the day-to-day issues, and implementing
that policy. We think, however, that there are going to be some
grey areas between these two. Ministers must obviously retain
the ability to intervene in a number of circumstances and we feel
strongly there is a need for ministers to have the appropriate
advice in order to be able to make this separation work. To leave
ministers without the ability to call on advice in terms of the
actions of Oftel or indeed in the way new technologies and new
services are developing we think would be risky. That is why we
were disappointed to see that the Bill did not have any reference
to SMAG or indeed to the Cabinet Advisory Committee on spectrum
which is mentioned in Professor Cave's Report. So we understand
the way the separation is being proposed in the Bill but we do
think more definition of the terms of reference of these various
bodies is needed.
423. Do you see OFCOM as being in the main the
decision-maker or is there going to be lots of second-guessing
(Mr Forrest) We have not, my Lord Chairman, debated
this issue at length but we certainly think, as I said, there
are grey areas that you are identifying here.
424. You mentioned the importance that OFCOM
be technically equipped to carry weight in this area. We have
had previous evidence which has expressed concern that what has
been rather disparagingly termed the "fluffy" end of
broadcasting would dominate OFCOM. As you see it now, will there
be enough technical expertise there to make it a big beast in
the Whitehall jungle?
(Mr Forrest) My Lord Chairman, there is not that detail
obviously in the Bill at this stage, which is why we have flagged
up this particular point. There can be a tendency when one is
making changes in the way that these systems are organised, our
structures are organised, to rely on external consultants. We
have seen this in areas like transport, for example. It is a danger
in our view to leave expertise fragmented and it is very important
we feel, whether the expertise resides in OFCOM or associated
with advice to ministers, that expertise must be there and must
be clearly available, and must be available to ministers.
Lord Pilkington of Oxenford
425. As you know better than I do, the Ministry
of Defence has a large chunk of the spectrum. Is your view that
they should sell off the bits they do not use? My colleague knows
much more about this than I do. It seems a very large amount,
should they sell it or should it be handed to OFCOM and they sell
(Mr Webb) As a general principle if they are not entitled
to sell it, either directly themselves or through some intermediate
management organisation which they perhaps have appointed, it
is difficult to see what the incentive is on them to relinquish
their spectrum voluntarily unless there is some other external
pressure. But, as we know from the past, it is difficult to be
certain about whether that spectrum is being used efficiently.
So I would say in general it would seem appropriate for them to
be able to sell it directly themselves but I would note that there
is enormous restriction on the use of the defence spectrum through
international treaties and particularly usage which would probably
prevent much of that spectrum being sold or traded in the near
426. Do you not see a contradiction? I see what
you are saying, namely that no one knows anything about all those
funny little masts on the building across the Thames. So OFCOM
would be able to make, as we have heard from previous evidence,
allocation based on where need is but what you are suggesting
is that the Ministry of Defence would operate separately. In other
words, it would be Professor Cave's free market ad infinitum.
Is that what you want, because there is an awful lot of spectrum
(Mr Webb) That is correct. I think in general when
we look at trading we are suggesting that the current owners of
the spectrum, and Professor Cave has suggested this himself, be
free to trade that spectrum. I think your question is almost asking
whether there should be a special case for the Ministry of Defence
427. They are almost the BT of the spectrum,
are they not?
(Mr Webb) Because they have so much perhaps?
428. They have a lot.
(Mr Webb) Yes, but I do not see any strong rationale
for why that should cause them to be treated differently in that
Lord Pilkington of Oxenford: You are not very
free market men, are you!
429. Rather unusually, the Regulatory Impact
Assessment identifies above five possible risks, things like interference,
changes of use contrary to international law, buying up spare
company stock, competitiveness and so on. Do you think the Bill
has got those downsides right and are there any particular provisions
you would like to see in the Bill to tackle that?
(Mr Forrest) My Lord Chairman, I will take that first,
if I may, and then ask Philip Langsdale to respond. I think our
concern, as we stated in our evidence, is that the issues, particularly
of interference and harmonisation, although stated, have not been
taken quite seriously enough. There has been, under the activities
of the Radiocommunications Agency, a very good focal point and
a very good mechanism for dealing with interference. What is proposed
here is a change in that regard, so that interference may well
be debated, may be settled or there may be litigation between
those directly involved in that interference. This is a situation
which happens quite frequently in the USA. It certainly makes
the lawyers very rich. We are concerned that more thought goes
into understanding how, in the new environment as it is proposed,
interference matters can be tackled in as efficient a way as they
have been just now. I am sure there are mechanisms for this. We
also think, on the basis of harmonisation, that the processes
that are indicated may take some considerable time, because it
is easy at this stage to think that other countries within Europe
may fall into the kind of framework that we are talking about,
but there are many issues that need to be debated. Therefore,
again we are concerned that the risk assessment makes light of
that particular aspect. Perhaps I can ask Philip to comment further.
(Mr Langsdale) Thank you, my Lord Chairman. I think
our main concerns about the risks of the Bill also hinge around
the step change which is continuing to happen in the technology
and the technical environment and the sheer unpredictability of
that. We can sit here and we can be reasonably confident we know
what is going to happen, but actually it will happen in a different
way. I think the Bill needs to give sufficient flexibility and
have sufficient flexibility written into it to cope with new ways
of technology change, to cope with the very different ways in
which people will be using broadband and digital. Again, I do
not think we know what those ways will be at this stage. This
brings me back to John's point that OFCOM needs to be concentrated
so that it has the right access to a technical understanding,
technical insight and ability to manage those changes and pre-empt
430. We have looked at these risks in other
countries, and there are aspects of spectrum trading, as I understand
it, around the world. Have you looked at those risks in those
(Mr Forrest) My Lord Chairman, no, we have not as
yet. We are aware of some of the activities that have gone on,
for example, in New Zealand and in Australia. This certainly does
give some useful experience, I think, for the detailed mechanisms
to be used in spectrum trading. I think that is the next stage
of the process, to make sure that in the environment where spectrum
trading is allowed as a result of what has been happening within
the European Community legislation, we get the best possible mechanisms
for spectrum trading which would mitigate those risks.
431. Are there risks assumed with spectrum auctions
as well as spectrum trading?
(Mr Sleigh) I do not think that there is a significant
difference between those two. The way I always look at this is
to relate spectrum to the property market, and to argue that the
forms of trading and selling that you can adopt in dealing with
property are broadly equivalent to the approach that you would
take with spectrum. There are very similar considerations that
apply. Auctions we know are effective when the market is not well
established and you are not able to establish a price readily
by other means. I think that one of the risks that does need to
be dealt with here is how a good market for trading spectrum,
or however it is going to be transferred, is created. Currently,
because of the regulatory way it is handled today, there is not
an established market mechanism by which this is done, and therefore
there is a move into relatively uncharted territory here. That
is clearly something that needs to be looked at carefully in the
way that it is handled.
432. We have been talking about some of the
technical risks. I suppose one of the differences in the spectrum
field is that if you trade, it does not necessarily lead to your
neighbours' house falling down. Cave argues that there must be
a shift in the balance of responsibility for interference management
further towards industry, but another piece of evidence that we
have received suggests that that must be balanced by OFCOM's responsibilities
for setting and monitoring minimum standards. It has been pointed
out that the illegal use of the spectrum in some frequency bands
puts lives at risk. Are you satisfied, therefore, that on the
one hand industry has the technical expertise, know-how and capacity
to do it, and do you think it is ready to take on this extra burden?
Are you confident that OFCOM will be adequately equipped to police
the whole question of interference management?
(Mr Sleigh) I think there are two issues to this.
One is illegal abuse, where the equivalent is used in the police
force to deal with people who are actually transgressing the law.
For a number of reasonsand I think the technology reasons
are quite strong here, for example, different ways of using spectrum,
programmable radios, all sorts of things like thatthis
means that the issue of negotiating between conflicts which come
from legitimate users is something which is going to be quite
a deal more complex than the very simple allocating frequency
approach that we come from with our legacy. So, as with other
walks of life, I would see the commercial side playing a more
important role in finding ways of negotiating acceptable solutions
to interference, rather than only relying on clear regulatory
apparatus that is the custom from the past.
(Mr Forrest) Perhaps I could add, my Lord Chairman,
that I think the industry is there. There are certainly a number
of companies in this country that already do measurements of signal
quality, study interference problems and will carry out that kind
of service if required. So the industry is there. I am not sure
it is quite ready for this challenge, but I would emphasise the
further point that I think it is a little bit dangerous if particularly
interference problems are just solved on a very localised basis
or between two organisations, without taking account of the bigger
picture associated with that radio environment. So it does mean
that even though one puts quite a lot of this interference management,
handling, rectification out into the commercial sector, I think
there is still a need for bringing this information together to
a focal point, and that comes back to the importance of OFCOM
having the technical expertise to be able to take that role.
433. Those who have been attending previous
sessions will know that I usually at some point say, "Well
fine, you're talking about general principles. How does it actually
apply to the Bill?" Do you think the Bill is adequately drafted
on this point, or do you think it needs toughening up? You finished
up by answering the question and saying, "Yes, OFCOM has
a role." Is it adequately drafted in the Bill, or should
we be looking at some changes in the Bill?
(Mr Forrest) My Lord Chairman, I would argue, as I
did earlier, that it is disappointing that there is no mention
of the importance of having technical expertise within OFCOM.
Therefore, the answer to the question would be yes, it would be
important to have that somehow stated in the duties and expertise
434. I am sorry, can I pursue that point, because
I was a tiny bit puzzled when you made the original statement,
in the sense that having been a regulator in a rather different
field myself when I was responsible for trying to regulate the
water industry, I do not think we needed to be told that we had
to have vast expertise; I think that if we thought we needed expertise,
we went and got that expertise from wherever it was available,
as a regulator. Similarly, I suspect that government departments
do think they are perfectly capable of looking for the right expertise,
without having a clause in a Bill saying that they should do so.
I am much more interested in the powers to operate and exercise
whatever the advice is. Is the Bill adequately drafted so that
OFCOM can police, having got its expertise?
(Mr Forrest) My Lord Chairman, from that point of
view I think we do not have a particular concern, so it is really
a matter of how much detail it is felt there needs to be in the
Bill. As I see it, the powers are there, yes.
Lord Hussey of North Bradley
435. I have a fairly straightforward question.
To what extent do you think it is logical to apply spectrum charging
to satellite services, bearing in mind their inherent international
character? It seems to me that Professor Cave rather suggests
that it would be a good idea. What is your view on that?
(Mr Forrest) My Lord Chairman, perhaps I may make
an initial remark, and then hand over to my colleague William
Webb. Our viewand I think this is a view you have heard
beforeis that it is difficult to justify treating different
commercial uses in different ways. In other words, we see it as
being important, wherever possible, that there should be as level
a playing field in terms of spectrum charging as possible. The
difficulty, of course, is that of implementation, because when
we are talking about satellite services we are immediately talking
about international or global operators.
436. Yes, and something slightly different?
(Mr Forrest) Yes, and coverage which does make it
difficult. Maybe William may have a comment to make.
(Mr Webb) Of course I would agree entirely with that
assessment, and I would echo, I think, the importance of making
sure that every service is treated the same way, to avoid distorting
the market. With regard to satellite, it is a complicated area.
There are many different kinds of satellites used in many different
types of applications some of which are more tending towards national
applications, others of which are much more international applications,
and clearly they need to be treated in a slightly different manner,
depending on their type of licensing and their application. I
think this is an area that merits further study. My personal view,
I would say, is that perhaps in the cases where there are strong
international components of the satellite service it would be
important to try to price that service on an international basis
in some way, which would clearly require co-operation from other
countries and perhaps from the European Union.
437. It would not be easy, would it?
(Mr Webb) No, it would probably not be easy and it
would probably take some time.
438. When Sky were allowed to absorb British
Satellite Broadcasting was there any discussion then of spectrum
(Mr Webb) I do not know the answer to that question.
(Mr Forrest) My Lord Chairman, not to my knowledge.
(Mr Langsdale) No, not to my knowledge, my Lord Chairman.
439. Last week I missed the Committee because
I was actually visiting Astra. It is a misnomer that Sky bought
out the satellite, so let us put that record straight. It was
very interesting to visit Astra. One of the things they were suggesting
was that they have ITU agreements, and there is the whole issue
of the interference within both uplinks and downlinks. How would
your proposals for charging affect that?
(Mr Forrest) My Lord Chairman, I think this brings
out the point about harmonisation, that although, as I said, it
seems that the way in which charging for spectrum is done should
be made as uniform as possible over different services, different
transmission methods, once you get into the international dimension
then you are right into the area of the European Commission and
even wider ITU agreements, and hence the difficulty of implementation.
The only way, I think, that it could be implemented is to achieve
agreement in the international forum that everybody is going to
go down the second route.