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Lord Thomson of Monifieth: My Lords, I hope that it is sufficient for me to say from these Benches, with the serried ranks in support behind me, that we agree totally with what the noble Baroness, Lady O'Cathain, said about "must carry", "must offer" and the electronic guides. In some ways, the electronic guides are the most important. It may very well be the case that what the noble Lord, Lord Ashley of Stoke, called commercial common sense will be sufficient to ensure "must carry" for some years ahead, but electronic guides are a much more immediate matter and I hope that the Government will respond positively on that point.

Lord Dixon-Smith: My Lords, I must admit to being slightly puzzled. I understand the need to carry so-called "public service broadcasting". I use that term deliberately because people are perhaps over-defensive of it and seem worried that it will not be able to stand the heat of the competition that is coming. I do not share that lack of confidence.

I accept that such broadcasting must be free to the recipient who has paid for it through his licence. However, if I understood correctly, what was being suggested was free carriage of such programmes down the cable. I am not sure that I can go along with that. There are costs in transmitting down cables, so I have some difficulty in understanding why public service broadcasters, such as the BBC, should not pay those who carry their service for them--in other words, the cable companies--for the privilege of having their public service programmes sent down the cable. Therefore, although I accept the concept of the service being free at one end, I have the gravest difficulty with the concept of it being free throughout. That applies particularly to what I would call the "transmission end". I have some problem in resolving that point.

Baroness O'Cathain: My Lords, if I may rise now I hope that I shall be able to put noble Lords' minds at rest. If there are costs involved by the satellite people or the cable people--

Noble Lords: Order!

Baroness Trumpington: My Lords, I must remind my noble friend that this is Report stage.

Baroness O'Cathain: My Lords, I am sorry. I tried to check whether I could intervene.

Baroness Trumpington: My Lords, I do hope that I am right.

6 p.m.

Lord Inglewood: My Lords, I shall try to take the amendments in order. I shall begin with Amendment No. 5 but speak only briefly because we have just had a discussion of most the issues involved. I reiterate that the Government have published proposals in the policy document The Regulation of Conditional Access Services for Digital Terrestrial Television which cover in full all the matters covered by the amendment. Indeed, those proposals are based on the need to ensure that digital conditional access providers offer all

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broadcasters fair, reasonable and non-discriminatory terms. They also prevent providers refusing to supply encryption and subscriber management services separately and making supply of those services dependent on acceptance of others. The proposals, in line with the European Community directive on advanced television standards, require separate accounting for conditional access services whether or not the provider is also a broadcaster.

I shall be glad to have further discussions with my noble friend. I wish now, however, to move on to Amendment No. 49, an important amendment which covers electronic programme guides. Again, I am happy to assure my noble friend that the Government to a large extent take the same view as she does and have proposals in place to address it through the Bill we are debating.

Let me once again state unequivocally that the Government are concerned to ensure that electronic programme guides are not used to distort competition between broadcasters. It therefore seems eminently sensible for the Bill to establish certain principles, as it does. EPGs will need an additional services licence and as such will be subject to the ITC's general power and duty to ensure fair and effective competition in the provision of all the services it licences. In that context it means that one cannot deliberately bury someone else's offering on the system.

Commercial as well as regulatory considerations are likely to work in favour of public service broadcasters. They will have an important role to play in generating demand for new programming services and consequently cable and satellite operators will wish to carry them. For the same reasons, the public service broadcasters will have a strong negotiating position with regard to the presence of their services on EPGs. Nevertheless, as I made clear in Committee, the Government intend to monitor the situation carefully. And should EPGs in the digital market develop in a way which makes further regulation necessary, we shall introduce it. But we cannot yet predict exactly how they will develop either in technical or commercial terms.

What is not sensible therefore is to write on to the face of the Bill specific requirements which depend on a particular conception of how EPGs might be configured. And that is what the second part of this amendment would do by requiring that the existing public service broadcasters be given a prominent position on the first page of all guides. By the time digital television is up and running, this sort of terminology may well be obsolete. Indeed, some existing guides do not even have first pages but scroll continuously through pages so that the viewer's point of entry depends on the exact moment he or she consults the guide, in the same way as multi-page Teletext entries. EPGs might also be configured by type of programme. Thus, if you were to call up an EPG and ask it for a selection of sports programmes currently showing, and no public service broadcasters were showing a sports programme, it would not be reasonable for their services to appear on the first page. To take an example which might be more redolent of science fiction--but how many existing technologies appeared

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not so long ago to be fantasy--it is not too far-fetched to suggest that some EPGs might eventually be speech-activated. I use that example merely to illustrate the unpredictability of the technology we are debating. If we set down a requirement of the sort my noble friend proposes it would either mean that all EPGs had to have a designated first page or that those that configure their system in another way will not be covered by the regulation she suggests.

The effect of that sort of prescriptive requirement, depending on exactly how it is set out and interpreted, might therefore be either to constrain providers of EPGs in terms of the technical arrangements they can make or, conversely, strictly to regulate something that to all intents and purposes does not exist while allowing providers to evade the principles of that regulation. Having said that, the Government are in agreement with my noble friend in that we want fair competition. We also want to see that the public service channels continue to be available to all and that they are accessible without difficulty. But the way to fair competition is to regulate by reference to principles, not to speculate on what technology might look like in 10 or 15 years' time. In view of those considerations, I hope that my noble friend will be reassured.

I turn now to Amendment No. 6. Again, I thank my noble friend for raising the points in the amendment and for the helpful discussion she had with me and my officials following Committee stage. I hope I shall be able to offer her a considerable degree of reassurance.

First, conditional access services, including subscriber management, for digital satellite television are clearly covered by the provisions in the EC directive on advanced television standards and the proposals in the Government's policy document The Regulation of Conditional Access Services for Digital Television, published in January. Such services will require a licence as has been said a number of times today, issued by the DTI and enforced by Oftel, both in close co-operation with the ITC. That licence will include a number of conditions intended to ensure fair and effective competition. I do not propose to go into detail here. Instead I refer noble Lords to the policy document concerned.

Those conditions are also relevant to the second part of the amendment, which, if I understand my noble friend correctly, is intended to ensure that viewers have access to public service channels through their satellite set-top boxes where those services are transmitted by satellite. I understand from my own discussions with the BBC last week, at which my noble friend was present, that what is sought in the amendment is an assurance that public service broadcasters using satellite delivery will be able to reach viewers through satellite set-top boxes whether the services they are transmitting are encrypted or not. If those services are not encrypted, then Article 4(a) of the directive requires that all digital consumer equipment shall be able to receive them.

As my noble friend said, even programme services for which the broadcaster does not intend to charge viewers might be encrypted in order to avoid encroachment into countries where they are not intended to be received.

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In that case, of course, the broadcaster concerned will need either to provide for himself, or to purchase, encryption services. Providers of such services, according to our legal advice on the meaning of the directive, will be required to provide them on a fair, reasonable and non-discriminatory basis to all relevant broadcasters. If the BBC, or any other public service broadcaster, wishes to provide an encrypted service, regardless of whether the viewer is to be charged for the key, and if that public service broadcaster has contracted with a provider of satellite transmission capacity, say Astra or EUTELSAT, then a conditional access provider cannot unreasonably refuse to supply the encryption and de-encryption services necessary to enable those viewers who have digital satellite set-top boxes to receive the service. It will, of course, charge the broadcaster a fair price for them. But the viewer will pay nothing beyond the cost of his TV licence and the set-top box if the broadcaster does not wish to charge him anything.

In summary, if I have understood the purpose of the amendment correctly, so far as concerns digital satellite television, the intention behind the amendment is already achieved by the proposals I have spoken of. If a public service broadcaster wishes to transmit a service, free to air or encrypted, via digital satellite, it will have to meet the costs of doing so, just as it needs to meet the costs of its terrestrial broadcasts. But it will not be possible for a conditional access provider to use its position in the market to prevent viewers receiving that service by denying the broadcaster supply of encryption services on reasonable terms. I appreciate that I have spoken at some length. I shall be happy to have further discussions with my noble friend if she would find that helpful.

I turn now to Amendment No. 7. Again, I do not wish to go over the ground I covered in response to my noble friend in Committee. However, I think it worth repeating that the Government are in full agreement with the aims behind her amendment in so far as we want the services of existing public service broadcasters to continue to be available to all the people of the United Kingdom. Indeed, that is one of the key principles on which our proposals for digital terrestrial television are based. It is why we are offering them guaranteed places. But there are other principles from which I am very reluctant to depart and which this amendment infringes. One of those is that regulation should be introduced only where necessary. Another is that industry should not be faced with frequent moving of regulatory goalposts. The amendment would involve rescinding provisions made in the 1990 Act, as my noble friend pointed out, regarding the conditions of local delivery licences during the validity of a number of such licences. This might be largely symbolic. As I shall explain, we do not think whether or not regulation is reintroduced in this area will affect cable companies' behaviour. But we must give a message to industry more widely that the regulatory environment will be stable. I made that point earlier today.

As I also said in Committee, the Government intend to monitor the situation as it develops. That will be a continuous process, though the review of the scope for analogue switch-off, due to take place within five years

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after the commencement of digital terrestrial television, will clearly need to cover among other issues the matter of the availability of the public service channels. There is no reason at this stage to take unnecessary regulatory action. Indeed, we believe that to do so would be precipitate.

Currently, all viewers can receive the public service channels via terrestrial aerials; and analogue services will not be switched off until the vast majority of viewers have acquired digital receiving equipment. Until then, viewers will continue to be able to receive the BBC and Channels 3, 4 and 5 in the same way as they do now.

It is pretty clear that viewers like those channels. That is a great vote of confidence in them and echoes the views of the right reverend Prelate. Even in homes with cable and satellite they are by far the most watched, which is a credit to those who provide them. Everything suggests that they have every reason to be confident that viewers will not suddenly turn against their programmes. Viewers will not simply renounce terrestrial and switch to other means of reception unless they know that they will continue to receive the public service channels. Is there something which public service broadcasters imagine will make them do that? If so it would be interesting to hear of it.

Once viewers have the appropriate set-top boxes or digital receivers they will, at no further cost and using their existing aerials, be able to receive a substantial number of free-to-air services, including the existing channels and new services, at very high technical quality, via digital terrestrial transmission. I believe that that will be an attractive proposition. To compete with it, it will be all the more necessary for cable companies to provide what people want, and that includes the terrestrial channels.

All cable companies currently choose to carry the services of terrestrial broadcasters and will continue to do so. They want to attract customers and I repeat that public service broadcasters attract customers. What is more, once cable goes digital operators will have far more capacity. This will make it even more likely that they will continue to wish to carry the main terrestrial channels. If they carry them now, when they have 40 or so channels to play with, why would they stop when they have 500? Introducing regulation to ensure that cable companies carry the BBC, ITV and Channel 4 would simply be obliging them to act in their own interest.

I am aware of the fear of the noble Lord, Lord Ashley, that cable companies might offer the public service broadcasters, along with their other services, for a while and then once they have built up a significant customer base, drop them and leave their customers marooned. In the first place, this supposition betrays a view of the cable industry which I am bound to say is self-evidently somewhat cynical. It is also unrealistic to suppose that industry wins by acting against its customers' interests and wishes, in particular this kind of industry. But I am glad to reassure your Lordships that any such case of a monopoly franchisee abusing its dominant position to deprive customers of services they want to receive,

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or making access to those services deliberately difficult, having attracted custom on the basis that it would offer those services, would swiftly attract the attention of the fair trading authorities. Indeed, the phrase "their feet would not touch the ground" would seem apt.

All of that said, however, let me repeat the assurance that I previously gave. Should further action become necessary, and I am far from certain that it will, we shall take it. But far better to take that action once we have a fuller picture of exactly what dangers, if any, we are seeking to eliminate and what the problem we are seeking to remedy might be. For example, if by the time analogue is switched off the industry has developed receivers able to receive all three modes of transmission--terrestrial, cable and satellite--then what would be the point of requiring more than one of those to carry particular broadcasters? Meanwhile, we can recognise the continuing success of British public service broadcasting and the success of the cable industry. Neither is a threat to the other. They are complementary, not mutually exclusive, and the cable operators clearly realise this. That is why they carry public service broadcasting.

I recognise the real and heartfelt concerns that have been expressed in the debate. However, I hope that on hearing that exposition of the Government's position and the legal background to it noble Lords will come to the conclusion that the kind of amendments being proposed are not appropriate for dealing with the problems that they are intended to tackle.

6.15 p.m.

Baroness O'Cathain: My Lords, I am grateful to the Minister for giving us such a detailed, conciliatory and helpful response to the four amendments. Perhaps I may deal with them in turn. As regards Amendment No. 5, the Minister said that he was prepared to discuss the matter further with me and I shall be taking him up on that offer. I thank him for it.

As regards Amendment No. 6, he spent a great deal of time talking about everything that is reasonable. I began by looking at the whole Bill on the basis that everyone was innocent until proved guilty. However, the more I look into what is happening with satellite and cable and the way in which the operators view public service broadcasting the more concerned I become.

I accept that our public service broadcasts take the great proportion of viewing time at the moment. However, I must remind the Minister that the satellite and cable companies are in business to obtain as many of the viewers' hours as possible so that in turn they can run a commercial business. If they cannot say to their advertisers, "We are gaining a market share. We now have 25 per cent. of the viewers' hours", they will not have a good commercial future. Therefore, commercial reality is such that there will always be a pressure on the satellite and cable companies to push their product ahead of public service broadcasts. That is what the marketplace is like.

I repeat that the public service broadcasting companies in this country--that is, the BBC, ITV, Channel 4 and S4C--represent to a greater or lesser

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extent the culture of this country and we must be sure that we preserve that situation. We cannot have wall-to-wall imported programmes. Although the companies might carry public service broadcasts, if they do not carry them in a prominent position or, by extension, do not allow them to be advertised prominently on electronic programming guides there is a concern about the future. I promise noble Lords that I am not looking for problems but I feel greatly uneasy about that. However, my noble friend the Minister asked us to be reasonable, so I shall be; but I will enter into further discussions on the matter.

As regards electronic programming guides, I was given many crumbs of comfort by the fact that my noble friend said that the Government will monitor them and any abuse will be dealt with. I take the point that, with the ever galloping advances in technology, it could well be that the amendment will appear to be stupid because it requires the public service broadcasting to be on page 1 of the guide and there may not be pages in the guide. But at the moment pages are suggested on the guide and while that is the case I should like to see the public service broadcasts on page 1. I take the point that if one were to scroll the guide looking for a sports programme but there did not happen to be an offering on a public service broadcast network the provision would be a little foolish. However, I believe that we are trying to anticipate what the technology will be and I am a little concerned about that issue.

As regards Amendment No. 7, I agree that regulation should be introduced only when necessary, but that apparently makes a nonsense of making a regulation in 1984, removing it in 1990 and then proposing to implement it again. Of course, a stable regulatory environment is needed. I subscribe to all of that. However, I am scared--and I put it as strongly as that--that the competition from the satellite and cable companies will leave us in a situation in which the public service broadcasts will suffer.

It may be that I am being very suspicious and highly cynical about this, which is not in my nature. I am anxious, but my anxieties have been reduced to quite a large extent by my noble friend's offer of further talks between now and Third Reading, and I shall avail myself of that offer. I thank all noble Lords who have taken part in the debate and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 6 and 7 not moved.]

Clause 8 [Multiplex licences]:

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