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Lord Mottistone: I need hardly say that I hope the Government do not accept the amendment. I understand that Amendment No. 211 was also spoken to. As I said, Amendment No. 211 is premature. We do not know what the situation will be in January 2001. No doubt it will be a suitable time to have another look at this Competition Bill. I hope therefore that Amendment No. 211 will be rejected.

I am somewhat surprised at the large companies which are ganging up against the very skilful management by Oftel of the telecommunications position. I suspect that those companies are not giving attention to the basic point: that we have to make certain that the large telecommunications companies are made properly competitive. I think that they would agree with

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that, as will the noble Lord, Lord St. John. I find the noble Lord's great effort to take Oftel out of the picture very strange.

Lord Fraser of Carmyllie: I entirely agree with my noble friend Lord Mottistone, as I think we all do, that without the powerful presence of regulators--in the case of telecommunication it is Oftel--the competition in that industry which we now see would not have been established as quickly and effectively as it has been. There is no dispute about that. We recognise the value of those who have held the office.

However, the real issue was neatly encapsulated in a remark of the noble Lord, Lord Ezra. Do we know where the line of concurrency will be drawn? If we know now, will we know it in a year's time; or, if we know now, do we believe that it falls at a worthwhile point? Such has been the speed of change that clearly telecommunications is no longer a discrete sector, as the noble Lord, Lord Ezra, said. It is for that reason that we believe that it is right to explore this issue now; and I have no doubt we shall explore it again at a later date.

We must be clear that the issue will be properly covered for all the anti-competitive purposes of the Bill. There is a powerful argument for saying that, as regards competition provisions, so broad is the activity of telecommunications now that authority is better invested in the Director General of Fair Trading.

Amendment No. 211 is grouped with Amendment No. 208. It is the "sunset" provision. It restricts the functions of the Director General of Telecommunications until 1st January 2001. I accept that there is no magic about the year 2001 in terms of telecommunications. However, as I see it, the amendment signals the realisation that even at the time of the passage of the Bill there may yet be arguments about the continuing value of having Oftel in place over competition. It must be obvious to anyone with even half an appreciation of the change that has been undertaken, that sooner or later we would wish to see the industry subject to broader competition and not restricted in this sectoral way.

Even if the noble Lord, Lord Simon, cannot give us comfort tonight--I should be surprised if he were to do so--I hope that, nevertheless, he will be in a position to recognise that the concerns on this issue are more keenly felt than they might be on the broader issue of concurrency which we dealt with in the earlier, larger group.

6.45 p.m.

Lord Simon of Highbury: I can start with a positive statement. It is not on any of the amendments, in case anyone becomes overexcited. It is on the question of regulators in Europe. I answer in general to the noble Lord, Lord Ezra.

It is my experience in general that, in particular in the telecommunications field, we are way ahead. I find that an extremely good position for our industry. The capacity of our regulators and the effective communication in the market place have put us in a

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strong position. If the noble Lord wants more detail, perhaps he will apply to me separately. But we are effectively leading the world in the regulatory process in creating competition in the market place. I would not defer even to our American friends in a number of sectors on the way that we have increased the dynamic of the market.

Perhaps I may respond to the noble and learned Lord, Lord Fraser, as to where the guidelines are drawn. Where is an industry regulator relevant in his field? As I said earlier in talking about the development of guidelines from the director general and the sector regulators, it has to be a moving series. The guidelines have to reflect the dynamics of the market place. They will not be cast in stone. Therefore we shall have to adjust to an understanding that the process of advice and guidance can change over time as the market place changes over time. Those are general points that are worth making.

I can offer a less warm response on the specific amendments. The amendments concern Oftel's concurrent powers. Amendment No. 208 in the name of the noble Lord, Lord Ezra, excludes the Director General of Telecommunications from the list of regulators mentioned in Schedule 10 who are able to exercise concurrent functions under Part I of the Bill. The purpose would seem to be to remove the ability of the Director General of Telecommunications to exercise concurrent functions under the prohibitions, under Part I of the Bill. The effect of Amendment No. 211 would be to limit Oftel's concurrent functions under the Fair Trading Act and the Competition Bill to the period until January 2001.

The reason for this choice of regulator, and the terminal date of 2001, in relation to Amendment No. 211 is not entirely clear. It may be related to the development of competition in the telecoms retail market, and to the fact that the Director General of Telecommunications has said that, in view of this, he expects BT's current retail price cap to be the last one. It will expire in August 2001.

Implicit in the amendments seems to be the assumption that the central competition function of the regulators is imposing price caps, and that when the need for price caps falls away so will the case for the sectoral regulators to be involved in wider competition issues. Amendment No. 208 in fact implies that the sectoral regulators can retreat from wider competition issues even while price caps still apply.

With respect, this is not the Government's view. As I have explained in the earlier discussion on concurrency, it is appropriate that the regulators, including the Director General of Telecommunications, should have concurrent functions under general competition law because there is no clear distinction between sectoral regulation and the promotion of competition in those sectors. The regulators have competition-related duties so that sectoral regulation merges seamlessly into competition issues and the regulators are inevitably drawn into competition issues.

One of the purposes of price caps is to prevent one kind of abuse of a dominant position--namely, excessive, exploitative pricing. The policy of the

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Director General of Telecommunications is to remove retail price caps as quickly as possible as competition develops. In fact BT's current retail price cap already applies to only about 40 per cent. of BT's services in terms of the revenue generated. But abuse of the dominant position can also take other forms which could be relevant, even after retail price caps no longer apply. Predatory pricing could easily be used to squeeze people out in this sector. The telecommunications system is a mosaic of interconnecting networks, and access to networks is an area where it will be market power that can be exercised. There is no doubt a whole variety of other ways, subtler than network access or the retail pricing or predatory pricing strategies, and therefore more difficult to foresee in advance. The range of potential strategies, particularly in this sector, is limited only by human ingenuity, which is not currently a great limiting factor.

The broad position remains that sectoral regulators have certain duties under the utility statutes to promote competition where that is feasible. This issue goes wider than the price cap. It is an issue which--

7 p.m.

Lord Fraser of Carmyllie: I understand the Minister's point that, under the existing scheme of arrangement, the sectoral regulator has a duty imposed upon him to examine competition issues. As the scheme of the Bill is presently laid out, that is a concurrent jurisdiction.

What we are trying to probe is the issue of what is his sector, and whether there is a risk that in the foreseeable future, if Oftel sought to exercise those competition powers to examine the conduct of some player in what the regulator believed to be the telecommunications sector, it might then be met with the complaint, "This goes beyond your statutory powers". Our concern is that it would be no fault of the regulator and no criticism of him, but such is the speed of change that trying to maintain a definition of that sector is becoming an increasingly artificial exercise. Since it is so artificial, it would be safer in the public interest simply to vest investigation of competition law, anti-competitive practice and abuse of dominant market position in the director general himself rather than take the risk of there being any challenge to the Director General of Telecommunications.

Lord Simon of Highbury: I thank the noble and learned Lord for his intervention. But I still see at this time that the special capacities of the Director General of Telecommunications, as specified, must be maintained. If there has to be testing of the limits, it can be handled in other ways. But it is not an appropriate approach now to ask him to give up his special capacity powers on the way to developing the new legislation.

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