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Lord McIntosh of Haringey: We do indeed come to spectrum, which is the "techie" subject of all "techie" subjects. The two amendments concern Ofcom's duties in relation to the management of the spectrum.

I agree that radio spectrum is at the heart of the communications revolution. Its effective management is crucial to fostering a competitive and dynamic—I am sorry. I beg the Committee's pardon. I "mispeak" myself, which I believe is the correct phrase, but it is right that we should debate Ofcom's duties.

Amendment No. 130 concerns the insertion of the words "social, cultural". The noble Lord, Lord Avebury, gave illuminating examples. We agree that it is necessary to take into account non-economic benefits of essential public and safety of life services, defence, cultural and scientific pursuits and a range of social and educational applications. These transcend economics and cannot easily be valued in monetary terms. We would all be the poorer if Ofcom focused exclusively on economic benefits.

The diversity of spectrum use is fully reflected in the Bill. Clause 3 makes clear that Ofcom should manage the spectrum in the interests of all those who wish to use it. This includes not just commercial enterprises but also those with cultural, educational, social or scientific aims. Clause 3 also requires Ofcom, in exercising its functions, to pursue the cultural objective of securing the availability of a wide range of high quality programmes.

Turning to Clause 151, subsection (2)(b) requires Ofcom to have regard to the desirability of promoting not just economic but also other benefits. There is no need to add a reference to social or cultural benefits. Indeed, if one did, one would be in danger of excluding other forms of non-economic benefit, such as scientific benefits, and of giving the impression that they were somehow second class. The provision for other benefits combined with the great specificity of Clause 3, makes the amendment unnecessary.

I understand the point made on Amendment No. 131 about the need for spectrum management duties to be harmonised and consistent. Indeed, we included Clause 151 in the Bill with that in mind. That was in positive response to a recommendation of the Joint Scrutiny Committee chaired by my noble friend Lord Puttnam.

The clause applies the considerations currently contained in Section 2 of the Wireless Telegraphy Act 1998 in relation to spectrum pricing, with the addition

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of the non-economic benefits we have just discussed, to all Ofcom's spectrum management functions. I hope that the Committee will let me explain the reason for including subsection (3).

Spectrum management involves a wide range of activities from international agreements on spectrum use to domestic television interference. The factors listed in subsection (3) had their origin in the Wireless Telegraphy Act 1998, where they were included to provide a safeguard against the use of incentive pricing to raise revenue. They encapsulate the specific considerations that were considered necessary for setting licence fees. Not all of them are equally relevant to Ofcom's other spectrum management functions, however.

For example, the objectives of an auction may include other matters such as quality of service, speed of roll-out or geographical coverage. Furthermore, in an auction, the fees paid will be determined by the bidders, not imposed by the regulator, so the context is very different from that of administrative incentive pricing under Section 2 of the 1998 Act. Nor is it easy to relate the Section 2 factors to Ofcom's function of investigating and assisting with interference.

Subsection (3) simply provides that Ofcom may disregard such of the factors that do not appear relevant to a particular function. But this is constrained and it is important to appreciate that it does not extend to a factor that Ofcom is required to consider by another provision or to setting fees for licences or recognised spectrum access. Subsection (3) does not weaken the important safeguard that fees should reflect spectrum management considerations.

Clause 151 is intended to bring the elements of consistency and coherence that the Joint Committee recommended while giving Ofcom a necessary degree of flexibility in exercising the wide range of spectrum management functions.

Subsection (3) makes explicit that Ofcom may exercise a sensible degree of discretion to set aside factors that do not apply. I hope that that explanation will be sufficient to persuade the noble Lord, Lord Avebury, not to press the amendment.

Lord Avebury: I accept, I think, the Minister's argument that Amendment No. 130 may not be necessary because of the general duties that are imposed on Ofcom under Clause 3, which reflect the objectives which I sought to bring into the clause we are discussing. The only point I make about that is that in other parts of the Bill the Government have been careful to ensure consistency of terminology and wording between one section and another and between different subsections within the same clause. I shall need to reflect whether it would be sensible to pursue the matter to try to insist on the inclusion of the relevant words or whether I am satisfied on the basis of the advice available to me that the general duties of Ofcom make it unnecessary to repeat them in this clause.

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With regard to Amendment No. 131, I accept what the noble Lord said in explanation. I am perfectly satisfied that I do not need to pursue the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 131 not moved.]

Clause 151 agreed to.

Clause 152 agreed to.

Clause 153 [Directions with respect to the radio spectrum]:

Lord Avebury moved Amendment No. 132:

    Page 141, line 33, leave out "3A" and insert "3"

The noble Lord said: We now come to the controversial process whereby parts of the radio spectrum, particularly those used by satellites, are to be subject to grants of what is called "recognised spectrum access" under a procedure which is set out in Schedule 5. As the Minister is aware, there is a great deal of opposition to the idea from sections of industry, notably from the organisation Intellect, which represents over 1,000 companies in the information technology, telecommunications and electronics industries based in the UK, whose use of the radio spectrum generates some 12 billion to 15 billion worth of business. They employ collectively some 400,000 people. They say that a high value for RSA would mean that satellite operators, and others in the future, would not take up Ofcom's proposed grants, but they particularly disliked the threat that if operators did not sign up, the satellite downlinks would be subject to interference.

Once the concept of RSA is established, they believe that it could be extended to licence-free areas of the spectrum such as those at present used by 802.11, stifling development in those areas. They foresee that a satellite operator looking to provide a European service might have to pay for 25 RSAs on each of the uplinks from EU member states after the next enlargement in 2004, and as many as 40 in the medium term future as more eastern states join, and if they all adopt the policy of RSA in the form that it takes in the Bill.

I know that the Minister in another place, Stephen Timms, was due to meet representatives of the European satellite industry on 8th April, and it would be useful to know whether they succeeded in persuading the Government to shift from their present position on the matter. If the Minister would like to respond in writing to save time in Committee, that would be fine because my crystal ball tells me that the Government will not accept these amendments and that we shall inevitably return to the subject on Report. Very briefly, what we are aiming to do in Amendments Nos. 132 and 136 is to knock out the auctions for grants of RSA; and in Amendments Nos. 134 and 135 we substitute, first, a requirement that Ofcom determine that there is a spectrum management need, and, secondly, that when it has done that, RSA is granted at the cost of administration.

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On Amendments Nos. 134 and 135, the Government said in their response to the Trade and Industry Select Committee report:

    "In particular, the Government accepts that RSA should not be applied, and that fees should not exceed cost recovery, in the absence of a spectrum management need".

The amendments seek to mirror that commitment back at the Government. I beg to move.

6 p.m.

Baroness Buscombe: I wish to speak to the remaining amendments in the group; that is, Amendments Nos. 134A to 134E, 135, 136, 136A to 136F, 138A to 138D, 140A and 141A.

I shall start with Amendment No. 134A. Recognised spectrum access introduces a system enabling charges to be made for satellite downlinks for the first time. There has been extensive consultation by Professor Martin Cave, the Government and the Radiocommunications Agency on the subject. Despite the views opposing RSA consistently expressed by satellite operators and broadcasters, and reflected in amendments tabled in Committee in another place, the Government have retained the proposal for RSA.

In so doing, the Government appear to take refuge in the fact that RSA will be "voluntary"; that there will be further consultation by Ofcom on implementation and pricing methodology; and that Ofcom would have to consider whether RSA was appropriate having regard to all its duties. The Bill contains no such commitment. Ofcom could simply decide to proceed with the issue of RSA. Accordingly, Amendment No. 134A seeks to amend Clause 156(1) to reflect those commitments.

That issue was raised in Committee in another place. The Minister there explained that the principles sought were already firmly embedded in the Bill, by virtue of the fact that Clause 156 refers to Clause 396, which includes a requirement to consult and take account of the representations received. However, that reassurance has provided little comfort to those who stand to be regulated. I hope that the noble Lord, Lord McIntosh, might feel able to move further in that regard.

Clause 396 relates only to Ofcom's powers to make regulations, orders and schemes, requiring consultation on them prior to their being put to Parliament. I recognise that consultation is required in that instance. However, it is very much at the 11th hour. The real concern that remains is the absence of any provision for extensive and detailed consultation on fundamental RSA principles, which should take place well before any statutory instruments as to their precise mode of implementation come to be drawn up.

I would like the Minister to explain why the Government appear to be hiding behind such inadequate provisions for consultation. On what has clearly become a sensitive issue for industry, would it not be far better to place a commitment to consult on the principle of RSA and its appropriateness to specified circumstances, as we propose, rather than to rely on limited provisions elsewhere in the Bill?

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Amendment No. 134B concerns Ofcom's ability to impose unrelated conditions in Clause 156(5), (6) and (7). Although it may be legitimate to provide that the protection afforded by RSA applies for so long as the holder keeps his signal within certain technical parameters, it is totally unacceptable to seek to use the grant of RSA to censor the content of what is broadcast over the satellite downlink. Clause 156(2) gives Ofcom power to impose conditions for the former purpose. However, Clause 156(5) seems to give Ofcom very wide powers to decide what should or should not be broadcast on the signal that is given RSA protection. There are no criteria to which Ofcom should have regard in setting the conditions.

I would like to go back for a moment to the alleged purpose of RSA, which is to protect the holder against interference to his satellite signal. There can be no circumstances in which positive conditions are imposed on the RSA holder relating to his signal or what he broadcasts on it. His protection may be limited if he does not stay within the boundaries set out by Clause 156(2), but that should be the extent of it. The power in Clause 156(5) is irrelevant, unnecessary and disproportionate in the context of RSA. Our amendment seeks to delete it and the connected clauses that follow.

"Grandfathering" commitments from government for terrestrial licensees should also apply to existing satellite transponder leases. In their response to the review of radio spectrum management, the Government indicated that spectrum trading and pricing as regards terrestrial broadcasters is not to take effect while they have existing licences which did not anticipate such pricing. For example, paragraph 8.23 of the response states:

    "Digital broadcasts of ITV and Channel 4 are carried on a multiplex operated by Digital 3&4 Ltd, while digital broadcasts of S4C and Channel 5 are carried on a multiplex operated by S4C Digital Networks Ltd (SDN). The first 12-year term of these multiplex licences expires in 2010. The Government is committed to not charging under the Broadcasting Act 1996 until this point".

Paragraph 8.24 makes a similar commitment with regard to the BBC's own multiplex, stating that,

    "the Government believes that it is appropriate to introduce spectrum pricing for the BBC multiplex on the same basis as the other multiplexes awarded at the same time—from 2010, 12 years after the award of that multiplex".

With regard to the three further digital television multiplexes, paragraph 8.26 makes another similar commitment, stating that,

    "any operator awarded a digital television multiplex licence under the Broadcasting Act 1996 between May 2002 and the date of this publication will not be subject to administrative pricing for the use of spectrum to support that multiplex before the renewal of that licence in 2014".

There appears to be a strong case, therefore, for applying the grandfathering proposals to pre-existing satellite transponder agreements, which have not factored in the possibility of RSA. The Minister in another place went to some lengths to seek to justify the proposal for the RSA regime and its proposed charging mechanism, based on an argument that to do otherwise would be discriminatory between satellite broadcasters on the one hand and terrestrial broadcasters on the other.

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I would be grateful if the noble Lord, Lord McIntosh, could explain the Government's policy on grandfathering. Would he not agree that, in order for the provisions to be fair and non-discriminatory between satellite and terrestrial broadcasters, similar commitments in favour of satellite broadcasters should be made?

It would seem perverse not to do so. I am sure that the Minister will recognise that many new satellite broadcasters have undertaken significant risk and investment to enter the United Kingdom market, encouraged to an extent by the policy framework to date. They have increased competition and expanded viewer choice in line with the Government's aims. Consider the contributions of 24-hour news channels to coverage of the Iraq war; of the many documentary channels on offer; of new arts and music services; of channels for ethnic minority audiences; and of new forms of public service, such as the Community Channel, the first UK-wide channel dedicated entirely to the voluntary sector.

Those providers are also contributing to another UK policy objective—digital switchover—by providing services that have already incentivised millions of homes to acquire digital television. Indeed, they have helped to make the UK a world leader in that area. I hope that the Government will keep that in mind, not only in respect of grandfathering, but in the context of their RSA policy overall.

I move on to Amendments Nos. 134C, 134D and 134E, which relate to Ofcom's ability to modify or revoke a grant of RSA under Schedule 5. Once an RSA is granted, Ofcom may, by virtue of paragraph 5 of Schedule 5, revoke a grant of an RSA, or modify the restrictions or conditions to which a grant is subject. There appears to be no constraint on the grounds on which Ofcom may modify or revoke a grant, other than when it includes in an RSA the self-denying ordinances in paragraph 7. Paragraph 6 states simply that Ofcom must state the reasons for its proposal to modify or revoke the grant of an RSA.

I believe it to be contrary to the legitimate rights of an RSA holder for Ofcom to have such unfettered power to amend or remove, albeit after the RSA holder has been able to make representations, an RSA during the period for which it has been granted. That raises the question of whether there would be any value at all in obtaining an RSA. It is supposed to give the holder protection against the possibility that terrestrial frequencies will be licensed during the term of the RSA that would interfere with his signal.

If Ofcom is able simply to revoke a grant of RSA, however, no such protection is given at all. The holder knows he has protection only until such time as Ofcom wishes to revoke it because, for example, it wishes to license terrestrial frequencies which may interfere with the satellite signal of the RSA holder. That means that the RSA holder is in no better position than he would have been had he not taken out an RSA at all. Once granted, RSA should not be revocable and should last its full term. My amendments seek to ensure that that is the case.

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The Minister in another place indicated that, because the communications sector is subject to rapid and unpredictable change, Ofcom needs,

    "sufficient powers to modify or revoke RSA when necessary and after due process".

Few examples were given, however, as to precisely what those changes might be. One was,

    "the need for spectrum refarming".

Another was,

    "problems of harmful interference arise due to some unforeseen problem—which may happen despite the best efforts of the spectrum manager".—[Official Report, Commons Standing Committee E, 9/1/03; col. 392.]

These are hardly convincing explanations for what are draconian measures to interfere in something which has, after all, been granted to provide security and peace of mind.

I should be grateful if the Minister could provide some further and, it is to be hoped, more concrete examples of the circumstances in which he envisages Ofcom would use these powers to amend or remove an RSA which would justify the erosion or RSA holders' rights. The Minister should recognise that the removal of RSA protections could sound the death-knell to a satellite broadcaster whose signal becomes unreceivable due to interference.

I turn to the amendments relating to Clause 158(3). It provides for the auctioning of RSAs. There are some outstanding questions on the proposal which we believe the Government failed to answer adequately in another place. I hope that the Minister will be in a position to remedy this today.

In another place, we tabled amendments seeking to delete the proposals for the auctioning of RSAs, which is what today's amendments also seek to do. The argument for that is simple. While it makes sense to auction an actual scarce frequency, it does not make sense to auction an RSA which is merely protection against a particular terrestrial frequency from being deployed to create interference. Surely if there is a risk of interference from a number of satellite broadcasters from the deployment of a terrestrial fixed link, all of them should be able to obtain protection against interference and not just one lucky winner.

I turn to Amendments Nos. 136A, 136B, 136C, 136D, 136E and 136F. They relate to Ofcom's ability to limit spectrum use in Clause 161. Clause 161 provides that Ofcom may specify frequencies for which it will grant or make available only a limited number of RSAs or specify uses for which, on specified frequencies, Ofcom will grant or make available only a limited number of RSAs. In effect, these provisions enable Ofcom to ration the protection which is to be afforded by RSA and to impose restrictions on the use of satellite frequencies which are already subject to international co-ordination and agreement.

In another place, amendments were tabled which sought to delete these provisions. The amendments are retabled here. It was argued, quite rightly, that if RSAs are to be made available, they must be available to all satellite operators and broadcasters. Why should

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Ofcom be able to limit the number of RSAs available and, indeed, how would it be able to do so in practice? After all, RSAs are simply intended to enable satellite broadcasters to guard against terrestrial interference, and therefore the number of RSAs granted should be determined wholly by the demand for them and nothing else.

The Government's reasons for these decisions are difficult to understand. In another place, the Minister indicated that the removal of RSAs from Clause 161 would lead to a great loss of transparency and would mean that Ofcom would not be able to follow the necessary procedure if it intends to limit the use that may be made of spectrum. That answer clearly misses the point. It is our contention that no limitation on RSA should ever exist, so whether or not Ofcom can follow the necessary procedures provided for in Clause 161 is irrelevant.

I would very much welcome some further explanation from the Minister on this point. For example, in what circumstances does he envisage that Ofcom might limit the number of RSAs or specify uses for which, on specified frequencies, Ofcom will grant or make available only a limited number of RSAs? So far, we have heard no explanation for this and no convincing explanation for resisting the amendment.

Amendments Nos. 138A, 138B, 138C and 138D, Amendment No. 140A and Amendment No. 141A relate to spectrum trading in Clause 165. We are all agreed that RSAs should be capable of being transferred from one person to another. However, concerns were raised previously in another place that Clause 165 would allow Ofcom to alter the condition of an RSA, require further payments to be made or financial security to be given, before giving its consent to any transfer. Such provisions, it is feared, could alter fundamentally the rights and value of the RSA originally granted and is inconsistent with the underlying principles of property and human rights.

It has the effect that on a sub-licensing of transponder capacity, it will not be possible to transfer any of the associated RSA protection. This will create problems for secondary trading and transponder capacity, which I understand the European Commission has been keen to see flourish. My amendments tabled for debate today seek to address that concern again. They do not remove RSAs from the trading provisions, but reduce significantly the ability of Ofcom to alter conditions, require further payment, or to require its consent to be given. These are, I believe, fair and reasonable amendments which the Government have yet to provide a clear reason for opposing.

In response to the same amendments tabled in another place, the Minister simply said that they would reduce the scope for trading. But how is that the case? It will, indeed, be the case that the scope for interfering in the rights of RSA holders will be reduced, but I do not see how the scope for trading will be reduced. It would be helpful if the Minister could explain why the Government believe this to be the case. Do they agree with the concerns that I have outlined with regard to the secondary market in transponder capacity?

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6.15 p.m.

Lord McIntosh of Haringey: Clearly, this is the most important single subject in the whole of Part 2 and it well deserves the detailed attention which is being given by the noble Lord, Lord Avebury, and the noble Baroness, Lady Buscombe. I am grateful to both of them for it.

The need for recognised spectrum access derives from the fact that some frequency bands are shared by licence services and services that, for whatever reason, cannot be licensed; that is, terrestrial fixed links used in telecommunications infrastructure and satellite downlinks. In that particular example, it is necessary to limit the deployment of fixed links in order to protect satellite service from interference. Therefore, giving satellites exclusive access to frequencies constrains other services.

That is the problem with which RSA seeks to deal. RSA will enable Ofcom to adopt a more even-handed approach to managing spectrum in these cases. The noble Baroness, Lady Buscombe, referred to the independent report on spectrum management by Professor Martin Cave. He recommended that RSAs should be used because it will enable Ofcom to treat different groups of spectrum users more fairly and apply spectrum pricing and trading to services that, for whatever reason, cannot be licensed. I want to make it clear from the beginning that RSA is not a revenue-raising tool but a way of extending sound spectrum management practices where licensing, or lack of licensing, is a problem.

We have said that RSA will not be compulsory and that has been questioned in debate. It is only not compulsory in the sense that if one does not apply for recognised spectrum access, there is a price to pay in terms of risk of interference in particular. That is a commercial judgment which has to be made by operators. They have to decide whether the benefits of enhanced security and quality of spectrum given by RSA are worth the fees that Ofcom charge.

I cannot determine in advance how different operators will make that judgment and I do not believe that Ofcom can either. Clearly, it will be a trading situation. Fees will be determined which will at some stage match willing buyers to willing sellers. This is not a matter which can be laid down in regulations, still less on the face of the Bill. Those who choose not to take advantage of RSA and not to pay the fees will be free to continue to transmit to the United Kingdom without RSA. They will be legitimate spectrum users and they will continue to be protected from interference from illegal sources. That option might be attractive to them if, for example, they are aiming their services at another company but spilling over into the United Kingdom, which is only a marginal market for them. But if they want to avail themselves of the privilege of exclusive access to spectrum, surely, as a

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basic principle, it is fair and reasonable that they should pay for that advantage on the same basis as licence users.

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