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Lord Avebury: Is the Minister saying that that would never occur? Is he saying that if an operator declines to negotiate for RSA that that frequency would be offered to another operator by Ofcom?

Lord McIntosh of Haringey: No, I am saying that an operator will be protected from illegal use, but there will be risks of security and quality of transmission. Clearly, spectrum is a continuum; it is not a series of discrete positions. That is the whole meaning of the word "spectrum".

Inevitably the powers in the Bill are enabling powers. It will be up to Ofcom to decide in which frequency bands RSA should apply, the timing of its introduction and the level of charges. We have not taken decisions on those matters. The noble Baroness, Lady Buscombe, and the noble Lord, Lord Avebury, commented on consultation but I believe that they recognise, as required by Clause 396, that there will be full and detailed consultation before decisions are reached. That means that in responding to the debate I cannot give answers on matters that have not yet been decided.

The amendments relate to the way in which RSA is introduced, charged for and regulated. In so far as they are intended to probe our intentions that is fine. I am happy to give such assurances as I can, but some of the issues, as I have made clear, cannot yet be determined.

I now turn to the detailed amendments. Amendment No. 134 would restrict the introduction of RSA to where Ofcom sees a spectrum management need. Amendment No. 134A would require Ofcom to consult all interested parties before making regulations to apply RSA on whether they are appropriate and proportionate.

I have no problem with the principle underlying either of those amendments, but they are not necessary. The introduction of RSA will be subject to the duty in Clause 151, which requires Ofcom to have regard in particular to specified spectrum management considerations. As I have already said in response to earlier amendments, it is Ofcom's duty to regulate in a way that is proportionate and appropriate and this will apply to RSA as well.

Ofcom will also be required by Clause 396 to consult and to take representations into account before making the regulations. No decisions have yet been taken on the frequency bands. That will be a matter for Ofcom. But the Bill already requires decisions on RSA to be based on spectrum management considerations and subject to consultation.

Amendments Nos. 132 and 136 would remove Ofcom's power to auction RSA. Amendment No. 135 would restrict RSA fees to cost recovery. The common theme of these three amendments is that RSA fees should not exceed the cost of managing the spectrum. That is what the Trade and Industry Select Committee of the House of Commons said in its report. We have already set out our response to that report. There has

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been widespread support in principle both for auctions and for spectrum pricing. The Trade and Industry Select Committee endorsed those principles for spectrum licences. Why should we distinguish between licences and the spectrum that cannot be licensed?

Whether for RSA or for licences, charging an economic fee gives incentives to use spectrum more efficiently. Users can take economically rational decisions based on their knowledge of the market and an assessment of the value of the spectrum. That will open up more opportunities for new services to benefit consumers and the UK economy because of more efficient use of the spectrum. Professor Cave endorsed spectrum pricing and recommended that opportunity cost pricing should be applied to satellite systems' use of spectrum where such use shares with, and constrains, the deployment of UK-based terrestrial services.

Auctions have advantages. They have transparency and economic efficiency and ensure that the licence or RSA in question passes to the person who attaches the highest value to it. But they are not suitable in all cases. They need to be applied selectively. There is provision for administrative prices where that would provide more efficient use of the finite spectrum resource. Again, the decisions on the use of auctions will be a matter for Ofcom. I cannot predict what use Ofcom will make of auctions, but it will be required to act in accordance with spectrum duty in Clause 151 and to consult as required by Clause 396.

I know that some satellite operators have been concerned about the level of administrative incentive pricing fees that may be charged. Let me give the assurance that they are looking for. The charges will be no higher than necessary for spectrum management purposes. Clause 151 gives that assurance statutory backing.

I hope it is clear that we take the concerns expressed in this debate and by the satellite industry seriously. Ofcom will do so as well. The noble Baroness, Lady Buscombe, raised an interesting issue about the balance between satellite and terrestrial, and particularly about grandfather rights. The timing of the introduction of RSA will be a matter for Ofcom but I am sure that Ofcom will take account of what the noble Baroness, Lady Buscombe, has said about grandfather rights. I have some sympathy with the argument that she used, but it is not a matter to be put on the face of the Bill.

Amendments Nos. 134B to 134E, 136A to 136F, 138A to 138D, 140A and 141A relate to the way in which Ofcom will grant and regulate RSA. It is entirely understandable that those who may be granted RSA should look for as little restriction as possible on the spectrum, maximum security of tenure and freedom of trade. But the amendments would reduce Ofcom's flexibility. They dilute or remove the powers to manage spectrum efficiently. They would not be in the best interests of achieving optimum use of the radio spectrum.

The communications sector is undergoing rapid and unpredictable change and we should not tie Ofcom's hands. So we entrust Ofcom with broad enabling

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powers, including on RSA so that it can react to changes in an uncertain world. But the powers are balanced by duties and as to how they should be exercised. That applies to overall objectives and to matters to be taken into account in Clause 3 and to the avoidance of unnecessary burdens in Clause 6. As I have said over and over again, there are obligations to have consultation and there are extensive rights of appeal.

In addition, where spectrum is concerned there are additional duties in Clause 151 stipulating matters to which Ofcom must have regard, including availability of spectrum, present and expected future demand, efficient management and use of spectrum, economic and other benefits, innovation and competition.

Amendments Nos. 134B and 134C would effectively remove Ofcom's power to make the grant of RSA subject to terms and conditions. It is not possible to anticipate what terms and conditions they may find it necessary to impose. They may need, for example, to impose conditions on RSA that technical criteria equipment should meet to obtain a desired quality of service, or to deal with extraneous symptoms that may be received, or to deal with restrictions on the frequency limits or on geographical boundaries. Ofcom has to have that power to impose conditions and restrictions in order to manage the spectrum.

Amendments Nos. 134D and 134E relate to revocation and modification. Ofcom may have the need to revoke or to modify RSA for a number of reasons but it does not need to be limited to those listed in Amendment No. 134D; for example it may be in the best interests of consumers to free up spectrum for a new service to be established. Of course, they have to act reasonably by giving a suitable period of notice, and decisions on revocation or modification of RSA will be subject to the full appeal procedure in Clauses 189 to 193 including the competition appeal tribunal on the merits of the decision.

The noble Baroness, Lady Buscombe, asked specifically about security of tenure. Ofcom will be required to act reasonably while modifying or revoking RSA and the answer is that there is the same regime for RSA as there is for licences. There is that protection in both cases. Ofcom will also be able to offer greater security by fettering its discretion under paragraph 7 of Schedule 5. RSA holders have the assurance that modification or revocation of RSA will be subject to full rights of appeal.

Amendments Nos. 136A to 136F would remove references to RSA from Clause 161. The purpose of the amendments may be to probe how Ofcom might use its discretion to impose limitations. Although it is difficult to predict how it could be used, we can see how it is needed. Radio spectrum is a scarce resource. In some frequency bands, the need to protect one service from interference can constrain the deployment of other services in bands shared by satellite downlinks and terrestrial point-to-point fixed links. It is necessary to limit the grant of RSA, to prevent other services from being unduly restricted.

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The remaining amendments in the group—Amendments Nos. 138A to 138D, Amendment No. 140A and Amendment No. 141A—relate to the regulation of secondary trading. The amendments would dilute Ofcom's powers and would prevent Ofcom from requiring consent or approval in advance for transfers of RSA and from prohibiting or imposing conditions on transfers of RSA. That would not be helpful. Again, the important point is to maintain comparability between licences and RSA.

I am conscious that I have set out what the amendments would do and why they are undesirable. I am also conscious that there was a raft of questions, asked by the noble Baroness, Lady Buscombe, and the noble Lord, Lord Avebury, that I did not answer fully. I shall write them a very long letter indeed between now and Report, to deal with all the points. However, the Government must resist the amendments.

6.30 p.m.

Baroness Buscombe: I am grateful to the Minister for his full response to the amendments. I would appreciate it if he were able to write to me concerning several questions that I raised.

I am also grateful for the Minister's suggestion that Ofcom should take account of what I said about grandfathering rights. I was disappointed by his response on some of the issues. I kept finding myself repeating the word "interfering" in connection with the clauses. A balance must be struck. When I have read in Hansard what the Minister said and when I have considered the contents of the Minister's letter, we will decide whether to take the matters further.

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