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Lord Avebury moved Amendment No. 137:

"(ab) require that amount to be expressed in terms of a single payment but shall give the applicant the choice of the making of annual payments;"

The noble Lord said: Amendments Nos. 137 and 138 deal with the manner in which payment is made for wireless telegraphy licences under the 1998 Act. As drafted, Clause 164 would allow Ofcom to specify that payment is made as a single lump sum, as a series of instalments over time, as a combination of the two, or in any of those ways at the applicant's choice. In the 3G auction, the option was given of a series of payments, but at an interest rate set so high that it was not taken up.

If up-front payments are required, that clearly would give an advantage to the major companies with cash, which may not be compliant either with the existing Licensing Directive 97/13/EC, Article 10(3) of which requires licensing to be "non-discriminatory", or Article 9(1) of the Framework Directive, which uses the same language.

Single payments also undervalue future years when compared with current usage, because of discounting. Even if there was a zero interest rate, that would be the case since a bidder would place a greater value on income in the near future. Such arrangements do not, therefore, achieve the stated objective of,

    "securing the optimal use of the spectrum",

as required both by the Bill and the new directives. Annual payments would go some way towards correcting that.

Amendment No. 138 would put an obligation on Ofcom to set a rebate when services start. That will deter speculators who are not going to provide any service, but who are intending to sell the frequencies if their bids are successful. While speculators might have a theoretical contribution to make in taking risks on future spectrum value, based on falling equipment costs and improvements in technology, that must be balanced against the need to use the spectrum immediately to achieve Ofcom's other objectives as laid down in Clause 3. In the extreme case, spectrum could be passed on and on, never to be used.

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Professor Cave—I have already pointed out that his words are holy writ on these matters—has argued that paying for the spectrum is sufficient incentive to use it. But the investment needed might not make use as profitable as resale, even though use would attract consumer surplus or consumer benefit. The operator is not interested in consumer surplus, and that is why we believe that there is a need to redress the balance with a further rebate. I beg to move.

Lord McIntosh of Haringey: Both of the proposals set out here are things that Ofcom may well want to do. Certainly I can see the circumstances in which they would be appropriate. Auctions are held in which spectrum trading situations arise and where a series of annual payments would be appropriate as opposed to a single up-front lump sum scheme. Certainly there are circumstances where it would be desirable to find some kind of incentive to prevent speculation rather than trading, which I think is the legitimate point that the noble Lord, Lord Avebury, is seeking to make here. There is a power to do that, of course—Section 1(3)(c)of the Wireless Telegraphy Act 1998 gives the power for the Secretary of State, and now for Ofcom, to make refunds following an auction. But I really do not think it is a good idea to make it mandatory.

Ofcom will have the experience of conducting these auctions; it will have to judge on which occasions it should demand all upfront payment or annual payments and whether it needs to protect against speculation by providing for a refund. It has all the powers—it does not need a restriction which would make it a duty in all circumstances.

Lord Avebury: The question between us is whether these stipulations should be de rigeur or an option for Ofcom. The noble Lord has asserted that Ofcom should be given this freedom without any indication of his reasoning for that conclusion. I cannot imagine any circumstances in which Ofcom might have a legitimate reason for demanding the whole of the payment upfront instead of allowing the person concerned the choice of making annual payments. Similarly, I cannot think of any circumstances in which it would not be a good idea to encourage the use of the spectrum by providing for a rebate as part of the normal process. But as I am obviously not going to get a more thorough explanation of the reasoning behind these provisions at this stage, I shall hope that perhaps we can discuss the matter behind the scenes or even that the noble Lord may write to me in due course.

Lord McIntosh of Haringey: I would be delighted to discuss this with the noble Lord, Lord Avebury, or write to him about it. The flexibility that I am talking about allows for a more precise discrimination between the value of different bids, because these other items can be taken into account. But I am not at all against the noble Lord's arguments.

Lord Avebury: It may well be that the use of some practical illustrations will clarify the matter. I am very happy to accept the noble Lord's undertaking, and I beg leave to withdraw the amendment.

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Amendment, by leave, withdrawn.

[Amendment No. 138 not moved.]

Clause 164 agreed to.

Clause 165 [Spectrum trading]:

[Amendments Nos. 138A to 138D not moved.]

Baroness Wilcox moved Amendment No. 139:

    Page 151, line 31, at end insert—

"( ) In authorising the transfer of rights and obligations under a wireless telegraphy licence or grant of recognised spectrum access under this section, OFCOM shall have regard to the impact of such a transfer on music provision."

The noble Baroness said: This amendment seeks to include a provision at the end of subsection (3) of Clause 165 in order for Ofcom to consider the impact of a spectrum transfer on music provision.

The Joint Scrutiny Committee assessed that the capacity of Ofcom and the Government to cope with the real risks associated with spectrum trading—which the Government themselves identified—will depend upon the regulations made by Ofcom as spectrum trading is gradually phased in.

In theory, the expanding radio environment should increase innovation and diversity because there should be more stations reaching new and different audiences. However, in practice, music creators are deeply concerned that the Government's proposed regulatory regime will put less than a handful of players in control of access to our radio communications networks, with centralised playlists limiting musical diversity. Music creators are concerned at the propensity of radio operators to walk away from licence obligations relating to music programming when ownership is transferred.

Therefore, the amendment is designed to ensure that the impact of spectrum trading on music diversity is specifically assessed by Ofcom as the current general criteria offer no guarantee that this will be the case. Unless this is put on the face of the Bill, the regulator will not have a defined responsibility to consider the consequences of these changes on music provision. I beg to move.

Baroness Warnock: I strongly support the amendment because I believe that there is a lack of overt protection for diversity of music in the Bill. Sometimes it is easy to overlook the fact that when independent local radio began, there was an enormous difference between one station and another and people were very proud of the fact that they had their own taste in music and their own performers. It was very much a local matter.

Things have changed greatly, I know, in the past 30 years, but there still is and should remain a sort of residual respect for the quite surprising difference in music tastes in different local radio areas, not just between Northern Ireland and Newcastle but between Birmingham and Wolverhampton—things that one might not expect. This diversity, along with the

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employment of local musicians, which we shall come on to later, need to be protected on the face of the Bill. There is very little in it about radio and very little about music, so I support the amendment strongly.

Viscount Falkland: This is clearly a probing amendment, and we share many of the views expressed by the noble Baroness, Lady Wilcox. It would clearly be wrong if a digital spectrum trade allowed a particular digital radio broadcaster to dominate the relevant market in a way that allowed him—or it—to compete unfairly. In the event that this is likely to occur, one would expect Ofcom to require clearance or consent prior to a proposed trade.

Authorisation by Ofcom would, one hopes, be needed in order to prevent any particular worrying trade from taking place. Distortions of the market can take place, as has already been said. The music industry has been worried about a large radio broadcaster arriving at a position where it would dominate the market and have a disproportionate amount of influence on the spectrum. However, these are interesting issues and one looks forward to the Minister clarifying the situation and, I hope, allaying some of our concerns.

Lord Gordon of Strathblane: It may well be that the music industry would love there to be a single dominant provider. In that way, you have to lobby only one person to ensure airplay for your product. That, of course, existed with BBC Radio 1.

The great advantage of the number of radio stations we have in this country is that in their own self-interest, they try to cater for musical tastes that are particular to the area. I do not know enough about the difference between Birmingham and Wolverhampton to know whether there is a difference. I have a horrible feeling that nowadays, with programmes such as "Big Brother" and "Pop Idol" being virtually universal, tastes have become somewhat homogenised. But nearly 30 years ago, when I started Radio Clyde, we managed to exploit local tastes which nobody, including the BBC, could exploit. I refer to people like Billy Connolly, who, of course, went on to somewhat greater things and is where I think I should be this evening—in Seville, to watch Celtic tomorrow.

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