Examination of Witnesses (Questions 1440
WEDNESDAY 14 DECEMBER 2005
Lord Currie of Marylebone and Mr Tim Suter
What is the case for adding to the costs of the BBC?
Lord Currie of Marylebone: I would not wish
to say that there is a case for adding to the costs of the BBC
in its own right but there is a casehere again the broader
spectrum review is relevantfor spectrum pricing in order
to encourage efficient use of spectrum. For example, if one was
rolling out a new broadcast network, a system of masts and so
on, with spectrum being priced you would arrive at a very different
configuration of masts than if there was no charge, just as if
you do not charge for electricity you would have a very different
usage of electricity by broadcasters and others. We are asking
the question: should broadcasters pay for spectrum, which is a
very valuable resource, but nobody asks should the BBC pay for
its electricity usage. It is also worth making the point that
we are talking about a prime bit of spectrum, 112 megahertz of
ultra high frequency spectrum. That is about two thirds of the
equivalent of the 3G spectrum that was auctioned a number of years
ago, so potentially it is a very valuable resource and one would
want to encourage broadcasters to use that spectrum in the most
efficient, possible way. That is the rationale, not pushing up
costs. Those are arguments that will have to be considered and
balanced in the consultation and the decisions which we take next
What would happen to the money that you raise?
Lord Currie of Marylebone: Like all spectrum
receipts which we collect across the range, they go to the Treasury.
What we are talking about is a spectrum tax?
Lord Currie of Marylebone: Yes. It is a price
for the use of spectrum.
The Treasury will be very interested in this, will they not, because
they can raise more money? You are saying that is an independent
decision for yourself?
Lord Currie of Marylebone: Yes. One of the key
points is that in making that decision the maximisation of revenue
for the Treasury is not the main consideration.
Why have we not charged before?
Lord Currie of Marylebone: Historically, we
have had a different arrangement. We have slowly been implementing
charging for spectrum across the board. We saw that with the mobile
phone auction. We have increasingly applied administrative incentive
pricing to the Ministry of Defence and other public sector users.
Interestingly, in the case of the Ministry of Defence, it has
been releasing spectrum and it has been made available for other
users. We have seen the effect of pricing, encouraging exactly
the type of efficiency benefits one would like, given the highly
valuable spectrum. In the case of broadcasting, we have not charged.
We have had the analogue compact, where in return for the gifting
of spectrum there has been a requirement of public service broadcasting
which has been laid upon the commercial broadcasters.
Q1445 Lord Holme of Cheltenham:
There is obviously a strong prima facie case for looking
at spectrum between broadcasters to arrive at a level playing
field and a fair definition of entry cost in the way you describe.
The bit that is worrying in the evidence you have just given is
the role of the Treasury. When you go out to consultation next
year is the Treasury simply one of the bodies with which you consult
or does the Treasury have some special role in this?
Lord Currie of Marylebone: Clearly the Treasury
will take an interest in it but it is a decision for Ofcom.
Q1446 Lord Holme of Cheltenham:
Will you consult with the Treasury?
Lord Currie of Marylebone: Of course. We will
consult with all relevant bodies.
Q1447 Lord Holme of Cheltenham:
Will they be like any other stakeholder or will they be a special
Lord Currie of Marylebone: I do not think they
will be special.
When the consultation document goes out, will you have shown it
to the Treasury beforehand to see if you are putting the right
Lord Currie of Marylebone: That is something
I have not considered. We would want to get the views of the Treasury
but it will be an Ofcom consultation document that goes out. I
do not think we as a regulator have been seen to be in thrall
to any particular department of government. We are an independent
regulator set up by Parliament with our statutory duties and I
think we have been quite vigorous in pursuing those independently.
Chairman: I have not put out a Green
Paper yet which has not been pored over by the Treasury but you
might say I was a government department and not an independent
Q1449 Lord Peston:
Obviously the other comparison would be with road pricing. Essentially,
all you are enunciating is the view that if something is scarce
it is appropriate to get the optimum use of it through pricing.
I am right, am I not, that in economics there is nothing that
says that should be used as a revenue raising device? In other
words, there is no reason why that money should accrue permanently
to the Treasury?
Lord Currie of Marylebone: It could be recycled
back, for example, into public service broadcasting, the broadcasters
themselves or some new concept like the public service publisher
that we have talked about.
Q1450 Lord Peston:
Normally the economic analysis of this is that it is revenue neutral,
is it not?
Lord Currie of Marylebone: Yes. On the other
hand, what that money is used for is not a matter for Ofcom.
Q1451 Lord Peston:
You said that you were not purely an economic regulator but you
are to some degree concerned with economic considerations. Are
there limitations on that? For example, do you have the right
to look at the sellers of broadcasting rights of all sorts? Obviously,
sporting rights are the ones that particularly interest us. If
you believe that the sellers of those rights are abusing their
dominant market position, do you have any role there or is that
a matter for OFT and the Competition Commission?
Lord Currie of Marylebone: We have competition
powers concurrently with the Office of Fair Trading. In the media
area, we would work with the Office of Fair Trading on any possible
breach of competition policy. Ultimately, those decisions then
go to the Competition Commission.
Q1452 Lord Peston:
If there were explicit or implicit collusion, for example, between
the owners and therefore the sellers of broadcasting rights and
one or two of the buyers, would that fall within your remit or
would you just discover it and pass it on to the OFT and the Competition
Lord Currie of Marylebone: There would also
be the question of whether it rests within UK competition law
or whether it is a European matter and therefore whether the jurisdiction
is with the Commission rather than the UK competition authorities.
Q1453 Lord Peston:
What if it clashed with the UK to start with?
Lord Currie of Marylebone: If it was purely
UK, we would be very much involved with but we would be working
closely with the Office of Fair Trading.
Q1454 Lord Peston:
If it were international or European?
Lord Currie of Marylebone: It would be a matter
for the Commission.
Q1455 Lord Peston:
Just for the Commission? You would not draw it to their attention
if you came across something?
Lord Currie of Marylebone: If there was something
that we felt was remiss, we would have the scope for bringing
it to the attention of the Commission but it would not be a matter
Q1456 Lord King of Bridgwater:
You said you might charge the BBC if you thought they were being
too slow hanging on to spectrum when they should have switched
over. Are you or the BBC taking responsibility for this issue
about who is going to lose coverage when we do the switch over
and people who will be disadvantaged by that? Is that your responsibility
overall? If people have complaints, do they come to you?
Lord Currie of Marylebone: The relevant body
is Digital UK which has responsibility for overseeing the whole
process of digital switchover.
Q1457 Lord King of Bridgwater:
Who do they report to?
Lord Currie of Marylebone: The government.
Mr Suter: And the Secretaries of State.
Q1458 Lord King of Bridgwater:
It is a government department?
Mr Suter: No. It is an organisation. We suggested
in our report on digital switchover last year that the implementation
of digital switchover should be put in the hands of a body that
drew from the broadcasters and the relevant industries and stakeholders
who would ensure that switchover happened. There should be a body
set up that would report through to government on implementation.
Our role is around ensuring that the spectrum coverage is going
to meet the requirements as set out for digital switchover. It
is the role of Digital UK which has representations from the broadcasters,
the manufacturers and the relevant bodies to ensure that the marketing
Q1459 Lord King of Bridgwater:
If there is one particular area of the country that is going to
be seriously disadvantaged by the switchover and plans are not
in place or there are no arrangements to provide alternative broadcasting
coverage, who takes the decision that would delay the switchover
because it is going to disadvantage one group too severely? Is
that you or Digital UK?
Lord Currie of Marylebone: Any decision for
delay would be a matter for DCMS. The government made the decision
to proceed with digital switchover. On the question of disadvantaged
areas, there are very detailed plans to ensure that digital coverage
at least matches the current analogue coverage. Stephen Carter
and our people gave evidence to the House of Commons Trade and
Industry Select Committee on exactly this point yesterday.