Select Committee on BBC Charter Review Minutes of Evidence


Examination of Witnesses (Questions 1440 - 1459)

WEDNESDAY 14 DECEMBER 2005

Lord Currie of Marylebone and Mr Tim Suter

  Q1440  Chairman: 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 case—here again the broader spectrum review is relevant—for 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 year.

  Q1441  Chairman: 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.

  Q1442  Chairman: What we are talking about is a spectrum tax?

  Lord Currie of Marylebone: Yes. It is a price for the use of spectrum.

  Q1443  Chairman: 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.

  Q1444  Chairman: 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 stake holder?

  Lord Currie of Marylebone: I do not think they will be special.

  Q1448  Chairman: When the consultation document goes out, will you have shown it to the Treasury beforehand to see if you are putting the right points?

  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 regulator.

  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 Commission?

  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 for us.

  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 works.

  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.


 
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