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A particular aspect of the protection given by Clause 36 is that it seeks to make sure that providers cannot escape proportionate, targeted regulation protecting the universal service by providing services which have some but not all of the features of a service required to be provided as a universal service, or which are interchangeable from a user’s perspective with such a service, but which cherry pick from the specifications. The most obvious features that could be cherry picked from the list of minimum requirements of the universal service set out in Clause 29 are spelt out in Clause 36(1)(b).

The postal services market is changing. We cannot predict with certainty which way this change will go. Therefore we need to make sure that Ofcom has the right regulatory tools available where this is objectively justifiable and proportionate to ensure that it meets its duties, primarily securing the provision of the universal service. This is why it is particularly important that Clause 36(1)(c) continues to stand as a separate strand of what could be included in the scope of the universal

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service. It gives Ofcom appropriate discretion because it is not possible to spell out in the Bill all occasions when services should be regulated for the benefit of users and to secure the universal service. In view of that explanation and reassurance, I invite the noble Lord, Lord Hunt, to withdraw his amendment.

Lord Hunt of Wirral: So, the Secretary of State is saying that the only thing that he can predict, the only certainty that he can give us, is the prospect of uncertainty. He adduces in evidence that the market is changing. We are all agreed on that, just as we are all committed to the universal postal service. But how do we decide on proportionate and targeted regulation? I remind the Secretary of State that we are giving Ofcom quite substantial powers. We must, as a Committee, be persuaded that it is necessary to give it this wide range of powers, even though there may be uncertainty as to how they will operate. I hope that the Minister would also consider carefully the points that I have raised, just as I will carefully consider his. I beg leave to withdraw the amendment.

Amendment 89B withdrawn.

Amendment 89C

Moved by Lord Hunt of Wirral

89C: Clause 36, page 21, line 15, leave out “in the opinion of OFCOM” and insert “OFCOM considers that”

Lord Hunt of Wirral: Amendments 89C and 89D look at the criteria by which Ofcom can consider a service to be interchangeable. The previous amendment considered the possibility that Ofcom would be forced to consider a service to be within scope, even if it knew that it was not interchangeable. These amendments look at what sort of services it might willingly consider to be interchangeable.

Interchangeability is a key feature of the postal services directive. However, as we all know, the simple repetition of a word from a directive does not mean that all the associated meaning is carried down. The clause gives no indication of the grounds on which Ofcom will be assessing the interchangeability of the service. As we have explored, paragraph (b) has no impact on paragraph (c). The safeguards on Ofcom’s behaviour that are set out in Schedule 6 apply only to the imposition of regulatory conditions. While those safeguards are, of course, welcome, the inclusion within scope, even if Ofcom decides to hold off the actual imposition of a condition, must be worrying to an operator. In a sense, the clause gives Ofcom the ability to hold a Damoclean sword over the head of an operator without being required to justify its assessment, since a decision to impose a condition has not yet been made. Schedule 6 therefore does not yet come into operation. Will the Secretary of State justify this? If he is unable to do so, will he find ways by which we could make the situation more proportionate and targeted? I beg to move.

Lord Mandelson: Amendments 89C and 89D add specific matters to what Ofcom must take into account before coming to the view that a service is interchangeable

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from the point of view of users, with a service set out in the universal postal services order: namely, the characteristics of the services, including added-value features, as well as the intended use and the pricing.

That would introduce a higher test before a service could be said to be interchangeable with a service in the universal postal service order. This has a knock-on effect on Ofcom’s ability to impose certain conditions, notably general universal service conditions that Ofcom may consider necessary to ensure that a universal service is provided in accordance with the required standards under Clause 37.

In this instance, restricting Ofcom’s discretion to regulate can only weaken the protection of the universal service. This is because, as I explained earlier, Clause 36, in conjunction with other clauses, seeks to ensure that Ofcom regulates where this is proportionate, targeted and protects the universal service.

3.30 pm

The Bill as it stands gives Ofcom the right amount of discretion. Ofcom can impose regulatory conditions only when this is proportionate and objectively justifiable under Schedule 6. There are also tests as regards when particular conditions can be imposed set out in the clauses themselves. As I have said before, Ofcom is an experienced regulator with targeted, transparent and proportionate regulation at the heart of its decision-making.

In addition, the language used in this amendment is not clear. I accept that the words used come from a recital of the most recent postal services directive—a recital that we have borrowed from in using the phrase “interchangeable with a service” of a description set out in the universal postal service order. I believe that we have taken the meaning of the recital and made it into a provision which is clear. We expressly chose not to include the words set out in this amendment as they do not add clarity to the provision but, rather, introduce undefined and unclear terminology. That is not in the interests of anyone.

I reassure your Lordships that Ofcom will objectively assess which services are in the scope of the universal service, and therefore what could potentially be regulated. The scope of the universal service is defined primarily by reference to the universal service order. As we have previously discussed, to decide which products should be provided as a universal service, Ofcom will carry out a thorough market assessment and a robust consultation. In turn, this will provide a strong evidence base for the scope of the universal service. In any event, Ofcom must regulate proportionately. Ofcom will need to target the regulation of the services within the scope of the universal service very carefully. In addition, according to Schedule 6, Ofcom can impose regulatory conditions only when this is objectively justifiable. Therefore, there is no reason to assume that merely because a service can be regulated it will be regulated. We have made sure that a service cannot be regulated unless Ofcom can show that the tests required by the Bill are met. As regards safeguards, Section 3 of the Communications Act on better regulation applies. In view of this, I ask the noble Lord to withdraw his amendment.

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Lord Hunt of Wirral: This, has been another useful opportunity to look at the text of the Bill to scrutinise its effect. The Secretary of State rightly identified my source. I proudly admit that I took it from the recital. However, there is still no indication of the grounds on which Ofcom will assess the interchangeability of the service. We have reassurances from the Secretary of State, which I shall consider carefully, that Ofcom will utilise its powers proportionately and in a targeted way. Service providers should have greater clarity about what will need to be proved in assessing the interchangeability of the service. I shall consider carefully all that the Secretary of State has said and I hope that he will consider introducing greater clarity. In the mean time, I beg leave to withdraw the amendment.

Amendment 89C withdrawn.

Amendments 89D and 89E not moved.

Clause 36 agreed.

Clause 37 : General universal service conditions

Amendment 89F

Moved by Lord Carter of Barnes

89F: Clause 37, page 21, line 26, leave out subsection (2)

The Parliamentary Under-Secretary of State for Communications, Technology and Broadcasting (Lord Carter of Barnes): In moving Amendment 89F, I shall speak also to Amendments 89H, 95B to 95D, 99, 100 and 103 to 109 standing in the name of my noble friend the Secretary of State.

Amendments 89F, 89H 95B, 95C and 95D relate to general universal service conditions. The Bill currently requires that a universal service must include a collection of letters from every access point on every working day. Access points include, for example, post boxes. These amendments clarify that where there is a designated universal service provider it is only that provider that needs to ensure collections from its access points. Were these requirements to apply more widely, this would have a disproportionate effect on competition and may discourage operators from entering the market. We need at least one service which includes such a daily collection, and it is right that this service should be provided by the designated universal service provider.

These amendments also seek to ensure that Ofcom has the power to impose requirements on all operators to take steps for guarding against loss or damage to postal packets, and ensuring that all postal packets are delivered to the intended addressee. Currently, Clause 37 provides that a general universal service condition may require persons to take steps for guarding against loss or damage and ensure that all postal packets are delivered to the intended addressee. However, before such a general universal service condition can be imposed, Ofcom must consider it necessary for the purposes of securing that the universal service is provided to the required standard.

Furthermore, conditions under Clause 37 can only be imposed on providers of services within the scope of the universal service. We believe that this is too restrictive and that all users of all postal services are right to expect that their packets will arrive at the

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intended address intact and undamaged. Therefore, we are seeking to amend the Bill to allow Ofcom to impose conditions where it is proportionate to do so for the purposes of ensuring that postal packets arrive undamaged and to the right address on any postal operator.

Amendments 99, 100 and 105 relate to the postcode address file, or PAF as I will henceforth refer to it, which contains the postcode used by the Royal Mail to provide postal services. As part of the transition from Postcomm to Ofcom, this Bill gives powers relating to the PAF to the new regulator. These powers allow Ofcom to enforce access to the PAF as well as to give directions in respect of the terms in which Royal Mail is to make the PAF available. These provisions are at paragraph 39 of Schedule 10 and reflect the current arrangements under the Royal Mail licence.

Postcomm currently has the ability to direct Royal Mail on the issue of compliance with and modification of a code of practice through licence condition 22 of Royal Mail’s current licence. The code of practice covers procedures for ensuring that persons affected by changes to the postcode address file are notified, as well as procedures for ensuring that the holder is made aware of users’ views. As a result of the more general move within this legislation from a licensed to a general authorisation regime, Ofcom requires the power to ensure continuation of these arrangements through a different mechanism provided by these amendments.

First, these amendments allow Ofcom to require the owner of the PAF from time to time to have in place a code of practice approved by the regulator. Secondly, they require the owner to comply with any such code of practice. Thirdly, these amendments allow Ofcom to enforce the code of practice through the Schedule 7 enforcement mechanism in the same way as any other regulatory condition.

A final group of minor and technical amendments deals with errors in the current draft of the Bill. Amendment 104 relates to Section 95 of the current Postal Services Act. It is consequential to a change widening the scope of Schedule 5 to that Act. Its effect is to alter Section 101(2) of the current Postal Services Act so that it refers to Ofcom rather than Postcomm.

Amendment 106 seeks to amend the list of references in Section 122(10) of the Postal Services Act to sections which are being omitted. The list should also omit,

because Schedule 7 of the Postal Services Act is being repealed.

Amendment 107 amends the definition of “the Postal Services Directive”, in order that it picks up amendments made by the 2008 directive and any subsequent directive.

Amendment 108 makes a correction to Schedule 10 so that it refers to the correct part of the Postal Services Bill.

The final amendment, Amendment 109, is to the reference in Section 16 of the Consumer, Estate Agents and Redress Act 2007 as to the meaning of “public post office”, so that it refers to Section 125(1) of the Postal Services Act 2000, rather than the Postal Services Act 2009.

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I hope that I have provided a clear or sufficient description of this group of government amendments, which are important to ensure that the Bill functions as intended. I beg to move.

Lord De Mauley: I am grateful to the Minister for explaining these amendments. While we are looking at Clause 43, I hope he can provide some clarification about the powers that the Government are giving Ofcom to regulate, as he has explained, all postal operators on certain matters. Clause 37(2) sets out the conditions for protecting against theft, loss and so on, while Clause 43 deals with what the Bill calls the “essential conditions” on matters such as confidentiality. Can he give us a little more information on these safeguards? Our concern is that they are largely covered by existing law and may be duplications. Can he expand on why it is necessary for the regulator to get involved in ensuring that private companies deliver a non-universal service package to the correct address? How much involvement does Postcomm currently have in these areas?

Lord Carter of Barnes: I thank the noble Lord for his three questions. I do not know the specific answer to the question about the extent of Postcomm’s writ in relation to the activities of so-called private companies. However, he also asked a specific question which has been a feature of a series of amendments which he and his colleagues have tabled on the legitimacy and value of extending or defining Ofcom’s remit in relation to companies other than Royal Mail. It would be helpful if the Government wrote to the noble Lord and laid out clearly in chapter and verse where those extensions are, where there are changes to the current regime and why those changes are proportionate and necessary to provide the new regime with a functioning set of rules.

Amendment 89F agreed.

Amendment 89G

Moved by Lord Hunt of Wirral

89G: Clause 37, page 21, line 31, at end insert “(to the extent they provide such services)”

Lord Hunt of Wirral: I very much welcome the Minister’s words a few moments ago. The Committee would certainly find it very helpful if such a letter could be written and a copy placed in the Library, if not in the Printed Paper Office, so that everyone could share in the knowledge that he has agreed to give us.

Amendments 89G, 89J and 90A are the first of several groups of amendments relating to the imposition of a levy on postal operators in order to share the burden of providing the universal postal service. Many of us were unaware that that was proposed until we received the department’s document in February setting out the Government’s policy on the future of the universal postal service in the UK. Our amendments in this group seek to ensure that, in the event that a levy is considered necessary, postal operators become liable for such a levy only to the extent that they

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provide services within the scope of the universal service. As Ministers have already concluded and admitted today, as the Bill is drafted, Ofcom is given a great deal of discretion over the method of distributing the liability, as well as over a number of the other issues that we have been raising.

Of course, there are safeguards against discrimination and the distortion of competition and so on in Clause 40(6), but there seems to be nothing in the proposed legislation to prevent the levy being awarded on, for example, an assessment of each company’s ability to pay. I hope that the Minister will be able to give us a little more clarity on how a levy would be imposed on operators and on what criteria the division of liability might be made. I beg to move.

3.45 pm

Lord Carter of Barnes: I fear that I am going to disappoint the noble Lord in providing the level of clarity that he is looking for but I shall try.

These amendments relate mainly to contributions from other postal operators to any scheme set up to share the burden of providing any universal service as defined by the regulator. They relate to both Clause 37 on general universal service conditions and Clause 40, headed “Sharing of burden of universal service obligations”.

One purpose of Amendment 89J appears to be to ensure that Ofcom gives consideration to the extent to which operators provide services within the scope of the universal service before imposing conditions necessary to secure the universal service. This amendment is, I am afraid, unnecessary. Ofcom can impose these general universal service conditions only to the extent necessary to secure that the universal service is provided to the required standard and not for any other reason. Furthermore, as with all conditions, Schedule 6 requires that Ofcom can impose conditions only where it is objectively justifiable, not unduly discriminatory, proportionate and transparent. The other type of condition that can be imposed, under Clause 37, is for the purpose of sharing the burden of universal service obligations—the compensation fund.

The amendments proposed by the noble Lord, Lord Hunt, would require that, if any such condition were imposed on postal operators, Ofcom would have to give consideration to the extent that the operator provided such services. In essence, we would interpret that as, again, a point about proportionality.

Clause 40(6) is already explicit in requiring that any compensation scheme operates in a proportionate manner, including the source of its funding. Further, it states that it must not involve or give rise to any undue discrimination against particular postal operators. Schedule 6 is also clear that, when imposing or modifying any regulatory condition, Ofcom must ensure that it is proportionate. Furthermore, under Section 3 of Ofcom’s founding statute, the Communications Act, Ofcom is required to follow the principles of best regulatory practice when carrying out its functions. Again, this expressly includes proportionality. Therefore, there would in effect be a triple lock of proportionality on exercising the allocation of those costs if that were to happen.

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I hope that I have provided the noble Lord with some reassurance on this point and I therefore ask that at this stage he withdraw his amendment.

Lord Hunt of Wirral: At this stage, I will. I beg leave to withdraw the amendment.

Amendment 89G withdrawn.

Amendment 89H

Moved by Lord Carter of Barnes

89H: Clause 37, page 21, line 35, at end insert—

“(3A) At any time when there is a postal operator designated as the universal service provider under section 31, nothing in subsection (1)(a) is to be read as authorising the imposition of a condition requiring a person—

(a) to deliver or collect letters or other postal packets as mentioned in section 29(3)(a) to (d),

(b) to provide a service throughout the United Kingdom, or

(c) to provide a service at an affordable price in accordance with a public tariff which is uniform throughout the United Kingdom.”

Amendment 89H agreed.

Amendment 89J not moved.

Amendment 89K

Moved by Lord Hunt of Wirral

89K: Clause 37, page 21, line 41, leave out subsection (5)

Lord Hunt of Wirral: This is a simple probing amendment to clarify what effect subsection (5) has on the provisions earlier in the clause. When I used to have to carry through legislation, I was always questioned on any provision as general as this one. I did not want to disappoint the Minister on this occasion.

I remind the Committee that Clause 37(5) states:

“Nothing in this section is to be read as restricting the generality of the provision that may be included in general universal service conditions”.

I also ought to point out that the drafting of the subsection is repeated at intervals throughout this part of the Bill and seems to imply that any limitations imposed on Ofcom earlier in the clause are not actually limitations at all. I look forward to the Minister reassuring the Committee on that.

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