Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence



APPENDIX 11


Memorandum submitted by the Computing Services and Software Association (CSSA)

SUMMARY

  1.  In this response, CSSA continues to assert the principles espoused in its original response prior to the publication of the White Paper:

    —  Developing a Consistent and Coherent Regulatory Approach: promoting a uniform, consistent and non-sector specific regulatory approach.

    —  The Regulatory Approach—Competition Law: moving away from sector-specific regulation and towards general competition law.

    —  The Regulatory Approach—Content: ensuring that the converging industries are not subject to the same regulation which is applied to the broadcasting industry.

    —  Providing Access to All: developing an inclusive information society.

  2.  At the outset, CSSA emphasises that successful development of the knowledge economy depends on close co-operation between industry and a range of government departments and agencies, not just the DTI and DCMS. Therefore, we are keen to ensure that the proposals for co- and self-regulation contained within the White Paper are embraced by all relevant agencies of government.

DEVELOPING A CONSISTENT AND COHERENT REGULATORY APPROACH

  3.  CSSA welcomes the concept of OFCOM as a recognition by the Government that the accelerated rate of convergence between the broadcasting, telecommunications and information technology (IT) sectors has altered many of the fundamental assumptions upon which traditional regulatory structures have been based.

  4.  Moreover, CSSA also applauds the Government's overarching objectives for the White Paper, namely:

    —  To make the UK home to the most dynamic and competitive communications and media market in the world.

    —  To ensure universal access to a choice of diverse services of the highest quality.

    —  To ensure that citizens and consumers are safeguarded.

  5.  CSSA believes that the introduction of OFCOM with its prescribed limitations represents an important opportunity in the UK's regulatory philosophy. One which reflects an acceptance by the Government that the rapid growth of the Internet took place within an environment which allowed the development of Internet-related services to take place without any significant regulatory interference and that a similar approach is needed for the converging industries. It is important that OFCOM not develop as a mere re-branding and perpetuation of regulatory functions overtaken by technology, and should ensure that it demonstrates from the start a greater responsiveness to users' concerns than has often been the case with OFTEL.

  6.  However, CSSA is concerned that the interregnum between the passage of legislation and the introduction of OFCOM will create a climate of regulatory weakness, which powerful interests could exploit for their own benefit. Moreover, CSSA is also concerned that existing regulators such as OFTEL, RA and the ITC during this period will effectively become lame ducks with regulatory enforcement falling a distant second to need for individual regulators to secure their own positions within this new environment.

  7.  CSSA believes this period of uncertainty may also result in the loss of key skills with a high risk that personnel within the existing regulators might be attracted to other positions offering greater career certainty. Such a loss of talented individuals would clearly erode OFCOM's credibility before it has even begun work. The CSSA would be concerned were OFCOM's interests to be a continuation of the marked imbalance in the White Paper between broadcasting and other issues, which might then lead to a low priority being given to the efficient working of telecom markets in the UK and their huge contribution to overall national global competitiveness.

  8.  Equally, unification of a number of disparate regulators creates the possibility for tribal or territorial conflicts to arise both before and after OFCOM comes into existence. In particular, CSSA is anxious that regulators within the existing structure do not view the intervening period as an opportunity to strengthen their position in advance of their move over to OFCOM at the expense of the new regulatory arrangements. If this new structure is to be successful then flexibility and fluidity must be paramount, therefore care must be taken to avoid the construction of "little fiefdoms" which would inevitably result in internal conflict and an external loss of confidence. The potential for this problem also highlights the need for care in establishing "who" OFCOM is, in terms of the delegation of regulatory decisions and announcements. In CSSA's view, extensive delegation beyond the proposed OFCOM board heightens the risk of tribal behaviour.

  9.  Therefore, CSSA calls upon the Government and the existing regulators to work closely with industry during this intervening period to ensure that transition arrangements, including the transfer of key personnel, are as smooth as possible and that poor regulatory implementation does not occur during this period of flux.

THE REGULATORY APPROACH—COMPETITION LAW

  10.  CSSA welcomes the move away from sector-specific rules for the converging industries especially for the merging industries, which unlike the telecommunications and broadcasting industries, are characterised by intensive competition, vigorous price competition and broad consumer choice. This approach is regarded as crucial if the Government is to achieve its three main IT related priorities, namely: making the UK the global leader in e-commerce by 2002; delivering 100 per cent of public services electronically by 2005; and universal access to the Internet by 2005. CSSA believes that this approach will more than adequately protect consumers whilst at the same time stimulate competition within the converging industries.

  11.  CSSA hopes that the provision of concurrent powers with the Office of Fair Trading to exercise the powers contained in the Competition Act for the communications sectors will signal the development of a set of principles which are uniform, consistent, technology-neutral and able to react to future technological developments.

  12.  However, it is important to note that CSSA is uncomfortable with the assertion by some companies that the proposed new regulatory structure will result in interference by the regulator in the marketplace only when something has gone wrong. CSSA believes this reactive rather than proactive approach is inappropriate in oligopolistic market segments or where there is existing evidence of significant market power. In these circumstances, both Government and industry should acknowledge that pre-emptive action by the regulator is sometimes not only desirable but crucial. Over the last two years we have witnessed OFTEL reacting rather than leading the push towards local loop unbundling, the result has been uncertainty and a wholesale loss of confidence by both the telecommunications industry and the wider user community in the ability of the regulator to deliver a significant technological benefit to both business and the citizen. There is clear evidence that potential new entrants have been driven away. OFCOM must have the power to act swiftly and decisively when it has to against a dominant market player otherwise its ability to assist in the implementation of positive and wide-ranging technological change will be fatally comprised and undermined.

THE REGULATORY APPROACH—CONTENT

  13.  CSSA applauds the Government for resisting temptation and recognising that the broadcasting and Internet sectors should be dealt with differently when it comes to developing a regulatory structure. Any explicit attempt to link these two sectors together would have seriously damaged the development of e-commerce in the UK and would have placed the UK at a significant international disadvantage. Indeed, CSSA would welcome an explicit statement from HM Government that it recognises the futility and harm to British trading interests implicit in any Government's attempting to regulate content on the Internet.

  14.  The recognition of this threat by the Government and therefore the subsequent emphasis on industry co-regulation through the work of the Internet Watch Foundation (IWF) should be applauded. CSSA believes that organisations such as the IWF represent the most appropriate mechanism for creating a safe and secure environment for all ages within society to access the benefits of the new technologies. CSSA is also supportive of the Government's use of general criminal law to enforce content regulation on the Internet and that within reason whatever is applicable "offline" should also be enforceable "online".

  15.  It should also be noted that CSSA calls on the Government to consult closely with industry and representative organisations should it decide to establish a set of objectives and principles which would apply to all content delivered by electronic communications. The recent experience of the Regulation of Investigatory Powers Act and the Electronic Communications Act demonstrates the need for Government to establish close and productive working relationships with industry.

PROVIDING ACCESS TO ALL

  16.  The past year has not been a good one for the achievement of the Government's objective to provide universal access to the Internet by 2005. This overarching goal effectively underpins the successful development of e-commerce in the UK and the growth of eGovernment. Continuing problems over the unbundling of the local loop and unmetered access to the Internet have severely affected public confidence in the abilities of both Government and industry to deliver the promised benefits of the information age and to create an inclusive society. This must change.

  17.  CSSA welcomes the publication in January this year of the OFTEL international benchmarking analysis that confirms what users have been claiming for at least the last five years with respect to the relative tariff levels in the UK, Germany and the USA. CSSA recommends that OFCOM undertakes a regular international benchmark of key telecom services to monitor the UK's international competitiveness.

  18.  For the regulatory authorities to assist the creation of an inclusive environment where all citizens can benefit from the digital age, regulatory policy should concentrate on encouraging competition in emerging sectors and implementing a consistent regulatory approach. The decision not to ban vertical integration is welcome, and should permit telecom suppliers to add new sources of revenue, not be exclusively dependent on line charges, and so allow more vigorous competition in access pricing.

  19.  In terms of action items, CSSA believes the single most important is to get UK organisations online and using the technologies, information and knowledge that then become available. By "online" we no longer mean via a low speed, dial-up connection; that capability has been met; we must now shift to providing high bandwidth, "always-on" connectivity.

  20.  To this end, CSSA suggests the Government adopt clear targets for broadband availability—to business and other organisations, schools and citizens generally. The targets should address availability in terms of both access and price, as either will be a barrier to uptake. An acceptable "access" metric might be that the service is capable of being used within four weeks of order; pricing should reflect international benchmark studies and UK should aim to fall below the OECD average in all cases.

  21.  Suggested targets might be:

    —  Minimum 0.5Mb/s access to 90 per cent of UK businesses by July 2002

    —  Minimum 2Mb/s access to 90 per cent of UK businesses by December 2003

    —  Minimum 10 Mb/s access to 95 per cent of population by July 2005

  22.  The targets can and should be challenging: technology is advancing rapidly and the targets themselves, in an economy the size of the UK, will spur innovation.

  23.  These targets provide a clear focus for investment by industry in infrastructure, development of applications and deployment of services. Industry will then be left to do what it does best: market these services and capabilities. This is the best possible "awareness" campaign.

  24.  However, CSSA is concerned that the goal of universal high bandwidth could be lost among the regulatory flux which will inevitably occur over the next couple of years before OFCOM comes into existence. We have already seen the effect an intransigent dominant player can have on the pace of local loop unbundling and CSSA would not want to see such a scenario repeated again. Therefore CSSA argues for the strictest possible monitoring of the deployment of bandwidth deployment with consideration given to the introduction of a Broadband Universal Service Obligation should the pace of change fall below an acceptable level. For CSSA and its members it is impossible to overstate the importance universal broadband roll-out means for the deployment of high quality services and the benefits these would bring to not just business but also Government and the citizen as well.

CONCLUSION

  The regulatory structure proposed in the White Paper meets many of the concerns CSSA had regarding the introduction of a system which would affect the development of the emerging industries. However CSSA does remain concerned that the interregnum before the introduction of OFCOM could present an unacceptable threat to the future growth of the UK's information economy. While the targets for broadband roll-out are not sufficiently aggressive enough to encourage the development of a fully inclusive society. This latter goal of inclusivity must remain paramount in the thoughts of both Government and industry for the foreseeable future.

February 2001


 
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