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Clause 80
Review of services market identifications and determinations
Mr. Whittingdale: I beg to move amendment No.83, in
clause 80, page 76, line 21, leave out from 'must' to 'carry' and insert
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'at intervals not exceeding two years from the commencement of the previous analysis of the market concerned, or if, as a result of a change in market conditions, a communications provider notifies them in writing that it requires them to carry out such a review,'.
This amendment is small, but quite important none the less. Clause 80 deals with reviewing the services market in which a determination has been made that a particular operator has significant market power. Whether that market power exists will, clearly, depend heavily on the particular market that has been identified and studied.
Under the terms of the Bill, the review of that services market should take place at ''such intervals as'' Ofcom considers ''appropriate''. That seems to us to give Ofcom too much power, especially since, in this field, it is likely that technology will develop very quickly, as has been said many times during our debates. It is conceivable that a market might change very rapidly. Therefore, it would be helpful to include in the Bill, at the very least, a requirement that Ofcom should re-examine the market
£''at intervals not exceeding two years from the commencement of the previous analysis of the market concerned''.
Moreover, where an industry has changed very quickly and the particular player that Ofcom has decided has significant market power can see that the market has changed and that matters are now extremely different from when the review was originally conducted, it is only fair that that player can go to Ofcom and request, in writing, a further review of the services market. That would be the effect of the amendment. It would set down a specific maximum time that could elapse before a review had to be undertaken again, and give any company affected by that the ability to request a review in an even shorter period.
Mr. Timms: I agree that Ofcom needs to keep under review the significant market power determinations that it has made and the conditions that it has set as a result. Clause 80 provides for that. However, I would argue that the timing of those reviews ought to be in the hands of Ofcom and not set by the rather rigid mechanism that the hon. Gentleman proposes.
We have already agreed that the general duties of Ofcom should include a requirement for it to have regard to the principle that regulatory activity should be
£''transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed''.
£That is in clause 3(3)(b). Clause 6(1) requires Ofcom to ensure that regulation does not involve
£''the imposition of burdens which are unnecessary; or ... the maintenance of burdens which have become unnecessary''.
£There is no need for an additional requirement on Ofcom to review significant market power analyses and determinations as a result of market changes. If such changes rendered a review appropriate, Ofcom would already be required to act.
I would be loth to set in statute the two-year limit that the hon. Gentleman proposed. We do not know at the moment whether that is the correct frequency. It may well be far too often, and would therefore impose unnecessary work on Ofcom and those required to
Column Number: 33 provide information for the analyses that Ofcom would have to carry out. It would be better to rely on the obligations of Ofcom that are already agreed, rather than set what is, inevitably, a somewhat arbitrary time limit.
The provisions are simply the sensible next steps, moving on from the initial determinations of significant market power to reviews of the situation. Ofcom is required by the clause to carry out further analyses of the markets for the purposes of reviewing the determinations made on the basis of earlier market analyses and reviewing any SMP conditions set as a consequence. That is very much in keeping with the aim of keeping any regulatory burdens appropriate to what is needed in the market. I hope that on reflection the hon. Gentleman might feel that imposing a strict two-year limit would not be the best way for Ofcom to exercise its responsibilities.
Mr. Whittingdale: I take the Minister's point about setting an arbitrary time scale. I particularly recognise his concern, which I share, that operators should not have to supply huge amounts of information every two years and take up a lot of time doing that when it is quite plain that nothing much has changed. I am slightly more disappointed that he does not recognise the need to give operators at least the power to request a review when something clearly has changed. I hope that his confidence that Ofcom will recognise that change without prompting from the industry is justified, but it is not an issue I particularly wish to press. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed,{**roman**} That the clause stand part of the Bill.
Mr. Lansley: I did not want to speak to the amendment because the Government accepted what the scrutiny Committee said about the mandatory character of periodic market analyses. I will not dwell on the subject that we previously discussed relating to the withdrawal of obligations. However, it is perfectly clear, not least from what the Minister has just said, that clauses 80 and 81 relate to the review of market analyses, rather than to the original market analyses. Perhaps the Minister will get back to me if there is some reassurance he can give about the nature of the withdrawal of pre-existing obligations.
I have a question for the Minister. Clause 80(4) will revoke SMP conditions if a subsequent analysis discloses that there is no one with significant market power in relation to the market analysed. The clause and the market analysis relate not only to SMP conditions but, under the Community directives, to conditions under article 7 of the access directive and article 16 of the universal service directive. Perhaps I have missed it somewhere else, but I wanted to be sure that, in so far as a review identifies that a market is effectively competitive, it is not only the case that SMP conditions are withdrawn, but that, where appropriate, access-related and universal service obligations related to whether a market is competitive are also revoked or withdrawn by the mechanism set out in the clause.
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6.45 pm
Mr. Timms: I would like to reflect on the questions that the hon. Gentleman has raised. I may be able to respond before the end of the sitting, but if not I will drop him a line.
Question put and agreed to.
Clause 80 ordered to stand part of the Bill.
Clause 81
Review of apparatus market identifications and determinations
Question proposed,{**roman**} That the clause stand part of the Bill.
Mr. Robathan: I shall be brief. The clause is similar to the previous one, in that it deals with a review. We discussed apparatus and fixed telephone lines in your absence this morning, Mr. Atkinson, and in the Minister's absence. We mentioned the extraordinary fact that 3 million people still rent telephones, largely from BT. I wonder whether the apparatus market and the review that pertains to it come from the European directives. If so, from what part of them? As far as I can see, the EU directives do not mention apparatus.
Mr. Timms: We did discuss this earlier. The provisions do not come from the directives. Individual member states can therefore make their own arrangements. We have used the Bill to carry over the arrangements already in the BT and Kingston Communications licences, but that is not required of us by the directives in any way. The hon. Gentleman is right to suggest that the directives are silent on the subject.
I would like to pick up the point raised by the hon. Member for South Cambridgeshire on pre-existing conditions, and refer him to the transitional provisions in paragraph 6 of schedule 18. He may find what he was looking for there. If he does not, I have no doubt that he will let me know shortly.
Question put and agreed to.
Clause 81 ordered to stand part of the Bill.
Clause 82 ordered to stand part of the Bill.
Clause 83
Conditions about network access etc.
Mr. Whittingdale: I beg to move amendment No. 199, in
clause 83, page 79, line 33, leave out 'unduly'.
The Chairman: With this it will be convenient to discuss amendment No. 200, in
Mr. Whittingdale: Clause 83 is obviously especially important, as it specifies the ability of Ofcom to set conditions when it has identified a provider of communication services as having significant market power. In terms of the conditions that may be imposed on that dominant provider, one of the key obligations is likely to be non-discrimination. By that, I mean a requirement that will prevent the dominant provider from discriminating in favour of the dominant supplier's own downstream businesses, as opposed to supplies of the same services by third party competitors.
I hesitate to name BT again, but it is the obvious example. It supplies services in competition with other providers on its own network. Obviously, BT's competitors could be placed at a significant disadvantage if the incumbentin other words, BTwere able to reduce the quality of service, or charge higher prices.
Under the current BT licence, which is to be replaced by the new regime established through the Bill, BT is required not to show undue discrimination or undue preference to itself. However, it is not a requirement of the access and interconnection directive that discrimination must be undue for there to be a breach of the non-discrimination obligation. I refer the Minister to paragraph 17 of the article's preamble and article 10 of the directive, in which there is no reference to a materiality thresholdin other words, the degree of discrimination necessary for the measure to come into effect.
That is a reflection of European Union competition law, under which there is no need, in the case of an abuse of the dominant position, to prove that there is hindrance of competition. It is enough to show that conduct is likely to produce such an effect. There is also no need to show that the effect would be substantial. Therefore, the requirement for the discrimination to be ''undue'' is not in accordance with European law. The risk is that the mere existence of the word ''unduly'' will imply that Ofcom must consider there to be a threshold of material effect above and beyond that required under European law. Not only is the provision a mis-implementation of the European directive, but it potentially puts BT's competitors in the United Kingdom at a disadvantage compared with those operating in other European Union member states. For that reason, we have tabled amendment No. 199, which would remove the word ''unduly''.
Amendment No. 200 is also connected with the principle of non-discrimination. It is designed to ensure that the UK implementation of the principle is interpreted in accordance with the provisions of the access and interconnection directive, which states in article 10(2) that
''Obligations of non-discrimination shall ensure, in particular, that the operator applies equivalent conditions in equivalent circumstances to other undertakings providing equivalent services, and provide services and information to others under the same conditions and of the same quality as it provides for its own services, or those of its subsidiaries or partners.''
That is a clear definition and a fairly specific requirement. Given that it is set out in those terms, it would be helpful if we could include a reference to the directive and the language in it in the Bill. That is the purpose of amendment No. 200.
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