Joint Committee on The Draft Communications Bill Minutes of Evidence


Memorandum submitted by the National Consumer Council

SUMMARY

  How the communications sector is regulated and the way in which consumers' interests are represented are matters of crucial importance to consumers. The National Consumer Council (NCC) strongly supports new legislation to introduce a more cohesive regulatory structure and a stronger consumer voice in this sector.

  However, there are some serious flaws in the draft Bill. The legislation should recognise the broad range of the consumer interest in this sector and use the term consumers, instead of other more restrictive terms such as customers. We welcome the provisions to set up the Communications Consumer Panel but disagree with the provision which would only allow it to comment on issues other than service delivery if asked to do so by OFCOM. To enhance the Panel's independence, its members should be appointed by the Secretary of State, not by OFCOM. Sensible arrangements should be put in place to ensure that the Panel and the Content Board co-operate on overlapping issues, and share forward plans for consumer research. Similarly, the Panel and OFCOM will need to co-operate while retaining their distinctive roles. A memorandum of understanding should be drawn up between OFCOM and the Panel with public consultation.

  OFCOM's duties should be amended to refer to consumers rather than customers, and the furtherance of the interests of consumers should be the over-arching duty. We recommend that access, equity, redress and information should be added to the list of matters to which OFCOM will need to have regard in the interests of consumers.

  We support the concerns expressed by the Independent Television Commission about the inadequacies of the Bill with regard to third tier content regulation. The Bill should be amended so that OFCOM is able to review public service broadcasting annually, rather than every three years.

  We welcome the amendments to the draft Agreement for the BBC, including provision to bring the BBC within the first and second tiers of OFCOM's content regulation. While we welcome the limited expansion of external regulation of the BBC under third tier regulation, the BBC should be independently regulated under OFCOM. We have welcomed the proposals from the BBC Board of Governors to improve their accountability and openness as an important watershed. These moves would be enhanced by amending the Agreement to ensure greater accountability on aspects such as reporting arrangements, and publication of criteria by the Department for Culture, Media and Sport to assess the Governors' regulatory performance. We support the proposals to commit the BBC to comply with non-financial sanctions that may be applied by OFCOM but urge caution in terms of giving OFCOM the power to impose financial sanctions. Further work is needed to develop a more appropriate form of sanction for a publicly funded body that would not penalise licence-fee payers, together with further consultation.

1.  INTRODUCTION

  We welcome the opportunity to make a submission to the Joint Scrutiny Committee on the Communications Bill. The NCC's purpose is to make all consumers matter by putting forward the consumer interest, particularly that of disadvantaged groups. We research, campaign and work with those who can make a difference to achieve beneficial changes for consumers.

  One of our key objectives is to ensure that markets and public services work for everyone. The consumer interest in communications is wide-ranging and substantial: it is about ensuring universal, affordable access to a broad range of good quality services, choice and diversity in those services, fair treatment of consumers in pricing and service conditions, and ensuring minority interests are met. We have been lobbying for some years for fundamental changes in the regulatory structure for communications, including the establishment of a single regulatory body—OFCOM.

  How the communications sector is regulated is a major concern for consumers. We have been lobbying for some years for fundamental changes in the regulatory structure for communications, including the establishment of a single regulatory body—OFCOM.

  Strengthening consumer representation is another key objective for the NCC. To this end we have been campaigning for some time for improvements in consumer representation arrangements in communications. We look forward to the setting up of the proposed Communications Consumer Panel and hope that it will be given the remit and tools to represent consumers' interests effectively in this fast-changing and complex sector.

  The NCC fully supports the introduction of new legislation for the communications sector. It is vital that key measures are implemented, notably the establishment of an integrated regulatory body—OFCOM—and a strong voice for the consumer interest through the proposed Communications Consumer Panel. However, we have some fundamental concerns about the draft Bill, in particular, the way that the consumer interest is interpreted, the remit for the Consumer Panel, OFCOM's objectives and duties, and content regulation. Given the short deadline for submissions on the draft Communications Bill to the Joint Scrutiny Committee, we concentrate on these key issues of concern to consumers.

2.  THE CONSUMER INTERESTGetting the terms right

  The government has stated that ``Consumer interests are a major focus of the entire draft Bill.'' (The draft Communications Bill—The policy, DTI/DCMS, 2002). This is very welcome. However, the Bill itself barely refers to consumers except in the title for the proposed Consumer Panel. Even here the Bill refers to ``the domestic and small business customer'' rather than ``consumers'' (clause 96).

  The consumer interest in communications is not confined to service delivery and other market-related issues. It is about access to networks and services but it is also about equity, choice and quality. Consequently the content that is delivered through those networks is as important for consumers as how it is delivered. This means that the existence of a strong and sustainable public broadcasting sector is very much a consumer concern.

  The term ``consumers'' more accurately conveys the broad span of the consumer interest in electronic communications and we recommend that this replaces other terms such as users or customers in the legislation.

THE CONSUMER PANEL

A broad remit

  Consumers need a stronger voice in the communications sector to ensure their interests are effectively represented and taken into account by decision-makers and industry. We welcome the inclusion of a Communications Consumer Panel in the draft Bill, and the intention that it should be independent and operationally separate from OFCOM.

  However, we disagree with the current wording of the Bill. As it stands, the Consumer Panel would only be able to comment on content issues at the instigation of OFCOM (clause 96(2)(g)). It will be vital for the Panel to have the independence to comment on consumer issues related to content for the following reasons:

    —  The breadth of the consumer interest in communications—this includes basic content issues such as choice, quality and diversity.

    —  The integrity of the project—if the intent is to create an integrated regulatory body because of converging technologies and markets, it is totally illogical to have a Consumer Panel which is restricted to one aspect.

    —  The integrity of the Consumer Panel—the Panel's independence will be undermined if it cannot comment on all issues of concern to consumers without OFCOM's permission.

    —  The global nature of communications regulation—UK regulation of content is not solely a matter for OFCOM. The EU and other international institutions also play a key role in regulating this sector, including content issues (for example, the European Directive on Television Without Frontiers).

    —  The unique role of the Consumer Panel—it will be external to OFCOM, whereas the Content Board will be within the regulatory structure. If the Panel is not allowed to comment on content issues without being asked to do so by OFCOM, there will be no independent voice on content issues. The Panel will be independent, whereas the Content Board will be part of OFCOM.

  We recommend that clause 96 (2)(g) is deleted as it would artificially limit the Panel's remit and restrict its independence from OFCOM. It should be replaced by a provision which would allow the Panel to advise on any other matter relating to the consumer interest in electronic communications networks and services.

Independence

  The Panel needs to be independent from OFCOM and to be perceived as such by consumers and other parties. We do not agree with the provision in the draft Bill (clause 97) that the members of the Consumer Panel should be appointed by OFCOM, with the approval of the Secretary of State. Consumer confidence in the Panel will be undermined it its members are subject to appointment by OFCOM. We recommend that the Bill is amended so that the Panel members are appointed by the Secretary of State, following consultation with OFCOM.

  The Panel will require a broad span of expertise and experience in the communications sector and on relevant issues. Panel members should, therefore, be appointed according to Nolan principles through open recruitment.

Relationship with the Content Board

  The draft Bill requires OFCOM to set up a Content Board to ensure the public interest in the nature and quality of television and radio programmes is sufficiently represented within OFCOM. Even though the draft Bill states that the majority of members of the Content Board will be from outside OFCOM, it will nevertheless be part of OFCOM and have decision-making functions delegated to it by OFCOM.

  The Content Board will have a fundamentally different role to that of the Consumer Panel as it will be part of the regulatory arrangements under OFCOM. However, there will be inevitable overlaps between the Panel's work and that of the Content Board, for instance on issues such as public service broadcasting and media literacy. We suggest that the Content Board and the Consumer Panel should be required to share forward plans for consumer research and consult on forward work programmes. The relationship between the Panel and the Content Board should be included in a memorandum of understanding between OFCOM and the Panel—see below.

Relationship with OFCOM

  The nature of the relationship between OFCOM and the Communications Consumer Panel will be of pivotal importance in ensuring that consumers' interests are fully protected and effectively represented. It will be essential to have as much clarity as possible about their respective roles and the relationship between them.

  The Panel will need to work closely with OFCOM—at Board and staff levels—to advise OFCOM on its work, and to exchange information on future work programmes and matters of concern to consumers. Co-operation will be vital to avoid unnecessary duplication of work—for instance, by sharing plans for consumer research on specific issues, and sometimes undertaking joint research. However, it will be necessary to draw a line between OFCOM and the Panel to ensure that such co-operation does not inhibit the Panel's independence. To get that line in the right place, we recommend that OFCOM's Board and the Panel draw up a formal memorandum of understanding to ensure co-operation, guard against unnecessary duplication, and also to enshrine their respective independence. A draft memorandum should be published before arrangements are finalised so that it is subject to public consultation.

3.  OFCOM

Duties

  We strongly support bringing together economic, network and content regulation within OFCOM. The Bill lists seven general duties for OFCOM (Clause 3(1)). We recognise that OFCOM will have to balance a number of objectives as encapsulated in these duties. However, it would assist in clarifying OFCOM's core mission if the relationship between the duties were to be made clearer. In our view, the first duty—``to further the interests of the persons who are customers'' should be over-arching. The word customers should be replaced by consumers, as we state above.

  We welcome the provision in the draft Bill for OFCOM to have regard to the interests of consumers (as we said, this should replace customers) in respect of choice, price, quality of service and value for money. However, we recommend that access, equity, redress and information should be included as well as these are matters of equal importance for consumers.

Regulation

  As it stands, the Bill will require OFCOM to review its functions to avoid the imposition of unnecessary burdens, or the maintenance of existing ones. We agree that regulation should not be retained unnecessarily but are concerned to ensure that the pendulum does not swing too much in the opposite direction to the detriment of consumers. Tough regulatory action is often required to protect consumers' interests, and to ensure that markets become and remain effectively competitive.

  Regarding content regulation, the move away from detailed box-ticking and clockwatching is sensible. However, regulation of public service broadcasting should be based on robust co-regulatory arrangements. Greater flexibility should not lead to less effective regulation or to consumer detriment.

  We support the concerns expressed by the ITC about some aspects regarding third tier regulation (Memorandum to the Joint Scrutiny Committee on the Communications Bill, 23 May 2002, ITC). In particular, consumers need to be able to identify the role of each PSB broadcaster to see how each fits into the whole of the PSB ecology, and what consumers are then entitled to expect. The current draft Bill would mean that the remits for PSB broadcasters would be far too general.

  The draft Bill requires PSB broadcasters to publish annual statements of programme policy. While OFCOM would be expected to review the performance of broadcasters annually, it only allows OFCOM to review and report on public service broadcasting every three years. We agree with the ITC that:

  OFCOM'S powers to conduct triennial analysis of the overall delivery of public service only permit it to reach conclusions about services taken "altogether over the period as a whole"; so it is hard to see on what basis OFCOM can inform the annual statements of individual licensees.

  It will be vital from the consumer standpoint that OFCOM is able to conduct annual analyses of the overall state of PSB. The programme policy statements of the individual broadcasters should be developed within the context of the whole PSB framework. If these are to be drawn up annually, then so should the overall analysis.

Regulation of the BBC

  The government has recently issued proposed amendments to the BBC Agreement with the Secretary of State, and is consulting on these proposals as part of its consultation on the draft Communications Bill (Draft Communications Bill: Proposed Amendments to the BBC Agreement, DTI and DCMS, 2002). We welcome the intention that the BBC will be subject to the first and second tiers of OFCOM regulation. However, the BBC will only come within the third tier of regulation to a limited extent. It will be required to consider any guidance issued from OFCOM on programme policy statements, and OFCOM's reports on public service broadcasting, to the extent that these raise issues relevant to the BBC. While we welcome these provisions, it is illogical and runs counter to the consumer interest to exclude positive content regulation of the BBC from OFCOM's remit.

  The Communications white paper put forward a convincing case for a single regulatory authority for communications. Yet the draft Bill would retain more than one regulator: OFCOM and the BBC's Board of Governors. This is not in the consumer interest and runs against the logic of streamlining the regulatory structure. We consider that backstop powers for the BBC should rest with OFCOM rather than the Secretary of State.

  External regulation of the BBC should not endanger its independence: OFCOM would not interfere in detailed scheduling or editorial decisions. Also, not all broadcasters would need to be regulated identically. OFCOM would regulate the BBC, like all broadcasters, according to their particular role and remit. Its decisions will need to be justifiable in the light of its objectives, centring on the interests of consumers.

  Earlier this year, the BBC Governors announced proposals to reform the BBC's system of governance which we strongly welcomed. It represented an important watershed in the way the BBC is regulated. Nevertheless, the BBC needs to spell out in more detail how the new arrangements will work in practice. For instance, how will the Governors set and monitor objectives for the Corporation? What criteria will the Governors use to judge whether the BBC has succeeded—or failed—in meeting those objectives? If there were a serious failure, what action would the Governors take?

  We are aware that the BBC Board of Governors is making strong efforts to become more open and to encourage greater external input into the governance arrangements, and we welcome these moves. However, in order to ensure greater accountability, we consider that the Agreement should be amended so that the Governors are required by the Secretary of State to differentiate clearly between regulatory and non-executive management activities, and report on them. The Department for Culture, Media and Sport should devise a set of criteria and audit procedures for assessing the effectiveness of the Governors' regulatory performance, building on good practice elsewhere and with open consultation. The government should set out ways in which regulation of the BBC can be aligned more closely with that of other broadcasters in the run-up to the Charter Review.

  In terms of OFCOM's enforcement powers for tiers 1 and 2 of content regulation, the BBC's position should as far as possible be analogous to that of other broadcasters, as the draft Agreement states. We agree that the Agreement should commit the BBC to comply with any non-financial sanctions that may be applied by OFCOM. The consultation on the draft Agreement also welcomes views on how the BBC should be treated with regard to the provision in the draft Bill for OFCOM to be able to impose financial penalties on broadcasters. As the draft Agreement states, the principle of a common approach for broadcasters might point to OFCOM having power to impose financial penalties on the BBC. However, as the proposals also state, it is ultimately the licence-fee payer who would be disadvantaged as the penalties would be paid out of licence fee revenue. As a result, we consider it would be preferable to find a more appropriate measure for a publicly-funded body that will not penalise licence-fee payers. This will need to be equivalent to the potential impact of financial sanctions on commercial broadcasters. We recommend that further work is carried out on this matter in order to identify an appropriate form of sanction, accompanied by further public consultation.

June 2002


 
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