Joint Committee on the Draft Communications Bill Minutes of Evidence

Examination of Witnesses (Questions 213-219)



  Chairman: We are sorry to have kept you waiting. It was well worth the wait, from our point of view. We shall start with Lord McNally.

Lord McNally

  213. Clause 3(3) of the Bill says that the main interests of consumers are choice, price, service and value. Are you content with the way the Bill is set out, as far as telecoms is concerned, that it will achieve those objectives?

  (Mr Carter) Perhaps I can kick off, and David may wish to contribute. I think our view—and I hope we have laid this out in our submission—is that inherent in the way the Bill is drafted, and I think inherent in the interests that are being regulated or proposed to be regulated by OFCOM, is the question about the balance between the content and competition issues. Our view would be that history would suggest that we are more confident as a nation of broadcast regulators than we are as a nation of competition regulators, and that the proposal contained within the Bill to create a Content Board, notwithstanding the legitimate issues over taste and decency, etcetera, etcetera, raise a question about whether the economic issues are going to be given due prominence and due consideration, number one; and number two, whether or not it might create a kind of first-class and second-class citizenship within the regulator, whereby first-class regulators in content will be attracted to perhaps the same objective that seems to apply in economic regulation. That is part of the reason why we suggested that consideration might be given to a balancing function, which is the Economic Regulation Board that we propose.

  214. Do you think that is why the Bill sets out as an objective to secure a wide range of TV and radio services, but is slightly more limited in its objective as far as telecoms is concerned? You have said we are more secure as television and radio regulators than as telecoms regulators. I am interested in what you said about the balance of the Bill and the balance of OFCOM. In some respects I think the reason why the Content Board has emerged is for precisely the opposite reason to yours: that it will create an organisation which knows the price of everything and the value of nothing, and that that is why the Content Board is there. The fact that you bring in a counter-balancing Economic Board is not something, I think, that was shared by the regulators themselves when they gave evidence to us. What do you think this board would do that is not already there in the powers of OFCOM? This also, may I remind you, is supposed to be a light touch regulator. It does seem to me that you are leading us into a path, or leading yourselves quite surprisingly into a path, of over-regulation. Do you know where you are going?
  (Mr Carter) Is that general or a specific question?

  215. I have to tell you, a couple of your colleagues along the line are looking rather worried at you there.
  (Mr Doherty) No, it is just a headache!
  (Mr Carter) That is David's natural resting face! I think the challenge is to create balance, and knowing the value of things, particularly in the content area you are in, is crystal. Equally, the duties and the objectives outlined in the Bill lay claim to making the country a dynamic and competitive environment for modern communication industries. We sit here today 20 years after the first deregulation of British Telecom, and British Telecom still accounts for 75 per cent of residential call revenues, which is a pretty significant market position by anybody's definition. So I think our view, which we have tried to crystallise in the proposals—it may well be that we are taking it down a route which is overstating the case—is that in looking to preserve the things where there is a necessary need for balance and control over, if you like, the softer areas, that might overbalance the converged regulatory environment, to the detriment of the competition and economic areas, in industries which look likely to change more dynamically and more dramatically than perhaps the traditional broadcasters.

  216. So basically you believe that oftel failed in the last 20 years. Do you have fears that, the way the Bill is constructed, those failures will be built into this Bill as well? If so, how do we avoid it?
  (Mr Carter) I think the best way to try to avoid it is to forcibly remind Parliament, that this Bill will become law at the end of 2003, will become reality in 2004 and will significantly affect business planning cycles in 2005 and beyond. That is five years from when the first consultation process started. Over that period of time, certainly the emerging communication industries are changing beyond recognition. So having a "beady eye" on what the future industry and industrial shape is, is where we would encourage the Committee to focus its judgement as to whether the Bill is appropriate or not.

  217. Would you give OFCOM a specific role in innovation, to encourage innovation?
  (Mr Taylor) Most definitely. Coming back to that particular point, I think one of the things we actually have to try to watch for is the unintended consequences of regulation, and perhaps the suggestion for an Economic Advisory Board is really not necessarily something that has to exist for ever and a day going into the future. When OFCOM is first established there are a lot of potential knock-on effects of regulating one part of the supply chain that could have a detrimental effect on others. Anything we can do to stop the unintended consequences of regulation would be good and to second-guess those if we can. If it can be done outside of OFCOM, the impact would still be the same. The objective is to have a dynamic and competitive communications market and the regulatory environment should encourage this as best we can, and I think that is one of the reasons to have a strong economic regulatory thrust.

  218. This slightly puzzles me, because I thought you chaps just wanted to get at the market. The problem about economic advisory boards is that you can start planning their 21st or 25th anniversary party right now. Getting rid of them is the difficulty. I think what we want to hear is that this Bill, particularly in your sector, is genuinely a deregulatory Bill, is genuinely light touch, and that you cannot wait to get into this new regime to start competing like mad with each other. But no, you want to regulate another body to look after you.
  (Mr Carter) No, I think we would not put that interpretation on it—the latter, I mean, not the former. Hopefully we have made clear that we are broadly in support of the Bill, we think it is a step forward in the right direction. We welcome converged regulation. We are a classic example of two organisations who are right in the thick of the alphabet soup of regulation with, I think, seven or eight regulatory relationships. In terms of simple time management alone, it would be more sensible to move to one rather than seven. Our point about the economic regulation, just to reiterate it, is that what would be a failure in our view is if the economic and competition issues ended up being subsumed in endless debates about the content, decency and taste issues, at which point the modern communication industries, of which we feel we are at least part, if not a leading part, would end up being disadvantaged rather than advantaged.

Mr Grogan

  219. I have one question directly following on from Lord McNally. We hear a lot about light touch being the essential ambition for this Bill. Is that an ambition that you share? If so, how would you make the Bill more light touch? Or would you agree with Cable & Wireless, who are later before us, that they really are saying, "Drop light touch, just go for appropriate and proportionate regulation"? Is not that what you are saying? Which would you side with?
  (Mr Carter) I am not sure I understand the difference between light touch and appropriate and proportionate. My judgement of light touch would be appropriate and proportionate. I think our specific addition to the debate around the nature of regulation would be speed. Again, we have made that point in our submission. Whether it is light touch or heavy touch, whether it is appropriate proportionate or disproportionate and inappropriate, if it is done slowly and languorously over time, in an industry that is changing apace, it is of no value to anyone. We have current examples of where that has happened to the disadvantage of the emerging players.

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