Joint Committee on the Draft Communications Bill Minutes of Evidence

Memorandum submitted by British Telecommunications (BT)


  1.1  BT strongly supports the draft Communications Bill's core objectives of creating a converged regulator to address the issues of a converging communications industry. We believe the draft Bill takes a realistic and balanced approach to many of the fundamental issues, in particular;

    —  combining stronger enforcement powers with appeals on merit against the regulator's decisions,

    —  acknowledging the inevitability of conflict between the many, individually desirable, objectives laid on OFCOM, and requiring the regulator transparently to address these conflicts on a case by case basis rather than attempting to establish priorities in advance,

    —  appropriate regulation of the internet,

    —  establishing an independent Consumer Panel, and

    —  keeping the need to remove unnecessary rules in the mind of OFCOM by creating a duty to review regulation regularly.

  1.2  Our submission to the Committee is designed to promote the achievement of the goals of the draft Bill. Our specific proposals concern;

    —  ensuring the independence of the Consumer Panel by having its members appointed by the Secretary of State, and providing it with staff and budget, "future proofing" regulation. We make proposals to ensure that OFCOM provides light touch regulation, including duties;

    —  to prevent "gold plating" of European Union Directives,

    —  to ensure that regulation withdraws as competition increases,

    —  to ensure that self and co regulation are used wherever possible.

    —  measures to ensure transparency and clarity, including consolidation of relevant legislation, and delineation of areas where OFCOM shares powers with agencies such as the Office of Fair Trading.

    —  Ensuring appropriate regulation of the internet,steps to bring the statutory enforcement powers of OFCOM into full compliance with Human Rights legislation, and achieve a proper balance between its powers and the interests of stakeholders. In particular; where criminal (or criminal type) penalties may be imposed, the customary safeguards of criminal law, such as burden of proof and presumption of innocence, should apply, the process should be for providers to make representations before any requirement to comply with OFCOM notifications or pay compensation, or risk of incurring penalties, arises, providers should not face the double jeopardy of enforcement by OFCOM, possibly including penalties, and civil litigation; and a suggestion that consideration be given to a Parliamentary Committee with responsibility for Communications to ensure OFCOM's accountability.

  1.3  The draft Bill is the most significant legislation for the telecommunications sector since the Telecommunications Act 1984. However, much of the detail of future regulation depends upon the implementation of recent European Union Communications Directives, for which the draft Bill provides a framework. Until that detail is fully published for consultation we are unable to see the complete picture. Our comments on the draft Bill need, therefore, to be seen in that context.


  2.1  The draft Communications Bill (the draft Bill) is a key element in a radical revision of UK communications regulation. The new European Union Communications Directives (the new EU Directives) also prescribe significant changes for the electronic communications regime, including the replacement of individual licences by a General Authorisation. We await the publication of the UK's draft General Authorisation and associated drafts on Universal Service and Access which will implement the main provisions of the EU Directives and provide the detailed implementation of the general principles set out in the draft Bill.

  2.2  BT believes that the draft Bill represents a significant step in the construction of a fair and effective regulatory system for this vital market. The draft Bill recognises that; regulation in the public interest of a market as complex as communications is not a simple task, reducible to a single, simple principle, or a hierarchy of importance. There are many desirable objectives which may, in particular cases, conflict with each other. The job of the regulator is to look at cases on their merits and decide which objectives are most important in individual cases. a balance must be struck between strong enforcement powers for the regulator and effective safeguards in the shape of appeal rights and fair procedures; the perspective of the regulator, who needs to consider the entire market and its international ramifications, needs to be balanced by a consumer body whose focus is the impact on individual and small business consumers, an external stimulus, such as a statutory obligation, encourages regulators to identify and remove unnecessary rules.

  2.3  BT, accordingly, strongly supports these particular provisions; the General Duties of OFCOM (Clause 3).

    —  the Duties to secure light touch regulation (Clause 5).

    —  the Duty to publish and meet promptness standards (Clause 6).

    —  the establishment of a Consumer Panel (Clauses 96 and 97)

    —  the arrangements for Appeals on the merits set out in Chapter 3 of Part 2.

  2.4  We believe that the basic approach of the draft Bill is right; our comments are offered to help the Committee make recommendations to ensure that the purposes of the draft Bill are achieved in practice. Our detailed comments are made on the following issues:

    —  OFCOM's Accountability to Parliament;

    —  the Consumer Panel;

    —  the regulatory impact of OFCOM's charging structures;

    —  "future Proofing" and the provision of "light touch regulation";

    —  checks and Balances in OFCOM's dealings with its stakeholders;

    —  achieving transparency;

    —  the draft Bill and the new EU Directives;

    —  the proposed powers of OFCOM and their relationship to the powers of the Office of Fair Trading and other agencies;

    —  Internet Regulation;

    —  Repeals and Consolidation; and

    —  Spectrum trading.


  3.1  We believe the Consumer Panel has a crucial role to play in the system to be established by the draft Bill. Although the essential purpose of the system is to protect the interests of consumers there will be many other voices competing for OFCOM's attention. Providers will have arguments to make. Legal and economic arguments can acquire a momentum of their own almost irrespective of the impact on consumer welfare. In this environment the Consumer Panel has the vital role of ensuring that consumer priorities are kept at the forefront of OFCOM's mind.

  3.2  It is inevitable that a degree of creative tension should exist between OFCOM and the Consumer Panel. The Panel may, from time to time, criticise OFCOM for pursuing policies whose contribution to consumer welfare may be difficult to perceive, however sound its basis in economic theory, or may require an unduly long time to take effect. As the Consumer Panel must be prepared to adopt such positions if it is to do its job effectively, we believe measures to protect its independence are appropriate. In particular:

    —  its members should be appointed directly by the Secretary of State, not by OFCOM; and

    —  the Consumer panel should have its own budget and support staff. No provision for these is made in the draft Bill.


  4.1  We support the draft Bill's proposal to give OFCOM a general duty to have regard to the principles of good regulation set out by the Better Regulation Task Force—transparency, accountability, proportionality and targeting (Clause 3, (2) (a)). These principles, however, need to be reflected throughout the draft Bill if they are to be fully effective. One example, concerning the principle of transparency is the requirement that OFCOM should resolve differences between its duties as and when any arise.

  4.2  It would promote transparency if OFCOM was required to explain the rationale behind its decisions in significant cases. This would also be of considerable use to stakeholders in enabling them to understand OFCOM's policy.

  4.3  The draft Bill proposes to confer functions on the "Secretary of State" although its subject-matter clearly involves the activities of at least two Departments of State. It is accepted that this conforms with normal drafting practice, but it would be appropriate for the Government to make clear which Secretary of State will normally exercise the various functions.


  5.1  Although paragraph 5.2 of the Policy Document accompanying the draft Bill says that OFCOM "is required to ensure that regulation is kept to the minimum necessary", Part 2 of the draft Bill is short of provisions for light touch regulation or de-regulation. Clause 5, requiring OFCOM to keep its functions under review so as to secure that regulation does not involve the imposition or maintenance of unnecessary burdens is the only provision which specifically tackles this issue, and it is left to OFCOM's discretion to decide what is "unnecessary". All OFCOM must do is to "have regard" to a statement it must publish saying how it proposes to meet its "light touch" obligations.

  5.2 We believe that the "light touch"/de-regulatory emphasis of the draft Bill could be significantly strengthened by the inclusion of duties along the following lines :

    (a)  a duty on OFCOM, in carrying out its functions under Part 2 of the Bill, to secure that minimum regulatory burdens are imposed consistent with the obligations on Member States under EU Directives;

    (b)  a duty on OFCOM to ensure the implementation of the principle that regulation shall diminish as competition increases;

    (c)  a duty on OFCOM to take utmost account of a statutory presumption in favour of self-regulatory and co-regulatory solutions wherever possible;

    (d)  a duty on OFCOM to ensure consistency of application of relevant EU Directives between the UK and other Member States;

    (e)  a duty on OFCOM, in the light of the convergence of the different elements of the communications sector and the principle of technological neutrality, to ensure consistency in its approach towards regulation in respect of those different but converging elements;

    (f)   a duty on OFCOM to ensure that in designating networks, services and facilities for notification purposes under Clause 23, it imposes minimum burdens on providers subject to the need for effective policing of the regulatory regime .. In particular there should be no requirement for additional or repeat notifications arising out of additions or modifications of the provider's portfolio of services, or changes to its network.


  6.1  The general regulatory regime envisaged by the draft Bill is more mature and sophisticated than the present Telecommunications Act 1984. BT welcomes the intention behind the draft Bill, to focus regulation only where necessary, to make it technology neutral, and to give OFCOM the powers necessary to police a converging industry. We note however that the draft Bill introduces a significantly stronger enforcement regime in relation to electronic communications than exists under the current legislation. In particular it proposes powers for OFCOM to impose penalties for breaches of authorisation conditions and suspend or restrict operators' entitlement to provide networks or services. It would also give third party rights to sue immediately for a breach of condition. Such significant powers need to be accompanied by an adequate system of checks and balances not least to provide the certainty necessary for sustained investment. The draft Bill does not contain such a system.


  6.2.1  Part 2 of the draft Bill contains a number of provisions entitling OFCOM to impose penalties, in particular for breaches in relation to notifications and charges, contraventions of conditions, and of the communications code, and breaches of information requirements. Although these are not criminal offences as such, the penalties are akin to criminal penalties, in so far as penalties which OFCOM may impose are intended to be both penal and a deterrent. Accordingly, we believe they should attract the protection of Article 6 of the European Convention on Human Rights as though they were criminal penalties.

  6.2.2  In addition, the draft Bill contains a number of specific criminal offences, including providing an electronic communications network or service in breach of a suspension or restriction of the entitlement under the general authorisation. 6.2.3 In our view, the draft Bill may not be consistent with Article 6 in a number of respects: no standard of proof is specified in respect of the contraventions for which penalties can be imposed. We believe it should be equivalent to the standard of proof in criminal cases, ie proof beyond all reasonable doubt;

    —  instead of a presumption of innocence until guilt is proved, the opposite is the case: the process under which steps to comply and remedy the consequences are to be taken during the period specified by OFCOM for making representations in a notification about an alleged contravention amounts effectively to a presumption of guilt;

    —  there is no protection against self-incrimination during the course of an OFCOM investigation;


  6.3.1  Processes in relation to contraventions of conditions

    (a)  The basic process in relation to contraventions of condition (this is the most significant type of contravention: the process in relation to other contraventions is similar) is for OFCOM, where it has "reasonable grounds to believe" that there has been a contravention, to issue a notification under Clause 74 of the draft Bill. This will allow the provider a period of at least a month (less in an urgent case) to take the opportunity to make representations, comply with the condition and remedy the consequences.

    (b)  The next step, where OFCOM is satisfied that the provider has committed the contravention and has not, during the period allowed under the notification, taken the steps considered by OFCOM as appropriate to comply and remedy the consequences, is for OFCOM to issue a legally enforceable enforcement notification (clause 75); and/or, where the provider has committed the contravention and has not during the period specified in the original notification taken the compliance/remedy steps considered by OFCOM to be appropriate, for OFCOM to impose a penalty of up to 10 per cent of turnover (clause 76).

    (c)  This means that:

    —  a provider in receipt of the Clause 74 notification must second—guess what steps OFCOM would consider "appropriate" to comply/remedy the breach, and

    —  a provider must in any case take steps to comply/remedy, during the period he has been given to make representations, or risk having a penalty imposed, and

    —  the provider must do all this, not on the basis of a conclusive finding of guilt, but on the basis of "reasonable grounds to believe", so that

    —  any representations he makes may in practice only be effective to mitigate the amount of any penalty.

We believe this process to be seriously flawed. At the very least, the period for making representations must be separated from the obligation to take steps to comply/remedy the consequences, so that the latter is based on a conclusive finding.

  6.3.2  The process in urgent cases

  In relation to urgent cases (clause 78), the process is seriously defective in two respects:

    —  Where OFCOM issues a clause 74 notification ("reasonable grounds to believe") and has "reasonable grounds for suspecting" that the case is urgent, it can, amongst other things, direct that the provider's entitlement under the general authorisation is suspended or restricted. Breach of the suspension or restriction is a criminal offence. We believe that "reasonable grounds" to believe/suspect is an inequitable basis for the creation of a criminal offence.

    —  The direction in an urgent case to suspend or restrict the provider's entitlement can include a condition requiring the provider to pay compensation to his customers for loss suffered by them as a result of the direction. This means in effect that on the basis only of "reasonable grounds", of which OFCOM will be the judge, OFCOM can impose what amounts to a financial penalty on providers. This falls far short of an acceptable standard of proof.

  6.3.3  Third Party Rights

  The provisions for third party rights to sue for contravention of a condition raise two issues:

    —  there are many potential contraventions which are simply not susceptible to determination by a court (either as a matter of fact or of law), but are regulatory decisions which can only satisfactorily be referred to and made by the regulator. Examples would include whether alleged discrimination was "undue", whether a preference was "fair", whether a cross—subsidy was "fair", or whether prices were "cost oriented" or complied with complex price control rules.

    —  In spite of the Government's express intention to avoid double jeopardy the right of a third party to sue for breach nevertheless creates a situation of double jeopardy, since, even though OFCOM may not have found the provider to be in breach, the complainant can have a ``second bite of the cherry'' in the courts. Furthermore, issues can arise about the status of any finding, of guilt or otherwise, on OFCOM's part, and about the position where, at the same time a third party is bringing proceedings, the provider is pursuing an appeal in the Competition Appeals Tribunal.

  6.3.4  Penalties

  The maximum level of penalty for contravention of a condition is set at 10 per cent of turnover over a maximum period of 12 months. Since the power to impose a penalty is backed by a power to suspend or restrict the provider's entitlement for repeated contraventions where penalties have not worked, it is felt that this limit is too high.

  6.3.5  Criminal offences—individual employees

  The draft Bill is unclear whether the provisions relating to criminal offences in relation to breaches of information requirements extend to individual employees of a communications provider. Since the draft Bill already includes the normal statutory provision under which criminal offences by a body corporate can be laid at the door of any director, manager, secretary or similar officer who connives at the breach, it would seem disproportionate for the draft Bill to include a further provision under which there can be individual personal criminal liability, and this should be clarified.

  6.3.6  Criminal offences—OFCOM's roles

  Included in OFCOM's functions is the power to institute and carry on criminal proceedings for any offence relating to matters for which it has functions. For example, OFCOM may have investigated an alleged contravention, found the operator guilty and exercised its powers to suspend or restrict the operator's entitlement to provide networks or services, whether for repeated contraventions or because the matter is urgent. If the operator breaches the suspension or restriction, the regulator, namely OFCOM, will be the person to make the decision whether to prosecute, and will then be the prosecutor in a criminal case in which they will be the principal provider of evidence and producer of witnesses, and would be relied on by the court as an expert witness. It was to avoid just this sort of anomaly and potential for conflict or distortion of judgement, that criminal prosecutions were removed from the police to the Crown Prosecution Service. It is wrong in principle for OFCOM to have this dual role.


  7.1  There are a number of respects in which the draft Bill does not correctly implement the new EU Directives. We believe that it would be appropriate for the Committee to remind the Government that they are under a Community obligation to implement directives from the EU correctly, and that they must therefore ensure that the draft Bill does so. For example:

    —  Clause 67(2) of the draft Bill says that OFCOM may carry out further market reviews after the initial reviews—Article 7(3) of the Access & Interconnection Directive and Article 16(3) of the Universal Service Directive say that National Regulatory Authorities shall carry out further reviews "periodically"

    —  Clauses 64(2) and 64(3) of the draft Bill say that OFCOM "shall have regard, to such extent as they consider appropriate" to the Commission recommendation and guidelines—Articles 15 and 16 of the Framework Directive say that OFCOM shall take "the utmost account" of these documents.

  7.2   The proposals concerning the implementation of relevant European Directives discussed in paragraph 5.2 (c) and (d) above are also relevant to this issue.


  8.1  At the core of the draft Bill is the elimination of duplication and overlap between multiple regulators. BT supports this fully. In the interests of avoiding the problems associated with duplication and overlap we believe that careful consideration should be given to the issues arising from the proposal for full concurrency of competition law powers between OFCOM and the Office of Fair Trading (OFT).

  8.2  The converged field that the draft Bill deals with affects the UK's economy and population at large. The Government's apparent underlying assumption that competition and consumer matters in this area should be subject to a "niche" regulator, OFCOM, and not to the regulator for the economy and population at large, OFT, requires serious examination and consideration of the consequences. Similar issues arise in respect of data protection.

  8.3  It is important that there is a clear statement of the respective roles of OFCOM, the OFT, the Information Commissioner and other agencies. This would facilitate effective transparency, predictability, impartiality and clarity. All stakeholders need to be able to predict accurately and in advance which specific regulator will intervene on particular matters. Failure to address duplication concerns effectively leaves the threat of multiple jeopardy in place.

  8.4  The roles of OFCOM and OFT need to be clarified to reflect more accurately the market analysis procedures set out in the new EU Directives. The Framework Directive, at Article 16, requires Member States, where appropriate, to ensure that this analysis is carried out in collaboration with the national competition authorities. An approach that engages the OFT in market analysis procedures is more consistent with the movement towards ex post competition law featured in the new EU Directives. The Office of Fair Trading's involvement at an early stage in market analysis and market definition may serve to reduce uncertainty and the risk of double jeopardy. Collaboration between OFCOM and the OFT in relation to market analysis is highly desirable and appropriate.


  9.1  Payments for numbers

  The draft Bill includes provisions for persons to whom numbers are allocated to make payments to OFCOM. Nothing is said about the purpose to which such payments are to be applied. If OFCOM intends to seek premia for the sale of "Golden Numbers" we believe that the sums involved could be significant. It would be inappropriate for OFCOM to benefit from such windfall payments, and we believe that they should be applied towards reducing OFCOM's costs in any year, and hence in reducing charges payable by communication providers.

9.2  OFCOM's operating costs

  The draft Bill proposes a structure that should bring increased efficiency in regulation. As competition in communications increases, the need for specific economic regulation should also diminish. Both these developments should lead to reduced costs, and, therefore, reduced charges to providers. The National Audit Office should monitor OFCOM to ensure that cost savings are reflected in lower charges.

9.3  The use of proceeds from penalties

  Nothing is said about how penalties paid to OFCOM are to be applied. A serious penalty under Part 2 of the draft Bill could easily amount to more than the costs incurred by OFCOM under that Part. We believe that it would be inappropriate for OFCOM to benefit from windfall payments. On the other hand, it would be equally inappropriate for OFCOM, in calculating how charges should be determined in any particular year, as required by Clause 29, to take account of possible "income" from fines. To do so might cause an appearance of prejudice, if it subsequently appeared that OFCOM were imposing a penalty in a particular case effectively to meet their budget obligations.

9.4  OFCOM and Cost Recovery

  9.4.1  Article 12 of the Authorisations Directive places clear limits on the charges that National Regulatory Authorities may levy on providers of electronic communications networks and services. Apart from charges for the use of frequencies and numbers, which may be set so as to reflect the need for optimal use of these facilities, charges must:

    —  cover only the administrative costs incurred in the management, control and enforcement of the general authorisation and other conditions of entitlement;

    —  be imposed objectively, transparently and proportionately.

  9.4.2  In addition, National Regulatory Authorities must publish a yearly overview of their administrative costs and the total sum collected.

  9.4.3  Article 12 is reflected in Clause 29 of the draft Bill and requires OFCOM to adopt a statement setting out the principles according to which it will fix administrative charges. In BT's view this statement, and the yearly overview of administrative costs required by Article 12, must;

    —  give sufficient detail for providers to be confident that they are only funding the appropriate OFCOM activities. For example, costs relating to OFCOM's Competition Act or Enterprise Bill activities should not be recovered through these charges.

    —  Additionally, the sectors for which OFCOM will be responsible should be required to fund OFCOM's costs only to the extent to which those costs are relevant to those sectors.

  9.4.4  The same principles and procedures should apply to the initial costs of setting up OFCOM which will be recovered over a number of years; only set up costs relating to OFCOM's functions as a National Regulatory Authority under the new EU Directives should be borne by electronic communications providers.


  10.1  Modern communications legislation cannot ignore the Internet. The fundamental issue is whether or not the Internet requires specific measures to supplement general legislation and self regulatory approaches.

  10.2  The Government states in the Guidance narrative that "it is not the intention for the draft Bill to extend regulation into the Internet" (Guidance notes clause; a position which remains unchanged from the White Paper. We support this approach which, if correctly applied, would allow the Internet industry to continue to provide and develop valuable content and services for UK consumers and businesses. Our comments are designed to enable the draft Bill to implement the Government's intentions in an effective manner. The fundamental problem is that the draft Bill uses concepts derived from traditional broadcasting which are defined in such a broad way that they could be held to apply, inappropriately, to Internet content. The issues addressed are:

    —  The right approach to ``future proofing'' legislation in a changing environment,

    —  Why it is appropriate to regulate broadcasting and Internet content in different ways,

    —  The role of the Content Board

    —  The definition of a ``television licensable content service'', and,

    —  Liability for third party content.


  10.3.1  It is impossible to predict how the Internet may develop and be used. There is no shortage of promising applications but some may not come to fruition while others may emerge in a different final form. Given this uncertainty, the aspiration to "future-proof" the draft Bill is challenging. There are two possible approaches—to seek to cover every conceivable eventuality, which we believe to be both unduly complex and impracticable, or to establish clear principles targeted on issues of genuine concern.

  10.3.2  It is essential that all stakeholders can clearly identify from the outset what regulation will apply to what Internet activity and when. It should be made clear which Internet activities will be regulated purely through the implementation of the new EU Directives via the draft Bill and associated secondary legislation. We also seek clarity on which aspects will be considered to relate only to the "infrastructure" or "access" provisions of the draft Bill.


  10.4.1  Internet content is, of course, already regulated by general criminal and civil laws (eg obscenity, incitement, libel, copyright). There would be no point replicating such provisions in new legislation. Where further provisions are felt to be necessary, care should be taken to ensure appropriate targeting. The principal danger is an inappropriate application of measures from the broadcasting environment to the very different world of the Internet.

  10.4.2  Traditional broadcasting involves one-to-many, tightly-scheduled communication, planned in advance, and provided by a small number of easily identifiable organisations within the UK's jurisdiction. Providers are state-licensed and users are essentially passive—with little choice of content after switching on the receiving equipment. It is, therefore, appropriate to make provision for standards of taste and decency, political neutrality, and devices such as the 9 o'clock watershed to provide protection against undesired content. Consumers expect such standards and provisions to be in place.

  10.4.3  The Internet is characterised by one-to-one communication, no or minimal scheduling and dynamic planning. It is available from multiple sources, the majority outside the jurisdiction of the UK. These are not state-licensed, and users exercise free choice over content. There is no expectation that prescribed standards are in place from an external regulator, applying to the entire medium. The real anxieties about Internet content concern the ability of consumers to exercise control over what they, and their children, can access. Literacy in this particular media is the key to addressing the issue.

  10.4.4  It may be argued that the principle of "technology neutrality" precludes different regulatory treatment of broadcast and Internet content. This is not the case. The rationale for different treatment lies in the different relationship that users (and Governments) have in relation to content available from broadcasting and the Internet. The reasons that currently justify state regulation of broadcast content remain valid. The application of such rules to Internet content, however, would represent an unjustifiable interference with such rights as freedom of expression, receiving and imparting information without interference by public authorities. Moreover, such regulation would not address the real and reasonable concerns of citizens and consumers. Having established this framework, we now address specific features of the draft Bill.


  10.5.1  We believe it would be inappropriate, as well as impractical, for the Content Board's remit to extend to Internet content, and it would conflict with the Government's commitment in the Guidance Narrative, not to do so. We appreciate that Clause 18 has to be read in conjunction with Clause 238, but an explicit sub-clause exempting the Internet would be a useful clarification.

  10.5.2  Regarding the composition of the Board itself, we would suggest that it includes representatives of all industry sectors covered by its remit.


  10.6.1  If providing content over the Internet is a "television licensable content service", then the rules applied to television broadcasting apply. Whether or not this is so depends on several key definitions;

    —  "television licensable content service" (Clause 154),

    —  "electronic visual programme guide" (Clause 154),

    —  "relevant ancillary service" (Clause 154),

    —  services that are not television licensable content services (Clause 155),

    —  "two way service" (Clause 155), and

    —  "for reception by members of the general public" (Clause 238).

  10.6.2  Unfortunately, these definitions do not provide the necessary level of clarity. Although the Government has repeatedly stated its intention not to regulate the Internet, it is possible to interpret these definitions in such a way that even the most simple Internet content, such as web pages, plain TV listings or hyperlinks could be covered. The provisions could be construed so that even hosting of third party content could also be covered (under Clause 238.5 ``distribution'').

  10.6.3  This outcome is clearly at variance with the Government's policy, and would result not only in confusion but unenforceable legislation. We understand the desire for the draft Bill to be as technology neutral as possible, but it should also recognise real differences between media and between associated delivery mechanisms.

  10.6.4  In this section we have outlined the overall framework that we believe should be embodied in the draft Bill and have given examples of where the drafting is, in our view, insufficient to deliver the clear policy on the Internet set out by the Government. We are seeking to develop solutions to improve the current draft in these respects with others in the Internet industry and will inform the Committee of the outcome of this work.

  10.6.5  The foregoing discussion has indicated the importance of these definitions. In the circumstances we believe there should be a duty placed on the Secretary of State to consult with OFCOM and for OFCOM to consult fully with industry before making modifications to these provisions under the proposed discretionary powers in Clause 156.


  10.7.1  The draft Bill does not contain any cross-reference to the e-Commerce Regulations, which transpose the European e-Commerce Directive, in particular the liability provisions for intermediaries. Given that the e-Commerce Directive explicitly absolves intermediaries of all liability for the transmission, caching or hosting of third party content (provided certain conditions are met), we would expect the draft Bill to maintain explicit consistency with the Directive and the UK Regulations.


  11.1  The draft Bill adopts the form of accountability currently used for regulators such as Oftel. OFCOM will present an annual report to the Secretaries of State which is then required to be laid before Parliament and published. Discussion of such reports has not been a regular feature of Parliamentary activity. Parliamentary scrutiny usually revolves primarily round the House of Commons Public Accounts Committee, which is concerned with value for money rather than broad, strategic objectives, and secondarily around hearings on topics relevant to the regulator's activities by other interested select committees.

  11.2  It is respectfully suggested that although these committees perform searching and effective work within their remits, they are not designed to provide a thorough examination of what a regulator such as OFCOM is doing, why it does it and how this relates to its statutory responsibilities and current public policy objectives.

  11.3  We believe that the size and responsibilities of OFCOM mean that this accountability structure should be reconsidered. We believe that Parliament should receive a report to provide a proper basis for policy scrutiny, and have institutions designed to provide it. Our proposals for OFCOM's report are:

    —  OFCOM should be required to include in its report an account of how it has met its statutory objectives.

    —  OFCOM should describe how its actions relate not only to statutory obligations but to its own policy goals.

  11.4  The intention is to secure an account of how OFCOM's activities relate to what it is supposed to do. This would enable informed debate to take place about the success of its efforts, the reasonableness of trade-offs and the allocation of its resources.

  11.5  We believe that it would be appropriate for Parliament to consider a committee with responsibility for communications to review OFCOM's activities on a regular and continuing basis. The members of such a committee would develop expertise in communications issues and be able to provide sustained, constructive comment on OFCOM's policies and activities—as well as undertaking probes on more detailed issues where appropriate. The importance of the communications industry and its infrastructure to the future economic success of the UK suggests that such Parliamentary scrutiny would be both proper and beneficial.


  12.1  The draft Bill proposes the repeal of more than half the provisions of the Telecommunications Act 1984, with significant amendments to the remaining provisions. Similarly large parts of the Broadcasting Acts 1990-96 are proposed for repeal, with widespread amendments to the remaining provisions, and the Wireless Telegraphy Acts 1949-98 receive similar treatment.

  12.2  It seems inappropriate, in the light of convergence and the creation of a new regulatory structure for the communications industry, and inconsistent with the principle of technological neutrality, for regulation to continue to be dealt with in part on the basis of legislation which relates to the pre-OFCOM distinctions between telecommunications, wireless telegraphy and broadcasting, and where the draft Bill adopts the terminology of ``electronic communications'' and ``spectrum use''. Furthermore, the heavily amended and truncated remaining statutes will be extremely difficult to use and apply. To that extent, the draft Bill fails to achieve the transparency that is intended to be a hallmark of the new regime.

  12.3  We suggest that it is necessary, and consistent with the philosophy behind the draft Bill, to repeal the current statutes completely and consolidate their remaining provisions, to the extent that they cannot be accommodated in the Communications Bill, in another Bill.


  13.1  We appreciate that Government policy in this area is not yet fully developed and that revised drafting may be forthcoming after the response to the Cave report has been published. We suggest that it would be appropriate for the Committee to revisit this area, and to receive views from stakeholders, after the Government's position is clarified. For the time being we would register the observations that Clause 124 of the draft Bill gives OFCOM extensive discretionary powers and that it would be desirable if these were supported by a suitable governance framework.[1],[2] ,[3]

May 2002

1   The Framework Directive ((2002/21/EC), the Access Directive (2002/19/EC), the Authorisation Directive (2002/20/EC), and the Universal Service Directive (2002/22/EC). Back

2   The EU Authorisations Directive makes clear that the least onerous authorisation system possible is to be used, and we believe that its intention is essentially to ensure that the national regulatory authority is aware of who the providers of electronic communications networks and services are. There is a danger that if notifications have to be made at too detailed a level of granularity, the industry will be mired in a disproportionate degree of red tape, contrary to the intention behind the Directive, and undermining the principle of a 'general authorisation', namely that anyone can offer any service. Back

3   We believe that the approach taken by the Competition Commission in Napp Pharmecuticals (CC Case No 1001/1/1/01) is unworkable. It proposes a "compromise" standard-more than "balance of probabilities" but less than "beyond all reasonable doubt". The draft Bill should state clearly the requisite standard or risk creating similar uncertainties. Back

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