Considered in Grand Committee
My Lords, these draft regulations are being introduced to transpose the EU Electronic Communications Code directive into domestic law, as we are committed to do under the European withdrawal agreement. The Joint Committee on Statutory Instruments, the Parliamentary Business and Legislation Committee and the Secondary Legislation Scrutiny Committee have all considered the instrument and did not raise any issues. The draft regulations are being introduced under powers set out in Section 2(2) of the European Union Communities Act 1972 as repurposed for the transition period by the European Union (Withdrawal Agreement) Act 2020.
The draft regulations make corrections to legal deficiencies arising from the UK’s exit from the European Union. The corrections being made under the powers set out in Section 8 of the European Union (Withdrawal) Act 2018 are mostly minor and technical, including references to EU law that are no longer applicable to the UK as a result of EU exit. These regulations are a crucial milestone towards the delivery of our digital ambitions and will play a significant role in aiding the delivery of our manifesto commitments, ensuring a future-proofed telecommunications regulatory regime. These changes will facilitate competition and a pro-investment regulatory environment, supporting gigabit-capable rollout across the country. UK consumers will benefit from better information to make informed decisions, have stronger contract rights and be able to switch their services much more easily than before, which will help support competition. The regulations will also ensure that universal services remain affordable for consumers with low incomes or other specific needs.
The measures sit alongside those being implemented by Ofcom under its existing powers. Ofcom is implementing new rules on information requirements for contracts, contract duration and termination rules, along with broadband switching rules. This includes rules banning providers from selling locked devices, ensuring that a customer’s new provider leads any switch, stronger contract exit rights and short summaries of main contract terms to help customers make more informed decisions. We recognise that the industry will need to make changes as it responds to Covid-19 so Ofcom will allow providers a further year to put these measures into place during this exceptional period.
A small number of measures in the directive are not being implemented via these draft regulations. Some measures are being implemented through other legislation, while others have already been put in place, including those that relate to car radios via the Road Vehicles (Approval) Regulations 2020. A limited number of the measures are applicable to “over the top” services, including instant messaging and email communications, which we are considering further how to take forward. We have given Ofcom powers to gather information on these services in the draft regulations. This will help us to better understand and assess this market and to continue to develop any future measures.
The draft regulations introduce measures to drive investment into future-proof networks and communications services through sustainable competition, supporting the efficient and effective use of radio spectrum and providing a high level of consumer protection. While we are required to implement these changes, they are legislative changes that we would want to make in any case. The UK played a key role in the negotiations and indeed shaped the wider regulatory framework for telecoms that the directive builds on.
A number of the provisions promote competition and are pro investment. Ofcom will be able to impose conditions to ensure connectivity and choice for consumers where it is challenging for competition to emerge in an area that already has a network. The instrument also provides Ofcom the power to ensure that another provider can access a dominant provider’s physical infrastructure assets—the ducts and poles that house the network—to ensure choice and competition irrespective of the market scope. We will enable Ofcom to impose longer-term pro-investment regulation, such as implementing longer market review periods that focus on promoting higher capacity networks. We will support the availability of build plan information to industry and to the Government in order to better inform any rollout plans. We will also enable co-operation between network providers, which should support these primarily rural deployments. These measures are essential if we are to create the right environment to encourage investment and ensure that Ofcom has the necessary powers to promote competition and protect consumers.
The draft regulations include measures that will enhance consumer protections. The Government, alongside Ofcom, are implementing measures to help ensure that UK consumers will benefit from better information to make informed decisions, stronger contract rights and the ability to switch services much more easily than before. The regulations will support the efficient and effective use of radio spectrum, promoting competition and the timely rollout of 5G services and the widespread availability of mobile connectivity. There are also measures that relate to the universal service obligation that will ensure that a range of telecoms services remain affordable for consumers with low incomes or other specific needs, giving them a safety net to ensure full participation in both society and the economy.
The instrument also includes powers for the Secretary of State to establish a mobile universal service obligation in the future if that is deemed necessary, and ensures that people who use legacy universal service obligation services, such as payphones, telephone directories, fax and particular methods of billing, will continue to be able to do so. Additionally, the instrument introduces measures to update the regime for social tariffs for telephony and broadband, should they be required. These will ensure that consumers with low incomes or other specific social needs are able to access universal services at affordable prices where the market does not provide these commercially or on a voluntary basis.
The importance of electronic communications has been underlined during the Covid-19 pandemic. Telecoms are now more critical than ever for the country, with a large proportion of the population working from home. Combined with future expectations around new technologies and services, including 5G, building future-proof networks will be essential to our future economy. The changes that we are introducing represent a significant step forward in helping to achieve these ambitions. I look forward to hearing noble Lords’ reflections on this instrument and I beg to move.
I thank the Minister for her introduction. I should declare an interest as chair of Ombudsman Services, which deals with customer complaints regarding telecommunications.
I was delighted to hear the noble Baroness extol the virtues of an EU directive, which I think was a bit of a novelty, coming from a Minister. It is sad that we have only three speakers on such an important SI. After all, it encompasses a whole Bill’s-worth of changes to our communications laws. When I first looked at it, I thought, “Well, all I can do is to try to stop the ship sailing on regardless and stick an oar in here and there”, because quite a few substantive issues are involved.
The Government response to the consultation on implementing the European electronics code states:
“a ‘copy out’ approach to the Directive”
is being taken
“where we consider change is needed in UK legislation”,
but in line with
“our overarching approach of a minimal transposition”.
I am not quite sure that we can have it both ways. I am going to kick the tyres on the “minimal transposition” aspect, because the Minister seemed to be quite positive about the impact the directive will have on investment and rollout of our 1 gig capability.
The response also says:
“In some cases, we will adopt an alternative approach to transposition to certain provisions in a way that is tailored to UK markets. We take this approach where there is sufficient justification and evidence for doing so, for example, where it would contribute to the government’s ambitions for digital connectivity.”
We heard some of the positive approach, but I am not quite sure whether we fully heard the more minimal approach. We have heard about further aspects—I think the Minister said that there are two categories they are considering—but we did not hear in the interim about where a minimal approach had been taken.
The Government set out three categories in the response:
“Articles which we consulted on given their potential to support the UK’s digital ambitions”—
“Incremental changes to the existing framework which we intend to transpose in a minimal way”—
again, there is the use of the word “minimal”; and
“Deprioritised from 21 December 2020 deadline”.
The problem is that there is a rather inadequate approach to this issue in both the Explanatory Notes and the response to the consultation. There is no easy breakout of what changes fall within the three categories. You have to rather laboriously cross-refer when you get to the table which glosses annexe A of the response. I therefore hope that the Minister will forgive me if I go through a few aspects of the statutory instrument and ask a few questions.
The fundamental flaw is where the consumer comes in all this. The list of respondents to the consultation consists solely of telecoms companies. As we go through certain areas, can we be sure that the way the Government have transposed the directive is acting in the best interests of consumers?
The Government say that the transposition of the code
“recasts the objectives and regulatory tools of the current”
European framework on electronic communications
“to place a stronger emphasis on incentivising investment”.
They say that:
“The Regulations support the government’s digital ambitions and plans to deliver nationwide gigabit-capable connectivity ... This will enable Ofcom to support deployment and investments in gigabit-capable networks … These include ensuring that Ofcom’s use of specific market regulatory tools promotes very high capacity networks. Ofcom are also required to promote measures that facilitate a competitive retail market for consumers.”
It would be useful if the Minister could unpack some of those statements. Are they going to speed up rollout? Are they going to make up for the fact that Covid-19 seems to have delayed that 1 gigabit capability rollout?
I can see the benefit of transposing Article 22 in terms of survey information and designation of areas where there is no planned coverage, but what are the other benefits? For instance, what substantive difference will these changes make to rollout of 1 gigabit capacity? Why only the minimum transposition of Articles 76 and 79? The Explanatory Memorandum states:
“There are specific conditions known as significant market power … conditions, which can only be imposed on providers with market dominance. Ofcom must analyse markets on a regular basis in what is known as a market review.”
The Government seem simply to have decided to swallow Article 61 whole and extend the market review to five years, increasing the maximum time between market reviews from three years to five. In a sense, they are therefore making the situation worse from the competitive point of view. Of course businesses that were consulted prefer this, but what about consumers? Does that not precisely show up the problems with the original consultation?
Surely when major developments occur with great speed, as with a consolidation of digital assets—for instance, specialised mast companies such as Phoenix Tower with its significant market shares, or the joint venture between Liberty Global’s Virgin Media and Telefonica’s O2—these kinds of reviews are required at very regular intervals. There are some aspects which I unreservedly welcome, such as the new protection for certain end-users who purchase a bundle of services. There are the social affordability aspects, too.
When we come to the universal service obligation, we see a certain amount of changes. There is no change to the inclusion of affordability requirements, but it should be said in passing that the 10 megabits per second universal service obligation is still miserably unambitious. We have made that point many times before on these Benches and it was, of course, criticised by one of our own Select Committees. I hope that the Minister will give an indication of when it might change. It seems extraordinary that we have this ambition for 1 gigabit capacity, yet we are still hobbling along on 10 megabits per second as a universal service obligation.
What about the impact assessment? If all these provisions are to be so beneficial, as I hope they will be, why do the Explanatory Notes say that there will be an impact of less than £5 million on the economy? Surely the idea is to incentivise investment. Were we doing absolutely fine before we adopted this directive or was the Minister engaging in a bit of hyperbole? Where do we stand on the impact of these new regulations and what are the substantial changes? Will it mean faster rollout and, if so, in what respect?
It is interesting that the Minister’s colleague, the noble Lord, Lord Vaizey, wrote a very percipient piece in the Telegraph in July. I think the headline was “It’s high time we fixed Britain’s patchy mobile networks”. How will all this contribute to that, or are the Government really just making a virtue out of necessity?
My Lords, I thank the Minister for her very good introduction to this SI. It is a long and complicated one, but she came across the issues quickly and with great clarity. I also thank her for arranging a meeting where I was able to ask direct questions of the officials responsible for this work.
It is, on first glance, a rather strange document—almost hybrid, if that is not a pun too far. It introduces most elements of a European directive positively and helpfully, but it also uses the EU exit regulations to discount a few things that might have got in its way. I say that to position myself on my first point: rather like the noble Lord, Lord Clement-Jones, it seems to me that this is almost primary legislation being achieved through secondary legislation because of the changes that are being made that will have an impact not only for consumers and companies but, more responsibly, for the regulator. This document is so large that one would almost want to go through it line by line and ask questions by having a due process that allowed more than this important but rather short exchange as a result of it being a statutory instrument.
I asked that question of officials. In a slightly unguarded moment, perhaps, the impression I gained—I will not quote them—was that Ministers presumably could have chosen either to seek a legislative opportunity to put forward primary legislation that might not have been time-efficient, as it certainly would not get us past the deadline of 21 December 2020, which is not far away, or to take the slightly unusual step of doing it through secondary legislation. These are my words, not theirs. For good reason or bad, the decision was taken to do it this way. I am not going to carry on with this point, because it was not picked up by any of our standing committees that looked at the legislation or by the Commons. However, it is quite interesting, and there must be a break point.
I will make one other point about it. One of the things that is looked at in deciding whether something should be primary or secondary legislation is the impact it has on consumers: for example, in criminal penalties or taxes. I do not think there is any such provision in here, but I wonder about the approach to the special subsidy. There is a phrase in the notes which gives the sense that it is not just a question of whether those who are vulnerable or have low incomes can get treated under the special subsidy system; it is also possible for Ofcom to look at whether others should make a contribution.
That point about “others” comes on page 8 of the Explanatory Memorandum in point 7.24, which says:
“If the burden is unfair, Ofcom may determine that contributions should be made by other providers to help meet the burden”.
I wondered whether that was heading towards taxation. I will leave my point in that area.
I want to make only two other points, because the noble Lord, Lord Clement-Jones, has made a substantial contribution to this debate. One is that, as he said, one of the key guiding principles, which we went over at length in earlier legislation and presumably will meet again as we go forward on this journey, is the attempt to get the country to have a gigabit-capable infrastructure. I welcome a lot of the measures here which will point us in that way, but I want to ask about two of them.
First, there is the question of whether the ability to share equipment, which is one of the powers that Ofcom has taken or will be given under these regulations, will be sufficient to ensure that the number of not-spots is reduced across the country. As the noble Lord, Lord Clement-Jones, said in citing the noble Lord, Lord Vaizey, it seems that we still have patches of the country, sometimes in major conurbations and many times in London, where the quality of reception is so bad that it is unbelievable that we are even thinking about getting to a USO of 10 megabits per second, rather than to this nirvana that we hope to have of one gigabit.
There are two measures that I thought might help with that. One is the need for a power to make providers share equipment where it is important. In the regulations, that appears to be limited to whether there is unfair competition. Is that right or is it more focused, as the noble Lord, Lord Clement-Jones, was saying, on this question of getting the whole country to a higher level of capability?
The second is the way in which spectrum is allocated, because that has such a major burden on the 5G capability of the country, and who knows what 6G or other Gs would do when they came along? One complaint that we were aware of 18 months or so ago, when we were doing the primary legislation in this area, was that the regulations relating to spectrum sales did not give sufficient fine-tuning of the arrangements under which Ofcom offered it to ensure that the quality of the spectrum available to those bidding for it was being met satisfactorily, given the needs that they identified.
I am probably at the limit of my technical knowledge at this point and will therefore not continue this line. But I am sure that the Minister is fully briefed on it today, and if she is not, perhaps she could write to me. Do the measures in this statutory instrument unblock that problem? When allocating spectrum, it is important to recognise that the bandwidth within it is as important as the amount available under certain measures, particularly 5G, because of its capability in ensuring that local areas are properly linked up so that those who live in blocks of flats, for instance, are not blocked simply because the walls are too thick or the material used in the building is obstructive to travel.
These are the two things we were left with after we went through this the last time around when we were talking about telecommunications development, the partnership that is necessary with the internet service providers and the problems faced by those in rural areas and in the centres of towns. They need to be assured that these regulations will bring this forward.
Finally, like the noble Lord, Lord Clement-Jones, I welcome the new consumer rights that have been brought in. They will be helpful, and I am glad to see them in place at last.
My Lords, I thank both noble Lords for their questions and the constructive tone of their contributions. I am pleased that in principle the regulations command support from all sides of the Committee, and that we share the ambition that this country should be able to benefit from gigabit-speed connectivity and that consumers should benefit from greater protections. I will try to address the points raised but in a couple of cases I will need to follow up with a letter to your Lordships.
In answer to the point raised by the noble Lord, Lord Clement-Jones, about the respondents to the consultation, a number of organisations representing consumers responded; these included Citizens Advice, the Communications Consumer Panel and the Clarion Housing Group, to give just three examples. I hope that that reassures him that a balance of views was sought.
Both noble Lords questioned—perhaps I can express it as—our enthusiasm for implementing this legislation. As I mentioned, the UK was heavily involved in negotiating the final text of the directive to make sure that it would be truly positive for the UK telecommunications market, and we played a really leading role in the negotiations.
The noble Lord, Lord Clement-Jones, questioned whether we were going above and beyond some of the minimum requirements in the directive. There are more than 100 measures in the directive and in six of them we have gone further, where it has been clearly in the UK’s interest to do so. That relates to Ofcom’s ability to collect information regularly about gigabit-capable network future build plans; its ability to penalise BT or KCOM if either reneges on voluntary commitments; and the additional powers to promote retail competition in buildings where there is not room for more than network deployment. I think that addresses that point.
In relation to speeding up, questions were raised about the impact of the directive. The £5 million cited in the memorandum relates to the direct impact but we expect the indirect impact to be very substantial in terms of opening up and speeding up the implementation of high-capacity networks. We believe that this will support our plans to incentivise investment in gigabit-capable networks by promoting both competition and commercial investment wherever possible; allowing Ofcom to have longer market reviews, which gives industry greater planning time; and, as I mentioned, supporting the availability of build plan information to industry and government, which supports our rollout plans. There are other examples that I will happily share with your Lordships in a letter.
The noble Lord, Lord Stevenson, is testing my technical knowledge of the impact of the statutory instrument on our spectrum policy framework. If I may, I will include further answers on that in my letter. The statutory instrument does introduce a requirement for Ofcom to consider whether specified level of use conditions would promote efficient use of the spectrum when designing competitive awards, but that does not address the noble Lord’s point about the quality of the spectrum, so, if I may, I will include that in my letter.
Finally, the noble Lord, Lord Stevenson, asked about not-spots in both rural areas and some urban areas. As he will be aware, we have committed £5 billion to support the rollout of gigabit-capable broadband in the hardest-to-reach 20% of the country. We are sticking with our target of 2025. We acknowledge that it is a very ambitious target, but we are driving forward with it as hard as we can.
To recap, transposing these changes into UK law will allow us to drive investment in future-proofed networks and communications services through sustainable competition. It will support efficient and effective use of the radio spectrum and provide a high level of consumer protection. It will also ensure that Ofcom’s powers remain operable and reflect recent technological innovation. Some of the measures are being transposed through alternative legislation, such as the requirements for the security of networks and services.
With thanks to both noble Lords for their questions, I beg to move.